Mini Project 2

(Excerpt from report abstract and introduction)

Herbert Gintis has recently published two papers [1,2] looking at Economic Dynamics using Agent-Based Modelling. We examine, evaluate and extend the Barter Economy he proposes. Flaws in the original Agent-Based implementation are highlighted. We look at the initial behaviour of economy, starting an out of equilibrium situation. Heterogeneity is introduced into Gintis' model. We evaluate the original results, our extensions and the framework itself.

A barter economy [3] is an economy where exchanges of goods or services take place simultaneously, without using money. The key consideration here is the relative evaluation agents, or some central coordinating body places on goods. Bartering is generally divided into axiomatic and strategic theory: the former is a more general set of results, the later focusing on more specific kinds of scenarios. While I focused on Gintis' work on the dynamics of a barter economy, much of the analysis could be applied to his work on the dynamics of a Walrasian economy in [2].

Agent-Based Modelling [4] is a computational approach that models a large number of individual agents' (people, firms, institutions and so on) interactions, usually in an attempt to ask questions about the system as a whole. The ideas involved have been around for decades but is only relatively recently that the computation power has become available to allow these techniques to be widely adopted. However in many respects this highly interdisciplinary field is still in its infancy, with no clearly accepted standards for describing, implementing or analysing models.

[1] Gintis, Herbert. "The Emergence of a Price System from Decentralized Bilateral Exchange" The B.E. Journal of Theoretical Economics 6.1 (2006).

[2] Gintis, Herbert,The Dynamics of General Equilibrium. Economic Journal, Vol. 117, No. 523, pp. 1280-1309, October 2007.

[3] Hart, Keith. "Barter", The New Palgrave Dictionary of Economics. Second Edition. Eds. Steven N. Durlauf and Lawrence E. Blume. Palgrave Macmillan, 2008.

[4] Leigh Tesfatsion, Agent-Based Computational Economics: A Constructive Approach to Economic Theory, Ch. 16, Handbook of Computational Economics, Volume 2, 2006, Elsevier B.V.