Evolutionary Microeconomics and the Theory of Expectations

Potts, J. (2000) Evolutionary Microeconomics and the Theory of Expectations. Discussion Paper No 270, Department of Economics, The University of Queensland.

Attached Files (Some files may be inaccessible until you login with your UQ eSpace credentials)
Name Description MIMEType Size Downloads
DP270Feb00.pdf DP270Feb00.pdf application/pdf 414.31KB 3410
Author Potts, J.
Title Evolutionary Microeconomics and the Theory of Expectations
School, Department or Centre Department of Economics
Institution The University of Queensland
Open Access Status Other
Report Number Discussion Paper No 270
Publication date 2000-02-01
Subject 340101 Microeconomic Theory
Abstract/Summary This paper sketches a framework for the analysis of expectations in an evolutionary microeconomics. The core proposition is that expectations form a network structure, and that the geometry of that network will provide a suitable guide as to the dynamical behaviour of that network. It is a development towards a theory of the computational processes that construct the data set of expectations. The role of probability theory is examined in this context. Two key issues will be explored: (1) on the nature and stability of expectations when they form as a complex network; and (2), the way in which this may be modelled within a multi-agent simulation platform. It is argued that multi-agent simulation (a-life) techniques provide an expedient analytical environment to study the dynamic nature of mass expectations, as generated or produced objects, in a way that bridges micro and macroeconomics.
Keyword Microeconomics
References Adams, J. (1995) Risk. London: UCL Press. Agliardi, E. (1998) Positive Feedback Economics, Basingstoke: Macmillan. Arthur, W. (1993) 'On Designing Economic Agents that Behave like Human Agents.' Journal of Evolutionary Economics. 1: 1-22. Banerjee, A. (1992) 'A Simple Model of Herd Behaviour.' The Quarterly Journal of Economics. 107: 797-817. Barkley-Rosser, J. (1999) 'Uncertainty and Expectation.' forthcoming in A New Guide to Post Keynesian Economics, R. Holt and S. Pressman, (eds) (1999) London: Routledge. Bausor, R. (1983) 'The Rational Expectations hypothesis and the Epistemics of Time.' Cambridge Journal of Economics. 7: 1-10. Bedard, J. and M. Chi (1992) 'Expertise' Current Directions in Psychological Research. 1: 135-139. Bowan, M. (ed) (1958) Expectations, Uncertainty, and Business Behaviour. New York: Social Science Research Council. Cagan, P. (1956) 'The Monetary Dynamics of Hyper-Inflation.' In M. Freidman (ed) (1956) Studies in the Quantity theory of Money. Chicago: University of Chicago Press. Campbell, J. and N. Mankiw (1990) 'Permanent Income, Current Income, and Consumption.' Journal of Business and Economic Statistics. 8: 265-279. Carnap, R. (1950) Logical Foundations of Probability. Chicago: University of Chicago Press. Collier, J. and Hooker, C. (1999) 'Complexly Organised Dynamical Systems.' Mimeo, Dept. of Philosophy, University of Newcastle, Australia. Cooper, A., T. Folta and C. Woo (1995) 'Entrepreneurial Information Search.' Journal of Business Venturing. 10: 107-120. Darley, V. and S. Kauffman (1997) 'Natural Rationality.' in W. Arthur, B. Durlauf and D. Lane (eds) (1997) The Economy as an Evolving Complex System II. New York: Addison Wesley. pp. 45-79. Davidson, P. (1982-3) 'Rational Expectations: A Fallacious Foundation for Studying Crucial Decision-Making Processes.' Journal of Post-Keynesian Economics. 5: 182-198. Davidson, P. (1991) 'Is Probability Theory Relevant for Uncertainty? A Post Keynesian Perspective.' Journal of Economic Perspectives. 5: 129-143. Debreu, G. (1959) Theory of Value. New York: Wiley. Dequech, D. (1999) 'Expectations and Confidence Under Uncertainty.' Journal of Post Keynesian Economics, 21: 415-30. Dow, S. (1985) Macroeconomic thought: A Methodological Approach. Oxford: Basil Blackwell. Earl, P. (1986) Lifestyle Economics: Consumer Behaviour in a Turbulent World. Brighton: Wheatsheaf Books. Earl, P. (1990a) Monetary Scenarios: A Modern Approach to Financial Systems. Aldershot: Edward Elgar. Earl, P. (1990b) 'Economics and Psychology: A Survey', Economic Journal. 