Journal articles on the topic 'Rational economic agents'
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1
Caniglia, Alan S. "George Eliot and Rational Economic Agents." Journal of Interdisciplinary Economics 8, no. 2 (April 1997): 127–43. http://dx.doi.org/10.1177/02601079x9700800203.
Abstract:
Conventional economists analyze human behavior by assuming a “rational economic agent” who is motivated solely by material self interest. This assumption has come to permeate our analyses of economic situations and policies, yet it is clearly limited, simplifying, and not capable of explaining the full range of human behavior. In this essay the writings of George Eliot are discussed as commentaries on this assumption and the implicit deductive methodology underlying it, and as explorations toward the possibility of a broader conceptual framework for analyzing economic issues. The paper argues that Eliot was knowledgeable about economic discourse and was consciously wrestling with the rational agent assumption and possible alternatives in her fictional as well as nonfictional work. Her writings suggest ambivalence toward the deductive/maximizing framework and the search for broader conceptualizations of human behavior.
2
Carrera, Edgar J. Sanchez, and Jose Ma Gonzalez Lara. "Economic Rationality and Rational Credence." International Journal of Applied Behavioral Economics 8, no. 1 (January 2019): 49–61. http://dx.doi.org/10.4018/ijabe.2019010103.
Abstract:
The aim of this article is to show that rational maximizer agents, i.e. economic rationality, do not parsimoniously with rational credence, i.e. agents preferences driven by beliefs, traditions, idiosyncrasy, culture and/or customs depending on the social state representing a possible credence. The authors formulate a model on rational behavior, where either an economic and/or credence rationality results in the expected referential payoff of a rational preference driven by beliefs is not necessarily the optimal one in terms of having the largest payoff. Hence, the authors show the relationship between the expected payoff and instrumental or credence payoffs of choices, and what justifies choosing the latter when, ultimately, it is the former that maximizes your payoff. Finally, the authors conclude that agents' ordinary decisions may consider together both to the economic rationality and credence rationality, given their certain constraints on information, beliefs, and resources.
3
Malkov, Leonid P. "How Rational is the Behavior of Economic Agents in Russia?" Comparative Economic Studies 34, no. 1 (April 1992): 26–40. http://dx.doi.org/10.1057/ces.1992.3.
4
Mazhara, Glib, and Volodymyr Kapustian. "BEHAVIORAL COMPONENTS IN RELATIONSHIPS OF ECONOMIC AGENTS (EXAMPLE OF THE UKRAINIAN CAR MARKET)." EUREKA: Social and Humanities 2 (March 31, 2020): 8–14. http://dx.doi.org/10.21303/2504-5571.2020.001184.
Abstract:
In neoclassical economics a concept of individual is seen as a logical thinking machine, which accurately analyzes all information received and, based on it, makes decisions that maximize his/her personal gain and minimize risks while achieving his/her goals. Such behavior of a person is called rational. Such concept serves as a source of neoclassicism for the construction of supply and demand models, operation of tax systems, business cycles, inflation etc. It was not accepted to pay attention to the psychology of decision-making, it was believed, that these transient, random factors pale against the grandeur of economic incentives. Psychologists are interested in solutions that are emotional, casual, pursued by some sort of cultural ideas, norms, rules, and may even be phobias, conversely economics is the science of rational behavior. The purpose of this paper is to identify and analyze the behavioral components and their influence on the interaction of economic agents in the commodity market. The study used methods of constructing a multivariate regression model, OLS, Student and Fisher criteria, statistical research, sociological surveys and expert opinion. Authors will analyze the behavioral aspects of market relationships on the example of used car market in Ukraine This paper provides several different situations and tested them with real market data to demonstrate that both buyers and sellers may not act rationally on the market, set prices, based on their personal beliefs, subjective and psychological factors and that must be considered when building economical models.
5
Valsan, Calin. "B is for Bias." International Journal of Applied Behavioral Economics 3, no. 2 (April 2014): 35–47. http://dx.doi.org/10.4018/ijabe.2014040103.
Abstract:
Standard economic theory assumes rational agents. Individuals are expected to have rational expectations and constantly optimize their choices. Modern economic and financial theory is build under the assumption of rationality. There is plenty of evidence from psychology, however, that individuals are biased and rely heavily on heuristics in order to make decisions. Yet, this is not a mere fluke, a behavioral oddity. Because the social and economic environment in which individuals evolve is complex, behavioral biases represent evolutionary adaptations allowing economic agents to deal with undecidability and computational irreducibility.
6
Chibale, Kelly. "Economic drug discovery and rational medicinal chemistry for tropical diseases." Pure and Applied Chemistry 77, no. 11 (January 1, 2005): 1957–64. http://dx.doi.org/10.1351/pac200577111957.
Abstract:
In order to fulfill research objectives around target-based drug discovery in the field of anti-infective agents that are prevalent mainly in poor Third World countries, selection of biological and chemical targets is guided by economic drug discovery and rational medicinal chemistry. Selection of biological targets of therapeutic relevance in multiple disease-causing organisms, as well as the use of natural products and existing drugs as chemical scaffolds for the discovery and design of novel therapeutics should be viable strategies underpinning drug discovery research in poor Third World countries. In this regard, biological targets of interest to our program include disulfide reductases and cysteine proteases (CPs), while chemical scaffolds include existing antimalarial agents and natural products.
7
Pavlov, I. "Ambiguity Aversion Phenomenon and Rational Choice Theory." Voprosy Ekonomiki, no. 10 (October 20, 2011): 16–34. http://dx.doi.org/10.32609/0042-8736-2011-10-16-34.
Abstract:
The paper analyzes ambiguity aversion that is one of the main anomalies characteristic for the individual behaviour of economic agents making choice in the face of uncertainty. It shows that this phenomenon plays a major role in the contemporary rational choice theory and hence is widely discussed both by economic theorists and experimental economists. The article further elaborates on the nature of this phenomenon and considers its main causes.
8
Jandoc, Karl, and Ruben Juarez. "An Experimental Study of Self-Enforcing Coalitions." Games 10, no. 3 (August 1, 2019): 31. http://dx.doi.org/10.3390/g10030031.
