More is different ... and complex! the case for agent-based macroeconomics

Abstract

This work nests the Agent-Based macroeconomic perspective into the earlier history of macroeconomics. We discuss how the discipline in the 70's took a perverse path relying on models grounded on fictitious rational representative agent in order to try to pathetically circumvent aggregation and coordination problems. The Great Recession was a natural experiment for macroeconomics, showing the inadequacy of the predominant theoretical framework grounded on DSGE models. After discussing the pathological fallacies of the DSGE-based approach, we claim that macroeconomics should consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This in turn implies that more is different: macroeconomics cannot be shrink to representative-agent micro, but agents' complex interactions lead to emergence of new phenomena and hierarchical structure at the macro level. This is what is taken into account by agent-based models, which provide a novel way to model complex economies from the bottom-up, with sound empirically-based microfoundations. We present the foundations of Agent-Based macroeconomics and we discuss how the contributions of this special issue push its frontier forward. Finally, we conclude by discussing the ways ahead for the fully acknowledgement of agent-based models as the standard way of theorizing in macroeconomics.

Planetary carambolage: The evolutionary political economy of technology, nature and work

“…7 Agent-based macroeconomic models have received increasing attention in the recent literature. Compare for instance a recently published special issue edited byDosi and Roventini (2019), also featuring a macro ABM with endogenous social class dynamics as discussed previously (Rengs and Scholz-Wäckerle 2019). 8 Brackets added by the authors.…”

The Real-Life Application of Differential Evolution with a Distance-Based Mutation-Selection

“…In addition to the area of engineering optimisation problems, the field of industrial economics is also very popular. In 2019, Dosi et al introduced a comprehensive theoretical survey of the history of agent-based macroeconomics [3]. The authors critically discussed the issues found in macroeconomics from different points of view.…”

Effects of Technological Change and Automation on Industry Structure and (Wage-)Inequality: Insights from a Dynamic Task-Based Model

“…We rely in our analysis on an agent-based modeling approach, which has become a widely used approach for studying issues related to innovation and industrial dynamics from an evolutionary perspective, see, e.g. Nelson and Winter (1982); Dosi et al (1995); Landini et al (2017); Dawid et al (2019), or the survey in Dawid (2006), as well as in labor economics (Neugart and Richiardi, 2018), and macroeconomics (Dawid and Delli Gatti, 2018;Dosi and Roventini, 2019). Several recent contributions have studied different implications of automation using an agent-based approach.…”