100: 718-55. Earl, P. (1998) 'George Richardson's Career and the Literature of Economics'. in Foss and Loasby (eds) (1998) Economic Organisation, Capabilities, and Coordination: Essays in honour of George Richardson. London: Routledge. pp. 14-43. Einhorn, H. (1973) 'Expert Judgement: Some necessary conditions and an example.' Journal of Applied Psychology. 59: 562-71. Ellison, G. (1993) 'Learning, Local Interaction, and Coordination.' Econometrica, 61: 1047-71. Epstein, J. and R. Axtell (1996) Growing Artificial Societies: Social science from the bottom-up. Cambridge, MA: MIT Press. de Finitti, B. (1931) 'Sul Significato Soggettivo della Probabilita.' Fundamenta Mathematicae 17: 298-329. Fisher, I. (1930) The Theory of Interest. New York: MacMillan. Fleith, B. and J. Foster (1999) 'Interdependent Expectations.' Mimeo, Dept. of Economics, University of Queensland. Friedman, M. (1959) 'The Demand for Money: Some Theoretical and Empirical Results.' Journal of Political Economy. Fukuyama, F. (1998) The Great Disruption: Human Nature and the Reconstitution of Social Order. London: Profile Books. Georgescu-Roegen, N. (1954) 'Choice, Expectation and Measurability.' Quarterly Journal of Economics, 68: 520-534. Georgescu-Roegen, N. (1958) 'The Nature of Expectation and Uncertainty.' in M. Bowan (1958) pp. 11-29. Gerogescu-Roegen, N. (1971) The Entropy Law and the Economic Process. Cambridge MA: Harvard University Press. Gowdy, J. (1985-86) 'Expectations and Predictability', Journal of Post Keynesian Economics 8: 192-200. Hacking, I. (1975) The Emergence of Probability: a philosophical study of early ideas about probability, induction and statistical inference. Cambridge: Cambridge University Press. Hartley, J. (1997) The Representative Agent in Macroeconomics. London: Routledge. Hayek, F. (1945) 'The Use of Knowledge in Society.' American Economic Review, 35: 519-30. Hazledine, T. (1998) Taking New Zealand Seriously: The Economics of Decency. Auckland: Harper Collins. Heiner, R. (1983) 'The Origin of Predictable Behaviour.' American Economic Review, 73: 560-595. Heiner, R. (1989) 'On the Origin of Predictable Dynamic Behaviour.' Journal of Economic Behaviour and Organisation. 12: 233-257. Hey, J. (1982) 'Search for Rules of Search.' Journal of Economic Behaviour and Organisation. 3: 65-81. Hicks, J. (1939) Value and Capital. London: Oxford University Press. Hirschman, A. (1970) Exit, Voice, and Loyalty: Responses to Decline in Firms, Organisations and States. New York: Norton. Holland, J. (1975) Adaptation in Natural and Artificial Systems: An introductory analysis with applications to biology, control, and artificial intelligence. Ann Arbor: University of Michigan Press. Holland, J. (1995) Hidden Order: How Adaptation Builds Complexity. New York: Helix Books. Holland, J. (1998) Emergence: From Chaos to Order. New York: Oxford University Press. Holland, J. and J. Miller (1991) 'Artificial Adaptive Agents in Economic Theory.' American Economic Review: Papers and Proceedings. 81: 365-370. Kahanaman, D. and A. Tversky (1979) 'Prospect theory: an analysis of decision under risk.' Econometrica, 47: 263-91. Katona, G. (1951) Psychological Analysis of Economic Behaviour. New York: McGraw-Hill. Katona, G. (1960) The Powerful Consumer: Psychological Studies of the American Economy. New York: McGraw-Hill. Kelly, G. (1963) A Theory of Personality. New York: Norton. Keynes, J. (1921) Treatise on Probability, reprinted in Collected Writings, Vol. VIII. 1973, New York: St. Martins Press. Keynes, J. (1936) The General Theory of Employment, Interest and Money. London: Macmillan. Keynes, J. (1937) 'The General Theory of Employment', Quarterly Journal of Economics 51: 209-223. Kirman, A. (1992) 'Whom or What Does the Representative Individual Represent?' Journal of Economic Perspectives, 6: 117-36. Kirman, A. (1993) 'Ants, Rationality, and Recruitment.' The Quarterly Journal of Economics, 108: 137-156. Kirman, A. (1997) 'The Economy as an Evolving Network.' Journal of Evolutionary Economics. 