Abstract:
We study a model in which agents endowed with power compete for a divisible resource by forming coalitions with other agents. The coalition with the greatest power wins the resource and divides it among its members via proportional sharing. We conduct an economic experiment using this model to investigate possible behavioral factors that may explain deviations from theoretical predictions. The main findings show that agents display rational behavior when forming coalitions, especially when they know that a large proportion of their opponents play myopic strategies from the outset. Over time, however, agents learn to behave more strategically and even more rationally, thus enabling agents to display more of the behavior predicted by the coalition formation model with farsighted agents.
9
Shults, D. N. "Behavioral economics and DSGE-modeling." Voprosy Ekonomiki, no. 1 (January 8, 2020): 47–65. http://dx.doi.org/10.32609/0042-8736-2020-1-47-65.
Abstract:
The article considers the “behavioral” modification of the standard DSGE model proposed by X. Gabaix. In his model, agents behave in a boundedly rational manner, showing incomplete attention to macroeconomic statistics. Moreover, unlike other attempts to abandon the hypothesis of rational expectations in favor of a model of adaptive and/or static expectations, the Gabaix model is initially constructed taking into account the inattention of economic agents to macro variables. The consequence of bounded rationality is that monetary policy is less effective (compared to the model of rational expectations) and, conversely, fiscal policy is effective due to the fact that Ricardo equivalence is not fulfilled. If the inertia of inflation expectations is taken into account in the Gabaix model, it demonstrates that the interest rate has a positive effect on inflation in the long run. Bayesian estimates for the rationality coefficient in the Russian economy are presented. Moreover, attention to inflation is much lower than attention to the variable of economic activity.
10
Lipovská, Hana, Lucie Coufalová, and Libor Žídek. "Homo Economicus in the Shortage Economy." Danube 9, no. 4 (December 1, 2018): 207–26. http://dx.doi.org/10.2478/danb-2018-0013.
Abstract:
Abstract Rational agents react to incentives in the market economy as well as in the centrally planned economy. Economic laws are persistent regardless of the economic system. The legislative system changes the outcome of the game between economic agents and managers. The aim of this paper is to show how rational agents reacted to legislative incentives in the Soviet-type economy in Czechoslovakia in the 1970s and 1980s, that is, how they reacted to the general shortage in the centrally planned economy. Based on the original survey among former managers as well as on the legislative sources from the 1970s and 1980s, a taxonomy was made of economic reactions to the shortage economy. This survey was possibly the last chance to map the experiences of socialist managers who tried to run companies in the centrally planned economy. We distinguish plan manipulation in order to ensure payment bonuses; bribery in order to obtain short-supplied inputs and the creation of reserves for the purpose of fulfilling the plan. It was shown that, if the rational agent wanted to obey the higher law, he was forced to ignore lower legislation.
11
BORZENKO, Olena. "Hypothesis of rational expectations in the international economy: developments in different countries." Fìnansi Ukraïni 2021, no. 10 (December 1, 2021): 9–12. http://dx.doi.org/10.33763/finukr2021.10.009.
Abstract:
The article reveals the development of the hypothesis of rational expectations according to the theory of rational expectations (TRO), where economic entities in their forecasts make optimal use of all available information, including the assessment of government policy, to form an opinion on future developments. It turns out that expectations in the economy are very important. Rational expectations are those that can be systematically erroneous. They do not necessarily have to be performed exactly, but this is only because economic processes are subject to random fluctuations that do not depend on the actions of the state, or because the actions of the state in economic policy are unpredictable for economic agents.
12
Böhm, Volker, and Jan Wenzelburger. "PERFECT PREDICTIONS IN ECONOMIC DYNAMICAL SYSTEMS WITH RANDOM PERTURBATIONS." Macroeconomic Dynamics 6, no. 5 (September 26, 2002): 687–712. http://dx.doi.org/10.1017/s1365100501010136.
Abstract:
The paper studies multivariate non linear economic dynamical systems with an expectations feedback subjected to exogenous perturbations. In these systems, agents form expectations on future variables based on subjective transition probabilities given by a Markov kernel. The notion of a perfect Markov kernel that generates rational expectations along all orbits of the system is proposed. Conditions are provided under which perfect Markov kernels exist. Applications are given to models of the Cobweb type, to multivariate affine-linear systems, and to the stochastic OLG model of economic growth. For the latter two models, it is shown when a globally attracting random fixed point with rational expectations exists.
13
Weinert, Friedel. "Weber's Ideal Types as Models in the Social Sciences." Royal Institute of Philosophy Supplement 41 (September 1996): 73–93. http://dx.doi.org/10.1017/s1358246100006056.
Abstract:
There has recently been a great interest in models in the natural sciences. Models are used mainly for their representational functions: they help to concretize certain relationships between parameters in studying physical systems. For instance, we might be interested in representing how the planets orbit around the sun—a scale model of the solar system is an ideal tool for achieving this end. We are free to leave out one or two planets or ignore the moons which many of the planets have. Alternatively, we might be interested in studying the relationship between two particular parameters—how one may be dependent on the other. Then we construct a functional model and determine the functional relationship between them. For instance, the orbital period of a planet is functionally dependent on the average distance of the planet from the sun.1 Models are rather widespread in the social sciences, especially in economics where functional models are used to study relationships between, say, supply and demand. Economics, however, also uses a different kind of model which is also used in the natural sciences: the hypothetical or as if model. Economists employ as if constructions when they assume economic agents to be perfectly rational beings who always seek to maximize their utilities. It is common knowledge that economic agents are not perfectly rational and that the assumptions of perfect rationality and optimal information are at best idealizations which do not, strictly speaking, correspond to the economic reality of how economic agents behave in the market-place.
14
Gilboa, Itzhak, Andrew W. Postlewaite, and David Schmeidler. "Probability and Uncertainty in Economic Modeling." Journal of Economic Perspectives 22, no. 3 (July 1, 2008): 173–88. http://dx.doi.org/10.1257/jep.22.3.173.
Abstract:
Economic modeling assumes, for the most part, that agents are Bayesian, that is, that they entertain probabilistic beliefs, objective or subjective, regarding any event in question. We argue that the formation of such beliefs calls for a deeper examination and for explicit modeling. Models of belief formation may enhance our understanding of the probabilistic beliefs when these exist, and may also help us characterize situations in which entertaining such beliefs is neither realistic nor necessarily rational.
