Decisions and macroeconomics: development and implementation of a simulation game

“Steer the economy” is an interactive game that shows the relationship between company decisions and macroeconomic dynamics. In this real time computer network simulation game the interaction between the players determines the macroeconomic results and players see within a short period the long-term consequences of their strategic decisions.For a lot of students macroeconomics is very abstract. It is difficult for them to imagine that the theories are fundamentally about the coordination of human decisions. A simulation game called “Steer the economy” has been developed that creates the possibility for students to make the decisions of the firms that are implicit in macroeconomic models. The game consists of a computer network where players manage their own company for about 150 months. The players make decisions about price, wage, labor demand, and investment. All players together are the complete production sector of the economy. Consumption, government and the Central Bank are incorporated in the computer model and can be manipulated by the game leader. The computer model is consistent with both neoclassical and Keynesian theory; when the game leader does not interfere, the stability of the economy depends completely on the decisions of the players. While in theory there is a rational expectations equilibrium growth path, it will never happen because of imperfect information. The students have to explain unemployment, inflation, investment, etc., as a consequence of their own decisions and expectations. They can increase the profits of their companies in the game by analyzing micro- and macroeconomic dynamics in the game economy. A system of feedback is necessary to generate the necessary skills.