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Agent-Based Computational Economics: A Constructive Approach to Economic Theory

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  • Tesfatsion, Leigh

Abstract

This chapter explores the potential advantages and disadvantages of Agent-based Computational Economics (ACE) for the study of economic systems. General points are concretely illustrated using an ACE model of a two-sector decentralized market economy. Six issues are highlighted: Constructive understanding of production, pricing, and trade processes; the essential primacy of survival; strategic rivalry and market power; behavioral uncertainty and learning; the role of conventions and organizations; and the complex interactions among structural attributes, behaviors, and institutional arrangements. Extensive annotated pointers to ACE surveys, research, course materials, and software can be accessed here: http://www2.econ.iastate.edu/tesfatsi/ace.htm

Suggested Citation

  • Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Staff General Research Papers Archive 12514, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:12514
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    File URL: http://www2.econ.iastate.edu/tesfatsi/hbintlt.pdf
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    References listed on IDEAS

    as
    1. Albin, Peter & Foley, Duncan K., 1992. "Decentralized, dispersed exchange without an auctioneer : A simulation study," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 27-51, June.
    2. Leigh Tesfatsion, 2002. "Agent-Based Computational Economics," Computational Economics 0203001, EconWPA, revised 15 Aug 2002.
    3. Leigh Tesfatsion, 2005. "Agent-Based Computational Laboratories for the Experimental Study of Complex Economic Systems," Computing in Economics and Finance 2005 72, Society for Computational Economics.
    4. Tesfatsion, Leigh, 2007. "Agents come to bits: Towards a constructive comprehensive taxonomy of economic entities," Journal of Economic Behavior & Organization, Elsevier, pages 333-346.
    5. Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 16, pages 831-880 Elsevier.
    6. Epstein, Joshua M., 2006. "Remarks on the Foundations of Agent-Based Generative Social Science," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 34, pages 1585-1604 Elsevier.
    7. Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Handbook of Computational Economics,in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 16, pages 831-880 Elsevier.
    8. Joshua M. Epstein & Robert L. Axtell, 1996. "Growing Artificial Societies: Social Science from the Bottom Up," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550253, January.
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    More about this item

    Keywords

    agent-based computational economics; Learning; network formation; decentralized market economy;

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E - Macroeconomics and Monetary Economics

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