SEI Contact:

Chris West

Telephone: +44 1904 324559

Time-frame: 2013–2014

New Approaches in Economic Modelling for Sustainable Development

Economy-wide economic policy analysis is dominated by computable general equilibrium (CGE) models. However, while popular, CGE models are in fact poorly grounded in theory. The patently unrealistic assumptions that underlie them raise serious questions.

Agent-based economic computational economics (ACE) tackles the problems of CGE models directly, by representing the economy as a set of interacting, heterogeneous agents. While other groups work in ACE, this project takes a unique approach by using both an ABM and a CGE model (developed as ‘toy’ systems for simplicity, but with real-world policy relevance) to explore how the outputs from the two types of models relate to one another under different assumptions.

In doing so, the project aims to bridge the divide between these two modelling approaches, with wide application in economics-based developmental analysis. It contributes to a wider programme of ‘macroeconomics for sustainability', and will provide a platform for a range of environmental and developmental analyses at SEI.