The Role of Expressiveness in Modelling Structural Change - Bruce Edmonds

1 Without Structural Change

Economists have been concerned principally with situations where the context of a situation is broadly fixed so as to focus on modelling changes that occur to within this framework (price, expected utility, stock etc.). In other words, economics has not so much been concerned with the effects of knowledge on economic processes, but has focused more on cases where suitable restrictions or assumptions rule out such effects to make the situation more tractable. Examples of these have included:

the assumption of perfect knowledge - this makes communication and information search by the agent redundant (as well as eliminating the problems of uncertainty and limited attention);
of perfect computational ability - thus the form of an agent's knowledge becomes irrelevant, only the content matters;
that agents have the correct model of the economy in their head - this by-passes the whole process of learning and model development;
that systems will tend to a equilibrium - this eliminates the necessity for studying the dynamic processes of its development;
and that an agent's actions can be determined by a numerically represented utility function - this (as usually applied) eliminates the effects of context on an agent's choice of action.

All of these can have the effect that the complex interaction of an agent's knowledge and the economy is reduced to simpler cases - ones that can, on the whole, be represented numerically. Innovations as chaos theory have expanded the range of mathematical techniques slightly, in that they now allow for systems of numerical equations which are ultimately sensitive to initial conditions, but they still keep broadly to the dame range of numerical techniques.

The Role of Expressiveness in Modelling Structural Change - Bruce Edmonds - 16 MAY 96

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