ABSTRACT
In a computational experiment, the researcher starts by posing a well-defined quantitative question. Then the researcher uses both theory and measurement to construct a model economy that is a computer representation of a national economy. A model economy consists of households, firms and often a government. The people in the model economy make economic decisions that correspond to those of their counterparts in the real world. Households, for example, make consumption and savings decisions, and they decide how much to work in the market. The researcher then calibrates the model economy so that it mimics the world along a carefully specified set of dimensions. Finally, the computer is used to run experiments that answer the question. 1