15
Drakopoulos, S. A., and A. D. Karayiannis. "The Historical Development of Hierarchical Behavior in Economic Thought." Journal of the History of Economic Thought 26, no. 3 (September 2004): 363–78. http://dx.doi.org/10.1080/1042771042000263849.
Abstract:
One of the basic ideas underlying the established conception of rational behavior is the unlimited substitutability of preferences. Economic agents are assumed to compare and reduce everything to a common denominator: utility. The most obvious example of such preferences can be found in standard consumer theory where complete substitutability of every good is assumed in the sense that a loss of some units of one bundle can always be compensated by gain of some units of another commodity (such preferences are sometimes called Archimedian—see Borch 1968). This conception of preferences has a long history in economic thought and forms the basis of the standard rational choice theory (Hicks and Allen 1934, Samuelson 1938, Hicks 1946, Houthakker 1950).
16
Asano, Yuki M., Jakob J. Kolb, Jobst Heitzig, and J. Doyne Farmer. "Emergent inequality and business cycles in a simple behavioral macroeconomic model." Proceedings of the National Academy of Sciences 118, no. 27 (July 2, 2021): e2025721118. http://dx.doi.org/10.1073/pnas.2025721118.
Abstract:
Standard macroeconomic models assume that households are rational in the sense that they are perfect utility maximizers and explain economic dynamics in terms of shocks that drive the economy away from the steady state. Here we build on a standard macroeconomic model in which a single rational representative household makes a savings decision of how much to consume or invest. In our model, households are myopic boundedly rational heterogeneous agents embedded in a social network. From time to time each household updates its savings rate by copying the savings rate of its neighbor with the highest consumption. If the updating time is short, the economy is stuck in a poverty trap, but for longer updating times economic output approaches its optimal value, and we observe a critical transition to an economy with irregular endogenous oscillations in economic output, resembling a business cycle. In this regime households divide into two groups: poor households with low savings rates and rich households with high savings rates. Thus, inequality and economic dynamics both occur spontaneously as a consequence of imperfect household decision-making. Adding a few “rational” agents with a fixed savings rate equal to the long-term optimum allows us to match business cycle timescales. Our work here supports an alternative program of research that substitutes utility maximization for behaviorally grounded decision-making.
17
Radonjic, Ognjen. "Fundamental uncertainty and Keynes' probability theory." Theoria, Beograd 50, no. 4 (2007): 35–55. http://dx.doi.org/10.2298/theo0704035r.
Abstract:
Within economic system agents daily make decisions. Those decisions are based on their expectations regarding future. Therefore, theoretical assumption about what do rational decision-makers really know about future and could agents make relatively reliable forecasts has colossal importance. Namely this assumption critically determines theoretical modeling of decision-making process. In economic theory we can make distinction between two opposite and irreconcilable standpoints on this issue. According to proponents of the Subjective Probability and the Rational Expectations Hypothesis future can be predicted exactly, that is, agents are able to mathematically calculate future precisely and to express it in terms of numbers. Consistently behavior of individual agent and society in aggregate can be predicted with great precision. On the other hand, Keynes, first economist who made clear distinction between risk and uncertainty, argued that past experiences and statistical analysis of past data were not reliable guide to future and that behavior of individual agents and society in aggregate could not be neither calculated exactly nor precisely predicted. Consequently, theoretical implications regarding decision-making and behavior of aggregate economic system of the two opposite standpoints are completely different.
18
Trček, Denis. "COMPUTATIONAL TRUST MANAGEMENT IN ECONOMICS PHENOMENA RESEARCH." Technological and Economic Development of Economy 24, no. 6 (November 21, 2018): 2241–54. http://dx.doi.org/10.3846/20294913.2017.1347907.
Abstract:
Economics phenomena are notably governed by dynamic, non-linear, bottom-up processes emerging from agents’ interactions. Therefore traditional top-down approaches provide a rather limited insight into these phenomena. Further, research in economics has been mostly focused on addressing tangible factors, while human agents in economic settings often do not adhere to rational reasoning, and trust is one such kind of reasoning. Thanks to recent technological advancements new approaches are enabled, and this paper proposes a novel and anticipatory research methodology for studying economics phenomena that enables inclusion of trust. The methodology, called auxiliary composite simulations, builds upon recent advancements in computational trust management. By doing so it enables bottom-up simulations of trust driven economic phenomena. The paper provides also epistemic evaluation of the methodology and ends up with an example application of the proposed apparatus.
19
Krause, George A. "Testing for the Strong Form of Rational Expectations with Heterogeneously Informed Agents." Political Analysis 8, no. 3 (March 23, 2000): 285–305. http://dx.doi.org/10.1093/oxfordjournals.pan.a029817.
Abstract:
In recent years, political scientists have tested for the existence of rational expectations (RE) using survey-based aggregate data on subjective economic perceptions. These tests suffer from several conceptual shortcomings of a nontrivial nature. In this study, the meaning of RE is clarified, and also a test for strong rational expectations (SRE) where citizens possess heterogeneous information levels is set forth. These empirical tests provide insights into what kinds of information citizens use in forming expectations from that which they do not utilize but could employ to arrive at more accurate forecasts. Using inflation expectations data for the period January 1978—December 1993, the empirical findings indicate that citizens can benefit from greater reliance on objective economic and political conditions when formulating their inflation expectations. The broader implications of this work pertain not only to the execution of RE tests in political science, but also to distinguishing which types of information people do and do not (but could) incorporate in their decision-making calculus.
20
Ishbayev, G. G., A. V. Kuritsyn, and N. A. Lazareva. "Microeconomic analysis of the main ways of decomposition of the cost index." Voprosy Ekonomiki, no. 11 (November 2, 2022): 149–60. http://dx.doi.org/10.32609/0042-8736-2022-11-149-160.
