Papers – Economic Philosophy

General comments

johndavis — Sat, 30 Sep 2017 10:44:36 +0000

Please leave comments here on groups of papers or the conference as a whole.

Mixed-method to deal with complexity in economic research

johndavis — Sat, 30 Sep 2017 10:22:31 +0000

Despite the fact that mathematical deductivist models in line with positivism are mostly considered as the conventional way to do economic research, those have been criticised for failing to deal with social complexities. The complexities in economics may come from two sources, the objects of economic research, and the approaches toward these objects. The main objects of economic research, social phenomena, are complex as it involves social interactions between individuals and institutions under the specific influencing environment. Therefore, for complex social realities, they requires economic research to obtain social ontology. This definitely goes beyond mathematical deductivists models and positivism, which often ignore this matter. Acknowledging the limitations of the conventional approaches from philosophical perspectives, there are two main ways to bring economics closer to social realities. Some propose alternative models with the aid of advanced econometrics and computational tools (Arthur, 2013). However, the underlying principle of this approach is still to isolate phenomena from its surrounding and potential causal mechanism. For this reason, alternative models hardly escape from criticisms as of their counterparts, i.e. mathematical deductivist models. In other words, economic models do not solve the root of methodological problems in economics. Based on the work of Lawson (2009) and his commentators like Downward and Mearman (2007), this paper argues for the use of mixed-method in economics research. It turns out that mixed-method is evidently used in a number of economic research like poverty and innovation. Additionally, mixed-method appears to respond to the inquiries made by some economists like Hebert Simon to make proper observations in economics. And, mixed-method has some supportive philosophical foundations, e.g. from critical realism alike.

NB This paper does not specify any industries/companies/institutions.

What is complexity economics, why is it heterodox, and what are its policy implications?

johndavis — Sat, 30 Sep 2017 10:20:53 +0000

Complexity economics has developed into a powerful empirical, theoretical, and computational research program in the last three decades, advancing more realistic economics. It converges with long-standing heterodox schools, and its theoretical and empirical findings are consistent with older heterodox research interests and predictions. Economic complexity is characterized by path-dependence, idiosyncrasies, some self- organization capacity, structural emergence, and certain statistical distributions in economic topologies and motions, as complex economic systems move between building order and phases of sudden disorder. In agent-based systems, underlying ―intentionality of agents includes improving their performance, reducing perceived complexity, and generating social institutions. Boosted by the financial crisis 2008ff., a surge to explore complexity-economics’ policy implications has emerged. This chapter will briefly review the literature on economic
Complex Adaptive Systems (CAS) and derive implications for economic-policy interventions and the state to act upon socio-economic complexity. From an ―evolution-of-cooperation perspective, we exemplarily derive some more specific policy orientations, specified ―framework-policy or ―interactive-policy approaches, embedded in a conception that we call ―new meritorics. We consider some required structures and capacities that a modern effective state, capable of a strong and persistent, but learning and adapting ―complexity policy, should have.

Agent-Based Modeling’s Open Methodology Approach:Simulation, Reflexivity, and Abduction

johndavis — Sat, 30 Sep 2017 10:18:49 +0000

This paper argues that agent-based modeling’s innovations in method developed in terms of simulation techniques also involve an innovation in economic methodology. It shows how Epstein’s generative science conception departs from conventional methodological reasoning, and employs what I term an open rather than closed approach to economic methodology associated with the roles that reflexivity, counterfactual reasoning, and abduction play in ABM. Central to this idea is that improvements in how we know something, a matter of method, determine whether we know something, a matter of methodology. The paper links this alternative view of economics and economic methodology to a social science model of economics and contrasts this with standard economics’ natural science model of economics. The paper discusses what this methodological understanding implies about the concept of emergence.

Complexity Economics and the Accounting Framework

johndavis — Sat, 30 Sep 2017 10:17:45 +0000

This working paper introduces a formal language to frame the concept of complexity within economic theory. The purpose is to provide a consistent analytical framework within which the varied aspects of complexity may be given expression.

The intuition underlying the framework is provided by double-entry bookkeeping and the accounting equation whereby assets equal liabilities for all possible agents in the economic system. The discussion is focused on foundational issues; markets, preferences, convexity in production, general equilibrium are not deemed to be required in describing an economic system. The basis for developing the framework is given solely by accounting theory. Linear algebra, in particular vector and tensor analyses, provide the mathematical elements required to construct said framework.

Complexity in economics is understood to imply subjective beliefs by interacting agents, who chose strategies given their particular goals, and further who update said strategies as time goes by. The resulting framework is, accordingly, dynamic and inherently uncertain. Therein, the accounting equation is seen as the expression of a solution concept, as this is defined in Game Theory. And economic value is a measurement scale which informs how distinct resource subsets relate to each other as input to output given a strategic economic process consisting of production, trade, or both.

The epistemological background which supports the framework relies on the representational theories of measurement.

The paper is organised as a list of talking points. Three appendices cover the methodological approach being used, the mathematics knowledge being required, and a short review of what the representational approach to measurement entails.

