CPM Report No.: 94-03
By: Scott Moss and Bruce Edmonds
Date: 11 October 1994
Published as: Edmonds, B. and Moss, S. (1998). Modelling Economic Learning as Modelling. Cybernetics and Systems, 29, 5-37.
Economists tend to represent learning as a procedure for estimating the parameters of the "correct" econometric model. We extend this approach by assuming that agents specify as well as estimate models. Learning thus takes the form of a dynamic process of developing models using an internal language of representation where expectations are formed by forecasting with the best current model. This introduces a distinction between the form and content of the internal models which is particularly relevant for boundedly rational agents.
We propose a framework for such model development which use a combination of measures: the error with respect to past data, the complexity of the model, the cost of finding the model and a measure of the model's specificity The agent has to make various trade-offs between them. A utility learning agent is given as an example.