Abstract:
The article considers a microeconomic analysis of the main options for decomposing the value index into price and quantity change factors, as a result of which it becomes possible to interpret these options in terms of changing the expectations of either the consumer or the producer. The purpose of the study is to show that the Laspeyres, Paasche and Fisher indices have not only an estimated, but also an important content function, reflecting changes in the market expectations of economic agents. To achieve the goal, a comparative analysis of the basic formulas of the concepts of adaptive and rational expectations was carried out, as well as a meaningful analysis of the cost aggregates that are components of the Laspeyres, Paasche and Fisher indices, and a schematic diagram of the formation of adaptive and rational expectations was developed. As a methodological basis for solving the problem, the expectation theory, the analogy method, the index method of factor reversibility, and the minimum basis method were used. It is shown that Laspeyres indices are the essence of changes in adaptive expectations, Paasche indices are changes in rational expectations of producers and consumers, and Fisher indices are a joint change in adaptive and rational expectations of economic agents. It is advisable to interpret one of the main methods of decomposition of the cost index into factors as a “buying” method that meets the expectations of the consumer, another — as a “selling” method that meets the expectations of the manufacturer, a decomposition method, the third — as a “compromise” between market expectations of economic agents.
21
Strogonova, E. I. "Problems of activation of investment activity of the banking sector on the background of the development of regional economic systems." Scientific bulletin of the Southern Institute of Management, no. 3 (October 13, 2019): 88–91. http://dx.doi.org/10.31775/2305-3100-2019-3-88-91.
Abstract:
In the modern financial system, depending on what are the volumetric factors of economic growth, it is necessary to maintain the competitiveness of the regional financial system. The modern banking sector is able to provide access to national economic agents. The rational and effective development of financial and economic relations between investment activities determines the individual characteristics of this system.
22
Rosser, J. Barkley. "On the Complexities of Complex Economic Dynamics." Journal of Economic Perspectives 13, no. 4 (November 1, 1999): 169–92. http://dx.doi.org/10.1257/jep.13.4.169.
Abstract:
Complex economic nonlinear dynamics endogenously do not converge to a point, a limit cycle, or an explosion. Their study developed out of earlier studies of cybernetic, catastrophic, and chaotic systems. Complexity analysis stresses interactions among dispersed agents without a global controller, tangled hierarchies, adaptive learning, evolution, and novelty, and out-of-equilibrium dynamics. Complexity methods include interacting particle systems, self-organized criticality, and evolutionary game theory, to simulate artificial stock markets and other phenomena. Theoretically, bounded rationality replaces rational expectations. Complexity theory influences empirical methods and restructures policy debates.
23
van Basshuysen, Philippe. "Rationality in games and institutions." Synthese 199, no. 5-6 (October 18, 2021): 12295–314. http://dx.doi.org/10.1007/s11229-021-03333-y.
Abstract:
AbstractAgainst the orthodox view of the Nash equilibrium as “the embodiment of the idea that economic agents are rational” (Aumann, 1985, p 43), some theorists have proposed ‘non-classical’ concepts of rationality in games, arguing that rational agents should be capable of improving upon inefficient equilibrium outcomes. This paper considers some implications of these proposals for economic theory, by focusing on institutional design. I argue that revisionist concepts of rationality conflict with the constraint that institutions should be designed to be incentive-compatible, that is, that they should implement social goals in equilibrium. To resolve this conflict, proponents of revisionist concepts face a choice between three options: (1) reject incentive compatibility as a general constraint, (2) deny that individuals interacting through the designed institutions are rational, or (3) accept that their concepts do not cover institutional design. I critically discuss these options and I argue that a more inclusive concept of rationality, e.g. the one provided by Robert Sugden’s version of team reasoning, holds the most promise for the non-classical project, yielding a novel argument for incentive compatibility as a general constraint.
24
Giocoli, Nicola. "Do Prudent Agents Play Lotteries? Von Neumann's Contribution to the Theory of Rational Behavior." Journal of the History of Economic Thought 28, no. 1 (March 2006): 95–109. http://dx.doi.org/10.1080/10427710500509714.
Abstract:
The year 2003 marked the 100th anniversary of the birth of John von Neumann (1903–1957), one of greatest geniuses of the last century. Beyond contributing to fields as diverse as set theory, quantum mechanics, atomic energy, and automatic computing, von Neumann has also had a decisive influence upon modern economics. From the invention of game theory to the axiomatization of expected utility, from the introduction of convex analysis and fixed-point techniques to the development of the balanced growth model, the von Neumann heritage can be clearly traced in several areas of our discipline. The aim of this paper is to clarify the relationship between the two concepts of rationality he devised in his classic 1944 book Theory of Games and Economic Behavior, written with the collaboration of the Austrian economist Oskar Morgenstern (von Neumann and Morgenstern 1953).
25
Portera, Mariagrazia. "Is capitalism in our genes? Competition, cooperation and the idea of homo oeconomicus from an evolutionary perspective." Filozofija i drustvo 27, no. 1 (2016): 119–30. http://dx.doi.org/10.2298/fid1601119p.
Abstract:
In the last few years a growing number of academic disciplines in the Humanities and Social Sciences have turned to the evolutionary approach: Evolutionary Economics, among these disciplines, is a thriving subfield of Economics, which adopts Darwin?s evolutionary ideas and concepts for the understanding of economic system and modes of production. Evolutionary hypotheses such as the ?selfish gene? idea, the ideas of ?inclusive fitness?, ?struggle for life? and ?survival of the fittest? may suggest - and have indeed suggested - that humans are rational self-interest individuals, doing what they can to increase their own reproductive chances or at least the chances of their close relatives (?inclusive fitness?). To put it differently, evolutionary theory seems to suggest that capitalism (in a broad sense) is a system that has co-evolved with humans and best fits our evolved psychology. Is this the whole story? Is capitalism ?in our genes?? In this paper I argue that conclusions such as ?we are born to be rational self-interested agents? or ?capitalism is encoded in our genome? are the result of a misleading application of Darwin?s evolutionary theory to human socio-economic processes, mainly to justify a (Western) society based on selfish principles, but which is not naturally selfish in itself. Evolution seems to be the result of cooperative, not only (or not mainly) competitive processes, and the model of Homo oeconomicus, that is the idea that humans are rational self-interested agents always trying to maximize profit, is, also from an bio-evolutionary perspective, nothing more than a fictional exercise.
