How agent-based modeling and simulation relates to CGE and DSGE modeling

This paper compares the formal foundations of the currently most common applied models in Economics, computable general equilibrium (CGE) and dynamic stochastic general equilibrium (DSGE) models, with that of agent-based models and simulations (ABMS). It is argued that the claim made by many economists, that CGE and DSGE models have a superior formalism and are clearer models, is misleading. The models are also compared theoretically and it is argued that although there are no relevant technical differences between them, that the underlying epistemological and ontological convictions frequently differ. In this context the question of whether ABMS constitute a new paradigm in economics is assessed. It is also argued that economists can benefit from the discussion about agent-based and equation-based models in other fields such as epidemiology and ecology.