7: 339-353. Klein, L. (1972) 'The Treatment of Expectations in Econometrics.' In J. Ford and C. Carter (eds) (1972) Uncertainty and Expectations in Economics: Essays in honour of G. L. S. Shackle. New Jersey: Augustus Kelly. pp. 175-190. Kolmogorov, A. (1933) Grundbergriffe der Wahrscheinlichkeitrechnung. Berlin. Lachmann, L. (1976) 'From Mises to Shackle: An Essay on Austrian Economics and the Kaleidic Society.' Journal of Economic Literature. 14: 54-62. Lakatos, I. (1978) The Methodology of Scientific Research Programmes. Cambridge: Cambridge University Press. Lamberton, D. (ed) (1996) The Economics of Communication and Information. Cheltenham: Edward Elgar. Lane, D., F. Malerba, R. Maxfield, and L. Orsenigo (1995) 'Choice and Action' Journal of Evolutionary Economics. 6: 43-76. Lawson, T. (1988) 'Probability and Uncertainty in Economic Analysis' Journal of Post Keynesian Economics 11: 38-65. Leibenstein, H. (1979) 'A Branch of Economics is Missing: Micro-Micro Theory.' Journal of Economic Literature. 17: 477-502. Lettau, M. and H. Uhlig (1999) 'Rules of Thumb versus Dynamic Programming.' American Economic Review. 89: 148-174. Loasby, B. (1976) Choice, Complexity and Ignorance, Cambridge: Cambridge University Press. Loasby, B. (1991) Equilibrium and Evolution: An Exploration of Connecting Principles in Economics. Manchester: Manchester university Press. Loomes, G. and R. Sugden (1982) 'Regret Theory: an alternative theory of rational choice under uncertainty.' Economic Journal. 92: 805-24. Lou, F. (1997) Turbulence in Economics: An Evolutionary Appraisal of Cycles and Complexity in Historical Processes. Cheltenham: Edward Elgar. Lucas, R. (1972) 'Expectations and the Neutrality of Money.' Journal of Economic Theory, 4; 103-124. Meischelman, D. (1962) The Term structure of Interest Rates. Englewood Cliffs, NJ: Prentice-Hall. Minsky, H. (1975) John Maynard Keynes. New York: Columbia University Press. Minsky, H. (1982) 'The Financial instability Hypothesis: Capitalist Processes and the Behaviour of the Economy.' In C. Kindleberger and J. Laffergue (eds) (1982) Financial Crises: Theory, History, and Policy. Cambridge: Cambridge University Press. Muth, J. (1961) 'Rational Expectations and the Theory of Price Movements.' Econometrica 29: 315-335. ODriscoll, G. and M. Rizzo (1985) The Economics of Time and Ignorance. New York: Blackwell. O'Driscoll, G. and M. Rizzo (1986) 'Subjectivism, Uncertainty and Rules.' in I. Kirzner (ed) (1986) Subjectivism, Intelligibility and Economic Understanding. London: Macmillan. (Ch. 18, pp. 252-67). Okun, A. (1981) Prices and Quantities: A Macroeconomic Analysis. Oxford: Basil Blackwell. Palley, T. (1993) 'Uncertainty, Expectations and the Future: If we don't know the answers, what are the questions?' Journal of Post-Keynesian Economics. 16: 3-18. Payne, J. (1976) 'Task Complexity and Contingent Processing in Decision Making: An Information Search and Protocol Analysis.' Organisational behaviour and Human Performance. 16: 336-87. Peters, E. (1999) Patterns in the Dark: Understanding Risk and Financial Crisis with Complexity Theory. New York: Wiley. von Plato, J. (1994) Creating Modern Probability : its mathematics, physics, and philosophy in historical perspective. Cambridge: Cambridge university Press. Pollock, J. (1989) Nomic Probability and the Foundations of Induction. New York: Oxford University Press. Potts, J. (2000) 'Uncertainty, Complexity, and Imagination.' In P. Earl and S. Frowen (eds) (2000) Economics as an Art of Thought. Routledge: London. Pp. 162-184. Potts, J. (1999a) 'First Principles of Evolutionary Microeconomics' unpublished Ph.D. Thesis, Lincoln University, New Zealand. Potts, J. (1999b) 'The Geometry of Economic Space.' Dept. of Economics, Discussion Paper, University of Queensland. Pryor, F. (1996) Economic Evolution and Structure: The impact of complexity on the U.S. economic system.New York: Cambridge University Press. Richardson, G. (1959) 'Equilibrium, Expectations and Information.' Economic Journal, 69: 223-237. Richardson, G. (1960) Information and Investment. Oxford: Oxford University Press. Richardson, G. (1971) 'Planning Versus Competition.' Soviet Studies. XXII: 443-47. (reprinted in G. Richardson (1998) The Economics of Imperfect Knowledge, Cheltenham: Edward Elgar. Pp. 128-142.) Richardson, G. (1972) 'The Organisation of Industry.' Economic Journal. 