Resource Criticality in Modern Economies: Agent-Based Model Demonstrates Vulnerabilities from Technological Interdependence

John Sherwood (), Anthony Ditta, Becky Haney, Loren Haarsma and Michael Carbajales-Dale
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John Sherwood: Clemson University
Anthony Ditta: University of Chicago Booth School of Business
Loren Haarsma: Calvin College
Michael Carbajales-Dale: Clemson University

Biophysical Economics and Resource Quality, 2017, vol. 2, issue 3, 1-22

Abstract: Abstract Industrialized society will transition away from dependence on non-renewable resources (fossil fuels, in particular) sometime in the foreseeable future. How disruptive this transition will be to the economy and societal well-being is unknown, particularly if there are any sudden resource supply constraints. However, the effects of resource supply constraints on an economy, or models of the interdependent relationship between the economy and natural capital overall have not been thoroughly developed. One problem is that traditional models of the economy assume linear growth, while highly interdependent industrialized economies may behave more like a complex adaptive system with non-linear, path-dependent, and unexpected growth trajectories. Agent-based models have been shown to successfully model important aspects of a complex adaptive economy. This paper uses an agent-based model to demonstrate potential economic impacts for industrialized economies in the face of a sudden resource supply constraint. Economic “agents” mine resources and invent technology. Through trade and specialization, the economy evolves from a collection of self-sustaining, resource-poor agents to a society with a high degree of interdependence and wealth. Economic growth, however, comes with a cost; the interdependence that arises from specialization and trade also leads to a less resilient economy. Unexpected, large economic collapse can arise from a shock to even a single resource, due to each resource’s interdependent role in the economy.

Keywords: Agent-based model; Resource criticality; Technological evolution; Evolutionary complexity; Biophysical economics (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s41247-017-0026-z

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