26
Branch, William A., Bruce McGough, and Mei Zhu. "Statistical sunspots." Theoretical Economics 17, no. 1 (2022): 291–329. http://dx.doi.org/10.3982/te3752.
Abstract:
This paper shows that belief‐driven economic fluctuations are a general feature of many determinate macroeconomic models. In environments with hidden state variables, forecast‐model misspecification can break the link between indeterminacy and sunspots by establishing the existence of “statistical sunspots” in models that have a unique rational expectations equilibrium. To form expectations, agents regress on a set of observables that can include serially correlated nonfundamental factors (e.g., sunspots, judgment, expectations shocks, etc.). In equilibrium, agents attribute, in a self‐fulfilling way, some of the serial correlation observed in data to extrinsic noise, i.e., statistical sunspots. This leads to sunspot equilibria in models with a unique rational expectations equilibrium. Unlike many rational sunspots, these equilibria are found to be generically stable under learning. Applications are developed in the context of a New Keynesian and an asset‐pricing model.
27
Wawrosz, Petr, Radim Valenchik, Ondrei Roubal, and Svetlana Sazanova. "Economic paradigms and economic communications." Upravlenie 7, no. 1 (May 7, 2019): 60–65. http://dx.doi.org/10.26425/2309-3633-2019-1-60-65.
Abstract:
The development of modern economic theory is influenced by various factors of the external and internal environment. The factors of the external environment include: changes in the practice of economic entities, global economy, in the institutional environment, technological changes. The factors of the internal environment include: changes in the field of scientific knowledge in general, as well as changes in the methodology of economic science itself. The main driving force behind the development of economic theory is the evolution of economic paradigms, which has an impact on the methodological choice of researchers, their scientific worldview. An important component of human economic activity are economic communications, the essence and content of which have not been yet sufficiently studied from a theoretical point of view. Since economic communications are closely related to the behavior of economic agents, which affects, in turn, the results of economic activity, their study is an urgent task. The subject of research in the article is the relationship of economic paradigms and ideas about the essence of economic communication. The purpose of the article is to study the influence of the evolution of economic paradigms on the development of scientific ideas about economic communication. The authors have applies following research methods in the scientific paper: the method of rational reconstruction of science, the method of comparative analysis, the method of scientific abstraction and others. The relationship between the evolution of economic paradigms, theories of behavior of economic agents and the understanding of the role of economic communications in economic activity have been revealed. The authors investigated economic communications in the context of the theory of full, limited, procedural rationality, organic irrationality, as well as in the context of the theory of productive consumption. The main scientific results consist in identifying features in the understanding of the essence of economic communications from the point of view of various theories. The results obtained are the basis for the study of the systemic and humanistic foundations of economic communications, as well as the development of recommendations for improving economic communications.
28
Kaiser, Timo Pascal. "Can Social Interaction Based Expectations Create the Characteristics of the Business Cycle?" Applied Economics Quarterly: Volume 64, Issue 4 64, no. 4 (December 1, 2018): 325–50. http://dx.doi.org/10.3790/aeq.64.4.325.
Abstract:
Abstract This paper introduces social-interaction based expectations in a New Keynesian frame and compares the characteristics with that of the standard rational expectation model. Agents in this model are connected with each other and build their rational expectation on their neighborhood’s opinions and recent economic developments. Instead of precise forecast they use rule of thumbs which reflect whether they assume a positive or a negative future. As result an endogenous business cycle arises. The autocorrelation of the output gap is much larger than in a model with rational expectation and two-way causality from output gap to expectation about output gap arises while kurtosis decreases and correlation between inflation and output gap is quite negative. The use of different networks changes the characteristics of the model. Situations where people trust much more their social network than economic developments can lead to continual recession, boom, inflation or deflation. JEL classifications: E10, E32, E71 Keywords: Rational expectations, non linear dynamics, animal spirit
29
Hommes, Cars. "Behavioral and Experimental Macroeconomics and Policy Analysis: A Complex Systems Approach." Journal of Economic Literature 59, no. 1 (March 1, 2021): 149–219. http://dx.doi.org/10.1257/jel.20191434.
Abstract:
This survey discusses behavioral and experimental macroeconomics, emphasizing a complex systems perspective. The economy consists of boundedly rational heterogeneous agents who do not fully understand their complex environment and use simple decision heuristics. Central to our survey is the question of under which conditions a complex macro-system of interacting agents may or may not coordinate on the rational equilibrium outcome. A general finding is that under positive expectations feedback (strategic complementarity)—where optimistic (pessimistic) expectations can cause a boom (bust)—coordination failures are quite common. The economy is then rather unstable, and persistent aggregate fluctuations arise strongly amplified by coordination on trend-following behavior leading to (almost-)self-fulfilling equilibria. Heterogeneous expectations and heuristics switching models match this observed micro and macro behavior surprisingly well. We also discuss policy implications of this coordination failure on the perfectly rational aggregate outcome and how policy can help to manage the self-organization process of a complex economic system. (JEL C63, C90, D91, E12, E71, G12)
30
Quaghebeur, Ewoud. "LEARNING AND THE SIZE OF THE GOVERNMENT SPENDING MULTIPLIER." Macroeconomic Dynamics 23, no. 8 (June 13, 2018): 3189–224. http://dx.doi.org/10.1017/s1365100518000019.
Abstract:
This paper examines the government spending multiplier when economic agents combine adaptive learning and knowledge about future fiscal policy to form their expectations. The analysis shows that the effects of a government spending shock substantially change when the rational expectations hypothesis is replaced by this learning mechanism. In contrast to the dynamics under rational expectations, a government spending shock in a small-scale new Keynesian DSGE model with learning crowds in private consumption and is associated with a positive comovement between real wages and hours worked. In the baseline calibration, the output multiplier under learning is above one and about twice as large as under rational expectations.
31
ZGONNIKOV, ARKADY, and IHOR LUBASHEVSKY. "UNSTABLE DYNAMICS OF ADAPTATION IN UNKNOWN ENVIRONMENT DUE TO NOVELTY SEEKING." Advances in Complex Systems 17, no. 03n04 (July 2014): 1450013. http://dx.doi.org/10.1142/s0219525914500131.
