EU acknowledges the failure of traditional economics to predict so adopts agent based modelling
“This long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.”
— John Maynard Keynes
A Tract on Monetary Reform (1923), 80.
Traditional economics has failed to predict the knock on effects of the financial crisis says the EU. The Eurace project is designed to remedy this failure, which uses an agent based modelling methodology as an alternative to the rational representative agent model that is a cornerstone of neoclassical economics. The post Progressing from game theory to agent based modelling to simulate social emergence further discusses agent based modelling. My earlier post, titled ‘The G8 protests and the logically inconsistent foundations of neoclassical economics’ discusses how the three basic axioms of neoclassical economics embodied in the rational representative agent are logically inconsistent, making the framework unsound and how agent based modelling offers the economics profession a scientific approach to modelling the economy as opposed to the mathematical axiom-proof-theory approach of neoclassical economics that includes the CGE and DSGE models that are discussed in my posts ‘G8 or G20 Protests and Computable General Equlibrium (CGE) modelling and its Dual Instability Problem‘ and ‘Real Business Cycle (RBC) and Rational Expectations Hypothesis (REH) contributing to the Global Financial Crisis (GFC) and the Dynamite Prizes‘.
The ideas discussed in this article are taken from and elaborated in Adaptive Interactive Expectations.