Cycling in a stochastic learning algorithm for normal form games

In this paper we study a stochastic learning model for 2×2 normal form games that are played repeatedly. The main emphasis is put on the emergence of cycles. We assume that the players have neither information about the payoff matrix of their opponent nor about their own. At every round each player can only observe his or her action and the payoff he or she receives. We prove that the learning algorithm, which is modeled by an urn scheme proposed by Arthur (1993), leads with positive probability to a cycling of strategy profiles if the game has a mixed Nash equilibrium. In case there are strict Nash equilibria, the learning process converges a.s. to the set of Nash equilibria.     

Human capital,innovation capability and economic growth in Portugal, 1960-2001

In maintaining that the main flaw in empirical studies on economic growth derives from the fact that they employ Solow-style neoclassical growth models, rather than testing actual endogenous growth theory, we examine the human capital-innovation-growth nexus, thus testing new growth theory more directly. We test its insights against the economic evolution of an individual country, Portugal, using time series data from 1960 to 2001. Estimates based on vector autoregressive and cointegration analysis seem to confirm that human capital and indigenous innovation efforts were enormously important to the economic growth process in Portugal during the period of study. In particular, the indirect effect of human capital through innovation, emerges here as being critical, showing that a reasonably high stock of human capital is necessary to enable a country to reap the benefits of its indigenous innovation efforts.Received: November 2003, Accepted: November 2004, JEL Classification: C22, J24, O30, O40 Correspondence to: Aurora A.C. TeixeiraThe authors are grateful to two anonymous referees, Paulo Brito and the participants of the 2003 Portuguese Society for Economics Research (SPiE) in Lisbon, Portugal for helpful comments and suggestions. CEMPRE - Centro de Estudos Macroeconómicos e Previsão - is supported by the Fundação para a Ciência e a Tecnologia, Portugal, through the Programa Operacional Ciência, Tecnologia e Inovação (POCTI) of the Quadro Comunitário de Apoio III, which is financed by FEDER and Portuguese funds.     

A critical realist interpretation of evolutionary growth theorising

The paper discusses a critical realist interpretation of evolutionarygrowth theorising by focusing on some of its basic characteristics.The evolutionary ontology is complex, differentiated, structured,systemic, open, ever-changing and radically uncertain. Its methodologytends to be increasingly based on ‘appreciative’theorising, retroductive explanations and interdisciplinaryanalysis. After discussing these features, the paper suggeststhat critical realism may indeed constitute an important philosophicaland methodological foundation for the future development ofevolutionary theories of economic growth.     

Global convergence of adaptive learning in models of pure exchange

Summary. This paper develops an adaptive learning scheme for a standard version of the OLG model with pure exchange. Perfect forecasting rules which generate perfect foresight orbits are approximated by cubic spline functions. These approximations are successively constructed using historical data only. Trajectories generated by this scheme converge to perfect foresight orbits globally for all initial conditions. This result holds for all parameterizations guaranteeing the existence of a monetary steady state and hence is independent of consumers' savings behavior. It generalizes to all one-dimensional models of the Cobweb type. Received: October 5, 2000; revised version: February 15, 2001     

The dynamics of firms in a micro-to-macro model: The role of training, learning and innovation

We analyze the co-evolution of the performances of firms and of the economy in an evolutionary micro-to-macro model of the Swedish economy. The model emphasizes the interactions between human capital (or competences) and technological change at the firm level and their effects on aggregate growth, taking into account the micro-macro feedbacks. The model features learning-by-doing, incremental and radical innovations, user-producer learning at the firm level, and a change in the techno-economic paradigm. We find that there is an optimal sequence for the firm to allocate their resources: (1) build a general human capital stock before the change in the techno-economic paradigm, (2) spend on R&D, and (3) invest in specific human capital. Innovators fare better than imitators on average, not only because they innovate, but also because they build a competence base, which supports the learning from other firms.     

Terrorism and its impact on economic growth and technological innovation

Recent terrorist acts, in particular the 9-11 attacks in 2001, have created disruptions in the global economy. The short-term impact had been felt in the global tourism, airline industries, as well as the financial markets. While the global economy has recovered and is adjusting to the new global realities, the longer-term impact of heightened security risk across the world can be felt in the form of higher risk premiums in asset markets, as well as a shift of resources towards dealing with terrorism. Just as World War II had accelerated the development of nuclear energy as well as a major contributing factor in the genesis of Silicon Valley, the current war against terrorism will affect both the pace and trajectory of technology trends, as efforts are focused on developing technologies to combat terrorism. In this paper, we review the effects of the current war on terrorism in terms of its impact on the economy, the allocation of resources to R&D, and the trajectory of future R&D.     

