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Emergent Macroeconomics - An Agent-Based Approach to Business Fluctuations.pdf

October 21, 2009 · Filed Under Social Economic  · Tags: , ,

Taken from Introduction: The conceptual divide between microeconomics and macroeconomics is usually associated in textbooks to the different viewpoints from which the economy is looked at. While the focus of microeconomists is the study of how individual consumers, workers and firms behave, macroeconomics deals with national totals and, in doing that, any distinction among different goods, markets and agents is simply ignored. The methodological device to accomplish such a task is aggregation, that is the process of summing up market outcomes of individual entities to obtain economy-wide totals. However, what macroeconomists typically fail to realize is that the correct procedure of aggregation is not a sum whenever there exists interaction of heterogeneous individuals. Aggregation is therefore a crucial step: it is when emergence enters the drama. With the term emergence we mean the becoming of complex structures arising from simple individual rules (Smith 1937, Hayek 1948, Schelling 1978). The physics taught us that to consider the whole as something more than its constitutive parts is a physical phenomena, not only a theory. Empirical evidence, as well as experimental tests, shows that aggregation generates regularities, i.e. quite simple and not hyper-rational individual rules when aggregated becomes well shaped: regularities emerge from individual “chaos”. This book is a first, modest, step from the economics as an axiomatic discipline toward a falsiable science at micro, meso and macro level. It also tries to go into the details of economic interactions and their consequences for aggregate economic variables. By doing so, we suggest the agent based methodology as a framework for sound microfoundations of macroeconomics1. According to us, mainstream economics by ignoring interaction and emergence, commits what in philosophy is called “fallacy of division”, i.e. to attribute properties to a different level than where the property is observed (game theory offers a good case in point with the concept of Nash equilibrium, by assuming that social regularities come from the agent level equilibrium.)

Contents:

  • Preface, by Joseph Stiglitz
  • Chapter 1. Crucial Issues
    • Introduction
    • Aggregate among Peers – if you please
    • Robinson Crusoe meets Friday
    • Complexity
    • Outline of the book
  • Chapter 2. Stylized facts of industrial dynamics: The distribution of firms’ size
    • Introduction
    • Pareto, Gibrat, Laplace: the statistical analysis of industrial dynamics
    • Unconditional firms’size distribution for pooled international data
    • The size distribution of firms conditional on the business cycle
    • The size distribution shift over the business cycle:
    • does it make any sense?
    • Power laws’ changes in slope
    • A mean/variance relationship for the size distribution
  • Chapter 3. Stylized facts in industrial dynamics: Exit, productivity, income
    • Introduction
    • The exit of firms
    • Productivity and income
    • Power law scaling in the world income distribution
    • Distributional features of aggregate fluctuations
  • Chapter 4. An agent-based model
    • Introduction
    • Heterogeneous interacting agents and power laws
    • Agent based modelling
    • Pareto and Laplace
    • An agent-based model
    • Simulation results: preliminaries
    • Statistical aggregation
    • Summing up
  • Chapter 5. Where do we go from here?
    • Instead of a conclusion
    • Where are we?
    • A hybrid framework
    • Where do we go from here?

Authors: DOMENICO DELLI GATTI – Catholic University of Milan, Italy; EDOARDO GAFFEO – University of Trento, Italy; MAURO GALLEGATI – Università Politecnica delle Marche, Ancona, Italy; GIANFRANCO GIULIONI – University “G. D’Annunzio”, Pescara, Italy; ANTONIO PALESTRINI – University of Teramo, Italy.

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