Agents, Equations and Economics

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Abstract

Critiques of Neoclassical Economics extend, unsurprisingly, to its mathematical structure.  The discussion has largely focused on General Equilibrium Theory (GET), a set of differential equations developed by Léon Walras over a century ago.  Internally consistent, but highly unrealistic, GET lacks predictive power, and has been a historical failure.  As an alternative, this article proposes a methodology largely developed by Gräbner et al. (2019), in which Agent-Based Models (ABMs) are correlated with existing Equation-Based Models (EBMs) as a means of developing a more powerful formalism.  The approach is illustrated by application to the Arrow-Debreu (AD) model of Neoclassical theory, and the Kuznets Curve of Developmental Economics.  Broader implications for the social and natural sciences are briefly considered.

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