The Economy as an Agent-Based Whole -Simulating Schumpetarian Dynamics

As pointed out by Mathews (2002) following the recent special issue of Industry and Innovation on Schumpeter’s “lost” chapter, “The economy as a whole”, Schumpeter’s view on the dynamics of economic systems has regained topicality as an early contribution to the complexity view in economics. The aim of this paper is to test some of the ideas of Schumpeter using the agent-based computational model presented in Bruun and Luna (2001). As in the early work of Schumpeter, this model assigns a central role to entrepreneurs, and through mechanisms involving creative destruction, the model displays cyclical behavior around a growth path. Inspired by Carlsson and Eliasson’s work on Schumpetarian dynamics and economic growth in their framework the experimentally organized economy (2002), focus will be placed on the role of the bankruptcy mechanism in selecting winners and exiting losers.