What simulation has done for economics and what it might

do

Edmund ChattoeDepartment of SociologyUniversity of Surrey

GuildfordGU2 5XH

Motivation

• Fitting work in with work of economists and simulators

Classification• By technique (GA, NN, Monte Carlo, Stochastic)

• By application area (forecasting, learning, macro policy)

• Other possibilities?

Classification by scientific hierarchy

METHODOLOGY

THEORY

MODELS

DATA

?

Different disciplines use thisdifferently

What is taken as given

New typology

• Casts new light on kinds of simulation• Allows simulators to orient with respect to each other: descriptive not prescriptive

• Casts light on the attitudes of different disciplines to methodology, theory, models and data and, indirectly, on expected attitudes to simulation

Economic application• Objective, quantitative data• Models based on equations linking data

• Theory based on optimisation within a system of constraints

• Methodology: positivist, individualistic, humanistic

• Theory/methodology distinction only made clear by study of history of economics

Trends in• Generality• “Ideological” importance

Data• Calculation(s)• Estimation (Monte Carlo)• POLIMOD• “Aggregation” (SPSS)• Even given “objective” data, the goals and success of these tasks are well defined/uncontroversial

Models• No longer uncontroversial: Can’t take model as given ( “more of the same”)

• Generalisation to n dimensions (but not “difficult” cases)

• Addition of types• Addition of noise• “Safe” applications are an overwhelming majority … why?

Theory and methodology• Problem separating these at moments in time

• Uncertainty versus risk• Altruism• Bounded rationality

New possibilities• Embodied preference• Different models, relative success, evolution

• Autonomy of environment, other agent process (not exogeneity!)

• Alternative knowledge and decision representations (hybrid agents?)

• Integration of partial disciplinary theories

• Simulation removes technical defences of traditional economic method. Empirical defences were always contentious. What is left?

Additional benefits• Clarify objections to simulation also