Project
EF4-5
An Agent-Based Understanding of Green Growth
Project Heads
Sarah Wolf
Project Members
Aida Saraí Figueroa Alvarez
Project Duration
01.07.2021 – 30.06.2024
Located at
FU Berlin
Description
This project aimed to contribute to the theory of Green Growth transitions, that is, make explicit mechanisms through which an economy can switch to a low carbon structure that at the same time comes with benefits in economic and social dimensions. To this end, we develop and analyse a series of agent-based models (ABM) which extend a standard economic model: the Ramsey growth model. The project’s models build on previous work by Steudle et al. [2018], who add three economic mechanisms to a strongly simplified Ramsey growth model structure. Technical progress through learning-by-doing, directed technical progress for a brown and a green capital stock, and a labour market with search. Focusing on two time steps, the authors provide a proof of concept of how with these three building blocks a coordination game structure arises: agents can coordinate on a better “green” equilibrium rather than staying in the given “brown” one with lower investment, lower growth, and higher unemployment. The present project aimed to investigate the first two mechanisms further, by adding a dynamic component that enable the study of transitions between such equilibria. This was done in a step by step process to obtain a mathematically understandable ABM.
As a first model, the Agent-based Ramsey growth model with endogenous technical progress (ABRam-T, [Figueroa Alvarez et al., 2024]) was developed and analysed. Its agents follow standard economic characteristics and rules as defined by a Ramsey growth model, but differ in terms of the investment strategy they use; in particular, in addition to a single rational representative agent and a decentralized economy of agents that ignore their contribution to technical progress, “collaborative” agents mimic the representative benevolent planner, and “witty agents” take into account their contribution to technical progress, forming expectations on how other agents invest. Exploration of economies populated by such agents yields that standard economic results can be reproduced in systems of homogeneous agents, that unequal capital distributions may converge to equal ones with higher growth, that taking into account one’s contribution to technical progress does not qualitatively change the picture, and that the economic performance of a system does not depend on how well agents’ expectations match the true values of investment of others [Figueroa Alvarez and Wolf, 2024].
To investigate different pathways for emission reductions, the model was extended for the case of two capital stocks: “brown” and “green”, representing high and low emissions respectively. Given an economy in which the brown production process has historically accumulated a much higher level of technical progress, there aren’t incentive to switch to a green production process for agents. To nevertheless model the decision to adopt green technology, we integrate social strategies for decision-making (Galesic et al. [2023]). By adding environmental attitudes to the agents. The agent’s beliefs and attitudes are update in such way that define the agent’s investment behaviour. We consider for the belief updating schemes a Voter Model an a Majority Rule.
References
G.A. Steudle, S. Wolf, J. Mielke, and C. Jaeger. Green growth mechanics: The building blocks. Global Climate Forum, January 2018. Available at https://globalclimateforum.org/wp-content/uploads/2018/01/GCF_WorkingPaper1-2018.pdf
M. Galesic, D. Barkoczi, A. Berdahl, D. Biro, G. Carbone, I. Giannoccaro, R. Goldstone, P. Gonzalez, Cleotilde, A. Kandler, A. Kao, and et al. Beyond collective intelligence: Collective adaptation. Journal of The Royal Society Interface. March 2023.
Selected Publications
A.S. Figueroa Alvarez and S.Wolf. Exploring heterogeneity and expectations in technical progress – an exercise in agentization. Submitted, 2024. A working paper version can be found at https://zenodo.org/records/10654996.
A.S. Figueroa Alvarez, M. Tokpanova, and S. Wolf. Agent-based Ramsey growth model with endogenous technical progress (ABRam-T) (version 1.0.0). Available at https://www.comses.net/codebases/0d2d9f03-e579-4d59-bd9a-35be1439f8ed/releases/1.0.0/, 2024.
Selected Pictures
Agent’s optimal investment as a function of their capital, when the total economy is formed by hundred agents with an equal initial capital of 1.
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