Agent-based modeling and the sociology of money: some suggestions for refining monetary theory using social simulation

Abstract The institution of money can be seen as a foundational social mechanism providing communities with the ability to quantify the results of economic processes and collectively regulate independent activities of production and exchange—money can be said, indeed, to constitute the micro–macro link in economics. As such, investigations of money’s role in the economy can be fruitfully combined with the tools of social simulation. This paper revisits some of the main positions taken in the contested landscape of fundamental monetary theory, evaluating how they might support the development of new agent-based modeling frameworks dedicated to elucidating key aspects of the role played by money in the economy. We begin by presenting a comparative review of the way different intellectual traditions in mainstream economics, heterodox economics, and economic sociology attempt to specify “the nature of money” as an institution. We then review the current literature applying agent-based modeling to the question of the “emergence of money,” assessing some of the main contributions from the perspectives of generative epistemology and of the key concepts emphasized by the different intellectual traditions examined before. We conclude by indicating research directions in which we believe agent-based models, in combination with the sociology of money, still have the potential to provide new answers to old questions in monetary theory.