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Dear Colleague,
I hope you are safe and well and coping with a tough January.
We have just launched the 50th publication in our series of Rebuilding Macroeconomics research outputs, all of which can be accessed here.
This landmark publication is one of a pair of papers (see below) co-written by Paul Beaudry, Dana Galizia and Franck Portier. They show how social interactions in simple macro models can lead to emergent aggregate phenomena quite different from individuals acting in isolation. Their closing blog can be found here.
Emergent aggregate phenomena are often illustrated with pictures of magnificent starling murmurations, but of course the most famous metaphor in economics is Adam Smith’s ‘invisible hand’.
While mentioning emergence, let me remind you that if you are planning to enter our ‘Complexity in Macroeconomics’ competition the closing date is the end of this month.
We particularly welcome applications from young scholars, and I would be grateful if you would forward the competition details below to anyone who may be interested.
Thank you and best wishes,
Angus Armstrong
Director, Rebuilding Macroeconomics
Please spread the word if you know friends and colleagues who would like to engage with Rebuilding Macroeconomics by forwarding this newsletter and invite them to subscribe here. You can follow all of our news through our website, www.rebuildingmacroeconomics.ac.uk, on Twitter and YouTube.
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50th Rebuilding Macro Publication
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All our working papers, discussion papers and special issue contributions can be found here.
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Publication No. 50: Dynamic Cooper and John's Economies: The Role of Coordination Failures and Accumulation in Equilibrium Emergent Phenomena
by Paul Beaudry, Dana Galizia and Frank Portier
We study the type of equilibria that emerges when one increases the level of inter-actions between agents in a dynamic extension of the Cooper and John’s [1988] model.In the model, agents exert an effort that accumulates into a stock. The payoff function V depends on individual effort, individual stock, but also possibly on the aggregate level of effort, as capturing interactions between agents. Three features of the payoff function V will be relevant: how does the aggregate level of effort impact marginal value of individual effort or marginal value of individual stock; whether interactions are under the form of complementarities or substitutabilities; and finally whether past accumulation increases or decreases current incentives to make effort. Depending on those properties, we show how hysteresis, limit cycles and sunspots can emerge from interactions.
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Publication No. 49: UK Emergent Equilibrium and the Role of Forward-Lookingness in a Dynamic Macroeconomic Model with Weak Complementarities
by Paul Beaudry, Dana Galizia and Frank Portier
We propose a reduced form model of accumulation and interactions between agents.The model can be seen either as an Agent-Based model or as the DSGE one, depending on how forward-looking the agents are. When complementarities between agents are increased (but stay weak in the sense that there are no multiple period-t equilibria), non trivial dynamic properties can emerge, depending on three mechanisms: the sign of the effect of past accumulation for current actions, the strength of sluggishness in actions and the strength of the forward looking behaviour of economic agents. Depending on the relative strength of those three forces, hysteresis, limit cycles of sunspot equilibria can emerge. Our results show that complementarities in actions are key for the emergence of fluctuations in otherwise stable and non-oscillating economies.
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If you are planning to enter our ‘Complexity in Macroeconomics’ competition the closing on 31 January 2021.
We particularly welcome applications from young scholars, and I would be grateful if you would forward the competition details below to anyone who may be interested.
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