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This book is a collection of essays which examine how the properties of aggregate variables are influenced by the actions and interactions of heterogenous individuals in different economic contexts. The common denominator of the essays is a critique of the representative agent hypothesis. If this hypothesis were correct, the behaviour of the aggregate variable would simply be the reproduction of individual optimising behaviour. In the methodology of the hard sciences, one of the achievements of the quantum revolution has been the rebuttal of the notion that aggregate behaviour can be explained on the basis of the behaviour of a single unit: the elementary particle does not even exist as a single entity but as a network, a system of interacting units. In this book, new tracks in economics which parallel the developments in physics mentioned above are explored. The essays, in fact are contributions to the analysis of the economy as a complex evolving system of interacting agents.
When writing the preface the main work has been done. What remains is thanking all those people who directly or indirectly contributed to the out come. My thanks go to my family and friends for their encouragement towards the completion of this book. Among the academic profession, I would like to thank Prof. Dr. Dr. Harald Scherf, my academic teacher, first. During the years at Hamburg University I benefitted especially from his profound knowledge of Keynesian theory. His way of examining an argument in an unbiased way helped me a lot to carry out the reseach I wanted to do. His confidence enabled me to finish the work. A part of the book was written while I was a visiting fellow at DELTA, Paris, where I am particularly indebted to Roger Guesnerie. I have benefitted from his encouragement, advice, and gentle criticism during discussions and seminars, especially on the topic of the time structure of economic dynamics. I would like to acknowledge the hospitality and stimulating atmosphere at DELTA. Different versions of the manuscript, or parts of it have been read by Prof. Dr. Manfred Holler, Dr. Jorg Bibow and Dr. Gabriele Kasten. Their comments and suggestions were quite helpul and are gratefully acknowledged. Additionally, I have to thank Prof. Dr. M. Funke and Prof. Dr. V. Timmer mann.
"The last decade has seen a lively debate in macroeconomics, with an increasing criticism on the model that seemed to be dominant in literature since the end of the 1990's, the Dynamic Stochastic General Equilibrium (DSGE, hereafter) and, consequently, the birth of some new theoretical approaches and methodologies"--
This 2000 text applies modern advances in game theory to the analysis of competition policy and develops some of the theoretical and policy concerns associated with the pioneering work of Louis Phlips. Containing contributions by leading scholars from Europe and North America, this book observes a common theme in the relationship between the regulatory regime and market structure. Since the inception of the new industrial organization, economists have developed a better understanding of how real-world markets operate. These results have particular relevance to the design and application of anti-trust policy. Analyses indicate that picking the most competitive framework in the short run may be detrimental to competition and welfare in the long run, concentrating the attention of policy makers on the impact on the long-run market structure. This book provides essential reading for graduate students of industrial and managerial economics as well as researchers and policy makers.
This three-volume handbook includes state-of-the-art surveys in different areas of neoclassical production economics. Volumes 1 and 2 cover theoretical and methodological issues only. Volume 3 includes surveys of empirical applications in different areas like manufacturing, agriculture, banking, energy and environment, and so forth.
John Sutton sets out a unified theory that encompasses two major approaches to studying market, while generating a series of novel predictions as to how markets evolve. Traditionally, the field of industrial organization has relied on two unrelated theories—the cross-section theory and the growth-of-firms theory—to explain cross-industry differences in concentration and within-industry skewness. The two approaches are based on very different mathematical structures and few researchers have attempted to relate them to each other. In this book, John Sutton unifies the two approaches through a theory that rests on three simple principles. The first two, a "survivor principle" that says that firms will not pursue loss-making strategies, and an "arbitrage principle" that says that if a profitable opportunity is available, some firm will take it, suffice to define a set of possible outcomes. The third, the "symmetry principle," says that the strategy used by a new entrant into any submarket depends neither on the entrants identity nor on its history in other submarkets. This allows researchers to bring together the roles of strategic interactions and of independence effects. The result is that the considerations motivating the cross-section tradition and those motivating the growth-of-firms tradition both drop out within a single game-theoretic model. This book follows Sutton's Sunk Costs and Market Structure, published by MIT Press in 1991.
