4. Review of Economic Modeling

Economic system is a large and complex system. It consists of a great number of economic men that interlink and interact with each other, which renders the whole system particular functions and characteristics. To carry out research on economic issues, appropriate models are indispensable tools. Plenty of scholars in the world have done a wide variety of researches based on certain economic modeling techniques. In this chapter, we will provide a brief review of popular models in the area of national economy. To start with, the input–output table will be introduced, since it is the most classical means to express the national economy situations effectively and clearly, and it serves as the foundation of not only some existing economic models but also the Agent Response Equilibrium (ARE) model proposed in this book. Then, we focus on the Computable General Equilibrium (CGE) model and the Agent-Based Computational Economics (ACE) model, which are useful tools that appear frequently in both academic papers and practical applications. In fact, our model is proposed and developed based on the analysis of the strengths and weaknesses of these models. Therefore, we would like to present our knowledge of existing economic modeling methodologies before introducing our model in detail in the following chapters.