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  <front>
    <journal-meta />
    <article-meta>
      <title-group>
        <article-title>Integrating System Dynamics and Agent-Based Models for Enhanced Analysis in Sustainable Development</article-title>
      </title-group>
      <contrib-group>
        <contrib contrib-type="author">
          <string-name>Beniamino Callegari</string-name>
          <xref ref-type="aff" rid="aff1">1</xref>
          <xref ref-type="aff" rid="aff2">2</xref>
        </contrib>
        <contrib contrib-type="author">
          <string-name>Christophe Feder</string-name>
          <xref ref-type="aff" rid="aff0">0</xref>
          <xref ref-type="aff" rid="aff3">3</xref>
        </contrib>
        <aff id="aff0">
          <label>0</label>
          <institution>BRICK</institution>
          ,
          <addr-line>Lungo Dora Siena 100A, Turin 10153</addr-line>
          ,
          <country country="IT">Italy</country>
        </aff>
        <aff id="aff1">
          <label>1</label>
          <institution>Bjørknes University College</institution>
          ,
          <addr-line>Lovisenberggata 13, Oslo 0456</addr-line>
          ,
          <country country="NO">Norway</country>
        </aff>
        <aff id="aff2">
          <label>2</label>
          <institution>Kristiania University College</institution>
          ,
          <addr-line>Kirkegata 24-26, Oslo 0153</addr-line>
          ,
          <country country="NO">Norway</country>
        </aff>
        <aff id="aff3">
          <label>3</label>
          <institution>Università della Valle d'Aosta</institution>
          ,
          <addr-line>Strada Cappuccini 2, Aosta 11100</addr-line>
          ,
          <country country="IT">Italy</country>
        </aff>
      </contrib-group>
      <abstract>
        <p>Sustainable development involves complex, non-linear mechanisms within a multidimensional framework integrating natural, social, and economic dimensions. This literature uses both System Dynamics (SD) and Agent-Based models (ABMs). SD models ofer a macro perspective with diferential equations and graphical representations, while ABMs provide a micro perspective on individual agents' behaviors. These models are complementary: SD models set exogenous conditions for ABMs, aiding their development and validation, while ABMs ofer data to validate SD structures by capturing emergent behaviors. Integrating Agent-Based and SD (ABSD) models leverages their strengths, ofering a more nuanced analysis of sustainable development despite challenges like complexity and computational demands. We then propose a guideline to address these limitations and two potential applications to provide a detailed analysis of ABSD models in global sustainable development.</p>
      </abstract>
      <kwd-group>
        <kwd>eol&gt;Hybrid methodology</kwd>
        <kwd>Complex systems</kwd>
        <kwd>ABSD models</kwd>
        <kwd>Sustainability</kwd>
      </kwd-group>
    </article-meta>
  </front>
  <body>
    <sec id="sec-1">
      <title>1. Introduction</title>
      <p>
        Achieving global sustainable development is the primary challenge of this century [
        <xref ref-type="bibr" rid="ref1 ref2">1, 2</xref>
        ],
necessitating collaboration among biologists, economists, sociologists, engineers, urban planners,
and computer scientists to achieve this relevant and overarching goal. Indeed, sustainable
development is a multidimensional, complex, and interdisciplinary topic [
        <xref ref-type="bibr" rid="ref3 ref4">3, 4</xref>
        ] that requires
the consideration and integration of diverse and essential aspects of natural, social, and
economic sustainability. Over time, various tools have been developed to promote a pluralistic,
interdisciplinary, and eclectic approach to this field [
        <xref ref-type="bibr" rid="ref5 ref6">5, 6</xref>
        ].