The economic crisis is also a crisis for economic theory. Most analyses of the evolution of the crisis invoke three themes, contagion, networks and trust, yet none of these play a major role in standard macroeconomic models. What is needed is a theory in which these aspects are central. The direct interaction between individuals, firms and banks does not simply produce imperfections in the functioning of the economy but is the very basis of the functioning of a modern economy. This book suggests a way of analysing the economy which takes this point of view. The economy should be considered as a complex adaptive system in which the agents constantly react to, influence and are influenced by, the other individuals in the economy. In such systems which are familiar from statistical physics and biology for example, the behaviour of the aggregate cannot be deduced from the behaviour of the average, or "representative" individual. Just as the organised activity of an ants’ nest cannot be understood from the behaviour of a "representative ant" so macroeconomic phenomena should not be assimilated to those associated with the "representative agent". This book provides examples where this can clearly be seen. The examples range from Schelling’s model of segregation, to contributions to public goods, the evolution of buyer seller relations in fish markets, to financial models based on the foraging behaviour of ants. The message of the book is that coordination rather than efficiency is the central problem in economics. How do the myriads of individual choices and decisions come to be coordinated? How does the economy or a market, "self organise" and how does this sometimes result in major upheavals, or to use the phrase from physics, "phase transitions"? The sort of system described in this book is not in equilibrium in the standard sense, it is constantly changing and moving from state to state and its very structure is always being modified. The economy is not a ship sailing on a well-defined trajectory which occasionally gets knocked off course. It is more like the slime described in the book "emergence", constantly reorganising itself so as to slide collectively in directions which are neither understood nor necessarily desired by its components.
The two essays in this classic work by sociologist Erving Goffman deal with the calculative, gamelike aspects of human interaction. Goffman examines the strategy of words and deeds; he uses the term "strategic interaction" to describe gamelike events in which an individual's situation is fully dependent on the move of one's opponent and in which both players know this and have the wit to use this awareness for advantage. Goffman aims to show that strategic interaction can be isolated analytically from the general study of communication and face-to-face interaction. The first essay addresses expression games, in which a participant spars to discover the value of information given openly or unwittingly by another. The author uses vivid examples from espionage literature and high-level political intrigue to show how people mislead one another in the information game. Both observer and observed create evidence that is false and uncover evidence that is real. In "Strategic Interaction," the book's second essay, action is the central concern, and expression games are secondary. Goffman makes clear that often, when it seems that an opponent sets off a course of action through verbal communication, he really has a finger on your trigger, your chips on the table, or your check in his bank. Communication may reinforce conduct, but in the end, action speaks louder. Those who gamble with their wits, and those who study those who do, will find this analysis important and stimulating.
What happens if an employer cuts wages by one cent? Much of labor economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition. Monopsony in Motion stands apart by analyzing labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labor market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labor economics based on this alternative and equally plausible assumption. The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labor market, concludes Manning, the "free" market can no longer be sustained as an ideal and labor economists need to be more open-minded in their evaluation of labor market policies. Monopsony in Motion will represent for some a new fundamental text in the advanced study of labor economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.
This book is open access under a CC BY-NC 4.0 license. This collected volume represents the final outcome of the COST Action IS1104 “The EU in the new complex geography of economic systems: models, tools and policy evaluation”. Visualizing the EU as a complex and multi-layered network, the book is organized in three parts, each of them dealing with a different level of analysis: At the macro-level, Part I considers the interactions within large economic systems (regions or countries) involving trade, workers migration, and other factor movements. At the meso-level, Part II discusses interactions within specific but wide-ranging markets, with a focus on financial markets and banking systems. Lastly, at the micro-level, Part III explores the decision-making of single firms, especially in the context of location decisions.