Introduction

Chapter 3 has carefully developed and discussed the main features of the core model of geographical economics. Most importantly, perhaps, the model is coherent: it is a miniature world in which the demand in one region for the manufactures of another region is not imposed beforehand but derived from the income generated in the region by its production and exports to other regions. Despite the care taken in setting up the different aspects of the model as simply and tractably as possible it turns out to be quite complex to study analytically.

This chapter focuses on the possibilities and the advantages and disadvantages of computer simulations to better understand the workings of the core model of geographical economics. In doing so, we will be able to say more on the determination of the long-run equilibrium in the core model. We start by explaining in some detail what computer simulations are, what they can and cannot do, and the specification issues involved in getting them to work. Subsequently, we show how computer simulations can be useful in three ways. First, we demonstrate that simulations allow us to do things one cannot do analytically. In general this is indispensable in more complicated models to get a “feel” for the model. The most important goal of these simulations is to see how certain crucial aspects of the model react to changes in important parameters of the core model. Second, analytical solutions are sometimes possible and simulations can give rise to ideas which can be proven analytically. Of the latter we give two examples, in sections 4.6 and 4.7 below. Third, as we show at the end of this chapter, simulations can be useful in demonstrating that certain ideas or suggestions do not always hold, simply by producing a counter-example.