Data-Driven Economic Agent-Based Models

A macroeconomic model is described whose structure features the delineation of decision-making at the microeconomic level.Each worker-consumer, firm, or bank takes account of its own position when making decisions.In each transaction, the seller's cash account is credited, the buyer's cash debited, the seller's inventory debited and the transaction added to the appropriate GNP account, thus generating consistent estimates of the flow of funds and the GNP accounts.Each week, firms make production, employment and price decisions, incomes are paid, consumers, firms and government make purchases of goods and make portfolio adjustments.That macroeconomics should be anchored in descriptions of micro-economic behavior is a principle well understood and universally agreed to, although often only loosely honored in practice.This paper describes work in progress on a model of the U.S. economy whose purpose is the forecasting of macroeconomic variables -GNP and its major components, price indexes, interest rates, employment, etc., and whose chief feature is an explicit delineation of behavior at the level of the household, the firm, the bank, the governmental unit.The strategy employed is the construction of a simulated "representative" economy composed in the current version of the model of about 1,000 worker-consumers, six firms, a single bank, a financial intermediary, a fiscal decision maker for a single government and a monetary authority.The computer is employed to keep track of the information about each firm which that firm requires for its own decision-making-its production possibilities, cosi structure, prices of inputs and outputs, inventories, money holdings, other assets, current and past sales, etc. Actions by the firm affect the values of its own decision variables and those of other decision makers.Actions by the firm which contribute to changing the components of the Gross National Product are appropriately recorded as they occur, so that the national accounts can be built up from below, so to speak.The actions of households and the other decision-making units are treated analogously.The computer permits easy depiction of the inter-relation of decision makers' activities, and the combination of these activities into the macroeconomic result.The major inspiration for the present model is the pioneering thought of Guy Orcutt (1960), although this model differs from the work of him and his associates considerably in terms of subject-matter focus, disaggregation of time periods, and econometric methodology.'It is hoped that the model can eventually be used in short-term and mediumterm forcasting, much as a conventional model based on simultaneous linear macroeconomic equations is used.However, the major contribution of the model is expected to be in uses which exploit the features of the model which sets it apart from other macroeconomic models-its delineation of the behavior of micro-units.