nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2008‒06‒21
five papers chosen by
Matthew Baker
City University of New York

  1. Evolutionary Modelling in Economics: A Survey of Methods and Building Blocks By Karolina Safarzynska; Jeroen C.J.M. van den Bergh
  2. Complex evolutionary systems in behavioral finance By Hommes, C.H.; Wagener, F.O.O.
  3. A Model-to-Model Analysis of The Repeated Prisoners' Dilemma: Genetic Algorithms vs. Evolutionary Dynamics By Xavier Vilà
  4. Regulation of Farming Activities: An Evolutionary Approach By Constadina Passa; Anastasios Xepapadeas
  5. Clientelism, Income Inequality, and Social Preferences: an Evolutionary Approach to Poverty Traps By Jorge Andrés Gallego Durán; Rafal Raciborski

  1. By: Karolina Safarzynska; Jeroen C.J.M. van den Bergh
    Abstract: In this paper we present an overview of methods and components of formal economic models employing evolutionary approaches. This compromises two levels: (1) techniques of evolutionary modelling, including multi-agent modelling, evolutionary algorithms and evolutionary game theory; (2) building blocks or components of formal models classified into core processes and features of evolutionary systems - diversity, innovation and selection - and additional elements, such as bounded rationality, diffusion, path dependency and lock-in, co-evolutionary dynamics, multilevel and group selection, and evolutionary growth. We focus our attention on the characteristics of models and techniques and their underlying assumptions.
    Keywords: bounded rationality, evolutionary algorithms, evolutionary game theory, evolutionary growth, innovation, multilevel evolution, neo-Schumpeterian models Length 51 pages
    JEL: B52 C60 C73
    Date: 2008–06
  2. By: Hommes, C.H. (Universiteit van Amsterdam); Wagener, F.O.O. (Universiteit van Amsterdam)
    Abstract: Traditional finance is built on the rationality paradigm. This chapter discusses simple models from an alternative approach in which financial markets are viewed as complex evolutionary systems. Agents are boundedly rational and base their investment decisions upon market forecasting heuristics. Prices and beliefs about future prices co-evolve over time with mutual feedback. Strategy choice is driven by evolutionary selection, so that agents tend to adopt strategies that were successful in the past. Calibration of "simple complexity models" with heterogeneous expectations to real financial market data and laboratory experiments with human subjects are also discussed.
    Date: 2008
  3. By: Xavier Vilà
    Abstract: We study the properties of the well known Replicator Dynamics when applied to a finitely repeated version of the Prisoners' Dilemma game. We characterize the behavior of such dynamics under strongly simplifying assumptions (i.e. only 3 strategies are available) and show that the basin of attraction of defection shrinks as the number of repetitions increases. After discussing the difficulties involved in trying to relax the 'strongly simplifying assumptions' above, we approach the same model by means of simulations based on genetic algorithms. The resulting simulations describe a behavior of the system very close to the one predicted by the replicator dynamics without imposing any of the assumptions of the analytical model. Our main conclusion is that analytical and computational models are good complements for research in social sciences. Indeed, while on the one hand computational models are extremely useful to extend the scope of the analysis to complex scenar
    Keywords: Agent-Based Computational Economics, Evolutionary Game Theory, Replicator Dynamics, Model-to-Model Analysis, Repeated Prisoners' Dilemma
    JEL: C63 C72 D82
    Date: 2008–06–11
  4. By: Constadina Passa (Department of Economics, University of Crete, Greece); Anastasios Xepapadeas (Department of Economics, University of Crete, Greece)
    Abstract: Farming activity is modeled under an intervention policy regime, combining the environmental requirements of the Council Nitrates Directive (91/676/EEC) and the compensatory provisions of the second pillar of the Common Agricul- tural Policy. The optimizing behavioural rule along with the evolutionary rule is employed in order to model the individual farmer's decision making, regard- ing compliance or not with regulatory provisions. The impact of these di¤erent behavioral rules on the selection of monitoring effort and thus on the compli- ance incentives of a population of farmers is examined. Analysis indicated that if monitoring effort is chosen arbitrarily or optimally based on the accustomed full rationality assumption then the population adopts a monomorphic behav- ior in the long-run, involving either full or noncompliance with the Directive's provisions. A polymorphic behavior involving partial compliance of the pop- ulation also arises if the dynamic model of optimal monitoring is constrained by replicator dynamics which represent the imitation rules. It is evident, thus, that the number and the type of the equilibrium steady-states is affected by the assumption regarding the behavioral rule adopted by regulated agents. Fi- nally, the dynamics of the population of compliant farmers is also assessed under accumulation of monitoring capital indicating identical properties.
    Keywords: Nitrates Directive, agri-environmental programs, monitoring effford, monitoring capital, rationality, optimal behavioral rule, replicator dynamics, imitation
    JEL: Q20 L51 B52
    Date: 2008–06–10
  5. By: Jorge Andrés Gallego Durán; Rafal Raciborski
    Abstract: Political clientelism is a dyadic relation in which a politician (the patron) gives material goods and services to a citizen (the client), in exchange for political support. We argue that there is a two-way relation between clientelism and income inequality and poverty. In a poor society in which income inequality is high, clientelism will be a natural outcome. Once clientelism is established, it is harder for democracy to redistribute income and it is easier for the society to be caught in a poverty trap. We develop a two-part game-theoretic model. In the first part, clientelism emerges in a poor and unequal society as a consequence of social preferences, in particular, strong reciprocity. In the second part, using evolutionary and stochastic game theory, we show that clientelism causes income inequality and poverty.
    Date: 2008–02–07

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