Modeling the out-of-equilibrium dynamics of bounded rationality and economic constraints

The analogies between economics and classical mechanics can be extended from constrained optimization to dynamics by formalizing economic (constraint) forces power in analogy physical Lagrangian mechanics. In the differential-algebraic equation framework of General Constrained Dynamics (GCD), households, firms, banks, government employ change variables according their desire assert interest. These ex-ante are completed constraint unanticipated system constraints yield ex-post dynamics. flexible out-of-equilibrium model combine Keynesian concepts such as balance sheet approach slow adaptation prices quantities with bounded rationality (gradient climbing) interacting agents discussed behavioral agent-based models. integrates some elements different schools thought overcomes restrictions inherent approaches, assumption markets operating or close equilibrium. Depending on parameter choice for relations speeds, nevertheless converge a neoclassical equilibrium, reacts an austerity shock post-Keynesian way.