nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2015‒11‒01
four papers chosen by
Matthew Baker
City University of New York

  1. Trade Bounded Rationality and Bounded Individuality By Davis, John
  2. Market vs. system failure as a rationale for EU regional policy? A critique from an evolutionary economic perspective By Peter Schmidt
  3. Who cares about the balderdash I spouted yesterday?* – An experiment on the volatility of bargaining norms – By Stephan Schosser
  4. Dynamics of Socio-Economic Systems: Attractors, Rationality and Meaning By Andrzej Nowak; Jorgen Andersen; Wojciech Borkowski

  1. By: Davis, John (Department of Economics Marquette University)
    Abstract: This paper argues that since the utility function conception of the individual is derived from standard rationality theory, the view that rationality is bounded suggests that individuality should also be seen as bounded. The meaning of this idea is developed in terms of two ways in which individuality can be said to be bounded, with one bound associated with Kahneman and Tversky's prospect theory and the "new" behavioral economics and a second bound associated with Simon's evolutionary thinking and the "old" behavioral economics. The paper then shows how different bounded individuality conceptions operate in nudge economics, agent-based modeling, and social identity theory, explaining these conceptions in terms of how they relate to these two behavioral economics views of bounded rationality. How both the "new" and "old" individuality bounds might then be combined in a single account is briefly explored in connection with Kirman's Marseille fish market analysis.
    Keywords: bounded rationality, bounded individuality, nudge economics, agent-based modeling, social identity theory, Marseille fish market
    Date: 2014–07
  2. By: Peter Schmidt
    Abstract: This paper reconsiders the economic explanation of EU regional policy from an evolution- ary perspective. It contrasts the neoclassical equilibrium notions of market and government failure with the prevalent evolutionary neo-Schumpeterian and Austrian-Hayekian percep- tions. Based on this comparison the paper criticises that neoclassical failure reasoning still prevails in non-equilibrium evolutionary economics when regional policy issues are exam- ined. This is more than surprising since proponents of evolutionary economics usually view their approach as incompatible with its neoclassical counterpart. In addition, it is shown that this ?fallacy of failure thinking? even finds its continuation in the alternative concept of ?system failure? with which some evolutionary economists try to explain and legitimate regional policy interventions in local, regional or national innovation systems. The paper argues that in order to prevent the fruitful and more realistic evolutionary approach from undermining its own criticism of neoclassical economics and to create a consistent as well as objective evolutionary policy framework it is necessary to eliminate the equilibrium spirit from it. Finally, the paper delivers an alternative evolutionary explanation of EU regional policy which is able to overcome the theory-immanent contradiction of the hitherto evolu- tionary view on this subject. Building on the preceding remarks, policy implications for EU regional policy from a ?proper? evolutionary perspective are deduced.
    Keywords: market failure; system failure; EU regional policy; evolutionary economics
    JEL: B52 B53 F15 H53 O20 R10
    Date: 2015–10
  3. By: Stephan Schosser (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: When talking about possible bargaining results participants in the Nash bargaining game mainly use fairness norms to support their favored outcome. According to theory a variety of different, fair solutions exists from which the participants can choose. In this paper, we experimentally investigate Nash bargaining with a previous opportunity to chat about the bargaining outcome. We find that playing a dictator game prior to the Nash bargaining game establishes – without any additional communication – a fairness norm, the participants resort to. However, if nothing is played prior to the Nash bargaining game, participants discuss longer about what to play. In addition, we find that deviations in favor of one participant occur the longer preplay communication lasts.
    Keywords: bargaining game, dictator game, norms, experimental economics
    JEL: C7 C9
    Date: 2015–10
  4. By: Andrzej Nowak (Institute for Social Studies, University of Warsaw - Institute for Social Studies, University of Warsaw,); Jorgen Andersen (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS); Wojciech Borkowski (Institute for Social Studies, University of Warsaw - Institute for Social Studies, University of Warsaw,)
    Abstract: Gintis and Helbing go beyond traditional boundaries of scientific disciplines and propose integration of major theories from the main disciplines of the social as well as natural sciences. The theory captures well many insights from social psychology. Several assumptions of the model, however, may be questioned. The assumption that social systems are at equilibrium is too narrow, because social systems may also be out of equilibrium. The notion of attractor dynamics shows that systems may converge on different types of attractors depending on the value of control parameters. The notion of rationality of human behavior may be challenged on the basis of new data from psychology, decision science and behavioral economics. Often individuals do not process the information, but rather copy the choices of others. Individuals interact by both direct and indirect means – though market mechanisms. Most importantly, social dynamics, in contrast to physical systems, is governed by meaning. Despite these limitations the theory of Gintis and Helbing represents an important step in the integration of the social sciences.
    Keywords: complex system,adaptive system,general equilibrium
    Date: 2015

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