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10/1/2008
New York Times Cites EMCAS as Pioneering Software Able to Mimic Market Dynamics
New York Times Cites EMCAS as Pionnering Software Able to Mimic Market Dynamics
 In a New York Times (10/1/08) op-ed, theoretical physicist Mark Buchanan writes that in the financial crisis, “it seems clear that no one really knows what is coming next.” Buchanan contends that “part of the reason is that economists still try to understand markets by using ideas from traditional economics, especially so-called equilibrium theory. This theory views markets as reflecting a balance of forces, and says that market values change only in response to new information.” He adds, “Really understanding what’s going on means going beyond equilibrium thinking and getting some insight into the underlying ecology of beliefs and expectations, perceptions and misperceptions, that drive market swings. Surprisingly, very few economists have actually tried to do this, although that’s now changing — if slowly — through the efforts of pioneers who are building computer models able to mimic market dynamics by simulating their workings from the bottom up.” Buchanan cites three examples, including “a model (called EMCAS) developed by Charles Macal and colleagues at Argonne National Laboratory in Illinois and aimed at providing a realistic simulation of the interacting entities in that state’s electricity market, as well as the electrical power grid. They were hired by Illinois several years ago to use the model in helping the state plan electricity deregulation, and the model simulations were instrumental in exposing several loopholes in early market designs that companies could have exploited to manipulate prices.”
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