Institutions,innovation and growth

This paper looks at the link between the quality of economic institutions and innovation, and innovation and growth. We construct a measure of the innovation content of individual manufacturing industries and show that countries with stronger economic institutions specialize in more innovation‐intensive industries. Our results also provide evidence that industries involving higher levels of innovation grow relatively faster in countries with better economic institutions. The results suggest that innovation is an important channel through which higher quality economic institutions contribute to better growth performance in the long run.     

社会结构、市场结构与企业技术创新

本文建立了一个基于社会结构与市场结构的技术创新系统模型,来解释企业的技术创新行为,认为企业是社会网络中的一个行动者,其技术创新行为是一种社会行动,它会受到人际关系和社会结构的影响.作为一种结果,社会结构会影响市场结构,从而两者共同作用于企业的技术创新过程.在这个过程中,对企业的社会资本分析是非常重要的.推动社会结构、市场结构与技术创新活动的协调发展是深化我国经济体制改革进而提升企业技术创新竞争力的重要途径.     

Accumulation, innovation and catching-up: an extended cumulative growth model

This paper presents an extended model of cumulative growth inwhich the effects of innovation and catching-up are considered.Innovation adds another source of cumulative growth to thatof traditional models and allows a consideration of the importanceof non-price determinants of international competitiveness.Catching-up is the major force leading to convergence in productivityowing to the effect of the diffusion of technology. The modelallows one to analyse whether cumulative forces may lead tostable growth and whether this solution generates convergencein productivity levels. The structural model is tested for aset of OECD countries over the period 1965–94.     

Understanding the demand-side of economic change: a contribution to formal evolutionary theorizing

An outstanding fact of capitalist change in the last few centuries is the ongoing emergence of new consumption alternatives which accompany income and productivity growth in expanding economies. Far from satiating consumers, exponential economic growth seems to stimulate human desires by providing novelty and variety embodied in a persuasive flow of unsettling goods. Although this is a well-known fact characteristic of capitalist change, little attention has been paid by modern growth theorists to the understanding of demand-side phenomena related to the increasing significance of consumption activities in our societies. Against this background, in this article, we show that as soon as we start drawing the demand-side contour of economic change, new phenomena appear which enrich our understanding of economic growth and structural change. By using ‘replicator dynamics’ systems, consumption dynamics are formally linked to the ongoing generation of innovations in capitalist economies. Certain emergent properties concerning economic growth and structural change and several policy implications follow.     

Adaptation and complexity in repeated games

The paper presents a learning model for two-player infinitely repeated games. In an inference step players construct minimally complex inferences of strategies based on observed play, and in an adaptation step players choose minimally complex best responses to an inference. When players randomly select an inference from a probability distribution with full support the set of steady states is a subset of the set of Nash equilibria in which only stage game Nash equilibria are played. When players make ‘cautious’ inferences the set of steady states is the subset of self-confirming equilibria with Nash outcome paths. When players use different inference rules, the set of steady states can lie between the previous two cases.     

Learning,forecasting and optimizing: An experimental study

Rational Expectations (RE) models have two crucial dimensions: (i) agents on average correctly forecast future prices given all available information, and (ii) given expectations, agents solve optimization problems and these solutions in turn determine actual price realizations. Experimental tests of such models typically focus on only one of these two dimensions. In this paper we consider both forecasting and optimization decisions in an experimental cobweb economy. We report results from four main experimental treatments: (1) subjects form forecasts only, (2) subjects determine quantity only (solve an optimization problem), (3) they do both and (4) they are paired in teams and one member is assigned the forecasting role while the other is assigned the optimization task. All treatments converge to Rational Expectation Equilibrium (REE), but at different speeds. We observe that performance is the best in treatment 1 and the worst in Treatment 3. We further find that most subjects use adaptive rules to forecast prices. Given a price forecast, subjects are less likely to make conditionally optimal production decisions in Treatment 3 where the forecast is made by themselves, than in Treatment 4 where the forecast is made by the other member of their team, which suggests that “two heads are better than one” in term of the speed of finding the REE.     

