Tesfatsion, Leigh

Journal of Economic Behavior and Organization Vol. 63 (2007): 333-346.

This essay is an invited comment on Philip Mirowski's essay titled "Markets Come to Bits: Evolution, Computation, and Markomata in Economic Science," also to appear in JEBO. In his usual brilliant and provocative style, Mirowski argues for a constructive approach to economic modeling centered on the computational representation of markets as integrated sets of algorithms that evolve over time. This essay counters that a broader constructive approach to economic modeling can and should be taken. The recent advent of powerful computer technologies supporting Agent-Based Modeling (ABM) renders feasible the computational study of economies modeled as evolving systems of interacting agents. In ABM, an "agent" refers broadly to bundled data and behavioral methods representing an entity constituting part of a computationally constructed world. Examples of possible agent referents include individuals, social groupings, institutions (e.g., markets), biological entities such as crops, and physical entities such as transportation networks and weather. Consequently, ABM provides tremendous opportunities for economists and other social scientists to tailor the breadth and depth of the entities represented in their models to the application at hand. A simple ABM of a two-sector decentralized market economy is used for concrete illustration. Annotated pointers to related work can be accessed here: http://www.econ.iastate.edu/tesfatsi/ace.htm

JEL Classification: C6, D, E