# Research¶

My initial motivation to study economics was to understand the the economic development of societies and the corresponding inequality in our world. During my studies and in particular my PhD I recognized that such ‘big questions’ can better be answered step-by-step. I therefore started to study institutions, their economic effects, how they emerge, and how they shape and are shaped by individual agency. I was hoping that a better understanding of institutions would ultimately help me to understand economic development.

But institutions are obviously not the only determinant of economic development. Thus I started working on technological change and how it has evolved differently over the world. For my current research project I pay particular attention to the effects of globalization in shaping technological change in various countries and regions all over the world.

Technological change and institutions are closely related. And while studying these two aspects may not yet be enough to answer the question of why some countries are rich and others are poor, they are important aspects of an answer to this big question.

Aside from these more applied questions, I am also interested in economic methodology and the question of how we can actually learn something about reality through the use of economic model. Since I use methods from complexity science, in particular network theory, agent-based models, and game theory, I am particularly interested in the epistemological foundation of these methods. I have therefore worked on a meta-framework for the study of economies as complex systems, using ideas from the mathematician Warren Weaver and the physicist and social philosopher Mario Bunge.

Of course, I will be happy to answer your questions and all comments and critiques are highly appreciated. You can contact me any time via email.

## Recent publications¶

Getting the Best of Both Worlds? Developing Complementary Equation-Based and Agent-Based Models

Published in: Computational Economics (2017, online first)

The paper deals with the distinction between equation-based and agent-based models, and ways to fruitfully combine them. We apply to our ideas to a model by Acemoglu and Robinson on the Kuznets Curve.

The Complementary Relationship Between Institutional and Complexity Economics: The Example of Deep Mechanismic Explanations

Published in: Journal of Economic Issues (2017, Vol. 51(2), p. 392-400)

I discuss the usefulness of mechanism-based explanations when one is dealing with complex systems, and how this aligns well with the research practice of classical institutionalism.

One challenge with mechanism-based explanations is the need for a new criterion to choose among competing explanations. I argue in the article that Mario Bunge’s concept of deep explanations would be very useful in this respect, but that the more widely known concept of Occam’s razor is problematic.

Accepted Manuscript (free download)

Dealing adequately with the political element in formal modelling

Published in: Hardy Hanappi, Savvas Katsikides and Manuel Scholz-Wackerle (Eds): Theory and Method of Evolutionary Political Economy, London et al.: Routledge, 2017

There are many reasons why a value-free way of doing (social) sciences is desirable. Max Weber stated this most impressively in his early work. However, Weber also acknowledged that such objectivity is (unfortunately) impossible and any investigation contains elements of the authors Weltanschauung. Many economists, however, argued that the mathematization of economics in the twentieth century have changed this and have turned economics, at least partly, to a positive and value-free science. In this chapter I show why this is impossible and explore the practical implications by looking at the current debate about the usefulness of the Transatlantic Trade and Investment Partnership.

The official book page

The book on Amazon

Accepted Manuscript (free download)

Comment: Errata in “The Political Economy of the Kuznets Curve”

Published in: Review of Development Economics (2016, Vol. 20(4), p. 817-819)

This is an byproduct of [this project]. We prove some conjectures not adequately adressed by Acemoglu and Robinson in their original article on inequality dynamics.

Accepted Manuscript (free download)

Agent-Based Computational Models - A Formal Heuristic for Institutionalist Pattern Modelling?

Published in: Journal of Institutional Economics (2016, Vol. 12(1), p. 241-261)

This article discusses the adequateness of agent-based modeling for theorizing in the tradition of the original institutional economics. In particular I ask whether ABM can provide a holistic, systemic and evolutionary perspective on the economy and how agency can be conceptualized within ABMs. Building on these questions, I discuss potentials and challenges of the application of ABM in institutionalist research. I also identify complementarities with modern evolutionary, or Neo-Schumpeterian economics.

Abstract and full published article

Accepted Manuscript (free download)

Policy Implications of Recent Advances in Evolutionary and Institutional Economics

I edited this volume together with Torsten Heinrich and Henning Schwardt. It contains a number of important contributions of leading reseacher in their respective fields, including institutionalist, evolutionary, and complexity economics. The contributions explore the policy implications of recent theoretical and empirical findings in the fields just mentioned.

The official book page

The book on Amazon

Formal Approaches to Socio-economic Analysis - Past and Perspectives

Published in: Forum for Social Economics, special issue on formal modelling, forthcoming.

In this article I review the most promising formal approaches in social economics, the social fabric matrix, evolutionary and classical Game Theory, system dynamics, the institutional analysis and development framework, and agent based models. The article provides a good overview of the strengths and weaknesses, and discusses the implicit assumptions inherent to the different approaches.

Accepted Manuscript (free download)

New Perspectives on Institutionalist Pattern Modeling: Systemism, Complexity, and Agent-Based Modeling

Published in: Journal of Economic Issues (2015, Vol. 49(2), p. 433-440)

This is joint work with Jakob Kapeller. We provide a preliminary outline of the concept of systemism for the analysis of institutions. Relations to the concept of computational methods and reasoning about economic complexity are discussed.

