The Microeconomics of Complex Economies - Edition 1 - By Wolfram Elsner, Torsten Heinrich and Henning Schwardt Elsevier Inspection Copies

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The Microeconomics of Complex Economies,

Edition 1 Evolutionary, Institutional, Neoclassical, and Complexity Perspectives

By Wolfram Elsner, Torsten Heinrich and Henning Schwardt

Publication Date: 23 Apr 2014

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The Microeconomics of Complex Economies uses game theory, modeling approaches, formal techniques, and computer simulations to teach useful, accessible approaches to real modern economies. It covers topics of information and innovation, including national and regional systems of innovation; clustered and networked firms; and open-source/open-innovation production and use. Its final chapter on policy perspectives and decisions confirms the value of the toolset.

Written so chapters can be used independently, the book includes an introduction to computer simulation and pedagogical supplements. Its formal, accessible treatment of complexity goes beyond the scopes of neoclassical and mainstream economics. The highly interdependent economy of the 21st century demands a reconsideration of economic theories.

Key Features

Describes the usefulness of complex heterodox economics
Emphasizes divergences and convergences with neoclassical economic theories and perspectives
Fits easily into courses on intermediate microeconomics, industrial organization, and games through self-contained chapters

About the author

By Wolfram Elsner, Institute for Institutional and Innovation Economics, University of Bremen, Germany; Torsten Heinrich, University of Bremen, Germany and Henning Schwardt, University of Bremen, Germany

Didactics: How to Work with This Textbook at Introductory, Intermediate, and Advanced Levels, and in Different Kinds of Courses

Beyond the “Economics of the x¿: A Different Task, a Different Style
Sample Syllabi: Roadmaps for Teaching in Different Formats
Prerequisites for Particular Parts
Reference

List of Abbreviations

Part I: Basics of the Interdependent Economy and Its Processes

Chapter 1. Introduction to the Microeconomics of Complex Economies

1.1 Introduction: A Microeconomics of Direct Interdependence
1.2 Different Problem Structures in Directly Interdependent Decision Situations
1.3 Competing Paradigms in Economics: Invisible Hand Versus Fallacy of Aggregation
1.4 Uncertainty, Strategic Uncertainty, and Bounded Rationality
1.5 Path Dependence, Nonergodicity, and Cumulativity in Processes of Change
1.6 Social Rules as Informational and “Expectational¿ Devices
1.7 Social Rules and Social Institutions as Solutions to Coordination and Dilemma Problems
1.8 The Public Good Character and Positive External Effects of Social Rules and Social Institutions
1.9 “Instrumental¿ and “Ceremonial¿ Dimensions of Social Institutions
1.10 Real-World Microeconomics
Further Reading
Further Reading—Online

Chapter 2. Tools I: An Introduction to Game Theory

2.1 Introduction
2.2 Understanding a Strategic Game
2.3 The Invisible Hand and the Fallacy of Aggregation Again
2.4 How Not to Play a Game
2.5 How to Play a Game
2.6 How Many Games Can We Play?
2.7 Summary
Chapter References
Further Reading
Further Reading—Online
Exercises

Chapter 3. Problem Structures and Processes in Complex Economies

3.1 A Continuum of Social Problem Structures
3.2 Solutions to Social Dilemma Problems
Further Reading
Further Reading—Online
Exercises

Chapter 4. Approaching Real-World Interdependence and Complexity: Empirical Phenomena in the Global Economy

4.1 Introduction
4.2 The Specific Inherent Complexity, Volatility, and Uncertainty of Today’s Real-World Economy
4.3 Individualistic Vs. Common and Collective, Strategies to Cope with Complexity
4.4 Implications of Real-World Complexity for Microeconomic Theory and Modeling
Chapter References
Further Reading—Online
Exercises

Part II: Markets: General-Equilibrium Theory and Real-World Market Structures

Chapter 5. The Ideal Neoclassical Market and General Equilibrium

5.1 Introduction: The Neoclassical Paradigm and Research Program
5.2 Consumer Theory
5.3 Production Theory
5.4 Partial Equilibrium
5.5 General Equilibrium
5.6 Further Developments
5.7 Extensions and Transitions: The General Theory of the Second Best, Asymmetric Information, and Efficiency Under Imperfect Information
Chapter References
Further Reading—Online
Exercises

Chapter 6. Critiques of the Neoclassical “Perfect Market¿ Economy and Alternative Price Theories

6.1 Introduction
6.2 The Mistaken Mechanical Analogy
6.3 Internal Inconsistencies
6.4 Preferences and Choice
6.5 The Classical Theory of Prices and the Sraffian Critique of the Neoclassical Theory of Value and Price
6.6 An Outlook on Post-Keynesian and Institutional Price Theories: Setting and Administering Prices
6.7 Conclusion and Outlook
Chapter References
Further Reading
Further Reading—Online
Exercises

Chapter 7. Real-World Markets: Hierarchy, Size, Power, and Oligopoly, Direct Interdependence and Instability

