AA - Micro-macro 50NC

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WHAT IS IT? ----------- This is an hibrid simulation shell. In fact we have both an euqtion and an agent simulation. The agents own personal very simple and economically based equation on wich bases they choose if and where to buy and work. Then they go to meet the firm, but in the meantime they can obtain informatins from other individual and so change the price immage they have about the real price and salaries quoted by the firms. The economy is a parallel process. Is the sequential math enough? It seems it is not. In fact, on the base of parallel approach, starting from an usual economic model we reach conclusions that are not usual at all. This seems to be only the head of an "iceberg". In fact, every traditional other model could be used. Is this the starting of a new methodology in economics? We do not think it is. It seems to only a deeper and more analytic way of analysing the economic reality. Many Authors have already spoken about the limitation of economic analysis that such an approach will allow to deal with. Therefore, nothing new under the sun. Only the analytical demonstration that this hints were correct. We have different entities in our model: individual, firm, firm_total_demand, Agg_Individual, and Agg_firm. Of course, considering the last two is equal to consider the average values. Take account that if there is only one individual and only one firm the microeconomic and macroeconomic models coincide. Each agent (individual or firm) has its own different level of intercept and coefficient of demand and offer for goods and work. At a first level of approximation, these are randomly fixed for economically significant ranges. We suppose the number of firms is >= that of individuals as it is obvious. Of course, each individual chooses the best firm for him taking into account his firm's price image. We ask each individual in our word on the base of his price image. Thus, for each firm we ask it if the individual have choosen it. Each individual has a price-immage of the real price of the firm as consequence of her information. FORMATION OF AGENTS DEMAND AND OFFER ------------------------------------ Demand andoffere of agents are implicitely obtained on the base of an utility function. For task of semplicity, in this trial we obtained directly the demand and offre functions. It is easy to introduce a direct utility derivation. The demand and offre of firm is obtained one's for all. each firms has a fixed part of demand and offre function for good and work and a random variable part (this regards both the intercept and the coefficient). Therefore, each firm has its proper demand and offer (different production functions). {this is setled on the SETUP procedure} Vice versa, individuals will have a starting demand and offre obtained one's for all {this is setled on the SETUP procedure}. These demand and offre are changed during the run on the base of experiences and the conseguent learning process individuals have. This process could be both based on direct experience or on information obtained from other agents. There are two possibilities: a) only past direct experience; b) direct experience and information obtained. In both case the individual change her value about the "good-for-price" and/or "wage-for-work" offred by each firm. On this base she will choose her best firm. A more complicated model, that is not considered in this work, could be obtained on the base that each individual will choose different firms for working and buying. INFORMATION EXCHANGED BY AGENTS ----------------------------- Of course, the individuals are able to know only their walrassian point. So they can inform others about their happyness relative to that point. If they are not rationad (Walrassian point) they are completly happy. When they are far from this point they are less happy. When they are very far from it they are unhappy. The informationis not crispy but only of level - we consider only 3 levels. They will exchange this information with friends {this is setled on the INFORMATION-EXCHANGE procedure}. Thus, each of them has a list of friends. They consider this information received by friends that are meet during the run, but they attach different random importance to it. Of course, more positive information they receive, more higth is the starting point. Some polar cases: a) Of course, in the case individuals will obtain information from each other individual they meet we will have a complete diffusion of information and after, a while, all the individual will have the same information and preferences. b) If individual does not receive information from others, no preferences modification is introoduced from this side. The only modification will be originated according direct experience, but the individual will not make this experience as she has not any rational motivation to change her idea about which is the best firm. Perhaps the reality seats in the middle. Obviously, the level that this information is used (preferences modification) influences the speed of the process. More if in the friends group every individual has a similar experience we could obtain that the preferences of individuals pertaining to each group will be averaged. THE DETERMINATION OF THE TOTAL DEMAND ------------------------------------- As our agents are rationad, is is possible to summ the total demand of all individual for each level of rationing. Of course, we will hypotise that the rationing is equal for each individual. Different level of rationing will determine different levels of total demand of goods. The same is valid for the case of total demand of work by individuals for goods rationing. This means that in the case of demand, the total demand is the sum of each individual demand for and the total rationing is the summ of individual rationing experimented by individuals. Of course, identical discourse is valid for the firms offer of goods and work. THE PUBLIC EXPENDITURE ------------------------------------- This is the amount of PE for buying goods. For the preferential rationing, when the Public expenditure command is on, the fixed amount of it (10) is subtracted to the amount that the firms put on the market. (see the rule valide for the New-Keynesian Model). Of course, the total amount of goods produced and the respective amount of work necessary, is obtained by the sum of the private exchanged good and the public obtained one. THE DETERMINATION OF THE TOTAL WALRASSIAN POINT FOR INDIVIDUALS AND FOR FIRMS ----------------------------------------------------------------------------- The TWP are the point in wich all individual are not rationed. This means that it is the minimum level af rationing that allow this condition. TH = Max di H TF = Max di F. Some simplyfing assumption ------------------------------------- Each individual will choose the firm for wich to work and from wich to buy on the base of price of good. Each firm divide its offre in equal provision for every customer. These hipothesys are not compulsory, but they have implication on the results. Of course an other simplifing assumption could be that the firm consider the whole demand it meets. This is not very different from the preciding hypootesis, only, in this case is the firm that is optimizing its result and not the individual. In fact if a part of offer is not absorbed by an individual it will be diverted to one other individual asking for a larger quantity. Of course, this is only different from a degree from the aggregated individual hypothesis. Different results obtained from traditional models and their causes ----------------------------------------------------------------------------- When the hypotesis of representative agent helds, the market and each agents are in the same scenario. Therefore the policy impact is similar over each individual and aggregated on the market it-self. Vice versa, when agents are heterogeneous each of them will find its scenario. Therefore, the effect of a policy differes from the one that could be foreseen in the aggregate. As the effect of a policy on one agents demand and offre depends on the level of its starting point (different levels of the multiplicator in the aggregate), we could have so many different levels of "equilibrium" as how many agents there are. This means that they are many cases in which the final effect of a policy in our model contrast the effect that could be grasped by a model based on the representative agent. Of course, our solution is valid only in the particular model here hypothesed. As it is well known from every and each good traditional book of economics the economy is build on homogeneous agents all having the same preferences. All the other are specific cases. Therefore, traditional conclusions remaine in the heart of economists with all the good consequences that this has on the effects of policy they have untill now suggested, effects that are obviously under the eyes of all of us. About this fact, it is possible to see: Domenicantonio Fausto: Economia e finanza della sicurezza sociale, Franco Angeli, Milano, 1973 (con M. Leccisotti); Il sistema italiano di sicurezza sociale, Il Mulino, Bologna, 1978; La politica del debito pubblico, Franco Angeli, Milano, 1978. Ha curato la pubblicazione dei volumi: Public Enternrises, Liguori, Napoli, 1983 (con G. Minervini); L’efficienza dell’amministrazione finanziaria, Il Mulino, Bologna, 1991 (con M. Marrelli); Teoria e fatti del federalismo fiscale, Svimez - Il Mulino, Bologna, 2000 (con F. Pica). Tra gli articoli pubblicati figurano: Gli effetti della tassazione sulle decisioni di investimento, in AA.VV., Le imposte e l’economia dell’impresa, Giannini, Napoli, 1969, pp. 47-185; Aspetti e problemi dell’incidenza delle imposte sui moli papa, "Studi Economici , n.6, 1969, pp. 490-593; Una interpretazione della politica monetaria italiana: 1961-1971, "Rassegna Economica", n. 2, 1975, pp. 397448; An Interpretation of Government Intervention in Health: the Italian Case, in Van der Gaag and M. Perlman (eds.), Health. Economics and llealth Economics, North-Holland, Amsterdam, 1981, pp. 33-43 (con M. Leccisotti); The Market for Government Securities in ltaly. 1961-1971, "Economic Notes", No. 2, 1981, pp. 14-34; The Finance of Italian Public Enterprises, "Annais of Public and Co-Operative Economy", No. 1,1982, pp. 3-23; Expenditure and Tax Illusions, "Economia Internazionale", n. 3-4, 1982, pp. 435-444; The Crisis of the "Weifare State", "Giornale degli Economisti e Annali di Economia", n. 1-2, 1985, pp. 5-16 ( con M. Leccisotti); ltalv, in J.