Munich Personal RePEc Archive

Impact of Environmental Dynamics on Economic Evolution: Uncertainty, Risk Aversion, and Policy

Nannen, Volker and van den Bergh, Jeroen C. J. M. and Eiben, A. E. (2008): Impact of Environmental Dynamics on Economic Evolution: Uncertainty, Risk Aversion, and Policy.

WarningThere is a more recent version of this item available.
[img]
Preview
PDF
MPRA_paper_13834.pdf

Download (517Kb) | Preview

Abstract

The general question of how environmental dynamics affect the behavioral interaction in an evolutionary economy is considered. To this end, a basic model of a dynamic multi-sector economy is developed where the evolution of investment strategies depends on the diversity of investment strategies, social connectivity and relative contribution of sector specific investments to production. Four types of environmental dynamics are examined that differ in how gradual and how frequent environmental change occurs. Numerical analysis shows how the socially optimal level of diversity increases with the frequency and rapidity of the changes. When there is uncertainty about which type of environmental dynamics will prevail, the socially optimal level of diversity increases with the degree of risk aversion of the policy maker or the society.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.