      </p>
      <p>
        When sustainability researchers aim to describe and simulate global development mechanisms,
they often turn to system dynamics (SD) to incorporate natural, economic, and social dynamics
and their complex interactions. SD is a methodology consisting of linked diferential equations,
graphically represented through stock and flow diagrams or causal-loop diagrams, and simulated
by algorithms [
        <xref ref-type="bibr" rid="ref10 ref7 ref8 ref9">7, 8, 9, 10</xref>
        ]. SD models provide a macro perspective that helps maintain an
overarching view of aggregate variables. Moreover, SD models can easily incorporate lags
and threshold efects, allowing for a more accurate representation of temporal dynamics and
structural changes over time. This capability is essential for analyzing long-term policy impacts
and systemic outcomes. Lastly, the aggregate nature of SD models simplifies the integration of
composite causality chains due to their focus on population-level mechanisms.
      </p>
      <p>However, relying solely on SD models would mean losing the ability to capture the diverse
behaviors and interactions of individual agents, leading to the emergence of novel patterns
and trends that might not be predicted by aggregate-level models alone. Agent-based models
(ABMs) are particularly efective at modeling heterogeneity and stochasticity within a system,
providing insights into micro-level dynamics and agent-based innovations. This micro-level
detail is crucial for understanding how innovation, adaptation, and competition mechanisms
work within the complex landscape of sustainable development at the global level.</p>
      <p>
        Indeed, ABMs are computational simulations of agents’ interactions within an environment
that evolves based on the agents’ actions and interactions [
        <xref ref-type="bibr" rid="ref11 ref12">11, 12</xref>
        ]. These models adopt a flexible
micro-approach to capture the agents’ heterogeneity and their emerging interactions. ABMs
simulate complex systems, identifying otherwise unpredictable emergent behaviors. While
commonly used in many fields, they require careful design, substantial computational resources,
and thorough validation to be efective and reliable simulation instruments.
      </p>
      <p>In this paper, we propose to integrate Agent-Based and SD (ABSD) models to leverage the
strengths of both approaches. This integration allows for a more nuanced and accurate analysis
of complex systems. However, the ABSD approach presents substantial challenges that limit
its widespread application. The increased complexity, significant computational demands, and
the necessity for transdisciplinary expertise among computer scientists are among the most
relevant obstacles. Nevertheless, careful and precise management of the tool could significantly
mitigate these limitations. Therefore, in this paper, we propose to investigate the benefits
and drawbacks of the ABSD approach in the context of a potential application to the field of
sustainable development.</p>
      <p>
        In addition to the field of sustainable development, this article can provide significant insights
into at least three other research areas. Firstly, it contributes to the debate on the
micromacro link [
        <xref ref-type="bibr" rid="ref13">13, 14</xref>
        ], which examines how micro and macro levels mutually influence and shape
each other. Our work is firmly grounded in this approach, afirming the emergent properties
of ABMs and their dependence on macro-level constraints and characteristics that are often
predetermined. However, our hybrid approach allows us, in certain circumstances, to propose a
macro-founded theoretical framework that incorporates specific micro-level processes, making
the entire bidirectional process clearer and more implementable.
      </p>
      <p>Secondly, it engages with the debate on macro-to-micro mapping [15, 16], providing insights
into how macro-level models, such as SD, can enhance the understanding of detailed behaviors
of individual agents within ABMs. Indeed, macro-to-micro mapping is operationalized in the
ABSD model by defining more realistic agent behaviors in ABMs that mirror the real-time
environmental dynamics identified by the SD model. This integration can also significantly
improve the validation and calibration of the ABSD model. All the same, the ABSD model
can be seen as a simulation environment where macro-to-micro mapping facilitates dynamic
interactions between the two levels of analysis, enabling an explicit exploration of feedback
between macro and micro levels.</p>
      <p>Finally, we suggest an alternative approach to macro-programming, where a high-level
ABM program integrates low-level equations [17, 18]. Vice versa, the proposed ABSD model
organizes high-level equations with low-level ABM programs. Neither methodology is superior
to the other; the choice depends on the specific objective. Macro-programming is ideal for
optimal coordination of spatially adaptive systems [19]. However, the ABSD model is preferable
for describing complex systems of interconnected and micro-founded aggregate variables.
