The Distribution of Outcomes for a Networked Economy

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Abstract:

We develop a theoretical framework and an accompanying set of tools for mapping the topologies of networks in the economy to different probability distributions of interest.  We apply these tools to analytically show how the topology of an agent interaction network enables non-fundamental fluctuations in aggregate macroeconomic sentiment, thereby providing microfoundations for animal spirits; as the network's topology changes, we can compute how the shape of the corresponding distribution of aggregate sentiment adjusts.  We can moreover apply these tools to carry out closed-form analysis of complex economic systems and to construct error bounds about the paths of aggregated networked economies.

Last updated on 06/13/2019