82; 883-96. Riechmann, T. (1999) 'Learning and Behavioural Stability: An economic interpretation of genetic algorithms.' Journal of Evolutionary Economics. 9: 225-242. Rosenthal, N. (1993) 'Rules of Thumb in Games.' Journal of Economic Behaviour and Organisation. 22: 1-13. Runde, J. (2000) 'Shackle on Probability' In P. Earl and S. Frowen (eds) (2000) Economics as an Art of Thought. Routledge: London. pp. 185-208. Sargent, T. (1993) Bounded Rationality in Macroeconomics. Oxford: Clarendon. Saul, J. (1993) Voltaire's Bastards. London: Penguin Books. Savage, L. (1954) The Foundations of Statistics. New York: Wiley. Scarf, H. (1989) 'Mathematical Programming and Economic Theory' Cowles Foundation Discussion Paper, No 930, Yale University, Connecticut. Schoemaker, P. (1993) 'Determinants of Risk Taking: Behavioural and Economic Views.' Journal of Risk and Uncertainty. 6: 49-73 Schumpeter, J. (1939) Business Cycles: A theoretical, historical, and statistical analysis of the capitalist process. (2 vol.s) New York: McGraw Hill. Shackle, G. (1949) Expectation in Economics, Cambridge: Cambridge University Press. Shackle, G. (1958a) Time in Economics. Amsterdam: North Holland. Shackle, G. (1958b) 'Expectation and Liquidity.' in M. Bowan (1958) pp. 30-44. Shackle, G. (1966) The Nature of Economic Thought : selected papers, 1955-1964. Cambridge: Cambridge University Press. Shackle, G. (1968) Expectations, Investment and Income. 2nd ed. (first published 1938) Oxford: Clarendon Press. Shackle, G. (1970) Expectations, Enterprise and Profit: The Theory of the Firm. London: George Allen and Unwin. Shackle, G. (1972) Epistemics & Economics. London: Cambridge University Press. Shackle, G. (1974) Keynesian Kaleidics: The Evolution of a General Political Economy Edinburgh: Edinburgh University Press. Shackle, G. (1979) Imagination and the Nature of Choice. Edinburgh: Edinburgh University Press. Shannon, C. and W. Weaver (1949) The Mathematical Theory of Communication. Urbana: University of Illinois Press. Simon, H. (1958) 'The Role of Expectations in an Adaptive or Behaviouristic Model' in M. Bowan (1958) pp. 49-58. Simon, H. (1959) 'Theories of Decision-Making in Economics and Behavioural Science.' American Economic Review, 49: 253-283. Simon, H. (1962) 'The Architecture of Complexity.' Proceedings of the American Philosophical Society, 106: 476-82. Simon, H. (1981) Sciences of the Artificial. 2nd ed. (1st ed. 1968). Cambridge MA: MIT Press. Simon, H. (1976) 'From Substantive to Procedural Rationality' in S. Latsis (ed) (1976) method and Appraisal in Economics. Cambridge: Cambridge University Press. Simon, H. (1982) Models of Bounded Rationality: Volume 1, Economic Analysis and Public Policy; Volume 2, Behavioural Economics and Business Organisation. Cambridge MA: MIT. Townshend, H. (1939) 'Liquidity Premium and the Theory of Value.' Economic Journal, 47: 157-166. Tversky, A. and D. Kahneman (1974) 'Judgement Under Uncertainty: Heuristics and Biases.' Science. 185: 1124-31. Wright, G. and F. Bolger (eds) (1992) Expertise and Decision Support. London: Plenum Press. Zacharakis, A. and G. Meyer (1998) 'A Lack of Insight: Do Venture Capitalists Really Understand Their Own Decision Process.' Journal of Business Venturing. 13: 57-76.

Document type: Department Technical Report
Collection: Discussion Papers (School of Economics)
Version Filter Type
Citation counts: Google Scholar Search Google Scholar
Created: Thu, 05 Feb 2004, 10:00:00 EST