What exactly is computational economics? For example, does certain software for calculating/predicting/visualizing cost of manufacture falls under computational economics?
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3 Answers
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Taken right from the society for computational economics:
Computational economics explores the intersection of economics and computation. These areas include agent-based computational modeling, computational econometrics and statistics, computational finance, computational modeling of dynamic macroeconomic systems, computational tools for the design of automated Internet markets, programming tools specifically designed for computational economics, and pedagogical tools for the teaching of computational economics. Some of these areas are unique to computational economics, while others extend traditional areas of economics to new areas through computational techniques.
I would say that calculating cost of manufacture is too trivial to fall under this category - unless it's a monopolist who has to take into account equilibrium responses of his suppliers and demanders to his choices.
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$\begingroup$ Cost is not trivial if the cost structure is not observed but needs to be estimated. This is actually one of the primary reasons structural estimation is used for firm problems. Otherwise, welfare effects cannot be calculated. $\endgroup$– philECommented Feb 6, 2015 at 16:54
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@Foobar provides an excellent reference.
Whenever I am looking into a new area of economics, I generally check two places almost immediately (after google, of course :)
- The Handbooks in Economics series, and
- New Palgrave Dictionary of Economics
The Handbooks series has three very nice volumes that cover a broad range of "what computational economics is;" I'd highly recommend checking them out.
At the time of this writing, I'm not aware of a nice central article in Palgrave for computational economics (which is a shame). However if you search the dictionary for articles related to computational economics, you'll get a lot of results. The first few pages of results are have a reasonable set of topics.
I'd definitely recommend checking the Handbooks of Economics first. Peruse the tables of contents of each to get a reasonable overview of what people publish in these fields. You might also check out some of the journals of the Society for Computational Economics: Journal of Economics Dynamics and Control, Computational Economics. Flip through the table of contents for the journals.
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The algebraic formulas in microeconomics can be tabulated for a large number of conditions and then the results averaged or otherwise adjusted before being presented graphically. This is one kind of computational economics. So the answer to your question is affirmative.
But by far the most interesting form of computational economics is in macroeconomics, when the situation of a country is simulated as time passes. Unfortunately, due to the failures to properly express the configured situation in what I regard as logical terms, these forecasts are made to be inaccurate and wrong. (In many cases this is deliberate, because there are strong political reasons for making the associated assumptions.) I am not talking about the effects of sudden changes, simply the ability for a situation to tend to a greater amount of equilibrium (self-stabilize).
The model that I use goes back to the situation before John Bates Clerk combined the factors of land and capital (offensively from A. Smith's explanation of the factors and returns on production). Were this situation to be correctly and better expressed, then we would have a greater degree of accuracy in simulating the changes. My method for response to the effect of the external changes is original and will also greatly help this process, for which my soon to be released book "Consequential Macroeconomics" should provide the answer.
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1$\begingroup$ Such bold claims can be stimulating. But seen as a response to the specific question, this answer is totally out of sync, out of equilibrium I would say, since it is full of opinions and value judgements without argument. I understand that it may indeed take a whole book to properly question and attempt to refute such established fundamentals of economic thinking, but then, such a short post was doomed from the beginning, something that its author knew, making it more of a self-marketing bid rather than anything else. $\endgroup$ Commented Feb 6, 2015 at 3:39