Abstract:
Learning and adaptation play great role in emergent socio-economic phenomena. Complex dynamics has been previously found in the systems of multiple learning agents interacting via a simple game. Meanwhile, the single agent adaptation is considered trivially stable. We advocate the idea that adopting a more complex model of the individual behavior may result in a more diverse spectrum of macro-level behaviors. We develop an adaptation model based on the reinforcement learning framework extended by an additional processing channel. We scrutiny the dynamics of the single agent adapting to the unknown environment; the agent is biased by novelty seeking, the intrinsic inclination for exploration. We demonstrate that the behavior of the novelty-seeking agent may be inherently unstable. One of the surprising results is that under certain conditions the increase of the novelty-seeking level may cause the agent to switch from the non-rational to the strictly rational behavior. Our results give evidence to the hypothesis that the intrinsic motives of agents should be paid no less attention than the extrinsic ones in the models of complex socio-economic systems.
32
Kristinevich, Sergey. "Institutional Intervention as a Rational Choice: Microeconomic Foundations of the Involuntary Exchange." Moscow University Economics Bulletin, no. 6-2018 (December 30, 2018): 24–39. http://dx.doi.org/10.38050/01300105201862.
Abstract:
Based on the hypothesis of uneven distribution of violence potential among economic agents, the paper describes a model of power redistribution as the purposeful manipulation of rules and/or enforcement mechanisms. The author determines the methodological foundations, premises and theoretical framework for the study of institutional interventions as forms of involuntary exchange. The state of violent equilibrium is described: further use of potential power for the interventionist leads to a decrease in legitimacy and increased control costs; the resistance of the object of intervention to the established institutional order causes an increase in the costs of noncompliance. We propose practical applications and perspective directions for further studies of power redistribution in the political and economic process.
33
Gans, Joshua S. "The Economic Consequences of R = 1: Towards a Workable Behavioural Epidemiological Model of Pandemics." Review of Economic Analysis 14, no. 1 (April 10, 2022): 3–25. http://dx.doi.org/10.15353/rea.v14i1.4786.
Abstract:
This paper reviews the literature on incorporating behavioural elements into epidemiological models of pandemics. While modelling behaviour by forward-looking rational agents can provide some insight into the time paths of pandemics, the non-stationary nature of Susceptible-Infected-Removed (SIR) models of viral spread makes characterisation of resulting equilibria difficult. Here I posit a shortcut that can be deployed to allow for a tractable equilibrium model of pandemics with intuitive comparative statics and also a clear prediction that effective reproduction numbers (that is, R) will tend towards 1 in equilibrium. This motivates taking R = 1 as an equilibrium starting point for analyses of pandemics with behavioural agents. The implications of this for the analysis of widespread testing, tracing, isolation and mask-use is discussed.
34
Musshoff, Oliver, Norbert Hirschauer, and Philipp Hengel. "Are Business Management Games a Suitable Tool for Analyzing the Boundedly Rational Behavior of Economic Agents?" Modern Economy 02, no. 04 (2011): 468–78. http://dx.doi.org/10.4236/me.2011.24052.
35
Kirman, Alan. "ANTS AND NONOPTIMAL SELF-ORGANIZATION: LESSONS FOR MACROECONOMICS." Macroeconomic Dynamics 20, no. 2 (September 18, 2014): 601–21. http://dx.doi.org/10.1017/s1365100514000339.
Abstract:
This paper suggests that we need an alternative approach to economic modeling in general, and macroeconomic modeling in particular, if we are to capture salient characteristics of recent economic developments. Rather than focusing on models built on the basis of isolated, rational, optimizing agents, we should recognize that much simpler individuals following basic rules can collectively generate complex behavior. We have lessons to learn from studying the behavior of social insects for example. Noisy systems of interactive agents can generate aggregate phenomena such as sudden changes in the state of an economy or market, with no external shock. I give two examples of simple models of financial markets to illustrate this but would argue more generally that such models are indispensible if we are to understand aggregate economic phenomena.
36
Woodford, M. "Whats Wrong with Economic Models? A Response to John Kay." Voprosy Ekonomiki, no. 5 (May 20, 2012): 14–21. http://dx.doi.org/10.32609/0042-8736-2012-5-14-21.
Abstract:
The article is a response to a polemical essay of J. Kay and his critique of macroeconomic modeling. The author shows that models are an indispensable instrument of economic analysis and that the only alternative would be the formulation and estimation of structural relationships between macroeconomic aggregates. But such a project is doomed to failure, because it does not account for the expectations of economic agents. However, as the author admits, the critique of rational expectations concept is justified. He shows possible directions that a more realistic analysis of ecpectation could take.
37
Polyakova, Ekaterina, and Yulia Vymyatnina. "Formation of economic agents’ inflationary expectations and central bank policy effectiveness: Еxperimental approach." St Petersburg University Journal of Economic Studies 37, no. 3 (2021): 442–73. http://dx.doi.org/10.21638/spbu05.2021.304.
Abstract:
Expectations of heterogeneous economic agents play a pivotal role in modern macroeconomic theory. Since the standard assumption about a representative fully rational agent and his/her ability to form model-consistent expectations of the underlying process governing real economic outcomes is subject to well-grounded criticism, laboratory experiments are an important tool for gaining new knowledge about the formation of individual expectations. This paper provides an overview of the results of learning-to-forecast experiments based on the New Keynesian model that allow to identify specificities of agents’ expectations formation. These results suggest specific recommendations on ways to increase efficiency of the Central Bank monetary policy. Special attention is paid to agents’ inflation expectations and specificities of applying various types of inflation targeting. The article presents an analysis of the impact of announcing the inflation target on agents’ inflation expectations and the main macroeconomic variables dynamics for two different inflation targeting regimes — strict and flexible. A comparison of point and band versions of inflation targeting is provided for shocks affecting the economy with different intensities. The results of learning-to-forecast experiments presented in the review provide evidence of training and switching between different forecasting heuristics and also indicate the presence of specific cognitive restrictions of agents that extend a certain heuristic rule to all macroeconomic variables for which the forecast is performed.
38
Harstad, R. M., and R. Selten. "Bounded-rationality models:tasks to become intellectually competitive." Voprosy Ekonomiki, no. 5 (May 20, 2014): 4–26. http://dx.doi.org/10.32609/0042-8736-2014-5-4-26.
