EcoSim is a teaching tool that brings together students from principles micro and macroeconomics, intermediate micro and macroeconomics, public sector economics, mathematical economics, managerial economics, and econometrics in a unified comprehensive economic simulation. The simulation was designed with the intent of providing students with a laboratory in which they could experience real economic forces, and as an application for most of the theory covered in undergraduate economics courses. Although the flexibility of EcoSim allows it to be used simultaneously in all of the courses listed above, the simulation works quite well when used with students from only one or two of these courses.
EcoSim provides students with a computer based not computer generated economy All prices, interest rates, employment and inflation rates, investment, production and consumption levels, are established by the players themselves as they interact with each other. Because the computer does not interfere in the economy, expectations, information, and risk behaviour play as important a role in EcoSim as they do in the external world.
EcoSim players are divided into two groups: company/ population players and government / central bank players. Each company / population player is issued a company and a group of people at the start of the simulation. While playing the role of a company, the player hires labour from other populations and purchases materials from other companies to produce a product which is then sold to other companies or to other populations. In the short run, players must determine the optimal combination of labour and materials to use in production and their profit maximizing output levels.
In the long run, players must determine the optimal combinations of capital (plant and equipment) and technology to acquire. Players can purchase materials and hire labour to produce products, buy and sell stock and bonds in other players' companies, speculate in commodities markets, invest in plant and equipment or research and development, move between industries, enter contractual agreements with other players, lobby the government, form cartels, and undertake entrepreneurial ventures. Each company player receives a grade for his company which is based on the percentage growth of the value of the company's stock portfolio from the beginning of the simulation to the end. While playing the role of a population, the player hires out workers to earn money which he uses to purchase goods for his population to consume. In the short run, players decide what combinations of various goods to consume and how much of their population's time should be devoted to work and how much to leisure. In the long run, players try to achieve the optimal population size by adjusting their population growth rates. Each player receives a grade for his population which is based on the cumulative utility the population achieves over the course of the simulation.
Government/central bank players act as the government and monetary authority for the company/population players. The government/central bank can impose price controls, sales quotas, income taxes, profits taxes, and sales taxes, issue subsidies, impose fines, issue transfer payments, produce public goods, alter the money supply, borrow and lend money, and enact laws and regulations. The political climate (i.e. democratic, totalitarian, or anything in between) and the economic climate (i.e. capitalistic, socialistic, or anything in between) are determined by the government as it attempts to appease its constituents.
The government/central bank players elect one from their group to serve as the Head of State. The Head of State has the sole power to enact fiscal and monetary policy and to enforce laws. The remainder of the government/central bank players are legislators and are assigned a number of company/population players as constituents. Each round of play, each company/population player casts a vote for or against the Head of State and for or against the player's legislator. These votes have no bearing on who holds government office, rather the votes reflect the company/ population players' satisfaction (or lack thereof) with the government. Each government/central bank player receives a grade based on the number of "for" votes obtained over the course of the simulation.
Because the EcoSim economy is not fabricated by the computer, but is the result of true economic forces resulting from the interactions of real consumers and producers, the economic data generated by the simulation provides a wealth of information and examples for econometrics students. Econometrics students can download the macro and micro data generated in the simulation, perform statistical analyses, and construct forecasts of commodity prices, output levels, inflation, gross domestic product, and any of another fifty economic time series and cross sectional data sets.
EcoSim is programmed for a VAX/VMS minicomputer. A windows version for use on a PC network is under development. The simulation typically runs twenty-four hours a day, seven days a week, over the course of several months. Students access the simulation as frequently or as infrequently as they deem necessary. On average, students spend thirty minutes per day on the computer and another fifteen minutes per day making deals, discussing strategy, and writing contracts with other players "offcomputer". The EcoSim software is almost fully self-sufficient. The only requirement it makes of the course instructor is that the instructor notify the computer when it is to advance the simulation to the next round of play (i.e. the next accounting cycle).
In its most simple form, an EcoSim game can include at least 15 company/population players from a single course and will run without a government / central bank. Because of the small number of companies, players will be most concerned with striking deals with other players, forming cartels and trusts, and establishing monopolies.
