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arXiv · 2412.11259

Navigating through Economic Complexity: Phase Diagrams & Parameter Sloppiness

Abstract

We argue that establishing the phase diagram of Agent Based Models (ABM) is a crucial first step, together with a qualitative understanding of how collective phenomena come about, before any calibration or more quantitative predictions are attempted. Computer-aided *gedanken* experiments are by themselves of genuine value: if we are not able to make sense of emergent phenomena in a world in which we set all the rules, how can we expect to be successful in the real world? ABMs indeed often reveal the existence of Black Swans/Dark Corners i.e. discontinuity lines beyond which runaway instabilities appear, whereas most classical economic/finance models are blind to such scenarii. Testing for the overall robustness of the phase diagram against changes in heuristic rules is a way to ascertain the plausibility of such scenarii. Furthermore, exploring the phase diagrams of ABM in high dimensions should benefit enormously from the identification of ``stiff'' and ``sloppy'' directions in parameter space.

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BibTeXRIS

Jean-Philippe Bouchaud. 2024-12-15. Navigating through Economic Complexity: Phase Diagrams & Parameter Sloppiness. https://arxiv.org/abs/2412.11259

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