On Competing Technologies and Historical Small Events: The Dynamics of Choice under Increasing Returns

This paper explores the dynamics of microeconomic choice between objects with increasing returns. It finds that such dynamics possess four features: (a) a potential inefficiency of aggregate outcome, even where individual choices are perfectly rational; (b) an inflexibility of outcome, in that market shares become locked-in--they cannot always be influenced by standard, marginalist policy measures; (c) a non-predictability, in that knowledge of supply and demand conditions does not suffice to predict ultimate market shares; and (d) a non-ergodicity, in that small historical events are not always averaged away, but can determine the path of market shares. These properties are demonstrated within a simple model where agents choose between technologies competing for adoption. Choice under increasing returns appears to raise serious questions for policy prescription, for the interpretation of economic history, and for the possibility of constructing models for accurate economic prediction

Age and Earnings in the Labor Market: Implications of the 1980's Labor Bulge

This paper proposes a non-neoclassical model of earnings and advancement over the working lifecycle. It assumes an economy that generates job-slots or positions, arranged institutionally at different seniority levels, each carrying a salary tagged to its level. The individual is driven upward in rank and salary as time passes, not because his productivity or human capital necessarily increases, but because retirement and death progressively thin out the numbers "above him" who occupy positions at higher levels. Larger labor cohorts (for example the 1980's "labor bulge") would depress age-earnings profiles within this system. The extent of earnings loss depends on the relative number of job-slots at different levels, on the age-location of these cohorts within the labor force, on the extent to which they bring into being new productive jobs, and on the promotional policy in force

Why a Population Converges to Stability

A large part of mathematical demography is built upon one fundamental theorem, the "strong ergodic theorem" of demography. If the fertility and mortality age-schedules of a population remain unchanged over time, its age distribution, no matter what its initial shape, will converge in time to a fixed and stable form. In brief, when demographic behavior remains unchanged, the population, it is said, converges to stability. This short paper presents a new argument for the convergence of the age structure, one that is self-contained, and that brings the mechanism behind convergence into full view. The idea is simple. Looked at directly, the dynamics of the age-distribution say little to our normal intuition. Looked at from a slightly different angle though, population dynamics define a smoothing or averaging process over the generations -- a process comfortable to our intuition. This smoothing and resmoothing turns out to be the mechanism that forces the age structure toward a fixed and final form

Stochastic Control for Linear Discrete-Time Distributed-Lag Models

In an important class of linear stochastic control problems distributed-lag state or control variables appear in the dynamics or in the observations. Optimal control and estimation theory is derived for such problems in discrete time using a simple procedure. The results reduce computations from order N-cubed in the usual methods to order N-squared; they show the special structure of the time-lag controller and estimator more clearly; and they correspond closely to the known results for the continuous-time case

Out-of-Equilibrium Economics and Agent-Based Modeling

Standard neoclassical economics asks what agents' actions, strategies, or expectations are in equilibrium with (consistent with) the outcome or pattern these behaviors aggregatively create. Agent-based computational economics enables us to ask a wider question: how agents' actions, strategies, or expectations might react to- might endogenously change with- the patterns they create. In other words, it enables us to examine how the economy behaves out of equilibrium, when it is not at a steady state. This out-of-equilibrium approach is not a major adjunct to standard economic theory; it is economics done in a more general way. When examined out of equilibrium, economic patterns sometimes simplify into a simple, homogeneous equilibrium of standard economics; but just as often they show perpetually novel and complex behavior. The static equilibrium approach suffers two characteristic indeterminancies: it cannot easily resolve among multiple equilibria; nor can it easily model individuals' choices of expectations. Both problems are ones of formation (of an equilibrium and of an "ecology" of expectations, respectively), and when analyzed in formation - that is, out of equilibrium - these anomalies disappear

The Economics of Risks to Life

This paper examines the economic welfare implications of mortality change within a framework that both recognizes general equilibrium effects and incorporates full age-specific accounting. Two formal results are derived. Under a life-cycle criterion, changes in the age-pattern of mortality, caused say by a medical breakthrough, should be assessed on the utility of additional life-years, production and reproduction, less expected additional social costs of support. Loss of life at a specific age should be assessed on the opportunity costs of expected lost years of living and lost production and reproduction, less expected social support costs. From these results it is seen that current methods, in general, leave out an important social transfer term, that the valuation of life-risks is highly age-dependent, and that the degree of diminishing returns to consumption plays an important part in the calculations of the economic cost of risks

Some General Relationships in Population Dynamics

Important recent research by Samuel Preston and Ansley Coale (1982) extends the Lotka system of stable population equations (Lotka 1939) to any population. Here we present an alternative general system and describe its duality with the Preston-Coale system: We derive these results by considering the calculus of change on the surface of population density defined over age and time. We show that analysis of this Lexis surface leads to all the known fundamental relationships of the dynamics of single-region human populations, as well as some interesting new relationships

An Analytical Survey of Population and Development in Bangladesh

This paper is titled an Analytical Survey. As a survey it sets out to collect and pull together what is know from the many studies and detailed aspects of population and development in Bangladesh. And as an analysis it sets out to make sense of a complex situation, to pick out the various economic, social, demographic and environmental forces that shape Bangladesh's present predicament and set the bounds for its future possibilities. Two particular problems call for special attention in an analysis of Bangladesh. Agriculture measured relative to other Asian countries, has achieved little in the last decades that could be called dynamic progress. And human fertility, a generation after mortality has declined, remains high with little sign of falling. The source of both problems we seek in the social structure of rural Bangladesh, in the particular incentives this structure gives to those who control it, in the legacy of underadministration and underinvestment left by the country's colonial past, and in the extreme lack of security faced by a population that lives in a crowded and uncertain environment

An Analysis of Indirect Mortality Estimation

This paper investigates the robustness of the Brass child-survivorship indirect mortality estimation technique. It develops an analytical method for studying the error or bias caused in indirect mortality estimates by poor data, badly chosen model functions, and specific demographic assumptions that are often violated in practice. The resulting analytical expressions give insight into the rationale of indirect methods, the conditions under which they are robust, and the magnitude of errors that occur when specific assumptions are violated

Predictability in an unpredictable artificial cultural market

In social, economic and cultural situations in which the decisions of individuals are influenced directly by the decisions of others, there appears to be an inherently high level of ex ante unpredictability. In cultural markets such as films, songs and books, well-informed experts routinely make predictions which turn out to be incorrect. We examine the extent to which the existence of social influence may, somewhat paradoxically, increase the extent to which winners can be identified at a very early stage in the process. Once the process of choice has begun, only a very small number of decisions may be necessary to give a reasonable prospect of being able to identify the eventual winner. We illustrate this by an analysis of the music download experiments of Salganik et.al. (2006). We derive a rule for early identification of the eventual winner. Although not perfect, it gives considerable practical success. We validate the rule by applying it to similar data not used in the process of constructing the rule