Ideas Matter

Sim City 4 - How to Teach Kids the Planner's Fallacy

As I watched this person play Sim City 4 (Maxis) -- keep in mind I've never played, nor am I critiquing the game per se -- I could only think: this is what it must be like to be Paul Krugman or Robert Solow. Indeed, this is how it must be to work at the World Bank or at some Department of Municipal Planning. This demo looks to me like urban planning meets Keynesian economics. 

The game has a set of economic assumptions - probably largely false (and certainly not dynamic) -- and a godlike planner sits back and "builds"' infrastructure projects -- hospitals, schools, roads, subways -- and, if done 'correctly' -- the economy thrives. Fun to be sure. But it is an exercise in what is decidedly NOT what Arnold Kling and Nick Schulz call "Economics 2.0"

It leaves out the perspectival, the local, the entrepreneurial, the rules-oriented and the dynamic nature of an economy. And so also does Economics 1.0. This is the sort of game that would have caused a young Hayek to throw his mouse against the wall in disgust. Now, I could be wrong about the guts of the game. I have no idea. But this demo looks to me exactly like what I have described above.

Indeed this description from Wikipedia suggests I'm at least partially right: "For the success of a city players must manage its finances, environment, and quality of life for its residents." The assumptions are, of course, that environment and quality of life are to be managed by planners. That alone affords a sort of privileged, god's-eye view to budding urban planners. 

In any case, if you ever wanted to know what it's like to think like a Keynesian or a town planner, play Sim City 4. I'm sure it's fun to pretend you can build and improve society at the touch of a button.

Tim Harford on Schelling's Segregation Game

Schelling may well be the original practitioner of Freakonomics. Tim Harford's video is a nice exposition. It not only explains a specific phenomenon, it hints at something profound.

Ever hear the phrase "greater than the sum of its parts?" This is one of the many interesting phenomena of emergence. Economists and other social scientists are only now starting to cotton on to these insights and they will do well to keep on cottoning. Let's break this meta-lesson down into simpler parts.

First, you have actors with preferences. These preferences either create rules or have to operate within certain rules, which are devised separately. In Schelling's game, the preferences created the rules. 

Second, you have the actors behaving according to said rules, which - before Schelling came along - were unpredictable. The macro-effect of the behaviors do not resemble the individual behaviors, much less the original preferences of the actors. 

In other kinds of rules/preferences scenarios, the macro-effect can be totally unpredictable -- even if the rules are simple and the actors' choices limited. So we get different things happening at various levels of description, but these levels are interdependent. Economies, ecosystems and other complex systems work this way, too. 

This is similar to the lessons of chaos theory offered by Ed Lorenz: small changes in initial conditions can mean big changes throughout the system. Likewise, small changes to the rules can result in consequences we did not or could not anticipate. When one couples the latter insight with the idea of different levels of description (say, micro, mezzo and macro), we have a lifetime of questions for political scientists and economists to try to answer -- hopefully before they have any power.