# Hermetic Engine | Agent-Based Economic Simulation Source: https://www.vcesr.com/hermetic-engine # Hermetic Engine Hermetic is VCESR’s economic simulation engine. It powers the economy in Boom and Bust and the economic experiments in Noscere. [Read the model briefing](https://www.ministersdilemma.com/#model) [Discuss a simulation](https://www.vcesr.com/contact) ![Hermetic Engine logo](https://www.vcesr.com/assets/official-hermetic-engine-logo.063502c1e2.webp) ## How Hermetic models an economy Hermetic connects decisions with financial accounts and tracks how their effects carry into later quarters. ### Agents make decisions Households, firms and banks respond from their own positions. Spending, production, lending and investment emerge from decisions distributed across the economy. ### The accounts reconcile A stock-flow-consistent ledger records payments and counterparties. Financial assets and liabilities are tracked together, keeping economic changes connected to who holds the resulting claims. ### Quarters connect over time A projection layer connects output, inflation and exchange rates with demand, credit, employment, reserves and debt. A policy change can continue working through later quarters. ## Trace the transmission of a policy Interest rates, lending conditions and public finances operate through institutions and balance sheets. ### Choose an instrument Policy rates, liquidity operations, bond auctions and foreign-exchange intervention change financial conditions. ### Follow the responses Banks, firms and households face different constraints as financing conditions and expectations change. ### Inspect the consequences Compare the resulting production, prices, employment, credit and debt across subsequent quarters. In Boom and Bust, the player receives published statistics and uncertain forecasts. The underlying state of the economy is distinct from what the ministry can measure. That information problem is part of the decision. ## Compare economic decisions from the same starting point Compare a policy or shock with a baseline over the same quarters. Follow the consequences for production, prices, employment and the financial accounts. ### Set the starting conditions Define the economy’s initial balance sheets and economic conditions. Record which inputs are observed and which are estimated. ### Change a policy or shock Specify what changes and when it starts. Compare a tax change, a different interest-rate path or a disruption to demand. ### Trace the consequences Follow how households, firms and banks respond. Compare immediate effects with changes that carry into later quarters. A change to lending conditions can affect firms’ investment and production. The resulting changes to income and spending feed back into demand and the next period’s accounts. ## Review the economic assumptions Simulation results depend on the calibration, behavioural rules and scenario. Those choices need to be examined alongside the outcomes. ### Calibration and behaviour Distinguish observed starting conditions from assumptions about how agents respond. Review how consumption, investment and lending decisions are represented. ### Sensitivity and validation Check how conclusions change with uncertain economic inputs or behavioural assumptions. Compare model behaviour with available observations and identify where further evidence is needed. ## Where Hermetic is used ### [Boom and Bust](https://www.vcesr.com/boom-and-bust) Hermetic simulates the economy you govern from the finance minister’s desk. Changes to taxes, spending and credit affect production and the public accounts. ### [Noscere](https://www.vcesr.com/vcesr-educator) Hermetic powers Noscere’s economic experiments. Students can start from the same dated conditions, change a policy and compare the resulting paths. ## About the engine and its models What does Hermetic stand for? Heterogeneous, Expectational, Reconciled, Macro-Economic, Temporal Investment Cycle. The name reflects the architecture’s emphasis on different agents, expectations, consistent accounts and change over time. What does an economic simulation establish? A simulation result follows from the model, calibration and scenario. Empirical forecasting or policy use requires a defined application, data checks and independent validation. The game demonstration does not establish that validation. Can we commission a model? Contact us with your research question, audience and required outputs. We can discuss a tailored modelling engagement, including assumptions, documentation and validation requirements. Where can I see it in action? The public [Boom and Bust gameplay trailer](https://www.vcesr.com/boom-and-bust#trailers) and the official model briefing show Hermetic’s economic simulation in the game. You can also explore its teaching application in [Noscere](https://www.vcesr.com/vcesr-educator). ## Discuss an economic simulation Tell us the economic decisions your audience needs to explore and the relationships you want to represent. [Discuss your simulation](mailto:contact@vcesr.com?subject=Hermetic%20simulation%20enquiry)