Daniel Little — The similarity space of actor-centered research frameworks

  

Actor-centered sociology	Analytical sociology	Rational choice theory
Social outcomes derive from the actions of socially constituted actors in relations with each other	Explain outcomes as the aggregate result of the actions and interactions of purposive individuals	Individuals behave as economically rational agents. Explain outcomes as the aggregate result of these actions
Attention to “thick” theories of the actor	Desire-belief-opportunity framework for actors (DBO)	Narrow economic rationality: consistent preferences and maximization of utilities
Actors are formed and shaped by the social relations in which they develop	Causal models; commitment to the causal mechanisms approach	Equilibrium models; commitment to mathematical solutions for well-defined problems of choice.
Narrative accounts of the development of social outcomes give actions of the actors	Primacy of Coleman’s boat: explanation occurs from micro to macro and macro to micro	Game theory is used to represent interactions among rational agents
Agnostic about microfoundations	Commitment to requirement of microfoundations	Commitment to requirement of microfoundations

Understanding Society
The similarity space of actor-centered research frameworks
Daniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn and Professor of Sociology at UM-Ann Arbor

Lars P. Syll — Economic models — mistaking beauty for truth

Lars P. Syll’s Blog
Economic models — mistaking beauty for truthLars P. Syll | Professor, Malmo University

Rajiv Sethi — The Agent-Based Method

It's nice to see some attention being paid to agent-based computational models on economics blogs, but Chris House has managed to misrepresent the methodology so completely that his post is likely to do more harm than good.…

What you cannot have in an ABM is the assumption that, from the outset, individual plans are mutually consistent. That is, you cannot simply assume that the economy is tracing out an equilibrium path. The agent-based approach is at heart a model of disequilibrium dynamics, in which the mutual consistency of plans, if it arises at all, has to do so endogenously through a clearly specified adjustment process. This is the key difference between the ABM and DSGE approaches, and it's right there in the acronym of the latter.… 

A typical (though not universal) feature of agent-based models is an evolutionary process, that allows successful strategies to proliferate over time at the expense of less successful ones.…  This rich feedback between environment and behavior, with the distribution of strategies determining the environment faced by each, and the payoffs to each strategy determining changes in their composition, is a fundamental feature of agent-based models. In failing to understand this, House makes claims that are close to being the opposite of the truth… 

For instance, in the canonical learning model, there is a parameter about which learning occurs, and the system is self-referential in that beliefs about the parameter determine its realized value. This allows for the possibility that individuals may hold incorrect beliefs, but limits quite severely---and more importantly, exogenously---the structure of such errors. This is done for understandable reasons of tractability, and allows for analytical solutions and convergence results to be obtained. But there is way too much coordination in beliefs across individuals assumed for this to be considered part of the ABM family. … 

The title of House's post asks (in response to an earlier piece by Mark Buchanan) whether agent-based models really are the future of the discipline. I have argued previously that they are enormously promising, but face one major methodological obstacle that needs to be overcome. This is the problem of quality control: unlike papers in empirical fields (where causal identification is paramount) or in theory (where robustness is key) there is no set of criteria, widely agreed upon, that can allow a referee to determine whether a given set of simulation results provides a deep and generalizable insight into the workings of the economy.…

Rajiv Sethi — thoughts on economics, finance, crime and identity...
The Agent-Based MethodRajiv Sethi | Professor of Economics, Barnard College, Columbia University, & External Professor, Santa Fe Institute

Diane Coyle — Economists and humanity

Peter Smith sent me his new book The Reform of Economics: How the complex systems approach is building a realistic and humane alternative to laissez-faire. In a letter accompanying it, he said he has two motivations. One is to get economics out of the trap of over-simplifying so that models can use linear algebra and thus be made ‘tractable’. This is one of the things that makes complexity economics and agent-based modelling appealing; virtual economies run on a computer do not need to be solved algebraically.…

The book dates the choice of the purely deductive path to Lionel Robbins and his 1935 essay The Nature and Significance of Economic Science. He defined economics as the science of constrained choice, which, “Not only excludes uncertainty, but it also excludes from the scope of economics both institutions and the medium-term evolution of economic systems.” This isolates economics from the institutional framework of the economy, and hence from what determines the availability of resources over time – it makes economics an inherently static subject.

