Agent Based Modeling of Industrial Ecosystems
Clint Andrews**, Rob Axtell
cja1@rci.rutgers.edu
In the neoclassical theory of the firm the profit motive
suffices to induce optimal behavior of the firm with respect to its environment.
In real firms, viewed as multi-agent organizations, there are a variety of
principal-agent type problems and usually little clear consensus concerning
what constitutes optimal behavior. Thus, it is common wisdom that real firms
depart significantly from the neoclassical ideal, but the extent of such
departures and their importance are the subjects of considerable differences
of opinion. These competing perspectives are important in a variety of contexts
(e.g., antitrust) but are particularly well-defined when it comes to environmental
regulatory policy. Economists commonly assert that market forces are sufficient
to get firms to behave in ways the improve social welfare, and that appropriate
pollution prices can be depended upon to remedy pollution problems. Against
this view industrial ecologists have provided substantial empirical evidence
that firms often fail to adopt technologies and practices that are in their
own self-interest, and thus market mechanisms provide weak foundation for
well-functioning environmental policies.
We apply agent-based modeling techniques to a model of firm
formation and evolution in an attempt to better understand the origin of
sub-optimal behavior on the part of business firms. Specifically, we treat
several incentive problems that exist in typical corporate organizations
in an attempt to rationalize the behavior of purposive agents with empirical
data on the failure to adopt cost saving technology. We utilize data from
various pollution emission databases in the construction of our models. This
is work in progress and preliminary results will be reported.