More is Different... and Complex! The Case for Agent-Based Macroeconomics

Giovanni Dosi and Andrea Roventini

LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy

Abstract: This work nests the Agent-Based macroeconomic perspective into the earlier history of macroeconomics. We discuss how the discipline in the 70's took a perverse path relying on models grounded on fictitious rational representative agent in order to try to pathetically circumvent aggregation and coordination problems. The Great Recession was a natural experiment for macroeconomics, showing the inadequacy of the predominant theoretical framework grounded on DSGE models. After discussing the pathological fallacies of the DSGE-based approach, we claim that macroeconomics should consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This in turn implies that more is different: macroeconomics cannot be shrink to representative-agent micro, but agents' complex interactions lead to emergence of new phenomena and hierarchical structure at the macro level. This is what is taken into account by agent-based models, which provide a novel way to model complex economies from the bottom-up, with sound empirically-based micro-foundations. We present the foundations of Agent-Based macroeconomics and we discuss how the contributions of this special issue push its frontier forward. Finally, we conclude by discussing the ways ahead for the fully acknowledgement of agent-based models as the standard way of theorizing in macroeconomics.

Keywords: Macroeconomics; Economic Policy; Keynesian Theory; New Neoclassical Synthesis; New Keynesian Models; DSGE Models; Agent-Based Evolutionary Models; Complexity Theory; Great Recession; Crisis (search for similar items in EconPapers)
Date: 2019-01-11
New Economics Papers: this item is included in nep-cmp, nep-hme, nep-hpe, nep-mac and nep-pke
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (111)

Downloads: (external link)
http://www.lem.sssup.it/WPLem/files/2019-01.pdf (application/pdf)

Related works:
Journal Article: More is different... and complex! the case for agent-based macroeconomics (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ssa:lemwps:2019/01

Access Statistics for this paper

More papers in LEM Papers Series from Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy Contact information at EDIRC.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).