Computational Model Library

Peer reviewed BAM: The Bottom-up Adaptive Macroeconomics Model

Alejandro Platas López | Published Tue Jan 14 17:04:32 2020 | Last modified Sun Jul 26 00:26:21 2020

Overview

Purpose

Modeling an economy with stable macro signals, that works as a benchmark for studying the effects of the agent activities, e.g. extortion, at the service of the elaboration of public policies..

Peer reviewed BAMERS: Macroeconomic effect of extortion

Alejandro Platas López | Published Mon Mar 23 16:32:53 2020 | Last modified Sun Jul 26 00:20:45 2020

Inspired by the European project called GLODERS that thoroughly analyzed the dynamics of extortive systems, Bottom-up Adaptive Macroeconomics with Extortion (BAMERS) is a model to study the effect of extortion on macroeconomic aggregates through simulation. This methodology is adequate to cope with the scarce data associated to the hidden nature of extortion, which difficults analytical approaches. As a first approximation, a generic economy with healthy macroeconomics signals is modeled and validated, i.e., moderate inflation, as well as a reasonable unemployment rate are warranteed. Such economy is used to study the effect of extortion in such signals. It is worth mentioning that, as far as is known, there is no work that analyzes the effects of extortion on macroeconomic indicators from an agent-based perspective. Our results show that there is significant effects on some macroeconomics indicators, in particular, propensity to consume has a direct linear relationship with extortion, indicating that people become poorer, which impacts both the Gini Index and inflation. The GDP shows a marked contraction with the slightest presence of extortion in the economic system.

System Narrative
How do rebel groups control territory and engage with the local economy during civil war? Charles Tilly’s seminal War and State Making as Organized Crime (1985) posits that the process of waging war and providing governance resembles that of a protection racket, in which aspiring governing groups will extort local populations in order to gain power, and civilians or businesses will pay in order to ensure their own protection. As civil war research increasingly probes the mechanisms that fuel local disputes and the origination of violence, we develop an agent-based simulation model to explore the economic relationship of rebel groups with local populations, using extortion racket interactions to explain the dynamics of rebel fighting, their impact on the economy, and the importance of their economic base of support. This analysis provides insights for understanding the causes and byproducts of rebel competition in present-day conflicts, such as the cases of South Sudan, Afghanistan, and Somalia.

Model Description
The model defines two object types: RebelGroup and Enterprise. A RebelGroup is a group that competes for power in a system of anarchy, in which there is effectively no government control. An Enterprise is a local civilian-level actor that conducts business in this environment, whose objective is to make a profit. In this system, a RebelGroup may choose to extort money from Enterprises in order to support its fighting efforts. It can extract payments from an Enterprise, which fears for its safety if it does not pay. This adds some amount of money to the RebelGroup’s resources, and they can return to extort the same Enterprise again. The RebelGroup can also choose to loot the Enterprise instead. This results in gaining all of the Enterprise wealth, but prompts the individual Enterprise to flee, or leave the model. This reduces the available pool of Enterprises available to the RebelGroup for extortion. Following these interactions the RebelGroup can choose to AllocateWealth, or pay its rebel fighters. Depending on the value of its available resources, it can add more rebels or expel some of those which it already has, changing its size. It can also choose to expand over new territory, or effectively increase its number of potential extorting Enterprises. As a response to these dynamics, an Enterprise can choose to Report expansion to another RebelGroup, which results in fighting between the two groups. This system shows how, faced with economic choices, RebelGroups and Enterprises make decisions in war that impact conflict and violence outcomes.

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