Agent-based modeling (ABM) is a novel computational methodology for representing the
behavior of individuals in order to study social phenomena. Its use is rapidly growing in many
fields. We review ABM in economics and finance and highlight how it can be used to relax
conventional assumptions in standard economic models. In economics, ABM has enriched our
understanding of markets, industrial organization, labor, macro, development, environmental and
resource economics, as well as policy. In financial markets, substantial accomplishments include
understanding clustered volatility, market impact, systemic risk and housing markets. We present
a vision for how ABMs might be used in the future to build more realistic models of the economy
and review some of hurdles that must be overcome to achieve this.
Axtell, R.L. & Farmer, J.D. (2022). 'Agent-Based Modeling in Economics and Finance: Past, Present, and Future'. INET Oxford Working Paper No. 2022-10.