Agent-based computational economics: Difference between revisions
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''' Agent-based Computational Economics (ACE)''' is the computational study of economies |
''' Agent-based Computational Economics (ACE)''' is the computational study of economies |
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modeled as evolving systems of autonomous interacting agents.<ref>'L. Tesfatsion (2003), [http://econ2.econ.iastate.edu/tesfatsi/acewp1.pdf Agent-based Computational Economics]', Iowa State University Economics Working Paper 1.</ref> Starting from initial conditions, specified by the modeler, the computational economy evolves over time as its constituent agents repeatedly interact with each other and learn from these interactions. ACE is therefore a bottom-up |
modeled as evolving systems of autonomous interacting agents.<ref>'L. Tesfatsion (2003), [http://econ2.econ.iastate.edu/tesfatsi/acewp1.pdf Agent-based Computational Economics]', Iowa State University Economics Working Paper 1.</ref> Starting from initial conditions, specified by the modeler, the computational economy evolves over time as its constituent agents repeatedly interact with each other and learn from these interactions. ACE is therefore a bottom-up |
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culture-dish approach to the study of economic systems. It has been applied to research areas like [[asset pricing]],<ref name=arthuretal>B. Arthur, J. Holland, B. LeBaron, R. Palmer, P. Taylor (1997), 'Asset pricing under endogenous expectations in an artificial stock market,' in ''The Economy as an Evolving Complex System II'', B. Arthur, S. Durlauf, and D. Lane, eds., Addison Wesley.</ref> industry dynamics,<ref>R. Leombruni and M. Richiardi (2004), ''Industry and Labor Dynamics: The Agent-Based Computational Economics Approach.'' World Scientific Publishing, ISBN 9812561005.</ref>, [[macroeconomics]]<ref>M. Oeffner (2009), '[http://www.opus-bayern.de/uni-wuerzburg/volltexte/2009/3927/pdf/OeffnerDissohneAnhang.pdf Agent-based Keynesian Macroeconomics]'. PhD thesis, Faculty of Economics, University of Würzburg.</ref>, and [[Marxist economics]],ref> A. F. Cottrell, P. Cockshott, G. J. Michaelson, I. P. Wright, V. Yakovenko |
culture-dish approach to the study of economic systems. It has been applied to research areas like [[asset pricing]],<ref name=arthuretal>B. Arthur, J. Holland, B. LeBaron, R. Palmer, P. Taylor (1997), 'Asset pricing under endogenous expectations in an artificial stock market,' in ''The Economy as an Evolving Complex System II'', B. Arthur, S. Durlauf, and D. Lane, eds., Addison Wesley.</ref> industry dynamics,<ref>R. Leombruni and M. Richiardi (2004), ''Industry and Labor Dynamics: The Agent-Based Computational Economics Approach.'' World Scientific Publishing, ISBN 9812561005.</ref>, [[macroeconomics]]<ref>M. Oeffner (2009), '[http://www.opus-bayern.de/uni-wuerzburg/volltexte/2009/3927/pdf/OeffnerDissohneAnhang.pdf Agent-based Keynesian Macroeconomics]'. PhD thesis, Faculty of Economics, University of Würzburg.</ref>, and [[Marxist economics]],<ref> A. F. Cottrell, P. Cockshott, G. J. Michaelson, I. P. Wright, V. Yakovenko |
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(2009), ''Classical Econophysics.'' Routledge, ISBN 978-0-415-47848-9.</ref> |
(2009), ''Classical Econophysics.'' Routledge, ISBN 978-0-415-47848-9.</ref> |
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Revision as of 02:36, 10 February 2011
Agent-based Computational Economics (ACE) is the computational study of economies modeled as evolving systems of autonomous interacting agents.[1] Starting from initial conditions, specified by the modeler, the computational economy evolves over time as its constituent agents repeatedly interact with each other and learn from these interactions. ACE is therefore a bottom-up culture-dish approach to the study of economic systems. It has been applied to research areas like asset pricing,[2] industry dynamics,[3], macroeconomics[4], and Marxist economics,[5]
Overview
The "agents" in ACE models can represent individuals (e.g. people), social groupings (e.g. firms), biological entities (e.g. growing crops), and/or physical systems (e.g. transport systems). The ACE modeler provides the initial configuration of a computational economic system comprising multiple interacting agents. The modeler then steps back to observe the development of the system over time without further intervention. In particular, system events should be driven by agent interactions without external imposition of equilibrium conditions.[6]
ACE is an officially designated Special Interest Group (SIG) of the Society for Computational Economics.[7] Researchers at the Santa Fe Institute have contributed to the development of ACE.
