Complexity and Endogenous Instability

The global financial crisis proved the critical impact of the gap between individual rationality and group rationality. This gap is not supposed to arise in a Neoclassical world, but it frequently arises in a world as complex as ours. The paper explores how endogenous instability might arise due to such a gap, and what behavioral rules might help to mitigate its impact.fallacy of composition, empathy, n-person prisoner’s dilemma games, n-person zero-sum games, symmetry, the golden rule.

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 As a consequence, estimation has finally been replaced by simulation, and empirical tests have been substituted by non-disciplined exercises of comparison of models with reality.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.

What Can Artificial Intelligence Do for Scientific Realism?

The paper proposes a synthesis between human scientists and artificial representation learning models as a way of augmenting epistemic warrants of realist theories against various anti-realist attempts. Towards this end, the paper fleshes out unconceived alternatives not as a critique of scientific realism but rather a reinforcement, as it rejects the retrospective interpretations of scientific progress, which brought about the problem of alternatives in the first place. By utilising adversarial machine learning, the synthesis explores possibility spaces of available evidence for unconceived alternatives providing modal knowledge of what is possible therein. As a result, the epistemic warrant of synthesised realist theories should emerge bolstered as the underdetermination by available evidence gets reduced. While shifting the realist commitment away from theoretical artefacts towards modalities of the possibility spaces, the synthesis comes out as a kind of perspectival modelling

Social dilemmas, time preferences and technology adoption in a commons problem

Agents interacting on a body of water choose between technologies to catch fish. One is harmless to the resource, as it allows full recovery; the other yields high immediate catches, but low(er) future catches. Strategic interaction in one 'objective'resource game may induce several 'subjective' games in the class of social dilemmas. Which unique 'subjective'game is actually played depends crucially on how the agents discount their future payo¤s. We examine equilibrium behavior and its consequences on sustainability of the common-pool resource system under exponential and hyperbolic discounting. A sufficient degree of patience on behalf of the agents may lead to equilibrium behavior averting exhaustion of the resource, though full restraint (both agents choosing the ecologically or environmentally sound technology) is not necessarily achieved. Furthermore, if the degree of patience between agents is sufficiently dissimilar, the more patient is exploited by the less patient one in equilibrium. We demonstrate the generalizability of our approach developed throughout the paper. We provide recommendations to reduce the enormous complexity surrounding the general cases

Evolutionary game theory: Temporal and spatial effects beyond replicator dynamics

Evolutionary game dynamics is one of the most fruitful frameworks for studying evolution in different disciplines, from Biology to Economics. Within this context, the approach of choice for many researchers is the so-called replicator equation, that describes mathematically the idea that those individuals performing better have more offspring and thus their frequency in the population grows. While very many interesting results have been obtained with this equation in the three decades elapsed since it was first proposed, it is important to realize the limits of its applicability. One particularly relevant issue in this respect is that of non-mean-field effects, that may arise from temporal fluctuations or from spatial correlations, both neglected in the replicator equation. This review discusses these temporal and spatial effects focusing on the non-trivial modifications they induce when compared to the outcome of replicator dynamics. Alongside this question, the hypothesis of linearity and its relation to the choice of the rule for strategy update is also analyzed. The discussion is presented in terms of the emergence of cooperation, as one of the current key problems in Biology and in other disciplines.Comment: Review, 48 pages, 26 figure

Baseline Determination at Government Discretion: Multi-Project Baselines for the First Track of Joint Implementation?

The "first track" of Joint Implementation under the Kyoto Protocol gives host and investor countries total freedom in choosing a baseline for a project reducing or sequestering greenhouse gases. This is due to the fact that an overly generous granting of emission credits leads to a corresponding reduction of the host country's emission budget. Standardised, multi-project baselines can reduce transaction costs, especially in relatively homogeneous sectors such as electricity production or landfill methane collection. Host countries need capacity to calculate such baselines which currently does not exist. "Boundary organisations" can bridge the gap between technical analysis and strategic considerations. Interviews with government officials and other stakeholders in East European EU accession countries lead us to the conclusion that countries have not yet realised the chances and pitfalls of baseline definition under the first track, especially as they assume that the EU will define the "acquis communautaire" as the baseline. However, this would make international emissions trading more attractive than JI.Joint Implementation, baselines, institutions, host countries, Environmental Economics and Policy, Q25, O13,

Austrian Economics and Game Theory a Preliminary Methodological Stocktaking

This paper discusses, from the perspective of Austrian economics, the merits and drawbacks of game theory in economics. It begins by arguing that Austrians have neglected game theory at their peril, and then argues that game theoretic reasoning may be one way of modelling key Austrian insights, although some aspects of game theory doesn’t square easily with Austrian economics. However, a major stumbling block for an Austrian acceptance of game theory may lie in the traditional Austrian resistance to formal methods.Austrian economics, game theory

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

A survey on the nature, reasons for compliance and emergence of social norms

The aim of the paper is to offer a critical review of some of the most important contributions on the subject of social norms. The analysis will hinge upon a fundamental distinction between self-regarding and other-regarding reasons to action, which are supposed to represent two basic types of motivations making up the individual system of rational deliberation. Such a dichotomy will make it possible to divide the account of rules of behaviour in three categories, depending on the weight accorded to one rather than the other reason to action. The narrower concept is given by what will be called strictly-conceived convention, which coincides with Lewis's classical account of a convention. In this case, it is the self-regarding motive that actually provides an underpinning of such a regularity of behaviour, making it possible to build a system of convergent mutual expectations. The next category, that of broadly-conceived conventions are based on Sugden's earliest works on the subject; in this case, the self-regarding motive is still the crucial one, but conventions are not necessarily mutually beneficial, thus coming down to a standard Nash equilibrium, or evolutionary stable strategy, notion. Finally, with the final category of norms a decisive shift out of the self-interested justification is accomplished. In fact, these regularities are grounded on some forms of other-regarding behaviour, as Sudgen's model of normative expectations sets out clearly. The cognitive structure needed in order to generate such type of expectations leading to norms is then critically examined, reaching the conclusion that the account of norms provided in the received theory does not prove thoroughly satisfactory. Particularly, the notion of "empirical" expectation, as opposed to that of "causal" expectation, is deemed as the relevant one in order to build a system of mutual expectation in the case of norms; however, this concept does not help to explain how a norm comes out as an equilibrium of the social interaction, thus making the whole explanation arguably circular. We finally argue for the importance to ground the concept of norm on the dynamic evolution of expectations.