Social capital, social norms and the New Institutional Economics

Douglass North (1990) describes institutions as the rules of the game that set limits on human behavior, now a universally-accepted definition. North and others especially underline the crucial role of informal social norms. They predict that, like all rules of the game, social norms should affect the economic prosperity enjoyed by individuals and countries – that they should have a crucial impact, for example, on economic and political development. In fact, substantial evidence demonstrates that social norms prescribing cooperative or trustworthy behavior have a significant impact on whether societies can overcome obstacles to contracting and collective action that would otherwise hinder their development. Much of this evidence comes from outside the new institutional economics, emerging instead from scholarly research in the field of “social capital.” A review of this evidence, and its implications for our understanding of the role of social norms and institutions, is therefore the focus of this chapter.social capital, norms, institutions, institutional economics

Computational Theory of Mind for Human-Agent Coordination

In everyday life, people often depend on their theory of mind, i.e., their ability to reason about unobservable mental content of others to understand, explain, and predict their behaviour. Many agent-based models have been designed to develop computational theory of mind and analyze its effectiveness in various tasks and settings. However, most existing models are not generic (e.g., only applied in a given setting), not feasible (e.g., require too much information to be processed), or not human-inspired (e.g., do not capture the behavioral heuristics of humans). This hinders their applicability in many settings. Accordingly, we propose a new computational theory of mind, which captures the human decision heuristics of reasoning by abstracting individual beliefs about others. We specifically study computational affinity and show how it can be used in tandem with theory of mind reasoning when designing agent models for human-agent negotiation. We perform two-agent simulations to analyze the role of affinity in getting to agreements when there is a bound on the time to be spent for negotiating. Our results suggest that modeling affinity can ease the negotiation process by decreasing the number of rounds needed for an agreement as well as yield a higher benefit for agents with theory of mind reasoning.</p

The Influence of Experimental and Computational Economics: Economics Back to the Future of Social Sciences

Economics has been a most puzzling science, namely since the neoclassical revolution defined the legitimate procedures for theorisation and quantification. Its epistemology has based on farce: decisive tests are not applied on dare predictions. As a consequence, estimation has finally been replaced by simulation, and empirical tests have been substituted by non-disciplined exercises of comparison of models with reality. Furthermore, the core concepts of economics defy the normally accepted semantics and tend to establish meanings of their own. One of the obvious instances is the notion of rationality, which has been generally equated with the apt use of formal logic or the ability to apply econometric estimation as a rule of thumb for daily life. In that sense, rationality is defined devoid of content, as alien to the construction of significance and reference by reason and social communication. The contradictory use of simulacra and automata, by John von Neumann and Herbert Simon, was a response to this escape of economic models from reality, suggesting that markets could be conceived of as complex institutions. But most mainstream economists did not understand or did not accept these novelties, and the empirical inquiry or the realistic representation of the action of agents and of their social interaction remained a minor domain of economics, and was essentially ignored by canonical theorizing. The argument of the current paper is based on a survey and discussion of the twin contributions of experimental and computational economics to these issues. Although mainly arising out of the mainstream, these emergent fields of economics generate challenging heuristics as well as new empirical results that defy orthodoxy. Their contributions both to the definition of the social meanings of rationality and to the definition of a new brand of inductive economics are discussed.

Reputation for complex societies

Reputation, the germ of gossip, is addressed in this chapter as a distributed instrument for social order. In literature, reputation is shown to promote (a) social control in cooperative contexts—like social groups and subgroups—and (b) partner selection in competitive ones, like (e-) markets and industrial districts. Current technology that affects, employs and extends reputation, applied to electronic markets or multi-agent systems, is discussed in light of its theoretical background. In order to compare reputation systems with their original analogue, a social cognitive model of reputation is presented. The application of the model to the theoretical study of norm-abiding behaviour and partner selection are discussed, as well as the refinement and improvement of current reputation technology. The chapter concludes with remarks and ideas for future research.</p