Smith, Peter (2008): New perspectives on realism, tractability, and complexity in economics.
Download (300Kb) | Preview
Fuzzy logic and genetic algorithms are used to rework more realistic (and more complex) models of competitive markets. The resulting equilibria are significantly different from the ones predicted from the usual static analysis; the methodology solves the Walrasian problem of how markets can reach equilibrium, starting with firms trading at disparate prices. The modified equilibria found in these complex market models involve some mutual self-restraint on the part of the agents involved, relative to economically rational behaviour. Research (using similar techniques) into the evolution of collaborative behaviours in economics, and of altruism generally, is summarized; and the joint significance of these two bodies of work for public policy is reviewed. The possible extension of the fuzzy/ genetic methodology to other technical aspects of economics (including international trade theory, and development) is also discussed, as are the limitations to the usefulness of any type of theory in political domains. For the latter purpose, a more differentiated concept of rationality, appropriate to ill-structured choices, is developed. The philosophical case for laissez-faire policies is considered briefly; and the prospects for change in the way we ‘do economics’ are analysed.
|Item Type:||MPRA Paper|
|Original Title:||New perspectives on realism, tractability, and complexity in economics|
|Keywords:||Fuzzy logic; genetic algorithms; complexity; emergence; rationality; ill-structured choice; equilibrium; Walrasian Crier; paradigm change;|
|Subjects:||B - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - General
C - Mathematical and Quantitative Methods > C6 - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling > C61 - Optimization Techniques; Programming Models; Dynamic Analysis
B - History of Economic Thought, Methodology, and Heterodox Approaches > B4 - Economic Methodology > B41 - Economic Methodology
|Depositing User:||Peter Smith|
|Date Deposited:||06. Oct 2008 00:03|
|Last Modified:||12. Feb 2013 12:28|
 Ormerod, P (1994) The Death of Economics, Chapter 4 – Professional Reservations. (Faber and Faber.)
 Schumpeter, J (1954) The History of Economic Analysis, p 473. (OUP.)
 Mayer, T (1993) Truth versus Precision in Economics, pp 1 – 4. (Edward Elgar.)  Kennedy, P (1992), A Guide to Econometrics, Chapter 9 – Measurement Errors and Autoregression. (3rd Edn.) (Blackwell.)
 Greer, WB (2000) The Economics of JM Keynes and FH Knight. (Edward Elgar.)
 Mandelbrot, B, and Hudson, RL (2005) The (Mis)Behaviour of Markets, Chapters 4,8,9, and 11. (Profile Books, London.)
 Feder, J (1988) Fractals, Chapter 8 – Fractal Records in Time. (Plenum Press, New York.)
 Lowenstein, R (2002) When Genius failed: The Rise and Fall of Long-Term Capital Management, Chapter 8 - The Fall. (Fourth Estate, London.)
 Attfield, CL, Demery, D, and Duck, NW (1991) Rational Expectations in Macroeconomics : An introduction to theory and evidence. (Blackwell.)
 Holland, JH (2000) Emergence: From Chaos to Order. (OUP.)
 Lowenstein, op cit, pp 68-69.
 Ormerod, loc cit.
 Bell, DJ (1990) Mathematics of Linear and Nonlinear Systems, p 257 ff. (Clarendon Press.)
 Chiang, AC (1984) Fundamental methods of Mathematical Economics, p 124, 226, and Part 5: Dynamic Analysis. (McGraw-Hill International Editions.)
 McNeill, D and Freiberger, P (1994). Fuzzy Logic, p 117ff. (Simon and Schuster.)
 Ross, TJ (1995) Fuzzy Logic With Engineering Applications, Chapter 8 – Fuzzy Rule-Bound Systems. (McGraw Hill.)
 Haack, S (1996) Deviant Logic, Fuzzy Logic: Beyond the Formalism, p 233ff. (University of Chicago Press.)
 Terano, T, Kiyoji, A, and Sugeno, M (1994) Applied Fuzzy Systems, p 22. (Trans. by C Aschmann.) (AP Professional, Boston.)
 Elkan, C (1993) The Paradoxical Success of Fuzzy Logic, in Proceedings of the Eleventh National Conference on Artificial Intelligence, 698-703. IEEE.
 Holland, JH (1992) Adaptation in Natural and Artificial Systems: An introductory analysis with applications to biology, control, and artificial intelligence. (MIT Press.)
 Carroll, SB, Prud’homme, B, and Gompel, N (2008). Regulating Evolution. Scientific American, May 2008, pp 38-45.
 LeBaron, B (2000) Agent-based computational finance: Suggested readings and early research. Journal of Economic Dynamics and Control, 24, 679-702.