Developing a perspective on transition economies as complex systems

johndavis — Sat, 30 Sep 2017 10:15:42 +0000

Decades of blindly following mainstream economic policy has opened a new potentiality of research, especially since most of the phenomena that occur around us are caused by and interact with many other parts within a complex globalised world. The objective of this article is to give complexity theory the central place it deserves in development economics and policy research. The goal is to critique the mainstream economic position of neo-liberal institutions, such as the IMF, in their one size fits all approach, and to highlight the use of complexity theory in better understanding the economic systems. My intention is to provide an understanding of the applicability of this theory in the specific context from a qualitative analytical approach.

I analyse the relevant literature particularly relating to complex economic systems and the elements that comprise them. The main complexity characteristics are identified through this paper and applied in the context of the Macedonian transition economy. The choice of context is based on two reasons. The first one relates to the IMF’s frequent emphasis on Macedonia’s transition as a success story. The second reason relates to the prolonged transition escalating into the most serious economic and political crisis that the country has experienced recently (EUROPP, 2016). It seems confusing that such a successful transitional economy in the 90’s, after nearly three decades of reforms, could not reach economic and political stability.

Therefore, I am looking at the role of the IMF during Macedonia’s transition and critiquing the linear perception that the institution adopts from the mainstream economic theory and deliberate the benefits of using complexity theory instead, in uncovering the systems complexities. This paper contends that the neo-liberal policies implemented during the Macedonian transition have been imposed by following mainstream economic theory and neglecting the complex nature of the context.

Money, Cycles and Complexity

johndavis — Sat, 30 Sep 2017 10:13:58 +0000

The main idea of the present paper is that the appropriate inclusion of money and monetary circulation into economic analysis implies shift from acyclic to cyclic economic mathematical models. In the same tame such transition allows for the analysis of more complex economic instances, complexity being viewed in terms of computational complexity. Remarkably, the emergence and development of complex cyclical economic systems is actually possible only in the context of risk and uncertainty.

Limitations on the Perspective of Representative Economic Agent: Agent Based Model’s Alternative

johndavis — Sat, 30 Sep 2017 10:10:37 +0000

Economic Science emerges from the questions about the behavior human, conflict and social order. Smith, preoccupied with the complexity of social relations and economic phenomena, point out the individual as basis of Political Economics. For the author, social and economic order are maintained in function of the singular behavior of subjects in internal conflict between the search for self-interest and the necessity of social acceptance. A superficial lecture of his work, however, gave the basis of the development of neoclassical economic approach and the simplification of the individual and economic order, with objective to provide predictions about the phenomena, ordered by general and simplistic laws of operation. The homo economicus, caricature of the selfish subject of Smith, with unbounded rationality, homogeneous and self-interested, is the central of the economic order, static, in equilibrium and universal, like the perfect world of Newton, symbol of modern science. However, the simplistic model of individual as central to the neoclassical theory and economics mainstream implicates in difficulties to apprehender the economic phenomena, on a complexity and real world. The agent-based model consider the Economy as complex and dynamic system, in constant evolution, based on the mutative and interactive economic behavior. Through computer simulations, this model generate scenarios based on the change of rules in function of the adaptation and evolution of interactive individuals. Furthermore, consider the individual bounded-rationality and heterogeneity, unbalanced and instable environment, with maintenance of mathematical instruments, search precision, objectivity and robustness. This work aims to present the formation and evolution of Economic Science and the figure of representative economic agent, basis of the Neoclassic Economic. Next, is exposed the agent-based model as methodological alternative for Economic Sciences. Its recognizes the limitations of the economic representative economic model and the incipience of the complexity perspective, however, is fundamental the dialogue and review of economic basis, in reason to best comprehend the economic phenomena on a complexity and real world.

Autonomous Agents and Economic Complexities: A Philosophical Excursion

johndavis — Sat, 30 Sep 2017 10:07:53 +0000

This paper develops a conception of autonomous agents who, lacking the ready-made and complete list of possible states afforded their DSGE counterparts, must envision their own ―state space.‖ Such agents can and must do more than perform constrained optimization exercises; they must also imagine, evaluate, and choose among alternative courses of action. Autonomous agents of this kind tend to hold diverse beliefs about the factors determining the economy‘s past performance, its present state, and the range of its possible trajectories. Insofar as these agents will oftentimes be interacting on the basis of inconsistent beliefs, it‘s reasonable to say that their interactions take place under conditions of general disequilibrium. In developing this alternative scheme of thought, I draw on some ideas from the complexity literature to explain why agents hold diverse views about the economy and to explore how their interactions might play out.

Complexity and Economics

johndavis — Sat, 30 Sep 2017 10:06:36 +0000

Nobody will discuss that the economy constitutes a very complex system. The traditional approach to understanding it has been to reduce complexities to simple rules and behaviors, abstracting of many features of the real economy.

An alternative to reductionism consists of studying economic systems with a complexity approach. The complexity approach ́s point of departure is that the behavior of the whole is much more complex than the behavior of the parts.

Complexity economics has focused on economic phenomena like business cycle, crises and other out of equilibrium behavior. Its use of non-linear models offers the advantage that the same model allows us to describe stable as well as unstable and even chaotic behaviors.

The use of non-linear models in finance as well as the possibility of finding chaotic behavior in economics are discussed. Models of interacting agents in economics and finance are mentioned as another promising line of research in complexity applied to economics. Finally, whether the complexity approach is another twist of orthodoxy or constitutes a heterodox paradigm is another issue discussed in the paper.