- Elgar original reference
Edited by John B. Davis, Alain Marciano and Jochen Runde
21 Information, knowledge and modelling economic agency Philip Faulkner and Jochen Runde* Introduction The relationship between the information available to economic actors and what they are presumed to know, and then how and in what form this knowledge informs their actions, raises some of the most difﬁcult questions in economics. This chapter concentrates on how the relationship between information and knowledge is treated in mainstream microeconomic theory. Our aim is to establish that even in models that relax the standard assumption that actors have ‘perfect’ knowledge, this typically amounts to no more than introducing small ‘black spots’ into the otherwise unlimitedly sharp and comprehensive knowledge that they are assumed to have of their model ‘world’. We then identify some different ways in which this approach, while useful in some respects, fails to address some important aspects of the relationship between information and knowledge as they arise in actual economic situations. Our argument begins with a brief account of what we mean by information and knowledge. The paper then splits into two halves. The first explores the mainstream economics perspective on information and knowledge by way of a detailed examination of a representative game theoretic model. The second considers three aspects of the relationship between information and knowledge that are largely neglected on the mainstream approach: non-probabilistic forms of uncertainty and ignorance, the subjectivity of knowledge, and tacit knowledge. We here touch on themes related to the treatment of rational agency in economics that also arise in other chapters in...
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