市场学习、创新方式与企业多维绩效关系研究

探讨了探索性和应用性市场学习、突破式和渐进式创新与企业效率和效果绩效之间的差异化关系。基于303家中国企业双份调研数据的实证研究发现：渐进式创新正向促进突破式创新,并受竞争战略独特性正向调节;探索性市场学习比应用性市场学习更有助于促进突破式创新,而应用性市场学习比探索性市场学习更有助于促进渐进式创新;两种市场学习交互正向影响突破式和渐进式创新,但对突破式创新的影响更强;突破式创新比渐进式创新对绩效效率与效果两方面的提升都更大。     

Vintage capital,market structure and productivity in an evolutionary model of industry growth

This paper examines the effects of inter-firm variation in vintage equipment replacement policies on industry productivity and structure using an evolutionary model based on Nelson-Winter. Traditional industry productivity measures assume a graduated replacement policy with low variation across firms in the average age of the capital stock. This approach allows for inter-firm policy variation. The first part reviews the neoclassical treatment of vintage capital investment; the second part outlines an evolutionary model of vintage replacement in the context of industry growth; and the third part presents results of simulation experiments focused on the relationship between vintage replacement patterns and industry productivity growth. Findings suggest that inter-firm differences in vintage capital investment policies may account for significant shifts in the rates of industry productivity growth and changes in market structure.     

Economic (dis)integration in the presence of evolutionary learning

We use a two-factor, two-sector model to study the effects of economic integration and its reversal in the presence of input-generated external economies in one of the sectors. The equilibrium selection problem that arises is solved by applying a simple trial-and-error learning rule. Economic integration can take individual economies ridden with coordination failures to better equilibria, i.e., can solve the coordination problem. We show that integration (and disintegration) may generate cycles in wages, rentals and the sectoral allocation of factors.JEL Classification: F15, F16, F37 Corespondence to: Diego Méndez-Carbajo     

Endogenous innovation and imitation in a model of equilibrium growth

This paper provides a growth model in which innovation as well as imitation occurs. Economic growth is due to product innovations. Innovators driven by the possibility to appropriate monopoly profits do not remain in their monopolistic position forever. Latecoming imitators get into possession of the private knowledge of production through investments in R & D. Imitated products are marketed in oligopolistic markets. Imitation proves to be profitable despite a single factor market and positive imitation costs. A steady-state equilibrium with positive imitation and innovation rates as well as different market structures can be derived. Finally, the effects of industrial policy measures are discussed.     

Inequality,unemployment, and endogenous growth in a political economy with a minimum wage

This paper presents development of an endogenous growth model with heterogeneous households and political determination of the minimum wage. We investigate the interaction of inequality, unemployment, and economic growth. First, the arguments in this paper show that a positive correlation exists between inequality and unemployment, Second, the interaction between inequality and economic growth is shown to be a positive relation if high inequality pertains in a society. It is a negative relation if low inequality pertains.      

A Schumpeterian model of endogenous innovation and growth

A disequilibrium model of endogenous innovation and growth is presented. The behaviour of the agents is supposed to be governed by routines, not by maximization. The entrepreneurs are assumed to invest a fraction of their operating profits in real capital accumulation, and another fraction in R&D. The latter leads to an increase in labour productivity via a R&D production function. In this Schumpeterian model, not only the R&D processes of innovations are considered, but the diffusion processes as well. As in Schumpeter's theory of economic development the economic impact of technical change is considered a disequilibrium phenomenon. Thus, in a capitalist economy characterized by ongoing diffusion processes of innovations, time averages are more important than steady state values even in a long run perspective.     

Informality,innovation, and aggregate productivity growth

This paper investigates how the costs of innovation in the formal sector temper or magnify the impacts of traditional policy levers such as taxation on sectoral choice. I embed a decision whether to operate formally or informally into a richer, general equilibrium model. Formal firms are subject to taxation, but they can improve their productivity through process innovation. Informal firms can potentially avoid taxation, and their productivity is determined by productivity growth in the formal sector. I find that changing tax rates from 50% to 60% decreases formal‐sector participation by 20.9%; however, this percentage falls by 10% when the cost of innovation is lower in the formal sector. The model also illustrates how changes in tax policy affect total factor productivity growth by limiting both the number of formal‐sector firms and the intensity of innovation. These results indicate a potential mechanism to induce firms to operate formally or mitigate harmful impacts of necessary tax changes.     

中国经济增长的特征、可持续性与潜在增长率估算:一个综述

在本文通过对中国经济增长的表现特征、可持续性和潜在增长率估算三方面的理论综述,进一步论述了中国经济增长的发展脉络,并在此基础上提出研究中国经济增长理论尚需改进的空间.