Toward a New Austrian Macroeconomics

Abstract

Austrian macroeconomists of the interwar period saw the economy as a complex adaptive system, in which macroeconomic variables emerge from the interaction between millions of purposefully acting agents. Recent advances in computation technology allow us to build empirically salient synthetic economies in silico, and thereby formalize many Austrian insights. We present a workhorse model with firms on a production network. Macroeconomic variables evolve through the interaction between micro-economic decisions. We use the model to explain why some prices temporarily decrease in response to money injection. We also provide a sketch of other potential applications of our production network model.

Keywords: Macroeconomics, Agent-based Model, Schumpeter, Mises, Hayek, Business Cycles, Network

JEL Classification: E00, E14, E30, E40