 Goldberg, DE (2003) The Design of Innovation: Lessons from and for Competent Genetic Algorithms. (Kluwer.)
 Reeves, CR, and Rowe, J (2002) Genetic Algorithms: Principles and Perspectives - A Guide to GA Theory. (Kluwer.)
 Goldberg, DE (1989) Genetic Algorithms in Search, Optimization and Machine Learning, p 46ff. (Addison-Wesley.)
 Dawid, H (1999) On the convergence of genetic learning in a double auction market. Journal of Economic Dynamics and Control, 23,1545-1567.
 Goldberg (1989), p 185ff.
 Handy, C (1985) Understanding Organizations, Chapter 2 – On the Motivation to Work. (Penguin.)
 Mintzberg, H ( 1983) Power In and Around Organizations, Chapter 13 – The System of Politics. (Prentice-Hall.)
 Morgan, G (1986) Images of Organization, Chapter 1 – Mechanization takes Command, Organizations as Machines. (Sage)
 Hayek, F (1999) The Road To Serfdom. ( Ed. J Blundell) (Institute for Economic Affairs, London.) This edition also contains an editorial, The History of the Institute for Economic Affairs.
 Beder, S (2003) Free-market Missionaries. (Earthscan.)
 Schotter, A (1990) Free Market Economics: A Critical Appraisal, p 158 ff. (St Martins Press.)
 Orchard, L and Stretton, H (1994). Public Goods, Public Enterprise, Public Choice: Theoretical Foundations of the Contemporary Attack on Government. (St Martins Press.)
 McLean, B and Elkind, P (2004) The Smartest Guys in the Room: The Amazing Rise and Scandalous fall of ENRON, Chapter 7 – The 15 Percent Solution (et seq). (Penguin.)
 Axelrod, R (1990) The Evolution of Cooperation. (Penguin.)
 Brams, SJ (1993) Theory of Moves. (Cambridge.)
 Casti, JL (1992) Cooperation: the Ghost in the Machinery of Evolution, in: Casti, JL, and Karlqvist, A (Eds) (1994) Cooperation and Conflict in General Evolutionary Processes. (John Wiley and Sons.)
 Axelrod,R (1997) The Complexity of Cooperation : Agent-based models of competition and collaboration, Chapters 1-3. (Princeton.)
 Sober, E, and Wilson, DS (1998) Unto Others: The Evolution of Unselfish Behavior. (Harvard.)
 Wilson, DS, and Wilson, EO (2007). Rethinking the Theoretical Foundation of Sociobiology. Quarterly Review of Biology, 82 (4), 327 – 348.
 Rushton, JP (1980) Altruism, Socialization, and Society, Chapter 2 – The Sociobiology of Altruism. (Prentice-Hall.)
 Iacoboni, M (2008) Mirroring People: The New Science of How We Connect With Others. (Farrar, Strauss and Giroux, New York.)
 Dunkley, G (2004) Free Trade: Myths, Reality, and Alternatives. (Zed Books.)
 Financial Times (2008) Multilateralism not as dead as a Doha. (FT Comment and Analysis, 7th August.)
 Richardson, GB (1990) Information and Investment: A Study in the Working of the Competitive Economy. (Clarendon Press.)
 Besley, T, and Burgess, R (2003) Halving Global Poverty Journal of Economic Perspectives, Summer 2003.
 Mitroff, II (1974) The Subjective Side of Science, Chapter 7 – Objectivity in Science. (Elsevier.)
 Smith, PJ (2001) Priority Setting in Agricultural Research: Beyond Economic Surplus Methods. Public Administration and Development, 21, 419-428.
 Peet, R and Hartwick, E (1999) Theories of Development, p52. (Guilford Press.)
 Shearmur, J (1996) Hayek and After: Hayekian liberalism as a research programme. (Routledge.)
 Hayek, F (1960) The Constitution of Liberty, Chapter 9 – Coercion and the State. (Routledge and Kegan Paul.)
 Meyer M, and Zucker, L (1989) Permanently Failing Organizations. (Sage.)
 Nozick, R (1974) Anarchy, State, and Utopia, p 169. (Basic Books.)
 Kant, I (1969) Fundamental principles of the Metaphysic of Ethics, Section II. (Transl. TK Abbott) (Longmans.)
 Lindsay, AD (1936) Kant, p 165 ff. (Ernest Benn Ltd, London.)
 Kuhn, T (1970) The Structure of Scientific Revolutions. (University of Chicago.)
 Lakatos, I (1970) Falsification and the Methodology of Scientific Research Programmes. In Lakatos, I and Musgrave, A (1990) Criticism and the Growth of Knowledge. (Cambridge University Press.)
 Laudan, L (1977) Progress and its Problems: Towards a theory of scientific growth. (University of California, Berkeley.)