Sustainable development depicts this distinction well. If the aim is to propose agent interactions
for achieving sustainability, macro-programming ofers valuable solutions. Conversely, to
illustrate the potential consequences of unsustainable human actions, the ABSD model is more
suitable.</p>
      <p>The remainder of the article is structured as follows. Section 2 clarifies the contribution
of the ABSD model, highlighting the benefits and limitations of a hybrid approach. Section
3 presents some potential applications of the integrated ABSD model in the sustainability
literature. Section 4 summarizes the discussion.</p>
    </sec>
    <sec id="sec-2">
      <title>2. Simulation Models for Sustainability</title>
      <sec id="sec-2-1">
        <title>2.1. Standard Approaches</title>
        <p>
          According to a recent systematic literature review on sustainability [
          <xref ref-type="bibr" rid="ref6">6</xref>
          ], over the past ten
years, 49% of the simulation models have used an ABM approach, while 46% have used an SD
approach. This paper confirms that SD and ABM are two popular tools for simulating complex
and multidimensional systems, such as sustainable development. However, the literature review
also reveals that only two articles have been found that combine both tools [20, 21], both
specific to water use. Consequently, even in fields where ABMs and SD models are prevalent,
their combination, although feasible, is rare and has limited application. Before describing the
limitations of the ABSD simulations and proposing a method to integrate both models, it is
helpful to briefly describe each of the two simulation models that compose it.
        </p>
        <p>SD models are structural, disequilibrium models characterized by path-dependency,
selforganization, historical time, and irreversibility [22, 23]. They feature the non-linear interplay
of feedback loops, which enables the emergence of complexity [24] and evolving macro
development dependent on systemic interactions. Developed initially by Jay W. Forrester in the
1950s, their non-linear nature allows SD models to simulate the evolution of a system through
shifts in the relative strength of positive and negative feedback loops, governed by stock levels
and determining systemic outcomes [25]. Like ABMs, the multiple and potentially unstable
equilibria follow chaotic trajectories [26]. Consequently, SD models can analyze unintended
consequences that may lead to undesirable systemic outcomes, providing decision makers with
a flexible tool for evaluating policy options [ 27]. However, the emergence of novelty is limited
to the macro level, as the underlying model of causal relations remains fixed. AnyLogic 1, Stella2,
1https://www.anylogic.com/
2https://www.iseesystems.com/
and Vensim3 are the most popular software tools for developing and simulating SD models.</p>
        <p>ABMs simulate novel emerging outcomes and trends arising from the interactions of
heterogeneous agents, defined as autonomous entities capable of perceiving and reacting to their
environment, incorporating stochastic elements. Among their many applications, this afords a
better understanding of micro-level mechanisms, such as innovation-based competition, and
their systemic consequences [28]. The concept of emergence, central to ABMs, refers to complex
patterns and behaviors that arise from simple interactions among agents, which cannot be
predicted by analyzing individual components in isolation [29, 30]. This characteristic enables
ABMs to capture the dynamics of systems where agent interactions lead to unexpected
macrolevel phenomena. Self-organization is another critical feature of ABMs, wherein a system
spontaneously forms organized structures without external direction. This occurs through local
interactions among agents following simple rules, leading to global order [31, 32]. Similarly,
ABMs have been used to model the emergence of cooperation, social norms, and collective
behavior in social and economic systems [33, 34].</p>
        <p>While behavioral sets in ABMs can vary, they are necessarily exogenous. Agent behavior
within the model can change due to evolving environmental variables, but only within the
predefined set of behavioral patterns and parameters established during the model’s
programming phase. This constraint limits the ability of ABMs to capture the adaptive and evolutionary
nature of real-world systems fully. While agent interactions can generate emergent novelty,
the underlying behavioral structure remains unchanged. Consequently, the dynamics of open
systems, characterized by continuous adaptation and innovation, cannot be fully represented
