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Econ aims to capture important aspects of real world systems, not model them perfectly. You can compare it with CS: big O notation is not useless even though i

Econ aims to capture important aspects of real world systems, not model them perfectly. You can compare it with CS: big O notation is not useless even though in principle the constants in the big O notation could be huge. Turing machines are a useful abstraction even though in real life it is impossible to build one. The criticism by mainstream economists of agent based models, is that they are so flexible you can create almost any kind of behavior you like. That said, the constraints that rationality impose on models don't prevent this either: with enough work you can get any kind of phenomenon you like in an econ model. At the end of the day, economics is hard because people, institutions and technology are complex, much more complex than atoms. If you stuck with it, I'm sure your viewpoint would have softened somewhat. Once you try to actually do economics, you'll see why people made so many assumptions that seemed stupid before.

pseut 13y ago
That's not my impression of the criticism of agent based models and I don't think there's a criticism of the models per se. Computationally intensive models with heterogeneous agents are used in parts of macro (an office neighbor of mine in grad school was using these models to look at efficient taxation, for example). They're not part of the core of macroeconomics because AFAIK they haven't been shown to do better than existing approaches at addressing the fundamental macro issues: the business cycle, monetary policy, forecasting, etc. (I'm not that familiar with the literature, so if there are key papers I'm missing I apologize). I'm repeating this because HN seems to have a disproportionately high number of people working on agent-based models. If you're working on that stuff and you want to take over macro, give new insights on monetary policy. That will do it.
- mc-lovin 13y ago
  The issue is that there just isn't that much data. You collect a bunch of macro level time series variables. Ok now what? No matter how cool or sophisticated your model is, there is just too little data to tell which models actually fit reality. The criticism I describe is what most economists tell me when I bring up agent based models. In practice they mostly just ignore the field.
  - pseut 13y ago
    That's probably a reasonable description for why most macroeconomists don't work on these models and wouldn't advise a student to start working on them, but if the models were giving new insights or understanding, people would pay attention.

pseut 13y ago

That's not my impression of the criticism of agent based models and I don't think there's a criticism of the models per se. Computationally intensive models with heterogeneous agents are used in parts of macro (an office neighbor of mine in grad school was using these models to look at efficient taxation, for example). They're not part of the core of macroeconomics because AFAIK they haven't been shown to do better than existing approaches at addressing the fundamental macro issues: the business cycle, monetary policy, forecasting, etc. (I'm not that familiar with the literature, so if there are key papers I'm missing I apologize). I'm repeating this because HN seems to have a disproportionately high number of people working on agent-based models. If you're working on that stuff and you want to take over macro, give new insights on monetary policy. That will do it.

mc-lovin 13y ago
The issue is that there just isn't that much data. You collect a bunch of macro level time series variables. Ok now what? No matter how cool or sophisticated your model is, there is just too little data to tell which models actually fit reality. The criticism I describe is what most economists tell me when I bring up agent based models. In practice they mostly just ignore the field.
- pseut 13y ago
  That's probably a reasonable description for why most macroeconomists don't work on these models and wouldn't advise a student to start working on them, but if the models were giving new insights or understanding, people would pay attention.