Computational economics uses computer-based economic modeling for the solution of analytically and statistically formulated economic problems. A research program, to that end, is agent-based computational economics (ACE), the computational study of economic processes, including whole economies, as dynamic systems of interacting agents. As such, it is an economic adaptation of the complex adaptive systemsparadigm. Here the "agent" refers to "computational objects modeled as interacting according to rules," not real people. Agents can represent social, biological, and/or physical entities. The theoretical assumption of mathematical optimization by agents in equilibrium is replaced by the less restrictive postulate of agents with bounded rationalityadapting to market forces, including game-theoretical contexts. Starting from initial conditions determined by the modeler, an ACE model develops forward through time driven solely by agent interactions. The ultimate scientific objective of the method is "to ... test theoretical findings against real-world data in ways that permit empirically supported theories to cumulate over time, with each researcher’s work building appropriately on the work that has gone before."
Computational solution tools include for example software for carrying out various matrix operations (e.g. matrix inversion) and for solving systems of linear and nonlinear equations. For a repository of public-domain computational solution tools, visit here.
^• Scott E. Page, 2008. "agent-based models," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. • Leigh Tesfatsion, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," ch. 16, Handbook of Computational Economics, v. 2, [pp. 831-880]. Abstract and pre-pub PDF. • Kenneth L. Judd, 2006. "Computationally Intensive Analyses in Economics," Handbook of Computational Economics, v. 2, ch. 17, pp. 881- 893. Pre-pub PDF. • L. Tesfatsion and K. Judd, ed., 2006. Handbook of Computational Economics, v. 2, Agent-Based Computational Economics, Elsevier. Description & and chapter-preview
links. • Thomas J. Sargent, 1994. Bounded Rationality in Macroeconomics, Oxford. Description and chapter-preview 1st-page links.
^• W. Brian Arthur, 1994. "Inductive Reasoning and Bounded Rationality," American Economic Review, 84(2), pp. 406-411. • Leigh Tesfatsion, 2003. "Agent-based Computational Economics: Modeling Economies as Complex Adaptive Systems," Information Sciences, 149(4), pp. 262-268Archived April 26, 2012, at the Wayback Machine.. • _____, 2002. "Agent-Based Computational Economics: Growing Economies from the Bottom Up," Artificial Life, 8(1), pp.55-82. Abstract and pre-pub PDFArchived 2013-05-14 at the Wayback Machine..
^• Joseph Y. Halpern, 2008. "computer science and game theory," The New Palgrave Dictionary of Economics, 2nd Edition. Abstract. • Yoav Shoham, 2008. "Computer Science and Game Theory," Communications of the ACM, 51(8), pp.
75-79. • Alvin E. Roth, 2002. "The Economist as Engineer: Game Theory, Experimentation, and Computation as Tools for Design Economics," Econometrica, 70(4), pp. 1341–1378Archived 2004-04-14 at the Wayback Machine..
^Leigh Tesfatsion, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," ch. 16, Handbook of Computational Economics, v. 2, sect. 5, p. 865 [pp. 831-880]. Abstract and pre-pub PDF.
^Journal of Economic Dynamics and Control, including Aims & scope link. For a much-cited overview and issue, see: • Leigh Tesfatsion, 2001. "Introduction to the Special Issue on Agent-based Computational Economics," Journal of Economic Dynamics & Control, pp. 281-293. •
[Special issue], 2001. Journal of Economic Dynamics and Control, Agent-based Computational Economics (ACE). 25(3-4), pp. 281-654. Abstract/outline links.