Chapter 10: Computational Economics
Paola Tubaro 10.1 INTRODUCTION Broadly speaking, computational economics is the use of computerintensive tools and techniques in the study of economic problems, and is at the crossroads between economics and informatics; its models take the form of computer programs that can be run to simulate the behavior of the economic system under study. The origins of the field date back to the first development of calculators in the 1950s, and its areas of application have widened over time as computing power has grown. The core of computational economics used to be the search for numerical solutions of equation-based models and the exploration of new optimization techniques, as reflected in the first volume of the Handbook of Computational Economics (Amman et al., 1996). The dramatic rise in calculation capacity of the last two decades has not only strengthened this line of research, but also fostered the appearance of a novel approach to the study of decentralized market economies. The new subfield, which is central to the second volume of the Handbook (Tesfatsion and Judd, 2006), places emphasis on agents and the dynamics of their interactions, and is often referred to as ‘agent-based computational economics’ (ACE). Among the main lines of development of ACE are, in apparent contrast to conventional economic approaches, a non-Walrasian framework of analysis, spatially distributed transactions, bounded rationality together with agents’ capacity to revise their decisions as interaction plays out, and learning processes. This chapter focuses entirely on ACE. It presents the main features of this area of...
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