Agents, information, interaction and institutions

Noble, Christopher (2006). Agents, information, interaction and institutions Master's Thesis, School of Economics, The University of Queensland.

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Author Noble, Christopher
Thesis Title Agents, information, interaction and institutions
School, Centre or Institute School of Economics
Institution The University of Queensland
Publication date 2006
Thesis type Master's Thesis
Total pages 70
Language eng
Subjects 1402 Applied Economics
Formatted abstract The proposed framework is an attempt to explain the formation and behaviour of institutions within a social context. The approach taken weaves information economics, complexity theory, evolutionary economics and learning theory together to provide a new cohesive perspective on institutions. Based on Neo-Vygotskian methodology, the integration of learning theory from psychology into these frameworks, provides insight into how information diffuses through a complex system such as everyday life. Vygotskian thought originates from developmental psychology which makes it ideal for the purposes of investigation here. If knowledge and information are placed at the centre of economic and social activity, as they frequently are, then it is appropriate that the foundations lend themselves to how agents develop with it.

Initially a proposal is made that an agent or group of agents can be constructed into a system that learn and internalise information they are exposed to through their activities. This entails a more detailed prescription of the attributes that agents possess then is provided. Here the processes, channels and abilities that agents have to learn with are described with the aim ofproviding insight into how real humans operate. The learning process is logical in that it suggests that agents need to internalise information before they have the ability to use it. By observing how people internalise information greater insight is gained about the effects information has and the outcomes people will present. Information is shown under such conditions to be subjective and structured, and that people don't automatically acquire it simply by its existence. The advantage of framing agents in this manner is that features like endogenous behaviour, heterogenous agents, and historically dependent events are possible to incorporate.

With these issues in mind, discussion turns to institutions directly. A simple set of axioms are suggested for the definition of an institution. Institutions are subjective rules with fixed relationships that are ultimately between two or more agents. From these axioms, attributes are discussed bearing in mind the Vygotskian agents that have been proposed earlier. Institutions can be broadly categorised into those that are formed from local or global situations. Informal and formal institutions are defined according to issues such as the necessity for information channels of large institutions and the lack of development of channels in local smaller institutions. Also only some types of institutions will become large scale because agents don't have the opportunity or ability to adopt many of them. Some additional focus is provided to implicit properties of institutions which shows why they behave in the manner they do.

Finally an argument is presented that the social-constructivism method used here has certain advantages over New Institutional Economics. Transaction cost theory is considered by taking the theory of Douglas North as an example. His historical approach to explaining the formation of institutions provides an opportunity to compare the constructivist method to more orthodox theory. In doing so, a number of benefits can be seen from the point of view presented.

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