Modeling Economic Systems as Multiport Networks

TL;DR

This paper introduces a novel approach to economic modeling by applying multiport network theory, enabling the analysis of complex macroeconomic systems through micro-level interactions using circuit simulation tools.

Contribution

It pioneers the use of multiport network theory in economics, linking flow and incentives via ports to model multi-level economic interactions.

Findings

Successfully modeled a Robinson Crusoe economy using circuit simulation.

Demonstrated emergent macroeconomic behavior from micro-level network interactions.

Provided a framework for analyzing entire economies with circuit-based models.

Abstract

In this paper, we demonstrate how multiport network theory can be used as a powerful modeling tool in economics. The critical insight is using the port concept to pair the flow of goods (the electrical current) with the agent's incentive (the voltage) in an economic interaction. By building networks of agents interacting through ports, we create models with multiple levels of abstraction, from the macro level down to the micro level. We are thereby able to model complex macroeconomic systems whose dynamical behavior is emergent from the micro level. Using the LTSpice circuit simulator, we then design and analyze a series of example systems that range in complexity from the textbook Robinson Crusoe economy to a model of an entire economy.