Recognition of investment opportunities and generation of investment cycles
CPM Report No.: 00-62
By: Guido Fioretti
Date: 2nd May 2000
A Paper at: The "Starting from
Society" symposium at ASIB'2000
convention, Birmingham University, 16th-19th April 2000.
Also published as: Guido Fioretti (2000), "Recognition
of investment opportunities and generation of investment cycles", in the
Proceedings of the AISB'00 Symposium on Starting from Society - the Application
of Social Analogies to Computational Systems, Birmingham, UK: AISB, 37-44. (ISBN
1 902956 13 8)
Abstract
Innovations cause entrepreneurs' mental models not to hold, generating optimism when
innovations open up new fields of activity and pessimism when investments in fields that used to
be safe no longer yield the usual returns. The state of optimism or pessimism in the minds of
entrepreneurs eventually propagates to the whole economy, triggering up- and downswings of
aggregate investments. This paper makes use of an original methodology to compute
entrepreneurs' state of confidence, depending on the extent empirical experiences validate their
mental models. It is primarily concerned with decision- making in situations where
unexpected events (e.g. new technologies) appear.
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