A Simple Test of Learning Theory?

We report experiments designed to test the theoretical possibility, first discovered by Shapley (1964), that in some games learning fails to converge to any equilibrium, either in terms of marginal frequencies or of average play. Subjects played repeatedly in fixed pairings one of two 3 × 3 games, each having a unique Nash equilibrium in mixed strategies. The equilibrium of one game is predicted to be stable under learning, the other unstable, provided payoffs are sufficiently high. We ran each game in high and low payoff treatments. We find that, in all treatments, average play is close to equilibrium even though there are strong cycles present in the data.: Games, Learning, Experiments, Stochastic Fictitious Play, Mixed Strategy Equilibria.

Why Italy and not Spain? Comparing two industrialization processes from a dissagregate time series perspective

In 1996 and 1997 Economic History Review published two appraisals of recent contributions on the contemporary economic development of Spain and Italy prior to the Second World War. In his study of Spain, James Simpson described the situation as one of slow growth. By contrast, Giovanni Federico entitled his study Italy, 1860-1940: a little known success story. The assessments of these two authors were based on the growing quantitative evidence of the healthy growth experienced in the Italian economy during the giolittiano period, in contrast to the relative stagnation of the Spanish economy during the second half of the nineteenth century, especially during the Restoration of the Bourbon monarchy. A comparison of the evolution in industrial output shows that this situation is the result of marked differences in the rate of industrial development. The indices of industrial output that are available support the opinions presented in seminal historiographical studies of the development of nineteenth century Spain and Italy. In 1975, Nadal considered that industrialization in Spain had failed to take a strong foothold; after a promising early start, the sector lost momentum as the last thirty years of the nineteenth century wore on. In contrast, the pioneer works of Gerschenkron stated that only during the final decade of the nineteenth century did a break occur in the behaviour of Italian industry, which was to represent the beginning of the process of industrialization.industrialisation

Beyond the DSGE Straitjacket

Academic macroeconomics and the research department of central banks have come to be dominated by Dynamic, Stochastic, General Equilibrium (DSGE) models based on micro-foundations of optimising representative agents with rational expectations. We argue that the dominance of this particular sort of DSGE and the resistance of some in the profession to alternatives has become a straitjacket that restricts empirical and theoretical experimentation and inhibits innovation and that the profession should embrace a more flexible approach to macroeconometric modelling. We describe one possible approach

The Relationship between Growth and Volatility under Alternative Shocks

This paper presents a simple stochastic endogenous growth model with multiple shocks � a preference shock and a learning shock. The model is used to predict alternative relationships between growth and volatility on the basis of the underlying impulse source of fluctuations.