7.1 Real-World Phenomena Again, the Corporate Economy, and Oligopolistic Market Structure
7.2 Factors Leading to Size, Power, and a Small Number of Interdependent Suppliers
7.3 Pure Monopoly
7.4 Oligopoly
7.5 Natural Monopoly
7.6 Heterogeneous Oligopoly and Monopolistic Competition
7.7 Heterogeneous Oligopolistic and Monopolistic Competition: Opportunities for Strategic Behavior of Firms and Their Potential Social Costs
7.8 A Final Consideration of Firm Size and Power, Strategic Cooperation, Monopolistic Competition, and Real-World Markets
Chapter References
Further Reading—Online
Exercises
Solution Keys
Appendix A Neoclassical Model of Monopolistic Competition

Part III: Further Tools and the Analysis of Complex Economies

Chapter 8. Tools II: More Formal Concepts of Game Theory and Evolutionary Game Theory

8.1 Introduction
8.2 Formal Concepts
8.3 Concepts from Decision Theory
8.4 Solutions of Normal-Form Games
8.5 Extensive Form Games
8.6 Repeated Games
8.7 Population Perspectives and Evolutionary Games
8.8 Rationality in Game Theory
8.9 Conclusion
Commented Game Theory Textbook References
Chapter References
Further Reading—Online
Exercises
List of Symbols

Chapter 9. Tools III: An Introduction to Simulation and Agent-Based Modeling

9.1 Introduction
9.2 Method
9.3 Particular Issues in Computer Simulation
9.4 Advantages and Disadvantages of Simulation
9.5 Microeconomics and Computer Simulation
9.6 Simulation in Practice: An Example
9.7 Outlook
Commented Textbook and Introductory Guide Reference
Chapter References
Further Reading
Further Reading—Online
Exercises

Chapter 10. A Universe of Economies: Interdependence and Complexity, System Trajectories, Chaos, and Self-Organization

10.1 Some Basics of Complexity Economics Versus Neoclassical Economics: Topology, Evolutionary Process, and Bounds and Barriers to Perfect Rationality
10.2 Local and Global Information, the Neoclassical and the Complexity Economics Approaches, and Complex System Dynamics
10.3 A Quasi-Neoclassical Perfect-Equilibrium Model Based on Global Information and Direct Interdependence
10.4 A Policy Solution and the Emergent-Institutions Solution
10.5 Conclusion
Chapter References
Further Reading—Online
Exercises

Chapter 11. Dynamics, Complexity, Evolution, and Emergence—The Roles of Game Theory and Simulation Methods

11.1 Introduction
11.2 The Picture Becomes Complex
11.3 Formal Aspects of Dynamic and Complex Systems
11.4 The Origins of Order, Turbulence, and Complexity
11.5 Modeling Complexity
11.6 Why Does it Matter: The Agent’s Struggle with Her Complex Environment
11.7 Conclusion
Chapter References
Further Reading
Further Reading—Online
Exercises

Part IV: History of Thought and Contemporary Models in Complexity Economics

Chapter 12. Themes of Complexity in the History of Economic Thought: Glimpses at A. Smith, T.B. Veblen, J.A. Schumpeter, and Others

12.1 Introduction
12.2 Adam Smith: The Classical Model of the Origins and Emergence of Institutions, and the Modern Significance of the Classical Approach
12.3 Thomas R. Malthus: Introducing Basic Biological Principles—The “Principle of Natural Selection¿ and the Danger of “Biologism¿
12.4 Karl Marx: Principles of Historical System Evolution, and Collective Action Capacity
12.5 Carl Menger: The Early Austrian Individualistic Evolutionary Approach—An Organic Analogy of Market Evolution
12.6 Alfred Marshall: “Economic Biology¿ as the “Mecca¿ of Economics
12.7 Thorstein B. Veblen: The Founding of Evolutionary-Institutional Economics
12.8 John M. Keynes: Complex Microfoundations of Macro-Price Level, Interest Rate, and Employment Under Uncertainty–and the Post-Keynesian Financial Instability Hypothesis
12.9 Joseph A. Schumpeter: Complex Process Through “Entrepreneurial¿ Innovation—Bridging Neoclassical Mainstream and Evolution
12.10 Karl Polanyi: The “Market¿ Economy, the Disembedding of the Market and its Downside
12.11 Gunnar Myrdal: Path-Dependent Development of Complex Systems—Circular Cumulative Causation
12.12 Herbert A. Simon: Complexity, Bounded Rationality, and “Satisficing¿
12.13 Nicolas Georgescu-Roegen: The Economy as an Open System, and its Entropy
12.14 Karl W. Kapp: Open-Systems Approach, Entropy, and the “Social Costs of Private Enterprise¿
12.15 Further Contributions to Complexity Microeconomics
12.16 Clustering Economists in Diverse Economic Paradigms, and a Final Remark
Chapter References
Further Reading
Further Reading—Online
Exercises
Solution Keys

