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Micro-Macro Connected Stochastic Dynamic Economic Behavior Systems

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  • George Judge

    (ARE, Graduate School and Giannini Foundation, 207 Giannini Hall, University of California Berkeley, Berkeley, CA 94720, USA)

Abstract

In this paper, we borrow some of the key concepts of nonequilibrium statistical systems, to develop a framework for analyzing a self-organizing-optimizing system of independent interacting agents, with nonlinear dynamics at the macro level that is based on stochastic individual behavior at the micro level. We demonstrate the use of entropy-divergence methods and micro income data to evaluate and understand the hidden aspects of stochastic dynamics that drives macroeconomic behavior systems and discuss how to empirically represent and evaluate their nonequilibrium nature. Empirical applications of the information theoretic family of power divergence measures-entropic functions, interpreted in a probability context with Markov dynamics, are presented.

Suggested Citation

  • George Judge, 2018. "Micro-Macro Connected Stochastic Dynamic Economic Behavior Systems," Econometrics, MDPI, vol. 6(4), pages 1-14, December.
    • Handle: RePEc:gam:jecnmx:v:6:y:2018:i:4:p:46-:d:187923
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    References listed on IDEAS

    as
    1. George Judge, 2016. "Econometric Information Recovery in Behavioral Networks," Econometrics, MDPI, vol. 4(3), pages 1-11, September.
    2. Tesfatsion, Leigh, 2006. "Agent-Based Computational Economics: A Constructive Approach to Economic Theory," Handbook of Computational Economics, in: Leigh Tesfatsion & Kenneth L. Judd (ed.), Handbook of Computational Economics, edition 1, volume 2, chapter 16, pages 831-880, Elsevier.
    3. David F Hendry & John N J Muellbauer, 2018. "The future of macroeconomics: macro theory and models at the Bank of England," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 34(1-2), pages 287-328.
    4. Joseph E Stiglitz, 2018. "Where modern macroeconomics went wrong," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 34(1-2), pages 70-106.
    5. Charlotte Bruun, 2003. "The Economy as an Agent-based Whole--Simulating Schumpeterian Dynamics," Industry and Innovation, Taylor & Francis Journals, vol. 10(4), pages 475-491.
    6. Wagner, Richard E., 2012. "A macro economy as an ecology of plans," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 433-444.
    7. Douglas J. Miller & George Judge, 2015. "Information Recovery in a Dynamic Statistical Markov Model," Econometrics, MDPI, vol. 3(2), pages 1-12, March.
    8. Leonardo Bargigli & Andrea Lionetto & Stefano Viaggiu, 2013. "A Statistical Equilibrium Representation of Markets as Complex Networks," Working Papers - Economics wp2013_23.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    9. Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521532723, September.
    10. Bargigli, Leonardo & Tedeschi, Gabriele, 2014. "Interaction in agent-based economics: A survey on the network approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 399(C), pages 1-15.
    11. Domenico Gatti & Edoardo Gaffeo & Mauro Gallegati, 2010. "Complex agent-based macroeconomics: a manifesto for a new paradigm," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 5(2), pages 111-135, December.
    12. Bhattacharya,Rabi & Majumdar,Mukul, 2007. "Random Dynamical Systems," Cambridge Books, Cambridge University Press, number 9780521825658, September.
    13. Tiziano Squartini & Enrico Ser-Giacomi & Diego Garlaschelli & George Judge, 2015. "Information Recovery in Behavioral Networks," PLOS ONE, Public Library of Science, vol. 10(5), pages 1-11, May.
    14. George Judge, 2015. "Entropy Maximization as a Basis for Information Recovery in Dynamic Economic Behavioral Systems," Econometrics, MDPI, vol. 3(1), pages 1-10, February.
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