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

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  • Giovanni Dosi

    () (Scuola Superiore Sant’Anna)

  • Andrea Roventini

    () (Scuola Superiore Sant’Anna
    OFCE, Sciences Po)

Abstract

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.

Suggested Citation

  • Giovanni Dosi & Andrea Roventini, 2019. "More is different ... and complex! the case for agent-based macroeconomics," Journal of Evolutionary Economics, Springer, vol. 29(1), pages 1-37, March.
  • Handle: RePEc:spr:joevec:v:29:y:2019:i:1:d:10.1007_s00191-019-00609-y
    DOI: 10.1007/s00191-019-00609-y
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    Cited by:

    1. Foster, John, 2018. "The Consumption Function: A New Perspective," MPRA Paper 84383, University Library of Munich, Germany.
    2. Dosi, Giovanni & Roventini, Andrea & Russo, Emanuele, 2019. "Endogenous growth and global divergence in a multi-country agent-based model," Journal of Economic Dynamics and Control, Elsevier, vol. 101(C), pages 101-129.

    More about this item

    Keywords

    Macroeconomics; Economic policy; Keynesian theory; New neoclassical synthesis; New Keynesian models; DSGE models; Agent-based evolutionary models; Complexity theory; Great recession; Crisis;

    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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