scholarly journals Looking Backward and Looking Forward

Econometrics ◽  
2019 ◽  
Vol 7 (2) ◽  
pp. 27
Author(s):  
Zhengyuan Gao ◽  
Christian M. Hafner
Keyword(s):  
Economic System ◽  
Conditional Expectation ◽  
Rational Expectations ◽  
Economic Models ◽  
Information Loss ◽  
Rational Behavior ◽  
Agent Based ◽  
Profound Impact ◽  
Filtering Method ◽  
Equilibrium Process

Filtering has had a profound impact as a device of perceiving information and deriving agent expectations in dynamic economic models. For an abstract economic system, this paper shows that the foundation of applying the filtering method corresponds to the existence of a conditional expectation as an equilibrium process. Agent-based rational behavior of looking backward and looking forward is generalized to a conditional expectation process where the economic system is approximated by a class of models, which can be represented and estimated without information loss. The proposed framework elucidates the range of applications of a general filtering device and is not limited to a particular model class such as rational expectations.

Kornai, Schumpeter, and Economic Theory

2012 ◽  
pp. 145-152 ◽  
Author(s):  
V. Maevsky
Keyword(s):  
Economic Theory ◽  
Economic System ◽  
Evolutionary Theory ◽  
Economic Models ◽  
Macro Level ◽  
Mainstream Economic ◽  
Level Of Analysis

The author claims that J. Kornai in his paper Innovation and Dynamism (Voprosy Ekonomiki. 2012. No 4) ignored the understanding of socialism as a specific type of culture and not just as an economic system. He also shows profound differences between Schumpeters theory and mainstream economic models. Evolutionary theory, he claims, may itself become mainstream if Schumpeters legacy is not interpreted straightforwardly and if evolutionary economists consider not only micro-, but also macro-level of analysis in studying macrogenerations of capital of a different age.

Computational Economics in the Era of Natural Computationalism

2018 ◽  
Author(s):  
Shu-Heng Chen ◽  
Mak Kaboudan ◽  
Ye-Rong Du
Keyword(s):  
General Equilibrium ◽  
Rational Expectations ◽  
Computational Economics ◽  
Algorithmic Trading ◽  
Neural Computing ◽  
Computing Systems ◽  
Agent Based ◽  
Numerical Aspect ◽  
Nature Inspired Intelligence

After a brief review of natural computationalism, this introductory chapter presents a new skeleton of computational economics and finance (CEF) along with an overview of the handbook. It begins with a conventional pursuit focusing on the algorithmic or numerical aspect of CEF such as computational efforts devoted to rational expectations, (dynamic) general equilibrium, and volatility. It then moves toward an automata- or organism-based perspective of CEF, involving nature-inspired intelligence, algorithmic trading, automated markets, network- and agent-based computing, and neural computing. As an alternative way to introduce this novel skeleton, the chapter starts with a view of computation or computing, addressing what computational economics intends to compute and what kinds of economics make computation so hard, and then it turns to a view of computing systems in which the Walrasian kind of computational economics is replaced by the Wolframian kind due to computational irreducibility.

scholarly journals Fundamental uncertainty and Keynes' probability theory

2007 ◽  
Vol 50 (4) ◽  
pp. 35-55
Author(s):  
Ognjen Radonjic
Keyword(s):  
Decision Making ◽  
Economic System ◽  
Rational Expectations ◽  
Theoretical Assumption ◽  
Individual Agent ◽  
Expectations Hypothesis ◽  
Past Data ◽  
Fundamental Uncertainty ◽  
Past Experiences ◽  
And Behavior

Within economic system agents daily make decisions. Those decisions are based on their expectations regarding future. Therefore, theoretical assumption about what do rational decision-makers really know about future and could agents make relatively reliable forecasts has colossal importance. Namely this assumption critically determines theoretical modeling of decision-making process. In economic theory we can make distinction between two opposite and irreconcilable standpoints on this issue. According to proponents of the Subjective Probability and the Rational Expectations Hypothesis future can be predicted exactly, that is, agents are able to mathematically calculate future precisely and to express it in terms of numbers. Consistently behavior of individual agent and society in aggregate can be predicted with great precision. On the other hand, Keynes, first economist who made clear distinction between risk and uncertainty, argued that past experiences and statistical analysis of past data were not reliable guide to future and that behavior of individual agents and society in aggregate could not be neither calculated exactly nor precisely predicted. Consequently, theoretical implications regarding decision-making and behavior of aggregate economic system of the two opposite standpoints are completely different.

Recent Developments in Complexity in Economics

2021 ◽  
Author(s):  
Mauro Gallegati
Keyword(s):  
Economic System ◽  
Research Review ◽  
Agent Based Models ◽  
Agent Based ◽  
Mainstream Economics ◽  
Non Linear ◽  
Recent Developments ◽  
Uncertain Future ◽  
Theory Of Complexity

This research review identifies fundamental essays on the theory of complexity and its application in economics. The concept of complexity is linked to that of non-linearity, or rather of heterogeneity and interaction between agents. If a system is non-linear it cannot be broken down. When there is interaction, the total is not the sum of single causes, but rather the emergence of new facts. New properties appear that are not already present in the single elements. If the economic system is complex, mainstream economics is in a cul-de-sac where the macroeconomics is different from the microeconomics. The uncertain future and the agent-based models are the main tools for applying the theory of complexity.

scholarly journals News-Driven Expectations and Volatility Clustering

2020 ◽  
Vol 13 (1) ◽  
pp. 17
Author(s):  
Sabiou M. Inoua
Keyword(s):  
Long Memory ◽  
Rational Expectations ◽  
Linear Models ◽  
Autoregressive Process ◽  
Volatility Clustering ◽  
Agent Based ◽  
Market Participants ◽  
Long Run ◽  
Highly Nonlinear ◽  
Empirical Regularities

Financial volatility obeys two fascinating empirical regularities that apply to various assets, on various markets, and on various time scales: it is fat-tailed (more precisely power-law distributed) and it tends to be clustered in time. Many interesting models have been proposed to account for these regularities, notably agent-based models, which mimic the two empirical laws through a complex mix of nonlinear mechanisms such as traders switching between trading strategies in highly nonlinear way. This paper explains the two regularities simply in terms of traders’ attitudes towards news, an explanation that follows from the very traditional dichotomy of financial market participants, investors versus speculators, whose behaviors are reduced to their simplest forms. Long-run investors’ valuations of an asset are assumed to follow a news-driven random walk, thus capturing the investors’ persistent, long memory of fundamental news. Short-term speculators’ anticipated returns, on the other hand, are assumed to follow a news-driven autoregressive process, capturing their shorter memory of fundamental news, and, by the same token, the feedback intrinsic to the short-sighted, trend-following (or herding) mindset of speculators. These simple, linear models of traders’ expectations explain the two financial regularities in a generic and robust way. Rational expectations, the dominant model of traders’ expectations, is not assumed here, owing to the famous no-speculation, no-trade results.

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