by either SD models [35, 36] or ABMs [37, 38]. There are several software tools for developing
and simulating ABMs, such as NetLogo4, AnyLogic5, and Repast6.</p>
        <p>The choice between the two main non-linear models typically depends on the primary field
of research. Economists usually integrate economic, social, and natural aspects using ABMs
[39, 40, 41]. In contrast, ecological scholars often use SD models to combine these elements
[42, 43, 44]. Certainly, the background and previous skills of the authors play a role in the
decision, but the focus of the research issue is also crucial. When the goal is to study the overall
system, SD models are the preferable tool. Conversely, when the goal is to analyze human
reactions, ABMs are the best choice.</p>
        <p>
          However, exceptions exist. Some ABMs are published in environmental journals, focusing on
specific topics [ 45, 46, 47] or paying limited attention to the complexity of interactions among
the economy, society, and nature [
          <xref ref-type="bibr" rid="ref14">48, 49, 50</xref>
          ]. Moreover, ABMs have been used in ecological
studies, particularly in climate change research [
          <xref ref-type="bibr" rid="ref15 ref16 ref17">51, 52, 53</xref>
          ], and to analyze sustainability through
an evolutionary economics lens [
          <xref ref-type="bibr" rid="ref18 ref19 ref20">54, 55, 56</xref>
          ].
        </p>
        <p>
          Conversely, SD models are rarely published in economic journals. Some exceptions include
[
          <xref ref-type="bibr" rid="ref21">57</xref>
          ] and [
          <xref ref-type="bibr" rid="ref22">58</xref>
          ], who model the relationship between innovation and nature, and [
          <xref ref-type="bibr" rid="ref23">59</xref>
          ], who
simulate the relationship between sustainable development and human capital investment. A
possible explanation for this asymmetry could be the interdisciplinary nature of the topic, often
too broad for an economics journal, and the greater flexibility of ABMs, which make them a
3https://vensim.com/
4https://ccl.northwestern.edu/netlogo/
5https://www.anylogic.com/
6https://repast.github.io/index.html
more versatile and usable tool than SD models.
        </p>
        <p>
          However, the SD and ABM approaches can be interpreted as two sides of the same coin.
Indeed, both simulation models are useful for analyzing sustainability issues, but SD follows
a macroeconomic approach, while ABMs follow a microeconomic approach [
          <xref ref-type="bibr" rid="ref24">60</xref>
          ]. SD models
focus more on the relevance of time, path dependency, lock-in efects, and the irreversibility of
specific trends, while ABMs emphasize agents’ heterogeneity, behavior, and bounded rationality.
Both ABMs and SD models share three key components: (i) an open interaction space; (ii) the
potential for the emergence of constrained novelty; and (iii) an exogenous element. For ABMs,
the interaction space is the endogenous environmental component whose actual values influence
agent behavior, leading to non-linear dynamics as agents adapt to a changing environment. The
exogenous element comprises the behavioral sets of the agents, typically involving randomness,
and the given environmental conditions in which they operate. For SD models, positive and
negative feedback loops create an interaction space that can produce non-linear dynamics and
unexpected systemic outcomes. The exogenous element includes the system structure defined
by the designed stocks, their initial values, and the functions governing their flows.
        </p>
      </sec>
      <sec id="sec-2-2">
        <title>2.2. Hybrid approach</title>
        <p>
          ABMs are described as a micro-modelling approach, focusing on individual agents’ behavior sets
[
          <xref ref-type="bibr" rid="ref12">12</xref>
          ]. In contrast, SD models are defined as a macro-modeling approach, starting from aggregated
stocks and flows representing population-level mechanisms [
          <xref ref-type="bibr" rid="ref25">61</xref>
          ] embracing systemism [
          <xref ref-type="bibr" rid="ref26">62</xref>
          ].
Both tools are relevant and valuable for analyzing sustainability. Therefore, we suggest the use
of an ABSD approach capable of combining both analyses. As demonstrated by the two hybrid
models on the subject, integration is possible and highly explanatory [20, 21]. Theoretically,
a composite model should be considered the best choice for simulating real-world outcomes.
