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on Evolutionary Economics |
| By: | G. Buenstorf |
| Abstract: | The paper makes the case for an empirically grounded, "bottom-up" approach to theory building in evolutionary industrial economics. This approach is based on studying systematically selected industries that are comparable in key dimensions. It opens up opportunities for testing the relevance, preconditions, and generality of explanatory factors in industry evolution. An illustration of the approach is subsequently given by presenting some findings on the evolution of the historical U.S. farm tractor industry. Length 23 pages |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2006-23&r=evo |
| By: | Alexis Anagnostopoulos; Omar Licandro; Italo Bove; Karl Schlag |
| Abstract: | We provide a simple theory of inflation inertia in a staggered price setting framework a la Calvo (1983). Contrary to Calvo.s formulation, the frequency of price changes is allowed to vary according to an evolutionary criterion. Inertia is the direct result of gradual adjustment in this frequency following a permanent change in the rate of money growth. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2006/33&r=evo |
| By: | Giovanni Dosi; Luigi Marengo |
| Abstract: | The behavioral theory of the firm has been acknowledged as one of the most fundamental pillars on which evolutionary theorizing in economics has been built. Nelson and Winter’s 1982 book is pervaded by the philosophy and concepts previously developed by Cyert, March and Simon. On the other hand, some behavioral notions, such as bounded rationality, though isolated from the context, are also at the heart of some economic theories of institutions such as transaction costs economics. In this paper, after briefly reviewing the basic concepts of evolutionary economics, we discuss its implications for the theory of organizations (and business firms in particular), and we suggest that evolutionary theory should coherently embrace an “embeddedness” view of organizations, whereby the latter are not simply efficient solutions to informational problems arising from contract incompleteness and uncertainty, but also shape the “visions of the world”, interaction networks, behavioral patterns and, ultimately, the very identity of the agents. After outlining the basic features of this perspective we analyze its consequences and empirical relevance. |
| Date: | 2007–01–22 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2007/01&r=evo |
| By: | John M. Gowdy (Department of Economics, Rensselaer Polytechnic Institute, Troy NY 12180-3590, USA) |
| Abstract: | The policy recommendations of most economists are based on the rational actor model of human behavior. Behavior is assumed to be self-regarding, preferences are assumed to be stable, and decisions are assumed to be unaffected by social context or frame of reference. The related fields of behavioral economics, game theory, and neuroscience have confirmed that human behavior is other regarding, and that people exhibit systematic patterns of decision-making that are "irrational" according to the standard behavioral model. This paper takes the position that it is these "irrational" patterns of behavior that uniquely define human decision making and that effective economic policies must take these behaviors as the starting point. This argument is supported by game theory experiments involving humans, closely related primates, and other animals with more limited cognitive ability. The policy focus of the paper is global climate change. The research surveyed in this paper suggests that the standard economic approach to climate change policy, with its almost exclusive emphasis on rational responses to monetary incentives, is seriously flawed. In fact, monetary incentives may actually be counter-productive. Humans are unique among animal species in their ability to cooperate across cultures, geographical space and generations. Tapping into this uniquely human attribute, and understanding how cooperation is enforced, holds the key to limiting the potentially calamitous effects of global climate change. |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:rpi:rpiwpe:0701&r=evo |
| By: | Gallice, Andrea |
| Abstract: | We introduce a simple procedure to be used for selecting the strategies most likely to be played by inexperienced agents who interact in one shot 2x2 games. We start with an axiomatic description of a function that may capture players' beliefs. Various proposals connected with the concept of mixed strategy Nash equilibrium do not match this description. On the other hand minimax regret obeys all the axioms. Therefore we use minimax regret to approximate players' beliefs and we let players best respond to these conjectured beliefs. When compared with existing experimental evidences about one shot matching pennies games, this procedure correctly indicates the choices of the vast majority of the players. Applications to other classes of games are also explored. |
| Keywords: | prediction; beliefs; mixed strategy Nash equilibrium; minimax regret; matching pennies; experiments. |
| JEL: | C72 C91 |
| Date: | 2007–01 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:1365&r=evo |
| By: | Floris Heukelom (ASE, Universiteit van Amsterdam) |
| Abstract: | Kahneman and Tversky and their behavioral economics stand in a long tradition of applying mathematics to human behavior. In the seventeenth century, attempts to describe rational behavior in mathematical terms run into problems with the formulation of the St. Petersburg paradox. Bernoulli’s celebrated solution to use utility instead of money marks the beginning of expected utility theory (EUT). Bernoulli’s work is taken up by psychophysics which in turn plays an important role in the making of modern economics. In the 1940s von Neumann and Morgenstern throw away Bernoulli and psychophysics, and redefine utility in monetary terms. Relying on this utility definition and on von Neumann and Morgenstern’s axiomatic constraints of the individual’s preferences, Friedman and Savage attempt to continue Bernoulli’s research. After this fails economics and psychology go separate ways. Economics employs Friedman’s positive-normative distinction; psychology uses Savag! e’s normative-descriptive distinction. Using psychophysics Kahneman and Tversky broaden the normative-descriptive distinction and argue with increasing strength for a descriptive theory of rational behavior. A prominent part of contemporary behavioral economics is founded upon the export of Tversky and Kahneman’s program to economics. Within this research, two different branches of research can be observed. One branch continues Kahneman and Tversky’s search for a descriptive theory of rational behavior and extends the normative-descriptive distinction with a prescriptive part. A second branch takes Tversky and Kahneman’s work as a falsification of positive economics. It argues that economics should take account of the psychological critique but stick to rigorous mathematical model building and Friedman’s positive-normative distinction. |
| Keywords: | Kahneman and Tversky; behavioral economics; expected utility theory; normative economics |
| JEL: | A12 B21 D01 |
| Date: | 2007–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070003&r=evo |
| By: | Floris Heukelom (Universiteit van Amsterdam) |
| Abstract: | This paper provides an overview of the work of Herbert Simon and his ideas about rational decision making. By his own standards, Simon is an economist who works in the tradition of Adam Smith and Alfred Marshall. The central theme in Simon’s research is how human beings organize themselves in different structures of distributed decision making in order to achieve a degree of rationality that is higher than which can be attained by the individual. In this realm his main preoccupation are hierarchic organizations such as the business firm and the computer. Simon sharply contrasts his views with the EUT, the dominant view on rational decision making in economics and other social sciences. |
| Keywords: | Herbert Simon; decision making; Expected Utility Theory; hierarchic organizations |
| JEL: | A12 D01 D21 |
| Date: | 2007–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20070005&r=evo |