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Modelling Markets Versus Market Economies: Success and Failure

Author

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  • Zsolt Gilanyi

    (Department of Microeconomics, Corvinus University of Budapest, Budapest, Hungary)

Abstract

Non-linear, stochastic, thermodynamic, agent based or network modelling are powerful tools brought from other fields into economics. Applied in almost every sub-field of economics, these tools had however substantial success only in the analysis of financial markets. We suggest that the reason for this is less the insufficiency of these technical tools but rather the incapacity of mainstream economic theory to adequately represent the functioning of modern market economies. We argue that the method of mainstream economics to understand market economies by the help of simultaneous price determination on all markets fails to provide a satisfactory representation of our economies. As a result, when modelling financial markets, the final goal - a satisfactory determination of prices - is achieved; but when modelling market economies, the final goal - a satisfactory representation of modern market economies - is not achieved even if all prices are satisfactorily determined.

Suggested Citation

  • Zsolt Gilanyi, 2005. "Modelling Markets Versus Market Economies: Success and Failure," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 3(2), pages 94-99.
    • Handle: RePEc:zna:indecs:v:3:y:2005:i:2:p:94-99
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    References listed on IDEAS

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    1. Hellwig, Martin F., 1993. "The challenge of monetary theory," European Economic Review, Elsevier, vol. 37(2-3), pages 215-242, April.
    2. Andras Margitay-Becht, 2005. "Agent Based Modelling of Aid," Interdisciplinary Description of Complex Systems - scientific journal, Croatian Interdisciplinary Society Provider Homepage: http://indecs.eu, vol. 3(2), pages 84-93.
    3. Robert U. Ayres & Katalin Martina, s, 1996. "Wealth accumulation and economic progress," Journal of Evolutionary Economics, Springer, vol. 6(4), pages 347-359.
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    More about this item

    Keywords

    economic relation; market concept; credit operation; monetary economy;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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