Approach and development strategy for an agent-based model of economic confidence.

Abstract

We are extending the existing features of Aspen, a powerful economic modeling tool, and introducing new features to simulate the role of confidence in economic activity. The new model is built from a collection of autonomous agents that represent households, firms, and other relevant entities like financial exchanges and governmental authorities. We simultaneously model several interrelated markets, including those for labor, products, stocks, and bonds. We also model economic tradeoffs, such as decisions of households and firms regarding spending, savings, and investment. In this paper, we review some of the basic principles and model components and describe our approach and development strategy for emulating consumer, investor, and business confidence. The model of confidence is explored within the context of economic disruptions, such as those resulting from disasters or terrorist events.

Market disruption, cascading effects, and economic recovery:a life-cycle hypothesis model.

“…Ideally, a household will purchase bonds at a constant rate from age 20 to 60, leave the workforce at age 60, and sell bonds from age 60 to 80 using the proceeds for consumption. Once a household expires at age 80, it is recycled as a new household (heir) of age 20; any bonds held by a household upon expiration are endowed to its heir as a type of accidental bequest (for a discussion of bequests, see Abel 1985 andSprigg et al 2004). …”

“…To better understand such possibilities, we are developing a microeconomic model of economic demand and supply that is subject to terrorism-related impacts (see Sprigg et al 2004).…”