A hybrid ABSD model could analyze realistic interaction efects and produce more reliable
scenarios.
        </p>
        <p>
          SD models and ABMs are consistent and complementary to each other [
          <xref ref-type="bibr" rid="ref27 ref28 ref29">63, 64, 65</xref>
          ]. On
the one hand, ABMs provide essential data for validating SD model structures by defining
the range of novelty arising from micro-level interactions. On the other hand, by identifying
the range of macro-level outcomes, SD models can determine the exogenous environmental
conditions for ABMs, aiding their development and validation. Combining SD models and
ABMs is an efective way to overcome the limitations of both approaches. SD models help ABMs
maintain an overarching systemic perspective when reconstructing aggregate variables [
          <xref ref-type="bibr" rid="ref30">66</xref>
          ].
Similarly, ABMs contribute by depicting agent reactions as micro-level processes with systemic
consequences [
          <xref ref-type="bibr" rid="ref31">67</xref>
          ]. However, ABSD models are not exempt from significant limitations.
        </p>
        <p>
          Firstly, constructing and maintaining a hybrid model necessitates a broad spectrum of
expertise spanning both SD models and ABMs. This interdisciplinary nature requires collaboration
among specialists proficient in integrating diverse methodologies [
          <xref ref-type="bibr" rid="ref32">68</xref>
          ]. Advanced programming
skills are crucial for developing complex algorithms and efectively managing the extensive
data involved in these models [
          <xref ref-type="bibr" rid="ref33">69</xref>
          ]. The need for such a diverse skill set can complicate team
assembly and coordination, potentially hindering the practical feasibility of developing and
deploying hybrid models in real-world applications. Efective communication and integration
among team members from diferent disciplinary backgrounds are essential yet challenging,
as they must align on conceptual frameworks, modeling techniques, and validation methods.
Additionally, the iterative nature of model development requires continuous collaboration and
adjustment, which can be resource-intensive and time-consuming [
          <xref ref-type="bibr" rid="ref34">70</xref>
          ].
        </p>
        <p>
          Secondly, the development of a hybrid model demands extensive computational resources
and meticulous data parameterization. Detailed and comprehensive data are essential to capture
the nuanced behaviors and systemic interactions of diverse agents [
          <xref ref-type="bibr" rid="ref35">71</xref>
          ]. The computational
intensity required to simulate such intricate interactions can be prohibitive, necessitating
highperformance computing capabilities [
          <xref ref-type="bibr" rid="ref36">72</xref>
          ]. For instance, the need for real-time simulation of
thousands or even millions of agents interacting in complex ways requires significant processing
power and memory. Additionally, acquiring and processing the necessary data for model
parameterization and validation can be resource-intensive. This often involves integrating
diverse datasets from multiple sources, cleaning and preprocessing data, and continuously
updating the model with new information. The cost and efort associated with these tasks can
be substantial, making it a significant barrier for many research teams.
        </p>
        <p>
          Thirdly, integrating composite mechanisms at the micro level, mainly through heterogeneous
agents, significantly amplifies model complexity. This complexity poses challenges in
establishing clear causal links between aggregate outcomes and micro-level dynamics. As the number
and diversity of heterogeneous agents increase, managing and interpreting the model becomes
progressively dificult. This complexity risks obscuring how individual actions translate into
macro-level phenomena, thereby complicating the model’s explanatory power and usability [
          <xref ref-type="bibr" rid="ref34">70</xref>
          ].
Furthermore, the increasing heterogeneity and the need to model diverse agent behaviors add
layers of dificulty in defining and tracking the interactions within the system [
          <xref ref-type="bibr" rid="ref37">73</xref>
          ]. Studies have
shown that this can result in a combinatorial explosion, where the sheer number of possible
interactions grows exponentially, making it nearly impossible to simulate all potential scenarios
accurately [
          <xref ref-type="bibr" rid="ref38">74</xref>
          ].
