Agent-based modeling and economic theory: where do we stand?

Mandel, Antoine; Vignes, Annick

doi:10.1007/s11403-014-0132-6

Cited by 22 publications

(12 citation statements)

References 63 publications

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“…The issue of aggregation has mostly been ignored in macroeconomics, mostly by assuming representative agents [97], but this has recently begun to change with the advent of ABM. In order to implement locality and search costs, bounded rationality and heterogeneity among consumers, the possibility for coordination failures [98], and defaults and network effects [99], ABMs have been proposed and especially applied in econophysics in order to explain distributions with fat tails and volatility clustering, thus enabling the analysis of emergent disequilibrium dynamics created by the interactions of heterogenous agents [100,101]. Some of these properties are directly linked to the way different time scales are incorporated in the models [102].…”

Section: Common Groundmentioning

confidence: 99%

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

2015

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By synthesizing stock-flow consistent models, input-output models, and aspects of ecological macroeconomics, a method is developed to simultaneously model monetary flows through the financial system, flows of produced goods and services through the real economy, and flows of physical materials through the natural environment. This paper highlights the linkages between the physical environment and the economic system by emphasizing the role of the energy industry. A conceptual model is developed in general form with an arbitrary number of sectors, while emphasizing connections with the agent-based, econophysics, and complexity economics literature. First, we use the model to challenge claims that 0% interest rates are a necessary condition for a stationary economy and conduct a stability analysis within the parameter space of interest rates and consumption parameters of an economy in stock-flow equilibrium. Second, we analyze the role of energy price shocks in contributing to recessions, incorporating several propagation and amplification mechanisms. Third, implied heat emissions from energy conversion and the effect of anthropogenic heat flux on climate change are considered in light of a minimal single-layer atmosphere climate model, although the model is only implicitly, not explicitly, linked to the economic model.

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Section: Common Groundmentioning

confidence: 99%

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

2015

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“…7 In designing economic applications, many complexity theorists work with agent-based models (ABMs) (e.g. Agar 2005;Ballot, Mandel, and Vignes 2014;Buchanan 2009;Cogliano and Jiang 2014;Farmer and Foley 2009;Li 2013). ABMs allow for the study of how macro-scale patterns develop from thousands or millions of interactions of heterogeneous micro-scale agents, instead of modeling the economy through a series of aggregate equations that may or may not be founded on micro data.…”

Section: The Ecology Metaphor In Abm Modelsmentioning

confidence: 99%

“…However, in terms of the output, there are differences. For ABMs, there have been difficulties adapting model output to policy decisions, owing in no small part to the issue of calibration, or the ability to translate the numbers and patterns put out by the model into statistics that are analogous to observed statistics (Ballot, Mandel, and Vignes 2014). In contrast, DSGE models have been more successful at calibrating the models' output to numbers that can be translated into relevant units (for example, Euros), and orders, so that they more convincingly mimic observed statistics.…”

Section: Dsge and Segregation: From Equilibrium To Emergencementioning

confidence: 99%

Building Better Ecological Machines: Complexity Theory and Alternative Economic Models

Bier¹,

Schinkel²

2017

Preprint

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Computer models of the economy are regularly used to predict economic phenomena and set financial policy. However, the conventional macroeconomic models are currently being reimagined after they failed to foresee the current economic crisis, the outlines of which began to be understood only in [2007][2008]. In this article we analyze the most prominent of this reimagining: Agent-Based models (ABMs). ABMs are an influential alternative to standard economic models, and they are one focus of complexity theory, a discipline that is a more open successor to the conventional chaos and fractal modeling of the 1990s. The modelers who create ABMs claim that their models depict markets as ecologies, and that they are more responsive than conventional models that depict markets as machines. We challenge this presentation, arguing instead that recent modeling efforts amount to the creation of models as ecological machines. Our paper aims to contribute to an understanding of the organizing metaphors of macroeconomic models, which we argue is relevant conceptually and politically, e.g., when models are used for regulatory purposes.

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“…ABM numerically simulate the actions and interactions of a finite number of autonomous agents. They can implement locality and search costs, bounded rationality and heterogeneity among consumers and firms, the possibility of coordination failures, defaults and network ef- fects (Ballot et al, 2014;Battiston et al, 2007;Feng et al, 2012). Usually, these approaches are based on discrete time frameworks and include a distinct sequence of events within each period.…”

mentioning

confidence: 99%

From constrained optimization to constrained dynamics: extending analogies between economics and mechanics

Glötzl

Richters

2019

J Econ Interact Coord

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Since the beginnings of modern economics, economists sought to emulate the revolution in physics initiated by Newton's 'Principia' (1687). Concepts from mechanics have influenced economic models both in terms of methodology and content. The aim of this theoretical paper is to put forward a novel economic modeling framework that extends the analogies between economics and classical mechanics from constrained optimization to constrained dynamics. We introduce the concepts of economic forces and economic power that bear striking resemblance to physical forces and the reciprocal value of mass. In this setup, the change of a variable is determined by the forces agents employ to change it according to their desire, their power to assert their interest, and constraint forces emerging from system constraints. The approach is based on a genuine dynamic out-of-equilibrium analysis and can incorporate heterogeneous agents, prisoner's dilemma situations, and behavioral assumptions different from rationality and utility maximization. Thereby, it seeks to overcome some restrictions inherent to approaches based on optimization under constraint and provide an out-of-equilibrium foundation for equilibrium models. We transform a static textbook exchange model into a dynamic model, and reflect on advantages, extensions and caveats of our modeling approach.

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Agent-based modeling and economic theory: where do we stand?

Abstract: International audienc

Cited by 22 publications

References 63 publications

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

A stock-flow consistent input–output model with applications to energy price shocks, interest rates, and heat emissions

Building Better Ecological Machines: Complexity Theory and Alternative Economic Models

From constrained optimization to constrained dynamics: extending analogies between economics and mechanics

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