-J. Rosa (ed.), Comparative Health Systems: the Future ofNational Health Care Systems and Economic Analysis, JAI Press, Greenwich, 1990, pp. 211-240; La politica fiscale dalla prima guerra mondiale al repime fascista, in Ricerche per la storia della Banca d’italia, voi. IL, Laterza, Bari, 1993, pp. 3-138; Some Lessons from the Italian Experience with a Tax Reform, in M. Belka and H.-G. Petersen (eds.), Economic Transformation in Poland, Campus Verlag, Frankfurt, 1995, pp. 301-324; La revisione del finanziamento della sicurezza sociale, in Accademia dei Lincei, Problemi della moderna economia del lavoro, Roma, 1996,pp. 199-223; Il federalismo fiscale: un falso rimedio nei caso italiano, "Economia delle Scelte Pubbliche", n. 2-3, 1996, pp. 173-193; The Role of Coercive Choice in the ltalian Tradition in Public Finance, "Rivista Italiana degli Economisti", n. 1, 1998, pp. 3-25; L’intervento pubblico in Italia (1946-1964), in F. Cotula (a cura di), Stabilità e sviluppo negli anni Cinquanta. Problemi strutturali e politiche economiche, Laterza, Bari, 1998, pp. 54 1-652. Some considerations on Representative agents and regimes -------------------------------------------------------- When the number of firms and individual is equal and the representative agents hypothesis holds, if the market is in a regime also each and every agent is in the same regime. Whether a partial hypothesis hols (they are not representative one against the components of the other group - individuals and firms are of different numbers), each and every individual is in the same regime but this must not necessary be the same in which the global market is. When the heterogeneous hypothesis holds, each and every individual could be in a different regime or at different level of rationing. What happens if all or some firms quote the same price even when the Representative agents regime holds? -------------------------------------------------------- Even in the case of representative agents if all or some firms quote the same price individuals are obliged t choose. Of course, they cannot choose on the base of rational considerations. Thus, they must make a random choose. But this random choose is not without consequences. In fact, on this base the number of individuals choosing athe different firms will change and as consequence the offer of goods and work by the firm to each of them will change. The final consequence is that even when representative agents hypotesis holds the economy will not found its equilibrium, but it will oscillate strongly and the total welfare is reduced. This difference depends on the number of individuals and firms. Some main experiments to try. -------------------------------------------------------- We indicate: with Ra representative agents, with Pi Perfect information, with No their absence, whith Pe Public Expenditure (+ = positive, - = negative), and with the first and second number the individuals and the firms respectively. (past-inf 0.8, other-inf 0.5, Interc-Dom1 10, Intercet-off1 45, Interc-w1 -6, Intercet-off1 9, Inf 3, Lim-1-group 1, hmanyfromogr 3, dem_coef -3.07, off_coef -0.92, work_coef_p 5.1 and work_coef_s 7.4). The case NoRaNoPi 4-3 +Pe ( After 190 run it is clear the model oscillates strongly. The individual regimes will vary from keynesian, to neoclassics, repressed inflation, and underconsumption. The Total Aggregate Market is in Keynesian Regime. Of course, as in this case there is a random component, the results of each run will be different. Pleas for Pluralism Esther-Mirjam Sent (University of Notre Dame, US, and Netherlands Institute for Advanced Study in the Humanities and Social Sciences (NIAS)) http://www.btinternet.com/~pae_news/review/issue18.htm Pleas The first stage of the movement that led to the establishment the Post-Autistic Economics Network involved a group of economics students in France publishing a petition in June 2000 under the banner “autisme-économie.”1 Their plea was supported by an appeal from some economics teachers in France. The second stage was launched in September 2000 by the appearance of the first issue of the email newsletter you find in your inbox. By its second issue, the Post-Autistic Economics Newsletter had subscribers from 36 countries, and it currently has over 5000 subscribers from over 100 countries. In November of 2000 http://www.paecon.net went in the air, ushering in further international interest. In 2001, 27 economics Ph.D. students at Cambridge University in England who have come to be known as the “Cambridge 27” issued a petition entitled “Opening Up Economics.” The third stage is where we are now and at which this contribution carefully considers pleas for pluralism that have featured prominently during the previous two stages, as well as before the establishment of the Post-Autistic Economics Network. As Wade Hands (1997b, 194) observes: “The plea for pluralism in economics has been a frequent refrain throughout the history of modern economic thought. This refrain has usually been voiced by those who were outside, or critical of, the mainstream in modern economics.” Eight years before the first stage mentioned in the previous paragraph, in 1992, a group of economists issued a “Plea for a Pluralistic and Rigorous Economics” in an advertisement in the American Economic Review, calling for “a new spirit of pluralism in economics, involving critical conversation and tolerant communication between different approaches. Such pluralism should not undermine the standards of rigor; an economics that requires itself to face all the arguments will be a more, not a less, rigorous science.”2 The announcement had been organized by Geoffrey Hodgson, Uskali Mäki, and D. McCloskey, and signed by forty-four illustrious names amongst which were Nobel laureates Franco Modigliani, Paul Samuelson, Herbert Simon, and Jan Tinbergen. ............ Monism! Most importantly, despite these apparent appeals to pluralism, upon closer scrutiny, the pleas seem to be inspired my monism about theories. This motivation is evidenced, for example by the observation that the first conference of the International Confederation of Associations for Pluralism in Economics (ICAPE) is on the future of heterodox economics, while orthodox economics is considered to be “vapid, exclusionist, and detached from its social and political milieu.” The French students write about neoclassical economics: “We no longer want to have this autistic science imposed on us.” And their teachers concur: “Neoclassicalism’s fiction of a ‘rational’ representative agent, its reliance on the notion of equilibrium, and its insistence that prices constitute the main (if not unique) determinant of market behavior are at odds with our own beliefs.” Using a label introduced by Ronald Giere (forthcoming), the appeals to pluralism on the part of heterodox economics may be seen as an instance of strategic pluralism. Though advocacy of pluralism by the French students, their teachers, and the British students may be couched in metaphysical or epistemological terms, could be primarily inspired by efforts to achieve professional power and dominance. John Davis (1997, 209; original emphasis), therefore, concludes that the motivation of heterodox economists “is not that their own theoretical approaches are also correct — a theoretical pluralist view — but rather than neoclassical economics is mistaken and misguided in its most basic assumptions, and that their own approaches remedy the deficiencies of neoclassicism — a theoretical monist view.” Also against the spirit of pluralism, heterodox economists appear to be offering a rather monist reading of the mainstream. The French students “oppose the uncontrolled use of mathematics,” their teachers “denounce the naïve and abusive conflation that is often made between scientificity and the use of mathematics,” and the British students dispute the “commitment to formal modes of reasoning that must be employed for research to be considered valid.” Which mathematical formalism do they oppose (see, e.g., Hands and Mirowski 1998; Mirowski and Hands 1998)? Is it that of the University of Chicago Economics Department (in particular Milton Friedman and George Stigler), of the Cowles Commission at the University of Chicago (especially Kenneth Arrow and Gerard Debreu), or of the Massachusetts Institute of Technology (most notably Paul Samuelson)? Or is it the mathematical formalism of the game theoretic approach of John von Neumann and Oskar Morgenstern, or of John Nash? And how about efforts to incorporate bounded rationality approaches, behavioral insights, chaos theory, complexity approaches, and experimental methods? As Sheila Dow (2002, 7) suggests: “[M]ainstream economics gives the appearance of a moderate form of pluralism.” By monistically equating orthodox economics with mathematical formalism, therefore, heterodox economists ignore the fragmentation of the mainstream and manoeuvre themselves in a vulnerable position. Concluding Comments If heterodox economists are serious about their advocacy of pluralism, as we hope they are, they need to carefully consider the nature, source, and classification of pluralism.8 And they need to confront the charge that pluralism inevitably leads to an “anything goes” view. They also need to beware of sliding into monism. For instance, an ontological perspective that stresses the patchiness of the world runs the risk of being reduced to monism because it might be consistent with the idea that for every phenomenon there is a single, best account. An epistemological view that involves the hedging of bets may reduce to monism if the long-term goal is a single comprehensive account. An epistemological view that relies on the cognitive limitations of economists may reduce to monism if the limitations are merely delaying the development of a single, complete, and correct theory. If heterodox economists desire pluralism, they need to honor its spirit when offering interpretations of the mainstream. If heterodox economists employ appeals to pluralism strategically in an effort to achieve monism, they leave themselves vulnerable to criticism. Finally, they need to ensure, as stressed by the British students, that the material and social conditions for the flourishing of pluralism are met. Notes 1. A brief history of the Post-Autistic Economics Network is available at http://www.paecon.net/. 