Computational economics

Computational economics is an interdisciplinary research discipline that involves computer science, economics, and management science.[1] This subject encompasses computational modeling of economic systems, whether agent-based,[2] general-equilibrium,[3] macroeconomic,[4] or rational-expectations,[5] computational econometrics and statistics,[6] computational finance, computational tools for the design of automated internet markets, programming tool specifically designed for computational economics and the teaching of computational economics. Some of these areas are unique, while others extend traditional areas of economics by solving problems that are tedious to study without computers and associated numerical methods.[7]

Computational economics uses computer-based economic modelling for the solution of analytically and statistically- formulated economic problems. A research program, to that end, is agent-based computational economics (ACE), the computational study of economic processes, including whole economies, as dynamic systems of interacting agents.[8] As such, it is an economic adaptation of the complex adaptive systems paradigm.[9] Here the "agent" refers to "computational objects modeled as interacting according to rules," not real people.[2] Agents can represent social, biological, and/or physical entities. The theoretical assumption of mathematical optimisation by agents in equilibrium is replaced by the less restrictive postulate of agents with bounded rationality adapting to market forces,[10] including game-theoretical contexts.[11] Starting from initial conditions determined by the modeler, an ACE model develops forward through time driven solely by agent interactions. The scientific objective of the method is "to ... test theoretical findings against real-world data in ways that permit empirically supported theories to cumulate over time, with each research building on the work before."[12]

Computational solution tools include for example software for carrying out various matrix operations (e.g. matrix inversion) and for solving systems of linear and non-linear equations. The following journals specialise in computational economics: ACM Transactions on Economics and Computation,[13] Computational Economics,[1] Journal of Applied Econometrics,[14] Journal of Economic Dynamics and Control[15] and the Journal of Economic Interaction and Coordination.[16]