Agents, Equations, and Economics

Ron Wallace


Critiques of Neoclassical Economics extend, unsurprisingly, to its mathematical structure. The discussion has largely focused on General Equilibrium Theory (GET), a formalism 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 linked 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.

Published on 11th February, 2022, in Economic Thought Vol 10, No 2, 2021