The Economy as an Agent-based Whole--Simulating Schumpeterian Dynamics

Abstract

Schumpeter's view on the dynamics of economic systems has regained topicality as an early contribution to the complexity view in economics. The aim of this paper is to test some of the ideas of Schumpeter using an agent-based computational model. As in the early work of Schumpeter, the model presented assigns a central role to entrepreneurs, and through mechanisms involving creative destruction, the model displays cyclical behavior around a growth path. Focus will be placed on the role of the bankruptcy mechanism in selecting winners and exiting losers.