complexity – Economic Philosophy

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.

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.

Complexity in the theory of economic evolution of Thorstein Veblen: an introduction

johndavis — Sat, 30 Sep 2017 10:04:26 +0000

Thorstein Veblen is a classic author, recognized for his writings on institutions and economic change. The complexity perspective, on the other hand, is a relatively contemporary approach for studying a considerable range of phenomena both in natural and social sciences. There are important issues concerning the relation between the two lines of inquiry, but, in comparison, few works that undertake the task of investigating those links. This paper attempts to take some introductory steps in that direction in two ways. First, it identifies zones of convergence between the complexity view and Veblen’s theory of economic evolution. Secondly, it makes an effort to interpret the latter in terms of the former. Three major elements are emphasized in this regard, namely the psychology of the agents, the continuous evolution and adaptation of the institutional structure and the role of technology in this process. The conclusion is that, although being a preliminary effort, this paper establishes a good case for a more profound comprehension of Veblen’s work as circumscribed in the more broad complexity approach, providing, moreover, some directions on how this ought to be accomplished.

The evolutionary dimension of Hayek’s thought: cultural selection and spontaneous order

johndavis — Sat, 30 Sep 2017 10:00:25 +0000

The project’s basic axis the notion of order and cultural evolution by selection at the thought of Hayek. However, to highlight this aspect was necessary to analyze many other aspects of his work, as well as enter in the literature on the subject that goes beyond the thought of this author.