Chapter 32 Out of Equilibrium Economics and Agent Based Modeling Standard neoclassical economics asks what agents actions strategies or expectations are in equilibrium with (consistent with) the outcome or pattern these behaviors aggregatively create. Agent based computational economics enables us to ask a wider question: how agents actions strategies or expectations might react to—might endogenously change with—the patterns they create. In other words it enables us to examine how the economy behaves out of equilibrium when it is not at a steady state. This out of equilibrium approach is not a minor adjunct to standard economic theory; it is economics done in a more general way. When examined out of equilibrium economic patterns sometimes simplify into a simple homogeneous equilibrium of standard economics; but just as often they show perpetually novel and complex behavior. The static equilibrium approach suffers two characteristic indeterminacies: it cannot easily resolve among multiple equilibria; nor can it easily model individuals choices of expectations. Both problems are ones of formation (of an equilibrium and of an “ecology” of expectations respectively) and when analyzed in formation—that is out of equilibrium—these anomalies disappear.