Economics
College of Humanities and Social Sciences

An Agent-based Theory of Social Economy

James L. Caton

Major Professor: Richard E Wagner, PhD, Department of Economics

Committee Members: Peter J. Boettke, Robert Axtell

Buchanan Hall (formerly Mason Hall), #D180
April 28, 2017, 10:00 AM to 07:00 AM

Abstract:

The framework of economic theory used predominantly inthe post World War II era – starting with Paul Samuelson, Milton Friedman, Kenneth Arrow, and George Stigler, among others – is dependent on systems of linear equations. While these are useful for predicting outcomes with econometric models, they do not include the processes that lead to such outcomes. These models are incapable of modeling knowledge, entrepreneurship, and endogenous dynamics that emerge in the course of market interaction.

 

This thesis presents agent-based models that are constructed using an alternate framework. In it, action is presumed to be linked to knowledge, embodying that knowledge’s logic. Chapter 1 investigates the role of entrepreneurial strategy in overcoming search costs, where an entrepreneur’s strategy promotes structured interaction with the environment. This strategy represents technology that is cost reducing. The market selects for those strategies that most greatly reduce costs in the given environment. Chapter 2 considers the role of creativity in adaptation to change. As the environment in which market participants act changes, old strategies do not work. New strategies must be innovated to allow agents to continue to operate profitably in the market. Strategies that promote profit for agents who use them spread as they learn from one another. Chapter 3 details the theory of knowledge upon which the models from the previous chapters depend. It considers the relationship between agent knowledge and selection of ends. It emphasizes the role of learning and plan revision and execution that lead to agent coordination across the economic system. 

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