In its most complex form, an EcoSim game can include up to 500 company/population "teams" (each team can be comprised of several students from any of the following courses: principles micro/macroeconomics, intermediate micro/macroeconomics, mathematical economics, managerial economics, finance, management, and marketing), up to 100 government/ central bank players (while the government/central bank should be played by public sector economics or macroeconomics students, these students benefit from having other students from political theory, government, and public relations courses also play as legislators), and any number of econometrics students who will supply the players with statistical analyses and economic forecasts.
Because of the large number of players, there will be well developed stock and bond markets, significant trading in options and futures contracts, a respectable amount of contract litigation (usually mediated by the government), many laws passed regulating company and population behaviour, significant campaigning by the government/ central bank players and lobbying by the company/population players, and much entrepreneurial activity. Several universities have designed laboratory sessions based on EcoSim which run concurrently with the economics classes. While students play EcoSim on their own time outside of class, the laboratory sessions are times in which the students can come together in a more formal setting to make deals, discuss strategies, and perform analyses under the direction of the instructor. The EcoSim software is available free of charge. Students who use the software must purchase a manual and spreadsheet disk. The manual explains the rules of EcoSim and discusses player strategy in terms of economic theory. The spreadsheet can be used by the students to perform "what-if" analyses on their companies and populations. The spreadsheet takes information from the a student's company and population and computes measures of the student's total revenue, total cost, average variable cost, average fixed cost, average total cost, marginal cost, total product, average product, marginal product, marginal product per dollar, utility, marginal utility, and marginal utility per dollar. The spreadsheet also creates graphs of the players' product curves, indifference curves, and budget constraints.
The figures show selected screen displays from the
EcoSim program. They are not fabricated, but are taken from an
actual game with 54 company/population players and 20 government
players. Figure 1 shows a selection of macroeconomic
statistics
as of the beginning of period 15 in the game. When a player attempts
to purchase a commodity, he would see a screen as is shown in
Figure 2. This screen is a listing of quantities and
prices of a particular commodity offered by various players. The buyer
can select which, if any, of the offers he desires and the computer
will automatically perform the transaction, transferring the commodity
to the buyer and the money to the seller. A typical voting return
is shown in Figure 3.
The author may be contacted at the following address:
*Anthony Davies, Economics Department, Wesleyan College,
Buckhannon, WV 26201, USA. (e-mail: davies@academ.wvwc.edu)
Figure 1: A selection of macroeconomic statistics
at the beginning of period 15
REVIEW MACROECONOMIC DATA: Beginning of Period 15 Gross Domestic Product (current dollars) $292,823 Real GDP (Period 1 Dollars) $239,200 GDP Deflator (Period 1 = 1.00) 1.22 CPI Deflator (Period 1 = 1.00) 1.39 Money Supply $632,625 Private Debt $57,000 Capital Stock 186,049 Labor Assigned to R&D 5,175 RM Manufactured 3,033 HM Manufactured 6,890 LM Manufactured 7,964 FM Manufactured 8,268 RM Sold 1,869 HM Sold 2,990 LM Sold 5,208 FM Sold 5,158 Population 101,126 Labor Force 33,669 Employed Labor Force 16,821 Labor Participation Rate 37.l% LM Consumed 2,911 FM Consumed 2,863 Average Price of RM $38.02 Average Price of HM $11.54 Average Price of LM $12.85 Average Price of FM $12.85 Average Wage Rate $3.55 Average Interest Rate 12.7%
SELL QUOTES: HM * = private quote
No Price Ceiling. No Price Floor.
No quota imposed.
Current Checkable Deposits: $23,831.50
Total Units Offered: 3,986
Average List Price: $ 5.99
Average Price Last Period: $ 11.54
Quote # Quantity Price per Unit Total Cost Seller
1 370 $6.00 $2,220 7
2 947 $5.15 $4,877 8
3 1,350 $5.25 $7,088 9
4 100 $15.00 $1,500 10
5 460 $5.20 $2,392 28
6 600 $6.45 $3,870 35
7 50 $5.95 $298 40
8 52 $12.00 $624 52
9 57 $18.00 $1,026 54
Press Quote # to accept offer, X to abort, any other key for more quotes.
VOTE
You are registered as casting the following votes for this period:
Head of State: 110 ABSTAIN
Your Legislator: 117 ABSTAIN
The vote this period for the Head of State is:
Yes Votes No Votes Abstentions
14 63.6% 8 36.4% 32 59.3%
The vote this period for your Legislator is:
Yes Votes No Votes Abstentions
1 100.0% 0 0.0% 3 75.0%