Economic Dynamics of Agents

TL;DR

This paper uses an agent-based model to analyze how individual agents' economic conditions deteriorate rapidly under worsening economic and environmental policies, highlighting the potential for sudden collapses across income groups.

Contribution

It introduces an agent-based modeling approach to study individual responses to diverse policy impacts on economic and environmental factors, filling a gap in prior research.

Findings

Economic conditions can collapse rapidly for all income groups.

Agents' coping mechanisms vary with policy changes.

Economic deterioration can be sudden and drastic.

Abstract

Post-pandemic world has thrown up several challenges, such as, high inflation, low growth, high debt, collapse of economies, political instability, job losses, lowering of income in addition to damages caused natural disasters, more convincing attributed to climate change, apart from existing inequalities. Efforts are being made to mitigate these challenges at various levels. To the best of the knowledge of the author, most of the prior researches have focussed on specific scenarios, use cases, inter-relationships between couple of sectors and more so on optimal policies, such as, impact of carbon tax on individuals, interaction between taxes and welfare, etc. However, not much effort have been made to understand the actual impact on individual agents due to diverse policy changes and how agents cope with changing economic dynamics. This paper considers progressive deteriorating conditions of increase in expense, degrading environmental utility, increase in taxation, decrease in welfare and lowering of income with recourse to inherited properties, credits and return on investments, and tries to understand how the agents cope with the changing situations using an agent based model with matrices related to savings, credits, assets. Results indicate that collapse of agents' economic conditions can be quite fast, sudden and drastic for all income groups in most cases.