Accepted Manuscript (free download)

## Work in progress¶

From realism to instrumentalism - and back? Methodological implications of changes in the epistemology of economics [Working paper]

I identify epistemological shifts in economics throughout the 20th century and discuss their methodological implications. After the realist research program of the Cowles commission and Lucas’ rational expectations approach, several economists became dissatisfied with economic theory and initiated a shift towards instrumentalism. Recently, this movement has come under critique and a return to a realist epistemology focusing on identifying economic mechanisms is suggested. Such epistemological changes have important practical implications: they a ect the discrimination among competing explanations and determine which research methods are accepted. I illustrate this by studying epistemological and methodological changes in development economics throughout the last century.

Aspirations and social protest Together with Svenja Flechtner I build an ABM that models the decision of agents to participate in social protest or not. We question the alleged link between social activism and social inequality. Instead we build on Bandura’s social cognitive theory and Hirschmanns Tunnel Parabola to explain why recent social movements emerged in countries where inequality was decreasing.

Hawala and Trust Systems The Hawala system is an informal money transfer system that is particularly popular in the muslim world. From a game theoretic viewpoint the stability of such a system based on trust is surprising. I build an agent-based model that explores the conditions under which mutual cooperation in money transfer system emerges through different monitoring mechanisms. In a follow-up study together with Wolfram Elsner, Torsten Heinrich and Alex Lascaux we use the model to distinguish between trust and social control in informal money transfer systems.

Inequality and Social Mobility in Political Change: Exploring the dynamics of the Kuznets Curve [Working paper] According to the Kuznets hypothesis, inequality dynamics within countries follow a U-shaped trajectory: inequality increases in stages of early development and starts decreasing after a certain level has been reached. Acemoglu and Robinson (2002) offer an analytical infinit-horizon non-overlapping generations model to study the pattern from a political economic perspective. We transform the analytical model into an agent-based version to provide a dynamic account of the Kuznets hypotheses and to study the importance of institutions governing social mobility for the shape and timing of the Kuznets curve.

Beyond Equilibrium: Revisiting Two-Sided Markets from a computational perspective [Working paper] Existing models of TSM are mostly equilibrium models. Assumptions are not always intuitive and usually neglect constitutive features such as incomplete information, non-identical transactions, independent adoption decisions, and strategic behavior on the part of the platform owner or vendor. We take the canonical model of Rochet & Tirole (2003, 2006) as a starting point for a more flexible agent-based simulation. Not only do we reveal several implicit assumptions and inconsistencies of the original model, our model also allows to study potential technological lock-ins and the resulting powerful strategic position of the platform vendor or owner and the associated risks.

The model also illustrates the usefulness of generative explanations in economics.

The Micro Macro Link in Heterodox Economics [Working paper] Questions of aggregation abound in economics. But also the possibility of “downward effects”, i.e. the effects from higher ontological levels, such as institutions, on individuals, receives some attention. Their effect usually is through the habits or preferences of the individuals. We survey theories about these relationship and provide a coherent overall framework to study the relationships between micro, meso and macro levels: systemism.

Nature of Institutions Institutions are considered crucials determinants for growth, distribution and wellbeing. But what is actually the ontological status of an institution? And how does it affect individuals? How does it depend on support by individuals? After reviewing common conceptualizations of institutions such as the institutions-as-rules, institutions-as-equilibria, institutions-as-correlated-bayesian-equilibria and institutions-as-systems-of-beliefs, I try to provide a general, computational synthesis that pays particular attention on institutional change.

Methodology does matter [Working paper] I use the functional decomposition approach to modeling (Mäki, 2009) to discuss the importance of methodological considerations before choosing a modeling framework in applied research. I consider the case of agent-based and dynamic stochastic general equilibrium models to illustrate the implicit epistemological and ontological statements related to the choice of the modeling framework and highlight the important role of the purpose and audience of a model during this choice.

The respective frameworks are evaluated regarding their capacity for model exploration and their ability to model mechanisms explicitly. Considering interaction effects among different mechanisms is a challenge that may complicate the explanation of phenomena by isolating the underlying mechanisms. Agent-based models may represent a tool to address this challenge.

The conclusion is that scientific progress requires a certain plurality of models: single models are pushed to their limits if one wishes to identify the right degree of isolation required to understand reality.

Structuration processes in complex dynamic systems [Working paper] Networks are an obvious element in any economic system. The formal apparatus of graph theory allows to quantify our knowledge on economic networks and consider them directly in our models. This has been one of the most innovative and productive areas of economic research in the past decades. In this article, I and my co-authors summarize the recent developments and show how network theory can be an essential part of modern social economics. We also find that the applications of network theory still lack a theoretical underpinning. In particular, concrete social mechanisms underlying network formation and the precise mechanisms through which networks affect economic outcomes are not yet well understood. This is a lively area of further (interdisciplinary) research and aligns well with the systemic approach to economics that I have advanced elsewhere.

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