Abstract
A standard macroeconomic premise asserts that the aggregate economy is a single, smart representative agent using dynamic programming. This paper explores an alternative conjecture that the dynamic behavior of markets is often better interpreted as a collection of many heterogeneous, rule-of-thumb agents who are loosely-coupled in smart systems — much like the contrast of a single serial processor with global information versus parallel processors with limited communications. The illustration used in this paper is the contrast between an Euler equation for a manufacturing producer price index and variants of Jacobi solutions of an open-Leontief model of producer prices in a distributed production system.
Views expressed in this paper are those of the authors and do not necessarily represent those of the Board of Governors of the Federal Reserve System or its staff.
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Board, R., Tinsley, P.A. (1996). Smart Systems and Simple Agents. In: Gilli, M. (eds) Computational Economic Systems. Advances in Computational Economics, vol 5. Springer, Dordrecht. https://doi.org/10.1007/978-94-015-8743-3_3
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DOI: https://doi.org/10.1007/978-94-015-8743-3_3
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