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Three Distinct Uses of Agent-based Computational Models in Economics

. report, Brookings Institution, (November 1997)

Abstract

It is argued that three distinct uses of agent-based computational models exist in the social sciences. Only one such use - the simplest - deserves to be called simulation. This use arises when equations can be formulated that completely describe a social process, and these equations are explicitly soluble, either analytically or numerically. In the former case, the agent model is merely a tool for presenting results, while in the latter it is novel kind of Monte Carlo analysis. A second, more commonplace usage of computational agent models arises when equations can be written down but not be completely solved. In this case the agent-based model can shed significant light on the solution structure, illustrate dynamical properties of the model, serve to test the dependence of results on parameters and assumptions, and be a source of counter-examples. Finally, there are important classes of problems for which writing down equations is not a useful activity. In such circumstances resort to agent-based computational models may be the only way available to explore such processes systematically, and constitute a third distinct usage of such models.

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Axtell1997
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