Consumption & class in evolutionary macroeconomics

Bernhard Rengs,Manuel Scholz-Wäckerle

doi:10.1007/s00191-018-0592-2

Abstract

This article contributes to the field of evolutionary macroeconomics by highlighting the dynamic interlinkages between micro-meso-macro with a Veblenian meso foundation in an agent-based macroeconomic model. Consumption is dependent on endogenously changing social class and signaling, such as bandwagon, Veblen and snob effects. In particular, we test the macroeconomic effects of this meso foundation in a generic agent-based model of a closed artificial economy. The model is stock-flow consistent and builds upon local decision heuristics of heterogeneous agents characterized by bounded rationality and satisficing behavior. These agents include a multitude of households (workers and capitalists), firms, banks as well as a capital goods firm, a government and a central bank. Simulation experiments indicate co-evolutionary dynamics between signaling-by-consuming and firm specialization that eventually effect employment and consumer prices, as well as other macroeconomic aggregates.

Highlights

Evolutionary economists have traditionally focused on the supply side, following the Schumpeterian avenue of economic analysis (Schumpeter 1934). Nelson and Winter (1982), using this approach, created a theoretical core with an analytical apparatus that has inspired, among others, De Bresson (1987), Dosi et al (1988), Saviotti and Metcalfe (1991) and Witt (1992)
Evolutionary macroeconomics offers a new approach by employing computational social simulation of dynamic micro-meso-macro frameworks
We understand evolutionary macroeconomics as an integral part of evolutionary political economy that can shed light on the dynamic effects of specified agent heterogeneity and diversity for typical macro aggregates. These measures imply welfare effects for individual agents in political economy terms, with actual losers and winners. We presented such an evolutionary macroeconomic model – specified along a Veblenian meso foundation – and analyzed the long-run welfare effects for capitalists as well as workers by means of artificial simulation experiments

Summary

Introduction

Evolutionary economists have traditionally focused on the supply side, following the Schumpeterian avenue of economic analysis (Schumpeter 1934). Nelson and Winter (1982), using this approach, created a theoretical core with an analytical apparatus that has inspired, among others, De Bresson (1987), Dosi et al (1988), Saviotti and Metcalfe (1991) and Witt (1992). Nelson and Winter (1982), using this approach, created a theoretical core with an analytical apparatus that has inspired, among others, De Bresson (1987), Dosi et al (1988), Saviotti and Metcalfe (1991) and Witt (1992). Evolutionary economists have traditionally focused on the supply side, following the Schumpeterian avenue of economic analysis (Schumpeter 1934). This Schumpeterian theoretical core was embedded into a macroeconomic framework (in particular, an agent-based one) as shown by Dosi et al (2010). Our contribution aims to close this research gap by highlighting Veblenian consumption dynamics in an agent-based macroeconomic model

Objectives

Discussion

Conclusion