Agents, Equations and Economics
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.