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Über dieses Buch

This Palgrave Pivot presents experiments that reveal core dynamics of trade in a complex system. Monetary trade is stripped of all its complications and placed in agent-based models, a complexity research tool capable of reproducing emergent behaviour and evolution. Included are ground-breaking repeatable experiments exploring the impact of evolutionary prerequisites empirically present in markets.

Isolating the core dynamics of trade results in very simple agent-based models. However, decades of complexity research demonstrate that even the simplest systems result in emergent behaviour that is extremely difficult to anticipate. Readers who are only familiar with the linear-system theories and models used to train almost all undergraduate economics students might be surprised to witness price detaching from supply and demand, and extreme poverty and wealth arising in trade systems populated by agents with equal ability and opportunity. Watch as empirical evolutionary prerequisites are introduced and price patterns characterising two different markets – asset markets and speculative markets – emerge irrespective of supply and demand.

In addition to laying the groundwork of monetary trade in a complex system, more complicated models feature mortal reproductive agents. Including ‘living’ populations in economic models reveal how the complexity characteristics of our market economy are impacting impoverishment and starvation.

This book invites anyone interested in economics to join the growing ranks of people who are fascinated by the insights offered by complexity research.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract
This book invites you to explore the foundational forces of trade in a complex system. While complexity science transformed the physical sciences in the 1970s, economics has held fast to its 100-year tradition of using linear-system mathematical models to build the theory presented in undergraduate university courses around the world. As a result, trade in a complex system is under-researched. Furthermore, there is increasing pressure on the economics discipline to broaden its accepted theory, especially as it is taught in university. This book is about expanding our understanding of economic processes by exploring the outcomes of trade in a complex system when all complications are removed. If the economy is a complex system, then this work presents initial experiments revealing the basic theory of trade.
Tim Gooding

Chapter 2. First Nation Transition

Abstract
Useful theories have roots deep in reality. This work was inspired through witnessing the impact of transforming a First Nations community into a capitalistic community. As intended, the community, in aggregate, got richer. However, community rifts intensified, with some people feeling as if they had been bypassed altogether. In fact, many of the endemic ‘modern’ problems found fertile ground in the newly capitalistic community. In searching for practical answers to what I was witnessing, a key research question came into being: in practical terms, what is the root cause of persistent problems plaguing modern societies?
Tim Gooding

Chapter 3. Complexity, Emergence, and Evolution

Abstract
Most economists are not familiar with complexity science as it applies to economics . Complexity and emergent behaviour are broad terms that are not scientifically defined. This chapter outlines how the terms complexity, emergent behaviour, and evolution are being used in this work. While mainly aimed at people who are not familiar with complexity, it also explains how these terms are specifically being used in this work. It also defines two new terms that clarify certain aspects of evolution as it applies to economics, specifically, the ‘fitness test’ and ‘evolutionary strength ’.
Tim Gooding

Chapter 4. Agent-Based Model History and Development

Abstract
Agent-based modelling has a deep rich history. When it began in physics in the 1930s, it immediately resulted in key scientific breakthroughs. Through time, many disciplines both in and outside academia have adopted agent-based modelling for scientific investigation, especially where systems made up of people were concerned. All this makes it an ideal tool with which to investigate the economy.
Tim Gooding

Chapter 5. Netlogo

Abstract
Netlogo is the most common language used to introduce students to multi-agent models. It was designed by academics as a teaching and research tool. While some experienced academics consider Netlogo much like a bicycle with its training wheels still attached, Netlogo offers the advantage of allowing anyone with a personal computer to run and modify these models. This chapter offers a brief overview of how Netlogo works in order to understand the experiments later in the book.
Tim Gooding

Chapter 6. Evolution in Netlogo

Abstract
Wherever less successful heterogeneous people try to emulate those more successful, evolution will result. We know this because these are prerequisites for evolutionary systems . Similar prerequisites are routinely used by scientists, engineers, and industry to create specified parts and systems. What will arise from the resulting evolutionary forces is not always self-evident. This is where agent-based model experiments are most useful. This describes precisely how to place the prerequisites of evolution into a multi-agent economic model and demonstrates some results .
Tim Gooding