Abstract:
Research in experimental economics has cogently challenged the fundamental precept of neoclassical economics that economic agents optimize. The last two decades have seen elaboration of boundedly rational models that try to move away from the optimization approach, in ways consistent with experimental findings. Nonetheless, the collection of alternative models has made little headway supplanting the dominant paradigm. We delineate key ways in which neoclassical microeconomics holds continuing and compelling advantages over bounded-rationality models, and suggest, via a few examples, the sorts of further, difficult pushes that would be needed to redress this state of affairs. Closer collaboration between theoretic modeling and experiments is clearly seen to be necessary.
39
Bordalo, Pedro, Nicola Gennaioli, and Andrei Shleifer. "Overreaction and Diagnostic Expectations in Macroeconomics." Journal of Economic Perspectives 36, no. 3 (August 1, 2022): 223–44. http://dx.doi.org/10.1257/jep.36.3.223.
Abstract:
We present the case for the centrality of overreaction in expectations for addressing important challenges in finance and macroeconomics. First, non-rational expectations by market participants can be measured and modeled in ways that address some of the key challenges posed by the rational expectations revolution, most importantly the idea that economic agents are forward-looking. Second, belief overreaction can account for many long-standing empirical puzzles in macro and finance, which emphasize the extreme volatility and boom-bust dynamics of key time series, such as stock prices, credit, and investment. Third, overreaction relies on psychology and is disciplined by survey data on expectations. This suggests that relaxing the assumption of rational expectations is a promising strategy, helps theory and evidence go together, and promises a unified view of a great deal of data.
40
Wang, Tong. "EXPECTATION EFFECTS OF REGIME SHIFTS ON LABOR MARKET DYNAMICS." Macroeconomic Dynamics 23, no. 07 (March 22, 2018): 3010–33. http://dx.doi.org/10.1017/s1365100517001031.
Abstract:
This paper shows that expectations of possible future regime shifts can contribute to recent deep downturn and stagnant recovery in the US labor market. Apart from the current economic regimes, rational agents consider how regimes will unfold in the future and form their expectations based on the probability of occurrence. Possible regime shifts considered are the stance of monetary policy toward inflation, the degree of real wage rigidity, and the degree of autocorrelation of the shock process. The anticipation of regime shifts alters agents' decision rules and feeds back to labor market dynamics.
41
Thaler, Richard H. "Anomalies: The January Effect." Journal of Economic Perspectives 1, no. 1 (August 1, 1987): 197–201. http://dx.doi.org/10.1257/jep.1.1.197.
Abstract:
This feature will report successful searches for disconfirming evidence -- economic anomalies. As suggested by Thomas Kuhn, an economic anomaly is a result inconsistent with the present economics paradigm. Economics is distinguished from other social sciences by the belief that most (all?) behavior can be explained by assuming that agents have stable, well-defined preferences and make rational choices consistent with those preferences in markets that (eventually) clear. An empirical result is anomalous if it is difficult to “rationalize,” or if implausible assumptions are necessary to explain it within the paradigm. The first anomaly we will discuss is the “January effect.” Stock prices tend to rise in January, particularly the prices of small firms and firms whose stock price has declined substantially over the past few years. Also, risky stocks earn most of their risk premiums in January.
42
Fuster, Andreas, David Laibson, and Brock Mendel. "Natural Expectations and Macroeconomic Fluctuations." Journal of Economic Perspectives 24, no. 4 (November 1, 2010): 67–84. http://dx.doi.org/10.1257/jep.24.4.67.
Abstract:
A large body of empirical evidence suggests that beliefs systematically deviate from perfect rationality. Much of the evidence implies that economic agents tend to form forecasts that are excessively influenced by recent changes. We present a parsimonious quasi-rational model that we call natural expectations, which falls between rational expectations and (naïve) intuitive expectations. (Intuitive expectations are formed by running growth regressions with a limited number of right-hand-side variables, and this leads to excessively extrapolative beliefs in certain classes of environments). Natural expectations overstate the long-run persistence of economic shocks. In other words, agents with natural expectations turn out to form beliefs that don't sufficiently account for the fact that good times (or bad times) won't last forever. We embed natural expectations in a simple dynamic macroeconomic model and compare the simulated properties of the model to the available empirical evidence. The model's predictions match many patterns observed in macroeconomic and financial time series, such as high volatility of asset prices, predictable up-and-down cycles in equity returns, and a negative relationship between current consumption growth and future equity returns.
43
Harstad, Ronald M., and Reinhard Selten. "Bounded-Rationality Models: Tasks to Become Intellectually Competitive." Journal of Economic Literature 51, no. 2 (June 1, 2013): 496–511. http://dx.doi.org/10.1257/jel.51.2.496.
Abstract:
Research in experimental economics has cogently challenged the fundamental precept of neoclassical economics that economic agents optimize. The last two decades have seen elaboration of boundedly rational models that try to move away from the optimization approach, in ways consistent with experimental findings. Nonetheless, the collection of alternative models has made little headway supplanting the dominant paradigm. We delineate key ways in which neoclassical microeconomics holds continuing and compelling advantages over bounded-rationality models, and suggest, via a few examples, the sorts of further, difficult pushes that would be needed to redress this state of affairs. Closer collaboration between theoretic modeling and experiments is clearly seen to be necessary. (JEL B40, C72, C90, D01, D21)
44
Alesina, Alberto, John Londregan, and Howard Rosenthal. "A Model of the Political Economy of the United States." American Political Science Review 87, no. 1 (March 1993): 12–33. http://dx.doi.org/10.2307/2938953.
Abstract:
We develop and test a model of joint determination of economic growth and national election results in the United States. The formal model, which combines developments in the rational choice analysis of the behavior of economic agents and voters, leads to a system of equations in which the dependent variables are the growth rate and the vote shares in presidential and congressional elections. Our estimates support the theoretical claims that growth responds to unanticipated policy shifts and that voters use both on-year and midterm elections to balance the two parties. On the other hand, we find no support for “rational” retrospective voting. We do reconfirm, in a fully simultaneous framework, the “naive” retrospective voting literature's finding that the economy has a strong effect on presidential voting. We find congressional elections unaffected by the economy, except as transmitted by presidential coattails.
