A model for a financial asset is constructed with two types of agents. The agents differ in terms of their beliefs. The proportions of the two types change over time according to a stochastic process which models the interaction between the agents. Thus, unlike other models, agents do not...

Assumptions of the uniqueness and stability of general equilibrium in a Walrasian framework have no theoretical justification. This paper argues that the key reason for this is that the Walrasian model treats people as acting independently of one another, especially in their demand behavior....

We show that a class of microeconomic behavioral models with interacting agents, derived from Kirman (1991) and Kirman (1993), can replicate the empirical long-memory properties of the two first-conditional moments of financial time series. The essence of these models is that the forecasts and...

This paper presents a view of the economy as a complex system with heterogeneous interacting agents who collectively organize themselves to generate aggregate phenomena which cannot be regarded as the behavior of some average or representative individual. There is an essential difference between...

This paper argues that macro models should be as simple as possible, but not more so. Existing models are “more so” by far. It is time for the science of macro to step beyond representative agent, DSGE models and focus more on alternative heterogeneous agent macro models that take agent...

In this paper, we consider the extension of the conception of the economic agent as a person who chooses particular actions in relation to his or her social identity. We do this in particular by analysing Akerlof and Kranton's recent models on 'economics and identity' (2000). Amartya Sen has...

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in...