Chapter 7. Verifying Model Results

Abstract
Verifying that agent-based model results involve two steps. One is to ensure that the code is sound, and that it is operating according to the experimental design. The second is to ensure that the results are robust and not an artefact of specific code or a particular design. This is a particular challenge when the outcome involves patterns that are not amenable to statistical analysis. This explains steps taken to ensure that the results in this book are robust.
Tim Gooding

Chapter 8. Money Distribution

Abstract
Econophysicists have demonstrated that the physical dynamics of monetary trade systems result in a money distribution equal to 0.5 Gini coefficient. This occurs in efficient trade systems where all agents have equal ability and opportunity. The implication is that a market economy does not distribute money based on merit. The Toy Trader model is introduced, and experiments performed are designed to explore this finding and how different trade aspects might impact money distribution.
Tim Gooding

Chapter 9. System Efficiency

Abstract
It is frequently said that the market economy is the most efficient economic organisation ever devised by human kind. However, numerous complexity experiments indicate that agent computational effort is inversely correlated with system efficiency . The market economy puts consider computation pressure on consumers because of the wide range of choice and prices available in a market economy. The Toy Trader model is used to test whether normal complexity characteristics hold true in monetary trade systems.
Tim Gooding

Chapter 10. Price Basics

Abstract
It is often said that price is determined by supply and demand. Empirical evidence suggests that this is true in the short run. In the long run, time allows for complexity dynamics to become dominant. This chapter examines the behaviour of price in a complex system. Specifically, empirical evolutionary prerequisites present in the markets are introduced to examine their long-term impact.
Tim Gooding

Chapter 11. Evolutionary Price Robustness

Abstract
Having demonstrated the impact of evolution on price patterns, we test its robustness: the code is changed, products are added, and variables altered. To help explain the results, an old experiment called a double auction is built using Netlogo to demonstrate the difference between short-term and long-term pricing dynamics.
Tim Gooding

Chapter 12. Factors Impacting Money Distribution

Abstract
Relatively efficient evolutionary trade systems were robust in reproducing a money distribution equal to a 0.5 Gini coefficient . This chapter explores the money distribution outcome when trade is inefficient in an evolutionary system. The factors introduced are the number of times an agent attempts trades in a given iteration (trade velocity) and how far the agent can detect price in the market.
Tim Gooding

Chapter 13. Introducing Life

Abstract
While the economic system is meant to serve people, distribution failures present no permanent consequences in linear-system economic models as endogenously induced starvation and population changes are not modelled. Metaphoria is an agent-based model that features a ‘living’ population, one where the agents must find and secure food in order to remain alive and breed. All their propensities are evolved, even if this leads to extinction. This enables us to explore starvation and system efficiency in terms of the well-being of the population. It also allows us to directly test the efficiency hypothesis explored in Chapter 8, as Metaphoria can run a hunter/gather economy and a monetary economy using an identical set of agents in an identical environment.
Tim Gooding

Chapter 14. Long-Term Economic Outcome

Abstract
It is a fact that using a ‘living’ population in a model introduces a number of complexities. But is this complication necessary for a sound economic analysis? Common sense tells us that the economy will affect the population, and the population will affect the economy. This chapter explores the outcome of identical processes applied to eternal agents (those used in almost all other economic models) and that of ‘living’ population. The experiments show that introducing a living population shifts several economic graphs. This result suggests that long-term economic outcomes or narratives cannot be determined with confidence in models using eternal agents or eternal populations.
Tim Gooding

Chapter 15. Summary and Final Comments

Abstract
It is almost certain that the economy is a complex system. This research uses experiments to begin the process of building basic economic theory assuming the economy is a complex system. Most importantly, it examines how empirically present evolutionary prerequisites of markets and society go on to form evolutionary processes that can dominate price and distribution. While the linear-system economic theory taught in university courses around the world is useful for short-term analyses, it will likely fail in the long-term if the economy is a complex system. Knowledge of how trade behaves in a complex-system is crucial for any economist or policy-maker designing theory or policies for the long-term.
Tim Gooding

Backmatter

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