Navigating through Economic Complexity: Phase Diagrams & Parameter Sloppiness
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arXiv
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| Format: | Preprint |
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2024
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| _version_ | 1866910747396669440 |
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| author | Bouchaud, Jean-Philippe |
| author_facet | Bouchaud, Jean-Philippe |
| contents | We argue that establishing the phase diagram of Agent Based Models (ABM) is a crucial first step, together with a qualitative understanding of how collective phenomena come about, before any calibration or more quantitative predictions are attempted. Computer-aided *gedanken* experiments are by themselves of genuine value: if we are not able to make sense of emergent phenomena in a world in which we set all the rules, how can we expect to be successful in the real world? ABMs indeed often reveal the existence of Black Swans/Dark Corners i.e. discontinuity lines beyond which runaway instabilities appear, whereas most classical economic/finance models are blind to such scenarii. Testing for the overall robustness of the phase diagram against changes in heuristic rules is a way to ascertain the plausibility of such scenarii. Furthermore, exploring the phase diagrams of ABM in high dimensions should benefit enormously from the identification of ``stiff'' and ``sloppy'' directions in parameter space. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2412_11259 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Navigating through Economic Complexity: Phase Diagrams & Parameter Sloppiness Bouchaud, Jean-Philippe Theoretical Economics Statistical Mechanics We argue that establishing the phase diagram of Agent Based Models (ABM) is a crucial first step, together with a qualitative understanding of how collective phenomena come about, before any calibration or more quantitative predictions are attempted. Computer-aided *gedanken* experiments are by themselves of genuine value: if we are not able to make sense of emergent phenomena in a world in which we set all the rules, how can we expect to be successful in the real world? ABMs indeed often reveal the existence of Black Swans/Dark Corners i.e. discontinuity lines beyond which runaway instabilities appear, whereas most classical economic/finance models are blind to such scenarii. Testing for the overall robustness of the phase diagram against changes in heuristic rules is a way to ascertain the plausibility of such scenarii. Furthermore, exploring the phase diagrams of ABM in high dimensions should benefit enormously from the identification of ``stiff'' and ``sloppy'' directions in parameter space. |
| title | Navigating through Economic Complexity: Phase Diagrams & Parameter Sloppiness |
| topic | Theoretical Economics Statistical Mechanics |
| url | https://arxiv.org/abs/2412.11259 |