Established macro-economic models used for economic policy analysis, but also
for the evaluation of climate policies, often are neoclassical general
equilibrium models. Even though these models are based on comprehensive
empirical databases and allow the linking of economic theory with physical
resources and different types of environmental impacts, equilibrium models underly severe methodological and theoretical restrictions. In the context
of sustainability transitions, particularly three shortcomings were emphasized,
namely: (i) the inability to deal with uncertainty, (ii) the
assumed homogeneity, blindness to distributional aspects and alternative
welfare indicators, (iii) the abstract representation of
technological, socio-economic and behavioral change.
In this paper, I review established resource economic simulation
models, discuss the contributions and shortcomings of these modeling approaches
for the understanding of climate change and mitigation policies.
In the second part, I discuss the need of
alternative approaches when analyzing large-scale socio-economic transition
processes as required to overcome environmental pressure and resource scarcity.
I introduce to evolutionary economics theory and give an overview of alternative modeling
approaches with a focus on agent-based models (ABM). I discuss
how ABMs can contribute to overcome the above mentioned
shortcomings in established models. I show how
these models can be used to analyze policies of sustainable transitions
and how alternative welfare indicators can be incorporated. I conclude by giving
an overview on the remaining challenges and perspectives of agent-based macro-economics.
This media entry was a contribution to the special session „Macro-economic modeling of sustainability transitions“ at the 5th International Degrowth Conference in Budapest in 2016.