I have been reading up on this after having been introduced this election season by Nate Silver of fivethirtyeight.com. But not having much statistical knowledge, I am a bit baffled by the mechanics of the Monte Carlo technique.
I understand that there is a set of algorithms based on some observation, rules about the environment. In 538’s case, I think it is demographic analysis, donation history, vote history, etc. Then there are variable inputs like current polling. But these inputs are defined, not purely random, they are the source information.
My understanding: at some point, a random distribution of possible results is introduced and then weighed against the algorithms and the inputs to see if it fits the prediction. Is that a proper assessment of what is going on? If so, how/where in the analysis does this random element come about?
I know that the system for 538 is not public, but even an example of a simpler, similar model would help me to grasp this. I understand, for example, the “Battleship” model that is used as an intro on the wiki page for Monte Carlo, but it’s too simple, for the life of me I can’t see how that would apply to a more complex system like Nate’s.
Any elucidation would be gratefully accepted.