        </p>
        <p>
          The relevance of the last limitation depends on the type of ABM used. One pertinent
distinction is between collectives and composites ABMs [
          <xref ref-type="bibr" rid="ref39 ref40">75, 76</xref>
          ]. Collectives ABMs often exhibit
greater homogeneity among agents and are studied under the concept of ’collective adaptive
systems’ [
          <xref ref-type="bibr" rid="ref41 ref42">77, 78</xref>
          ]. In contrast, composites ABMs involve heterogeneous agents with varied
characteristics and behaviors. This distinction underscores the diversity within the framework
of multi-agent systems and emphasizes the specific challenges associated with integrating
heterogeneous agents in hybrid models like ABSD [
          <xref ref-type="bibr" rid="ref33">69</xref>
          ]. The complexity of managing these
diverse agents and their interactions often requires sophisticated modeling techniques and
substantial computational resources, further complicating the development and deployment of
such systems. However, while integrating SD models with collectives should be less challenging
than with composites, their utility will also be more modest.
        </p>
        <p>We then propose a roadmap to address these limitations, at least partially, during the projection
and development of a hybrid ABSD simulation without sacrificing its strengths. First, choose
the SD model tailored to the scope of the simulation as the foundation. This model should be
simple enough to facilitate development but widely recognized to support dissemination. In
this initial step, it is also essential to adopt a comprehensive and clear theoretical framework.
Then, identify variables within the SD model that would benefit most from the incorporation
of an ABM. This can be assessed in terms of population-level variance and numerosity and,
consequently, the relevance of the missed heterogeneity. Third, search for already validated
ABMs in the literature that are coherent with the SD theoretical framework, prioritizing recent
and well-known models that are consistent with the SD model in terms of assumptions and
ifeld of application. If no suitable ABMs exist, carefully consider the decision to either omit the
ABM or proceed with developing a new one.</p>
        <p>
          The following step is to integrate the selected ABM(s) into the SD model. This process involves
careful theoretical and technical analysis to ensure compatibility and coherence between the
models. Probably, the best way to integrate two or more simulations is through a macro-to-micro
mapping [15, 16] and a parallel approach, where, at each step, the inputs of one model evolve
based on the outputs of the others [
          <xref ref-type="bibr" rid="ref43 ref44">79, 80</xref>
          ]. Finally, the ABM must be fully integrated into
the SD model. After a thorough analysis of the already validated tools, continue combining
the ABM(s) into the SD model until the complexity becomes unmanageable or all relevant
micro-level heterogeneity has been addressed.
        </p>
        <p>The next section proposes two actionable applications of these broad guidelines through a
detailed analysis of the integration of SD models and ABMs for global sustainable development.</p>
      </sec>
    </sec>
    <sec id="sec-3">
      <title>3. Two Potential ABSD Models in Global Sustainability</title>
      <sec id="sec-3-1">
        <title>3.1. SD model</title>
        <p>
          In this section, we propose to apply the roadmap detailed above with a specific goal: to describe
the global trends of sustainable development, considering the main economic and financial
reactions. Indeed, the current unsustainable trend of development manifests through a selection
process that is often random and disruptive to human activities in a broad sense [
          <xref ref-type="bibr" rid="ref45">81</xref>
          ]. However,
people are reacting to this situation by proposing technological and financial innovations.
        </p>
        <p>
          We then propose an ABSD model that adopts a Schumpeterian framework at the macro
level of analysis. This theoretical approach combines technological and financial innovations
on solid and coherent bases [
          <xref ref-type="bibr" rid="ref46 ref47">82, 83</xref>
          ]. We will use the SD model called FRIDA (Framework for
Integrated Development Assessment), which explicitly employs this theoretical approach [
          <xref ref-type="bibr" rid="ref48">84</xref>
          ].
