catallaxy files

catallaxy in technical exile

Rebuilding microeconomics from the ground up?

with one comment

Rafe just did a nice post summarising some work by Samuel Bowles and Herb Gintis on reciprocity. As a minor addendum to that, it’s worth noting that Bowles has just written an interesting new book on microeconomics. More information on it is available here:

    In this novel introduction to modern microeconomic theory, Samuel Bowles returns to the classical economists’ interest in the wealth and poverty of nations and people, the workings of the institutions of capitalist economies, and the coevolution of individual preferences and the structures of markets, firms, and other institutions. Using recent advances in evolutionary game theory, contract theory, behavioral experiments, and the modeling of dynamic processes, he develops a theory of how economic institutions shape individual behavior, and how institutions evolve due to individual actions, technological change, and chance events. Topics addressed include institutional innovation, social preferences, nonmarket social interactions, social capital, equilibrium unemployment, credit constraints, economic power, generalized increasing returns, disequilibrium outcomes, and path dependency.
    Each chapter is introduced by empirical puzzles or historical episodes illuminated by the modeling that follows, and the book closes with sets of problems to be solved by readers seeking to improve their mathematical modeling skills. Complementing standard mathematical analysis are agent-based computer simulations of complex evolving systems that are available online so that readers can experiment with the models. Bowles concludes with the time-honored challenge of “getting the rules right,” providing an evaluation of markets, states, and communities as contrasting and yet sometimes synergistic structures of governance. Must reading for students and scholars not only in economics but across the behavioral sciences, this engagingly written and compelling exposition of the new microeconomics moves the field beyond the conventional models of prices and markets toward a more accurate and policy-relevant portrayal of human social behavior.

The book carries some endorsements from some pretty heavy hitters like Ken Arrow and Ariel Rubinstein. It’s already out in Australia in paperback for about $50 (I just picked it up in Kinokouniya last weekend but haven’t had the chance to get stuck into it yet).

Bowles and Gintis are interesting new heterodox thinkers in the social sciences to look out for. They both started out as Marxists (one of their early collaborative works was called Schooling in capitalist America) but they have both moved on to more fruitful avenues of thought since.

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Written by Admin

November 1, 2006 at 3:33 pm

Posted in Uncategorized

One Response

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  1. Sounds like an interesting read. Elsewhere I have discussed the possibility of exploring Austrian claims through simulation, only to be howled down by the more doctrinaire elements (“That’s formalism!”).

    It seems to me that if we’re performing thought experiments, what’s wrong with getting the computer to do it? As a programmer one learns that fiddly, repetitive problems should be solved once and then handed over to the computer solve next time. As a student of computer science proper, one also learns that the process of reasoning about complex structures can itself be so automated and consequences simulated.

    The Austrian methodological claim as I understand it is that economic reason must be carried out in conditions of pure logical derivation, since evidence is untrustworthy, history contested, statistics iffy etc etc.

    Supposing that this process is analogous to computer programming (and I think it is), then we know for certain that Austrian economics will have bugs. No program of non-trivial complexity has ever been written without bugs. But there are technologies and methods for reducing the incidence of bugs, often to very low levels, and these should be applied to any theory which supposes itself to be aloof from any other kind of methodological assessment.

    Jacques Chester

    November 2, 2006 at 8:59 pm


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