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On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms

Author

Listed:
  • G. Fagiolo
  • A. Roventini

Abstract

The article considers and compares two modern approaches to the scientific foundation of economic policy. The first one is a part of mainstream economics and involves developing dynamic stochastic general equilibrium models for analyzing business cycles and exogenous monetary shocks. The second one (which the authors prefer) is a creation of "agent-based models" with more realistic assumptions on the behavior and interactions of agents, absence of equilibrium and analytical solutions, but with computer simulations. The article criticizes an equilibrium approach, describes some results of application of agent-based computational economics to the analysis of economic policy and mentions some difficulties arising whenever this new theoretical paradigm is applied.

Suggested Citation

  • G. Fagiolo & A. Roventini, 2009. "On the Scientific Status of Economic Policy: A Tale of Alternative Paradigms," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 6.
    • Handle: RePEc:nos:voprec:y:2009:id:882
    DOI: 10.32609/0042-8736-2009-6-24-47
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    Cited by:

    1. is not listed on IDEAS
    2. Alessio Emanuele Biondo & Roberto Cellini & Tiziana Cuccia, 2020. "Choices on museum attendance: An agent‐based approach," Metroeconomica, Wiley Blackwell, vol. 71(4), pages 882-897, November.
    3. repec:spo:wpmain:info:hdl:2441/53r60a8s3kup1vc9l5643ehjk is not listed on IDEAS
    4. Dosi, Giovanni & Fagiolo, Giorgio & Roventini, Andrea, 2010. "Schumpeter meeting Keynes: A policy-friendly model of endogenous growth and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1748-1767, September.
    5. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
    6. Ricetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Unemployment benefits and financial leverage in an agent based macroeconomic model," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 7, pages 1-44.
    7. Neveu, Andre R., 2013. "Fiscal policy and business cycle characteristics in a heterogeneous agent macro model," Journal of Economic Behavior & Organization, Elsevier, vol. 92(C), pages 224-240.
    8. Riccetti, Luca & Russo, Alberto & Gallegati, Mauro, 2013. "Unemployment benefits and financial factors in an agent-based macroeconomic model," Economics Discussion Papers 2013-9, Kiel Institute for the World Economy (IfW Kiel).

    More about this item

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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