Monte Carlo Simulation of Public Sector Spending

I recently finished reading Fooled by Randomness and have been enamored with Monte Carlo simulations.  I recently, as a pilot, tried to simulate spending of New York State County Sheriff department spending.

I used data published by the Office of the State Comptroller which has  spending by chart of account codes.  I sampled all year over year spending and used it to project spending 5 years out.  I ran 10,000 simulations and compared my results to the actual results.

simulation  The jury is still out on this one.  I can say that the further out you get the less reliable the simulations are (which I think is wonderful).  I can also say that the Monte Carlo simulation doesn’t work equally well for all account codes.  I still have some tweaking to do before making anything public. But is has definitely been educational.

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