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In the political economy of development, government policy choices at a single point in time can dramatically affect a country's development path by impacting fertility, economic and political decisions across generations. Combining system dynamics and agent-based modeling approaches in a complex adaptive system, a simulation framework of the Politics of Fertility and Economic Development (POFED) is formalized to understand the relationship between politics, economic, and demography change at both macro and micro levels. First, a new political capacity measurement is used; and the system dynamics model is validated with the latest data. Second, the endogenous attributes are fused with non-cooperative game theory in an agent-based framework to simulate the interactive political economic dynamics of individual intra-societal transactions. Finally, macro and micro levels are connected with policy levers of political capacity and political instability by merging system dynamics and agent-based components. This paper also explores the agent-based model's behavioral dynamics via simulation methods to identify paths towards economic development and political stability. This model demonstrates micro level human agency can act, react and interact, thus driving macro level dynamics, while macro structures provide political, social and economic environments that constrain or incentivize micro level human behavior.