Example: finance
One area where ACE methodology has frequently been applied is asset pricing. W. Brian Arthur, Eric Baum, William Brock, Cars Hommes, and Blake LeBaron, among others, have developed computational models in which many agents choose from a set of possible forecasting strategies in order to predict stock prices, which affects their asset demands and thus affects stock prices. These models assume that agents are more likely to choose forecasting strategies which have recently been successful. The success of any strategy will depend on market conditions and also on the set of strategies that are currently being used. These models frequently find that large booms and busts in asset prices may occur as agents switch across forecasting strategies.[2][8][9] More recently, Brock, Hommes, and Wagener (2009) have used a model of this type to argue that the introduction of new hedging instruments may destabilize the market,[10] and some papers have suggested that ACE might be a useful methodology for understanding the recent financial crisis.[11][12]
See also
- Computational economics
- Econophysics
- Statistical Finance
- Agent based model
- Multi-agent system
- Macroeconomic model
- ACEGES
References
- ^ 'L. Tesfatsion (2003), Agent-based Computational Economics', Iowa State University Economics Working Paper 1.
- ^ a b B. Arthur, J. Holland, B. LeBaron, R. Palmer, P. Taylor (1997), 'Asset pricing under endogenous expectations in an artificial stock market,' in The Economy as an Evolving Complex System II, B. Arthur, S. Durlauf, and D. Lane, eds., Addison Wesley.
- ^ R. Leombruni and M. Richiardi (2004), Industry and Labor Dynamics: The Agent-Based Computational Economics Approach. World Scientific Publishing, ISBN 9812561005.
- ^ M. Oeffner (2009), 'Agent-based Keynesian Macroeconomics'. PhD thesis, Faculty of Economics, University of Würzburg.
- ^ A. F. Cottrell, P. Cockshott, G. J. Michaelson, I. P. Wright, V. Yakovenko (2009), Classical Econophysics. Routledge, ISBN 978-0-415-47848-9.
- ^ Summary of methods: Department of Economics, Politics and Public Administration, Aalborg University, Denmark website.
- ^ Society for Computational Economics website.
- ^ W. Brock and C. Hommes (1997), 'A rational route to randomness.' Econometrica 65 (5), pp. 1059-1095.
- ^ C. Hommes (2008), 'Interacting agents in finance,' in The New Palgrave Dictionary of Economics.
- ^ W. Brock, C. Hommes, and F. Wagener (2009), 'More hedging instruments may destabilize markets.' CeNDEF Working Paper.
- ^ M. Buchanan (2009), 'Meltdown modelling. Could agent-based computer models prevent another financial crisis?.' Nature, Vol. 460, No. 7256. (05 August 2009), pp. 680-682.
- ^ J.D. Farmer, D. Foley (2009), 'The economy needs agent-based modelling.' Nature, Vol. 460, No. 7256. (05 August 2009), pp. 685-686.
Further reading
- John Duffy (2006), 'Agent-based models and human subject experiments.' Ch. 19 of L. Tesfatsion and K.L. Judd, eds., Handbook of Computational Economics, Vol. 2 (Amsterdam: Elsevier, 2006), pp. 949-1011.
- Sheri Markose, Jasmina Arifovic, and Shyam Sunder (2007), 'Advances in experimental and agent-based modelling: Asset markets, economic networks, computational mechanism design, and evolutionary game dynamics.' Journal of Economic Dynamics and Control 31, pp. 1801-07.
- Shoham, Yoav, and Kevin Leyton-Brown, "Multiagent Systems: Algorithmic, Game-Theoretic, and Logical Foundations". Cambridge University Press, 2009.
External links
- Agent Based Computational Economics - Leigh Tesfatsion's website on ACE at Iowa State University
- JAMEL (a Java Agent-based MacroEconomic Laboratory) - An on-line, interactive agent-based macroeconomic model
- The Use of Agent-Based Models in Regional Science - a study on agent-based models to simulate urban agglomeration
- ACEGES - An on-line, interactive agent-based model of the global energy system