This model is based on the previous Earth4All model [
          <xref ref-type="bibr" rid="ref49 ref50">85, 86</xref>
          ], and simulates and analyzes the
complex interactions between climate, food and land use, society, population, economics, and
energy systems. Its primary aim is to provide insights into sustainable development pathways
by integrating multiple aspects of human and environmental systems.
        </p>
        <p>FRIDA efectively models atmospheric conditions, greenhouse gas emissions, and climate
change impacts, as well as agricultural production, land use changes, and food security. It also
includes demographic changes, fertility, mortality, and migration patterns within its societal
component. The economic aspect of the model covers GDP, government spending, consumption,
investment, and economic growth, while the energy component analyzes energy production,
consumption, and transitions to renewable energy sources. The model has been calibrated
using historical data from 1980 to 2020 to ensure its accuracy in reflecting past trends. Key data
sources for this calibration include the United Nations, IPCC, IEA, FAO, and other reputable
databases. To optimize its parameters, FRIDA utilizes Powell’s BOBYQA, an eficient gradient
descent method. A partial calibration approach is employed, focusing on individual domains
before a final whole-model calibration. This approach enhances both computational eficiency
and accuracy. The performance of the FRIDA model is robust, with a high correlation between
model outputs and historical data. Most variables exhibit correlation coeficients above 0.85.
Additionally, Theil Inequality statistics are used to identify and attribute errors, ensuring that
the simulations are both reliable and precise.</p>
        <p>The next step is to carefully evaluate which areas of the overall SD model would benefit the
most from the inclusion of an ABM. This analysis should be conducted by thoroughly assessing
the costs and benefits of the tool to achieve the goal. One area where it could be particularly
useful is in innovative responses to climate change, as significant heterogeneity across contexts
can be expected. Another potentially relevant area is finance, where the response to increased
risk and the efort to create more resilient financial systems have a cross-cutting impact on
various socioeconomic aspects and can be expected to have relevant interaction efects.</p>
        <p>We propose integrating two ABMs into the FRIDA model: one in the innovation domain and
the other in the financial domain. In the following subsections, we detail this process.</p>
      </sec>
      <sec id="sec-3-2">
        <title>3.2. ABSD model with innovation dynamics</title>
        <p>ABMs of innovation dynamics aim to capture the processes of novelty emergence and difusion
across a population of heterogeneous firm agents. These processes cannot be simulated within
the confines of SD sustainability models due to their highly aggregate nature. Innovation
can only be implemented within a pure SD model either as an exogenous trend or as the
linear outcome of aggregate innovative investments, optionally treated as a policy lever. While
stochastic elements may be introduced to simulate the deep uncertainty inherent in innovation
processes, they involve two significant costs. First, they complicate the process of calibration
significantly. Second, their exogenous nature contrasts with the SD methodology’s aim to
identify endogenous feedback mechanisms, thus impairing the model’s validity.</p>
        <p>
          The integration of an innovation ABM could provide a superior solution to this quandary.
The ABM’s main aims would be to identify: 1) the shape of the relationship between innovative
investment and aggregate technological innovation; 2) the time lag involved; and 3) the possible
negative consequences. In this way, the stochastic element related to innovation would be
contained in the ABM, a methodological instrument capable of dealing with stochasticity
appropriately, without having to resort to heroic assumptions of linearity. Integrating all three
elements into the SD model would enable it to depict much more realistic and theoretically
satisfying innovation dynamics. Regarding the aspects of innovative firms’ reactions, there
are several ABMs available, but the “Schumpeter meeting Keynes” family of ABM models is
probably the best choice [
          <xref ref-type="bibr" rid="ref16 ref51">52, 87</xref>
          ].
