Recently, I discovered the Tycoon$ game on Facebook. It is an economic simulation game, where you build a business and grow your “empire”. It is still in beta, but I found it very refined and completely bug free.
One thing that is really interesting about the game is that it gives us insight into how markets and economies work. Most people who make the rules for an economy (politicians) do not really know the effects of their policies. They have an idea about what they think is right, or what they think will happen. However, these ideas are based on opinion, or the unproven theories of economics.
What can we learn from such a “game”?
I think we can learn a lot more than most people think from a game like this. It has a realistic and functioning market for 24 different commodities. You can submit limit orders and become a commodity trader.
Another thing that it teaches us is how psychology expresses itself in the environment and in the markets. We can see that the big producers of any given commodity come in and sell in large lots (20,000 is the maximum, at this time). Yet the consumers are buying in small lots of hundreds or a few thousand. So, perhaps the market prices are under more influence from the large sellers than the small buyers, at least in the short term.
Another interesting thing to consider is what will happen over the next few months. The game is only a few months old, and hardly known. What will happen if the number of players doubles or quadruples over the next few months? What will happen to prices? Will they go up across the board?
What about automobiles? They cannot be produced by new players due to high capital requirements. However, they are consumed by the Housing Industry, which has a very low short term ROI. I think it is fascinating to analyze these markets and their interactions, and predict what will happen.
Although this simulation does represent a simplified economy, it does give us clear analytical proof about whether our theories are correct. It seems to me that this game, or any other economic simulation of similar complexity is a powerful learning tool.