Macroeconomics in the Small and the Large

Macroeconomics in the Small and the Large

Essays on Microfoundations, Macroeconomic Applications and Economic History in Honor of Axel Leijonhufvud

Edited by Roger E.A. Farmer

This book honors the work of Axel Leijonhufvud. The topics range from Keynesian economics and the economics of high inflation to the micro-foundations of macroeconomics and economic history. The authors comprise some of the very best economists active today.

Chapter 9:  Macroeconomics with Intelligent Autonomous Agents

Peter Howitt

Subjects: economics and finance, economic psychology, financial economics and regulation, money and banking


9. Macroeconomics with intelligent autonomous agents Peter Howitt INTRODUCTION 9.1 Axel Leijonhufvud has spent much of his distinguished career investigating how a decentralized economy coordinates economic activities. The question is basically the same as the one Keynes (1934) once posed: To what extent, and under what circumstances, particularly under what policy regimes, is the economy self-adjusting? In recent years Leijonhufvud has advocated the use of agent-based computational economics as an approach to the problem.1 The present chapter discusses this methodology and describes an ongoing research agenda aimed at implementing it. As described by Tesfatsion (2006), agent-based computational economics is a set of techniques for studying a complex adaptive system involving many interacting agents with exogenously given behavioral rules. The idea motivating the approach is that complex systems, like economies or anthills, can exhibit behavioral patterns beyond what any of the individual agents in the system can comprehend. So instead of modelling the system as if everyone’s actions and beliefs were coordinated in advance with everyone else’s, as in rational expectations theory, the approach assumes simple behavioral rules and allows a coordinated equilibrium to be a possible emergent property of the system itself. The approach is used to explain system behavior by ‘growing’ it in the computer. Once one has devised a computer program that mimics the desired characteristics of the system in question one can then use the program as a ‘culture dish’ in which to perform experiments. Now the first reaction of many economists upon first hearing about this...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information