I will discuss recent progress in numerical modeling of galaxy formation. Cosmological simulations can now resolve galactic structure on the spatial scale of parsecs, and follow the build-up and dissociation of giant molecular clouds. A lot of effort is going into understanding the drivers of turbulence in the interstellar medium and the effects of young stars. I will present a novel approach to modeling galactic star formation as a composition of individual star clusters, which allows new powerful tests of galaxy formation simulations. In a few years we should have fairly reliable predictions for full star formation histories of galaxies.

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