2. The advertisement appeared in American Economic Review 82 (2): xxv. 3. Information on ICAPE can be found at http://www.econ.tcu.edu/econ/icare/main.html. 4. The text of the French students’ petition is available at http://www.btinternet.com/~pae_news/texts/a-e-petition.htm. 5. The text of the professors’ petition circulated in France can be found at http://www.btinternet.com/~pae_news/texts/Fr-t-petition.htm. 6. The open letter of the 27 Ph.D. students at Cambridge University may be accessed at http://www.btinternet.com/~pae_news/Camproposal.htm. 7. One of the organizers of the plea, Uskali Mäki (1999), clarifies that some economists who are supporters of free market (object-)economics refused to sign, whereas some economists who are less enthusiastic about free market (object-)economics did sign. He conjectures that “when economists talk about the ‘free market’ of ideas, they do not use the expression in the sense in which it appears in their theories of the goods market” (504). This enables consistency, but eliminates full self-referentiality. 8. Some of these observations draw on a very insightful list of questions about scientific pluralism that was drawn up by Stephen Kellert, Helen Longino, and Kenneth Waters in preparation for a workshop on scientific pluralism. The list is available at http://www.mcps.umn.edu/pluralism/outstanding_questions.html. References Davis, John B. (1997), “Comment”, in Salanti and Screpanti 1997, 207-11. Dow, Sheila C. (1997), “Methodological Pluralism and Pluralism of Method”, in Salanti and Screpanti 1997, 89-99. ———. (2002), “Pluralism in Economics”, Paper presented at the Annual Conference of the Association of Institutional and Political Economics, 29 November 2002. Giere, Ronald N. (forthcoming), “Perspectival Pluralism”, in Stephen Kellert, Helen Longino, and C. Kenneth Waters (eds.), Scientific Pluralism, Minnesota Studies in the Philosophy of Science. Hands, D. Wade (1997), “Frank Knight’s Pluralism”, in Salanti and Screpanti 1997, 194-206. ——— (2001), Reflection Without Rules: Economic Methodology and Contemporary Science Theory. Cambridge: Cambridge University Press. Hands, D. Wade and Philip Mirowski (1998), “Harold Hotelling and the Neoclassical Dream” in Roger Backhouse, Daniel Hausman, Uskali Mäki, and Andrea Salanti (eds.), Economics and Methodology: Crossing Boundaries. London: Macmillan, 322-97 Mäki, Uskali (1999), “Science as a Free Market: A Reflexivity Test in an Economics of Economics”, Perspectives on Science 7 (4): 486-509. Mirowski, Philip and D. Wade Hands (1998), “A Paradox of Budgets: The Postwar Stabilization of American Neoclassical Demand Theory”, in Morgan and Rutherford 1998, 260-92. Morgan, Mary S. and Malcolm Rutherford (eds.) (1998), From Interwar Pluralism to Postwar Neoclassicism, Annual Supplement to Volume 30, History of Political Economy. Durham: Duke University Press. Salanti, Andrea, and Ernesto Screpanti (eds.) (1997), Pluralism in Economics: New Perspectives in History and Methodology. Cheltenham, UK: Edward Elgar. HOW IT WORKS ------------ This section could explain what rules the agents use to create the overall behavior of the model. HOW TO USE IT ------------- This section could explain how to use the model, including a description of each of the items in the interface tab. THINGS TO NOTICE =================================================================================================== 1) The case in which, according to the values of parameter, all agents reach a "Classic" equilibrium regime. A) The case of perfect information a) Of course, in the case of representative agents, indipendently from the number of agents, we obtaine a stable equilibrium result whose level in the consequence of market regime. b) Passing from representative to heterogeneous case introduces oscillations in the model's results. These are more regular with a larger public expenditure for buying goods. The exchange in the case of 4-8 model (4 Individual and 8 firms) is in average at around 17.8 with negative public expenditure (-10). Vice versa, in the case with positive public expenditure (+10) it is in average at around 4.3 (to which we must sum the public obtained goods for obtaining the production). B) the case of non perfect information a) the case with a withdrawl of public expenditure higlights large obscillations as effect of passing of information among agents. The system's dynamics can be easily appreciated from the phase-space diagram. b) the case without public expenditure higlights raghly similar obscillations. c) the case with public expenditure (+10) higlights … obscillations as effect of passing of information among agents. THINGS TO TRY ------------- This section could give some ideas of things for the user to try to do (move sliders, switches, etc.) with the model. EXTENDING THE MODEL ------------------- This section could give some ideas of things to add or change in the procedures tab to make the model more complicated, detailed, accurate, etc. NETLOGO FEATURES ---------------- This section could point out any especially interesting or unusual features of NetLogo that the model makes use of, particularly in the Procedures tab. It might also point out places where workarounds were needed because of missing features. RELATED MODELS -------------- This section could give the names of models in the NetLogo Models Library or elsewhere which are of related interest. CREDITS AND REFERENCES ---------------------- This section could contain a reference to the model's URL on the web if it has one, as well as any other necessary credits or references.

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