Re: Hungarian SugarScape -- rigor

[manor]

> Yes, these two families were inspired by the interesting but tantalizingly
> casual E&A models in their Sugarscape book.

Another example which disturbed me quite a bit was an argument for price
regulation based on some very very simplistic simulations. The implication
is along the following lines - if agents are only allowed to trade with their
immediate neighbours the market becomes less efficient, and there is price
dispersal. To counter this effect of such 'far-from-equilibrium' models we
need price floors and ceilings (some quotes are provided below):

------------------------------------------------------------------------

<Page 114>
 "The statistical character of the price equilibrium produced by
  bilateral trade algorithm T is very different from the usual
  general equilibrium notion."

<page 114>
 "Since agents are unable to trade with anyone other than their
  neighbors, there is always some 'pent-up' demand that goes
  unfulfilled."

<page 116>
 "Here we see that even though T produces exchanges that are nearly
  Pareto-optimal locally, the resulting market has far from optimal
  welfare properties globally."

<page 136>
 "Therefore, a clear role for economic regulation may exist when
  prices are heterogeneous."

------------------------------------------------------------------------

I find it worrying that in a world with newspapers, phones, faxes
etc. etc. E&A would only allow me to trade with 4 agents tops --
I am not allowed to shop around and I am not allowed to engage
in more than 4 trades per turn. Sure, if I am not completely
free to start off with, a free-market economy doesn't make much
sense... :)

All this suggests another exercise for the students at the CEU:
namely simulating the redeeming effect of shopping around!
After all, as consumers we are continuously using all sorts of
information brokers to try and overcome the difficulties of
'trading rule T'.

Regards,

Manor.


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