Implications for Economic Policy
Edited by John Finch and Magali Orillard
Chapter 2: Individual and Aggregate Behaviour: Of Ants and Men
Alan Kirman Major advances in science often consist in discovering how macroscale phenomena reduce to their microscale constituents. These latter are often counterintuitive conceptually, invisible observationally, and troublesome experimentally. Knowledge of the molecular and cellular levels is essential, but on its own it is not enough, rich and thorough though it be. Complex effects, such as representing visual motion, are the outcome of the dynamics of neural networks. This means that while network properties are dependent on the properties of the neurons in the network, they are nevertheless not identical to cellular properties, nor to simple combinations of cellular properties. Interaction of neurons in networks is required for complex effects, but it is dynamical, not a simple wind-up doll affair. (Churchland and Sejnowski 1995) INTRODUCTION There are two competing views of how the economy works. One of these is mathematically rigorous and internally consistent. It gives us a framework within which we can build models and prove results and is clearly the dominant paradigm at the moment. Its disadvantages are that it does not have testable assumptions, is poor at predicting and simply does not seem very realistic. The other view is far from being complete, often involves borrowing techniques from other disciplines in an ad hoc way, and does not, in general, yield elegant theorems. However it provides a more realistic view of the economy and offers the promise of being testable against empirical data. The ﬁrst view focuses on the existence of efﬁcient states of the economy....
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