Edited by Robert Geyer and Paul Cairney
Chapter 25: Agent Based Modelling and the global trade network
In the aftermath of globalization, the global economic system and global trade have become ever more important. This was highlighted further after the recent economic crisis which spread amongst nations like a viral epidemic. The global economy presents one of the most complex systems we know, and the global trade network is a complex system for several reasons. First, the global economy is a network of autonomous agents with multiple levels of properties, characteristics or dimensions. Some of these dimensions are geographic, social, political and cultural. As a general rule, it might be natural to think that geographic neighbours are also strong economic partners with tightly coupled economies, but there are many exceptions to this rule for historical reasons. Global economy has a long history and is path-dependent like many complex physical systems that depend on initial conditions that are difficult to measure accurately. The global economy is an adaptive system, as it has many agents such as sovereign nations and multinational companies that are able to observe their state and adapt accordingly. It can be defined as self-organized, as the global economy has no central controller that can turn levers and change the course of the global economic system; even though there are several global institutions, they have not been able to prevent crises emerging frequently in the recent century. Global trade links between nations provide positive as well as negative feedback, creating a far from stable network.
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