Autonomous Agents and Economic Complexities: A Philosophical Excursion
Greg Hill
Please cite the paper as:
Greg Hill, (2017), Autonomous Agents and Economic Complexities: A Philosophical Excursion, World Economics Association (WEA) Conferences, No. 2 2017, Economic Philosophy, Complexities in Economics
Abstract
This paper develops a conception of autonomous agents who, lacking the ready-made and complete list of possible states afforded their DSGE counterparts, must envision their own ―state space.‖ Such agents can and must do more than perform constrained optimization exercises; they must also imagine, evaluate, and choose among alternative courses of action. Autonomous agents of this kind tend to hold diverse beliefs about the factors determining the economy‘s past performance, its present state, and the range of its possible trajectories. Insofar as these agents will oftentimes be interacting on the basis of inconsistent beliefs, it‘s reasonable to say that their interactions take place under conditions of general disequilibrium. In developing this alternative scheme of thought, I draw on some ideas from the complexity literature to explain why agents hold diverse views about the economy and to explore how their interactions might play out.
Very good paper. Very clearly-written, I enjoyed reading it. I like the interpretation of the Arrow-Debreu model of general equilibrium as a precise description of the almost inconceivable conditions necessary to avoid any “Keynesian problems.” In fact, this was the point of view Hahn taught in his course on general equilibrium at LSE.
Once diversity of beliefs is introduced results nearer to the real world can be obtained. For instance, this is the case with the quite simple distinction between chartists and fundamentalists, as I mention in my paper for this conference.
The challenge is whether models based on interacting agents with heterogeneous beliefs is something which can be handled without having to resort to very extreme assumptions.
The paper focuses on the philosophical pleasure trip regarding the economic complexities in a nice way. I like the interpretation of general equilibrium in such a nice and an intellectually expression. Paper also discuss the autonomy, autonomous agents, draw the new innovative ideas from the complexity literature. My heartiest congratulations to Prof. Greg Hill for his wonderful contribution in such a nice way.
With due regards…
Yoshinori Shiozawa,
Thank you for your comments. Let me sidestep the “methodology” issue and just summarize by saying that the aim of my paper is to outline a different scheme of thought in which agents *reason* in addition to “calculating,” which is consistent with the actual diversity of views at work in political economies, and which is inconsistent with GE Theory. I’m a novice in the ABM world, but I was hoping that ABM might be a way of modelling the behavior of the autonomous agents in my alternative scheme.
Best regards, Greg Hill
Thank you, Greg
Hill’s paper may be useful as a critique of DSGE models. But I doubt if this line of argument can lead us to a new economics without too much depending rationality of agents.
Hill cites Howitt (2007). His agents behave with “simple rules.” If you admit this, the next thing we should do is to show how a network as big as national and now global economy can function in not so bad way.
Please see my comments and argument I made in relation to Beata Stepien’s short paper uploaded in ResearchGate:
Rejoinder to Methodology…?! Why? Some methodological aspects of the controversy between mainstream economics and institutionalism by Peter Galbács
https://www.researchgate.net/publication/320387119_Rejoinder_to_Methodology_Why_Some_methodological_aspects_of_the_controversy_between_mainstream_economics_and_institutionalism_by_Peter_Galbacs
This is the first paragraph I have given in my comment:
I am rather skeptic about the usefulness of methodology arguments. Reflections on methodology should be directed more to one’s own research and not be directed as criticism against other strands of economics. Criticism must be directed on the contents and logic of the theory and not on its methodology. In this sense, I am sympathetic with Colander’s proposition cited in the epigraph of Stepien’s paper: The debate is how to change economics, not whether it has problems.
Thanks for taking the time to comment.
Let me sidestep the methodology issue and just summarize by saying that the aim of my paper is to outline a different scheme of thought in which agents reason in addition to “calculating,” which is consistent with the actual diversity of views at work in political economies, and which, I believe, is inconsistent with GE Theory. You want “to change economics,” I reccomend thinking about agents along the lines of Aristotle, Wittgenstein, P.M.S. Hacker, or John McDowell – someone other Smith, Thaler, etc. I’m a novice in the ABM world, but I was hoping that ABM might be a way of modelling the behavior of the autonomous agents in my alternative scheme.
p.s. V.V. Chari (2010) wrote, “”If you have an interesting and coherent story to tell,
you can tell it in a DSGE model. If you cannot, your story is incoherent.”
Now, if you’re not already in the DSGE camp, why would you find this argument convincing? Why, in short, would you want to rule out models based on autonomous agents on theses grounds . . . if they are, indeed, grounds at all? Is GLS Shackle’s work ‘INCOHERENT” because it can’t be translated into DSGE?
The mathematical simplicity rather than empirical relevance is the fundamental difference between economics and physics. From physics perspective, Arrow-Debreu model and Lucas model of general equilibrium are just toy models for economic ideology, but not scientific models can be verified by empirical evidence. Therefore, we may develop an alternative framework that is capable of analyzing empirical economic data and addressing pertinent questions in economic analysis.
Choice of mathematical model should not judged by its mathematical beauty and computational simplicity, but empirical relevance and broad scope in empirical analysis. In this regard, we develop a better model of the BIRTH-DEATH PROCESS that is more powerful than RANDOM WALK and BROWNIAN MOTION model in macro dynamics and finance theory. We can directly model herd behavior in financial market by BIRTH ~ buy high (bull camp) and DEATH~ sell low (bear camp), which is very useful in studying Option Pricing and Financial Crisis. In this regard, various belief with numerous agents can be directly observed by transition probability from financial indexes by means of nonlinear master equation in non-equilibrium statistical mechanics.
In short, we agree with author’s vision of VARYING BELIEF among many-agent complex systems, but methodologically, we can simplifying market dynamics by DYNAMIC INTERACTION between BULL CAMP and BEAR CAMP without agent-based simulation model. See. Ping Chen, “Mathematical Representation in Economics and Finance: Philosophical Preference, Mathematical Simplicity, and Empirical Relevance,” in Ippoliti and Chen eds. Methods and Finance, Springer (2017).