Economic Production as Life: A Classical Approach to Computational Social Science

The paper proposes a simple model of multi-sectorial growth along classical, computational and evolutionary lines where equilibrium in prices and quantities is not presumed, but dynamically attained by the systematic, decentralized operation of economic competition over time. The model thus provides a parsimonious and innovative solution to the classic problem of the dynamic convergence of a competitive economy to equilibrium. The model views economic competition as a statistical process over time that results in the dynamic equalization of prices, industry supply and demand, and inter-industrial profit rates in the aggregate. It is disaggregated by firms under an evolving heterogeneous technology operating under alternative micro-foundations, without any recourse to utility or profit maximization, but instead based on reproduction as fundamental closure. In order to relate macro-level patterns to micro-level observations over time, the theoretical framework re-conceptualizes equilibrium as a stationary property of statistical distributions of micro-economic variables, which allows a more realistic empirical description of the economy beyond the conventional notion of equilibrium as a single-point, rest state. The model generates a variety of stylized facts as macro-level emergent outcomes of the competitive process: price dispersion around the competitive value, a spectrum of profitability differentials respecting cost differences, evolutionary selection of the lowest-cost firm, tent-shaped distributions of profit and growth rates that are consistent with the empirical evidence, cost-plus markup pricing, downward-sloping demand curves, and industry-level business cycles in prices and inventories.