Many who have been exposed to Monte Carlo simulation learned about it in the context of financial modeling such as asset management, cash flow analysis, or actuarial study. And that’s with good reason: The applications of Monte Carlo simulation for giving valuable insights into areas of financial uncertainty are limitless. This is part of the reason why platforms like Lumivero’s @RISK are embraced in such disparate fields as banking, construction, manufacturing, aerospace, and pharmaceuticals.
Yet there is another aspect of Monte Carlo simulation that receives less attention, and that is its contribution to overall public living standards around the world. A quick scan of recent headlines in the fields of healthcare and economics highlight this point.
The U.S. opioid crisis is persistent, complex, and highly destructive. A May 2022 research article published in the Proceedings of the National Academy of Sciences (PNAS) entitled “Modeling the evolution of the US opioid crisis for national policy development” applies a methodolgy leveraging Monte Carlo simulation to better understand the root causes of the crisis. This simulation model “replicates how risks of opioid misuse initiative and overdose have evolved over time…and suggests how those risks may evolve in the future, providing a basis for…analyzing potential policy impacts and solutions.”
Looking beyond the U.S., the Brookings Institute published an article in May 2022 entitled “Financial resilience in small states: Lessons from Eswatini.” In it, the authors – both employed by World Bank and @RISK users – examine the sensitivity of small nations to external shocks such as wars, natural disasters, and COVID-19. Using Monte Carlo simulation, the authors analyzed different risk-layering financial strategies to mitigate the impacts of such uncontrollable events.
Finally, Monte Carlo simulation continues to be implemented to better predict the path of COVID-19. In “COVID is no gamble: physics-inspired simulations predict waves in four countries,” published in May 2022 in The Conversation, the author likens the movement and interactions of people to the behaviors of subatomic particles. The application of Monte Carlo to better understand these interactions – a technique established in physics – has led to measurably accurate models of COVID spread. These insights, in turn, enabled the researchers to identify the most effective types of mitigation and prevention strategies for certain countries before the latest wave hit.
All of these examples align with our experience at Lumivero, where @RISK and the DecisionTools Suite have been used for everything from disease diagnosis to endangered species preservation. Food for thought.
Learn more about using Monte Carlo simulation for good in our @RISK and DecisionTools Suite case studies.