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Advances in Social Simulation 2015 pp 37–52Cite as

A Cybernetic Model of Macroeconomic Disequilibrium

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Part of the book series: Advances in Intelligent Systems and Computing ((AISC,volume 528))

Abstract

In “On Keynesian Economics and the Economics of Keynes” (1968) Leijonhufvud described his cybernetic vision for macroeconomic microfoundations and the dynamics that move the economy from one equilibrium to another. Here I implement that vision in agent-based model.

I focus on the difference between price-led adjustments (“Marshallian” in the original text) and quantity-led adjustments (“Keynesian”). In a partial equilibrium model the two dynamics lead to the same equilibrium at the same speed through the same path.

In a general equilibrium model the Keynesian dynamics overshoots and undershoots with consequent over-employment and unemployment. The agents within the model act by trial and error using very limited knowledge which I simulate here through the use of PI controllers. When a demand shock is treated with increased labor flexibility or positive productivity shock the result is a deeper recession and longer disequilibrium.

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Authors and Affiliations

  1. George Mason University, Fairfax, VA, USA

    Ernesto Carrella

Authors
  1. Ernesto Carrella
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Correspondence to Ernesto Carrella .

Editor information

Editors and Affiliations

  1. University College Groningen, University of Groningen, Groningen, The Netherlands

    Wander Jager

  2. Faculty of Mathematics and Natural Sciences, Institute of Artificial Intelligence, University of Groningen, Groningen, The Netherlands

    Rineke Verbrugge

  3. Faculty for Social and Behavioural Sciences, Department of Sociology, University of Groningen, Groningen, The Netherlands

    Andreas Flache

  4. Faculty of Spatial Sciences, Department of Spatial Planning and Environment, University of Groningen, Groningen, The Netherlands

    Gert de Roo

  5. Faculty of Economics and Business, University of Groningen, Groningen, The Netherlands

    Lex Hoogduin

  6. Faculty of Mathematics and Natural Sciences, Department of Behavioural Ecology and Self-organisation, University of Groningen, Groningen, The Netherlands

    Charlotte Hemelrijk

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Carrella, E. (2017). A Cybernetic Model of Macroeconomic Disequilibrium. In: Jager, W., Verbrugge, R., Flache, A., de Roo, G., Hoogduin, L., Hemelrijk, C. (eds) Advances in Social Simulation 2015. Advances in Intelligent Systems and Computing, vol 528. Springer, Cham. https://doi.org/10.1007/978-3-319-47253-9_4

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  • DOI: https://doi.org/10.1007/978-3-319-47253-9_4

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  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-319-47252-2

  • Online ISBN: 978-3-319-47253-9

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