45
Chen, Kaiji, and Yi Wen. "The Great Housing Boom of China." American Economic Journal: Macroeconomics 9, no. 2 (April 1, 2017): 73–114. http://dx.doi.org/10.1257/mac.20140234.
Abstract:
China’s housing prices have been growing nearly twice as fast as national income over the past decade, despite a high vacancy rate and a high rate of return to capital. This paper interprets China’s housing boom as a rational bubble emerging naturally from its economic transition. The bubble arises because high capital returns driven by resource reallocation are not sustainable in the long run. Rational expectations of a strong future demand for alternative stores of value can thus induce currently productive agents to speculate in the housing market. Our model can quantitatively account for China’s paradoxical housing boom. (JEL O16, O18, P24, P25, R21, R31)
46
Okhrymenko, Iryna, and Viktoria Biloshapka. "Strengthening monetary policy and managing inflation expectations in Ukraine in conditions of maritime." VUZF Review 7, no. 3 (September 27, 2022): 49–56. http://dx.doi.org/10.38188/2534-9228.22.3.05.
Abstract:
The article considers the current problem of strengthening monetary policy in Ukraine. Competent monetary measures of the NBU in the first months of the war ensured the smooth functioning of the banking system and payments in the economy. Fixing the exchange rate was ensured by currency restrictions, as well as foreign exchange interventions. The gradual adaptation of Ukraine's economy to the war and the replacement of psychological shock by economic logic require a change in approaches to monetary policy.
The article substantiates the need to strengthen the monetary policy of the NBU. Strengthening the monetary policy of the NBU is aimed at compressing the money supply, and its effectiveness depends on the coordination of measures with the government.
The way in which inflation expectations are formed influences the consequences of monetary policy. Therefore, the NBU, which aims at price stability, should take into account the inflation expectations of economic agents when planning monetary measures.
Adaptive and rational hypotheses of inflation expectations are estimated. It is established that the reasons for the differences in the mechanisms of inflation expectations are explained by rational expectations and ways of disseminating information. It is concluded that the main focus in assessing monetary policy is to determine the characteristics of the factors shaping inflation expectations in Ukraine. The NBU can increase the effectiveness of monetary policy by developing and implementing measures to strengthen the impact on inflation expectations of economic agents.
47
Nekipelov, Alexandr. "On the Spatial Dimension of General Equilibrium." Economics and the Mathematical Methods 58, no. 3 (2022): 5. http://dx.doi.org/10.31857/s042473880019631-3.
Abstract:
Problems related to the spatial aspects of economic development are considered within the framework of such scientific disciplines as "regional economy", "spatial economy", "new economic geography", "theory of international trade" mainly from the point of view of partial analysis. The article proposes a "basic model" designed to integrate the spatial dimension into the theory of general equilibrium in relation to a simple exchange economy. Its analysis shows why the choice by economic agents of the place of residence and production activities is as important as the selection of the field of specialization. Key modifications in the functional relationships of the main economic variables linked to the spatial dimension of economic activity are formulated. At the same time, it is shown that the effects of the social division of labor, identified using the "basic model", are potential, since the model ignores huge transaction costs that inevitably accompany the interaction of partially rational economic agents. That is why anchoring in space of the place of transactions, which is the result of experience, becomes a natural way of adapting institutional conditions to the real abilities of economic agents to receive and process information. And these adjustments, in turn, lead to changes in the toolkit of the market mechanism – in particular, adding to it rent by location.
48
Benhabib, Jess, and Alberto Bisin. "Skewed Wealth Distributions: Theory and Empirics." Journal of Economic Literature 56, no. 4 (December 1, 2018): 1261–91. http://dx.doi.org/10.1257/jel.20161390.
Abstract:
Invariably, across a cross-section of countries and time periods, wealth distributions are skewed to the right displaying thick upper tails, that is, large and slowly declining top wealth shares. In this survey, we categorize the theoretical studies on the distribution of wealth in terms of the underlying economic mechanisms generating skewness and thick tails. Further, we show how these mechanisms can be micro-founded by the consumption–savings decisions of rational agents in specific economic and demographic environments. Finally we map the large empirical work on the wealth distribution to its theoretical underpinnings. (JEL C46, D14, D31, E21, J31)
49
Kasahara, Tetsuya. "Strategic Uncertainty in the Guessing Game and the Role and Effects of a Public Common Noise Player." International Journal of Applied Behavioral Economics 6, no. 2 (April 2017): 23–36. http://dx.doi.org/10.4018/ijabe.2017040102.
Abstract:
Guessing games are often used in the behavioral economics literature to investigate the rationality of economic agents. In this paper, the author uses a typical guessing game to examine not only the rationality of the test subjects but also the degree of their strategic uncertainty in playing the guessing game. A typically negative relationship was found between the frequency and the degree of strategic uncertainty, measured by proxy using the test subjects' guesses as to the standard deviation of all test subjects' answers regarding selection of a number from a specified interval. The role and effects of a public common noise player in the guessing game were investigated, which showed that the existence of such a player, even when he/she is not rational, can decrease the variance of the answered values and the degree of strategic uncertainty. These findings imply that the existence of a public common noisy player who is not necessarily rational can provide an anchoring focal point in the guessing game under uncertainty and that this player can be an influential coordinator. This implication would be useful in explaining possible bubbles or booms/bursts, collective short sales such as currency attacks in markets, or other real-world economic and business anomalies.
50
Kay, J. "The Map Is Not the Territory: An Essay on the State of Economics." Voprosy Ekonomiki, no. 5 (May 20, 2012): 4–13. http://dx.doi.org/10.32609/0042-8736-2012-5-4-13.
Abstract:
The article claims that modern economics is in the state of crisis, because the major macroeconomic theories are in fact based on the concept of rational expectations, and the main method of research is considered to be the model-building with models as "artificial worlds". Therefore it is supposed that the agents expectations are consistent with a theoretical model. Such constructs are often based on aprioristic assumptions and only after the model is built are they confronted with reality. The author defends an alternative view of science which is methodologically more pluralist and sees deductive model-building in need of being supplemented by other methods of inquiry suggesting that economic science abandons claims for universality of its conclusions.