Natural scientists do regard economics as bizarrely non-empirical…

The Enlightened Economist
Economists and humanity
Diane Coyle | freelance economist and a former advisor to the UK Treasury. She is a member of the UK Competition Commission and is acting Chairman of the BBC Trust, the governing body of the British Broadcasting Corporation

Mark Buchanan — Economic orthodoxy is going down … even if most economists don’t yet know it

DSGE on the way out. ABM the wave of the future.

Physics of Finance
Economic orthodoxy is going down … even if most economists don’t yet know it

Mark Buchanan

Lars P. Syll — Macroeconomic challenges

It would be better to just face the truth — it is impossible to describe interaction and cooperation when there is essentially only one actor.

Macroeconomic challenges
Lars P. Syll | Professor, Malmo University

The assumption of representative agents is atomistic in the sense that atoms are indistinguishable elements of a homogenous system that is characterized by timeless invariant relationships that can be captured as mathematical functions — as it physics. However, social systems are not at all like physical systems, are they? 

So why assume atomism in the first place, when it is bound to fail. The only realistic answer I have seen is methodological convenience. Such models are tractable. Modeling complexity is hard.

Chris Dillow — The macroeconomic challenge

These facts are a challenge to both RBC and New Keynesian models. But they have something in common. They stress the heterogeneity of agents: some unemployed respond to benefit changes but most don't; some prices are sticky but others aren't; some firms are big enough to have macro effects, others aren't. This, I fear, means that the problem with conventional macro isn't so much its microfoundations per se as the assumption that these microfoundations must consist in representative agents.

Now, you'll object that any model that tries to embed these five facts will very quickly become very complex. But that's my point - the economy is a very complex system and any theory that doesn't see this is very dubious. It could be that the best way to understand it - if at all - lies in agent-based models rather than conventional DSGE ones.

Stumbling and Mumbling
The macroeconomic challenge
Chris Dillow | Investors Chronicle

Mark Buchanan — Beware of Economists Peddling Elegant Models

Mathematics can be beguilingly elegant. It can also be dangerous when people mistake its elegance for truth.

Bloomberg
Beware of Economists Peddling Elegant Models
Mark Buchanan
(h/t Ryan Harris in the comments)

Tim Harford — Where maths ends, computers begin

Machines have finally made their mark on economic theory with their use in agent-based modelling and simulations

The Financial Times Magazine | Undercover Economist
Where maths ends, computers begin
By Tim Harford

Daniel LiIttle — Actor-centered sociology and agent-based models

Actor-centered sociology (ACS) begins in the intuition that social processes begin in the interactions of socially constructed individuals, and it takes seriously the idea that actors have complex and socially inflected mental schemes of action and representation. So actor-centered sociologists are keen not to over-simplify the persons who constitute the social domain of interest. And this means that they are generally not content with sparse abstract schemata of actors like those proposed by most versions of rational choice theory.

Agent-based modeling (ABM) is a collection of aggregative techniques aimed at working out the aggregate consequences of the hypothetical choices of a number of individuals interacting in a series of social environments. ABM models generally represent the actors' motivations and decision rules very abstractly -- sometimes as economic actors, sometimes as local optimizers, sometimes as heuristically driven decision makers. An ABM model may postulate several groups of actors whose decision rules are different -- predators and prey, landlords and tenants, bandits and generals. The goal is to embody a set of behavioral assumptions at the actor level and then to aggregate the results of the actions and interactions of these actors at a macro level. (Stephen Railsback's Agent-Based and Individual-Based Modeling: A Practical Introduction provides an accessible introduction.)

My question here is a focused one: do these apparently similar approaches to explaining social outcomes actually have as much in common as they appear to at first glance? And the answer I'll suggest is -- not yet, and not enough.

Understanding Society
Actor-centered sociology and agent-based models
Daniel Little | Chancellor for the University of Michigan-Dearborn and Professor of Philosophy

Cuts to the quick about what's wrong with rational choice modeling. Hint: it's too simplistic to be representational.

Chris Dillow — Beyond models

Chris Dillow answers Simon Wren-Lewis. If you are still following this.

Read it at Stumbling and Mumbling
Beyond models
by Chris Dillow | Investors Chronicle