        </p>
        <p>The integration of the two approaches would yield benefits for the ABM as well. For example,
a key limitation of the “Schumpeter meeting Keynes” models lies in the exogenously set number
of agents. An unintended consequence of this approach is that corporate bankruptcy becomes an
economic boon in the model, as the firm entering default is instantaneously substituted by a fully
funded, equipped, and technologically savvy new entrant. Integration with an SD model such
as FRIDA would allow relaxation of this methodological constraint through the endogenization
of the firm population, using, for example, aggregate real GDP to inform development over
time.</p>
      </sec>
      <sec id="sec-3-3">
        <title>3.3. ABSD model with financial dynamics</title>
        <p>Another set of dynamics whose modeling could be greatly enhanced by a hybrid ABSD model
approach is financial mechanisms. Like innovation, many financial markets are characterized
by radical, persistent uncertainty. Therefore, their depiction could be significantly improved
by integrating ABMs focused on the consequences of financial agents’ interactions, thereby
limiting the use of implausible linear functions in SD models of sustainability. Furthermore,
ABMs could extend their range of applications to include the interactions between systemic
developments and agents’ behaviors.</p>
        <p>
          However, finding models that analyze the financial aspect in the sustainable development
literature is challenging. To date, the only model that examines these aspects in a clear but
simplified way using an ABM is [
          <xref ref-type="bibr" rid="ref52">88</xref>
          ]. Nevertheless, some financial aspects have been integrated
into the "Schumpeter meeting Keynes" framework by [89]. Unfortunately, the integration of
ifnancial dynamics in ABMs sufers from a significant limitation: the impossibility of
endogenizing systemic financial conditions. While these models focus on the agents’ interactions, it is
evident that these interactions both afect and are afected by systemic developments, making
the integration of the latter quite desirable.
        </p>
        <p>To achieve significant theoretical coherence within the model, especially if the intention is to
integrate both innovation and financial aspects into the FRIDA model, the ABM proposed by
[89] is the preferred solution. This model ofers a robust framework that efectively addresses
the complexities and interactions between these critical elements. Moreover, FRIDA shows
that integrating financial and monetary systems with SD models is greatly hampered by the
necessity to aggregate financial agents into sector-level entities, thus implicitly assuming a
lock-step behavior that greatly increases the financial sector’s stability, thereby hindering the
capability to simulate financial and monetary crises.</p>
        <p>A hybrid approach could alleviate both issues. For ABMs, systemic conditions could be
parametrized according to SD output, enabling the modeling of agent-level reactions to a variety
of alternative contexts, such as currency crises, production-generated recessions, or public
policy-fueled temporary booms. For SD models, ABM-generated scenarios could be used to
integrate plausibly calibrated ineficiencies, such as liquidity crises, market-making exits, and
bank runs, thus enabling the modeling of fragile financial and monetary sectors and their
consequences on the economy at large.</p>
      </sec>
    </sec>
    <sec id="sec-4">
      <title>4. Conclusions</title>
      <p>ABM and SD models are two complementary tools for simulating complex systems. SD models
focus on macro-level structures and feedback loops, while ABMs simulate micro-level
interactions and emergent behaviors. Combining these approaches, hybrid ABSD models can provide
a more comprehensive analysis by leveraging the strengths of both. However, integrating
these models poses significant challenges, including increased complexity, high computational
demands, and the need for interdisciplinary expertise. To address these issues, a structured
roadmap is proposed, starting with selecting a validated SD model, identifying impactful
variables for ABM integration, and carefully incorporating validated ABMs from the existing
literature. This approach aims to optimize the benefits while managing the practical challenges
of ABSD modelling.</p>
      <p>While this article focuses on sustainable development, the ABSD model holds extensive and
relevant potential across various fields such as epidemiology, organizational management, urban
planning, transportation management, and energy. We aim to establish a robust foundation in
these and other disciplines, facilitating clear and systematic coordination of both macro and
micro-level analyses to provide practical insights for decision makers. Naturally, improving and
integrating this methodology with diferent tools is crucial to efectively address the complex
and interdisciplinary challenges inherent in these areas of research and practice. We hope this
paper represents a step in that direction.</p>
    </sec>
    <sec id="sec-5">
      <title>Acknowledgments</title>
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Christophe Feder was supported by the research project PRIN B53D23010030008. The usual
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