Chapter 13. Recent Core Models of Complexity Microeconomics

13.1 Introduction
13.2 A. Sen (1967) on the Isolation Paradox and Assurance Game, and the Importance of the Future
13.3 A. Schotter (1981), R. Axelrod (1984/2006), and K. Lindgren (1997) on the Emergence of Institutions
13.4 T.C. Schelling (1978) and R. Axelrod (1984/2006) on Segregation
13.5 T.C. Schelling (1978) and W.B. Arthur (1994) on Attendance Coordination
13.6 W.B. Arthur et al. (1982), W.B. Arthur (1989), and P.A. David (1985) on Increasing Returns, Positive Feedback in Technology Choice Processes, and Lock-In
13.7 R.W. Cooper and A. John (1988) on Synergies and Coordination Failures
13.8 R.R. Nelson and S.G. Winter (1974, 1982) on the Evolutionary Theory of Economic Change
13.9 S.A. Kauffman (1993) on Search on Fitness Landscapes
13.10 D.J. Watts and S.H. Strogatz (1998) on Small-World Networks
13.11 A.-L. Barabási and R. Albert (1999) on Scale-Free Networks
13.12 The Veblenian Evolutionary-Institutionalist Model of Institutional Change (P.D. Bush, 1987)
13.13 E. Ostrom (1990) and E. Ostrom et al. (1992) on the Governance of Common Pool Resources
Chapter References
Further Reading—Online

Chapter 14. The Size Dimension of Complex Economies—Towards a Meso-Economics: The Size of Interaction Arenas and the Emergence of Meso-Platforms of Institutional Coordination

14.1 Introduction: Why Agents Might Rationally Strive for Smaller Structures
14.2 Terms and Overview
14.3 Size and Meso-Size of Populations and Groups in the Literature
14.4 The Ubiquity of the Dilemma Problem and Emergent Structure Again
14.5 A Stochastic Element, the Population Perspective, and the Minimum Critical Mass Again
14.6 Adapting Group Size: Agency Mechanisms
14.7 An Empirical Application: High General Trust and High Macro-Performance in Meso-Structured Economies—an Explanation of Persisting Varieties of Capitalism
14.8 Conclusion: Toward Meso-Economics
Chapter References
Further Reading—Online

Part V: Further Applications: Information, Innovation, Policy, and Methodology

Chapter 15. The Information Economy and the Open-Source Principle

15.1 Introduction
15.2 The Economics of Information, Knowledge, and Software
15.3 The Economics of Open Source
15.4 Policy in the Weightless Economy: Intellectual Property Rights, Open Standards, and Other Issues
15.5 Conclusion
Chapter References
Further Reading
Further Reading—Online
Exercises

Chapter 16. Networks and Innovation—The Networked Firm, Innovation Systems, and Varieties of Capitalism

16.1 Overview
16.2 Towards a Complexity-Based Understanding of Innovation
16.3 Firms in Clusters and Networks—An Organizational Triangle
16.4 National Innovation Systems
16.5 Endogenous Development Theory
16.6 Varieties of Capitalism
16.7 Chapter Conclusion: Main Aspects of the Above Concepts
Chapter References
Further Reading—Online

Chapter 17. Policy Implications: New Policy Perspectives for Private Agents, Networks, Network Consultants, and Public Policy Agencies

17.1 Policy Implications of Complexity (Micro-) Economics
17.2 Interactive and Institutional Economic Policy: A Lean Policy Approach for a Complex, Interactive, and Evolutionary Economy, Based on the Game-Theoretic Perspective
17.3 Policy Implications for Information and Innovation in Firms, Networks, and Open-Source Communities
17.4 Final Conclusions
Chapter References
Further Reading—Online

Chapter 18. How to Deal with Knowledge of Complexity Microeconomics: Theories, Empirics, Applications, and Actions

18.1 What Is Scientific Knowledge?
18.2 Positivism and Critical Rationalism
18.3 Model Platonism: The Immunizing Epistemological Practice of Mainstream Economics Under Scrutiny
18.4 From “if¿ to “as if¿: Milton Friedman and Methodological Instrumentalism
18.5 Emulating Wrong Ideals: The McCloskey Critique of the Rhetoric of Economics
18.6 Critical Rationalism Versus Paradigms
18.7 Critical Realism
18.8 Reality, “Realism,¿ and Constructivism
18.9 Epistemological Pluralism
18.10 Further “Applying¿ Your Knowledge on Complex Economies: Action and Experience, Enlarging Rather Than Consuming Knowledge Through Its Use
18.11 A Final “Application¿: Governance for the Res Publica, and Policy
Chapter References
Further Reading—Online

ISBN: 9780124115859

Page Count: 600

Retail Price : £73.99

Kissell/Glantz. Multi-Asset Risk Modeling. 9780124016903. 352 pp., $59.95. Pub November 2013.
Kosowski/Neftci. Principles of Financial Engineering, 3rd ed. 9780123869685. 700 pp., $99.95. Pub March 2014.
Young/Zamir, eds. Handbook of Game Theory, vol. 4. 9780444537669. 1032 pp.., $149.95. Pub June 2014.

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