Schumpeterian endogenous growth theory and evolutionary economics

In this paper, we aim to discuss whether Schumpeterian models of endogenous growth can accommodate Schumpeters vision of development through creative destruction. Taking a methodological approach, our focus is on individual decision-making, technology, general equilibrium and welfare, and steady state dynamics as the fundamental principles underlying endogenous growth theory. In particular, the Aghion-Howitt model of Schumpeterian growth in various extended versions is analyzed in the light of Schumpeters work. Therefore, we also try to root Schumpeters work in historical context. We find endogenous growth theory far from carrying Schumpeters idea of an evolutionary approach to change and development. Rather the emergence of numerous models of an evolutionary type can be observed to provide for the formal structure appropriate to keeping Schumpeters legacy alive.JEL Classification: B1, B2, B4, O3, O4Corespondence to: Thomas Kuhn     

Stochastic evolution with slow learning

Summary. This paper studies the extent to which diffusion approximations provide a reliable guide to equilibrium selection results in finite games. It is shown that they do for a class of finite games with weak learning provided that limits are taken in a certain order. The paper also shows that making mutation rates small does not in general select a unique equilibrium but making selection strong does. Received: January 19, 2000; revised version: September 25, 2000     

通货膨胀目标制度在我国实施的可行性分析

20世纪90年代以来,由于通货膨胀目标制(Inflation Targeting,以下又简称通胀目标制)被越来越多的国家采用,使得通胀目标制成为近年西方货币经济学领域最热门的研究课题之一。从传统的以控制货币供应量为主的货币目标法(Monetary'Targeting)和以稳定汇率为主的汇率目标法(Exchange rate Targeting)到明确公布通货膨胀目标的通胀目标制是一个货币政策方面的重大转变。本文主要分析了我国实施通胀目标制的可行性,并提供相关的政策建议。     

Endogenous fluctuations under evolutionary pressure in Cournot competition

An evolutionary game theoretic model of Cournot competition is investigated. Individuals choose from a finite set of different behavioral rules. Each rule specifies the quantity to be produced in the current period as a function of past quantities. Using more sophisticated rules may require extra information costs. Based upon realized payoffs, the fractions of the population choosing a certain behavioral rule are updated according to the replicator equation with noise. The long-run behavior of the evolutionary system consisting of the population dynamics coupled with the quantity dynamics of the Cournot game may be complicated and endogenous fluctuations may arise. We consider a typical example where firms can choose between two rules: the Nash rule and the best-reply rule. We show that a homoclinic tangency between the stable and unstable manifold of the equilibrium occurs as evolutionary pressure increases, implying bifurcation routes to complicated dynamics and strange attractors.     

On economic applications of evolutionary game theory

Evolutionary games have considerable unrealized potential for modeling substantive economic issues. They promise richer predictions than orthodox game models but often require more extensive specifications. This paper exposits the specification of evolutionary game models and classifies the possible asymptotic behavior for one and two dimensional models.     

The optimal neglect of inflation: An alternative interpretation of UK monetary policy during the “Great Moderation”

This paper argues that UK monetary policymakers did not respond to the inflation rate during most of the “Great Moderation” that ran from the early 1990s to the mid-2000s. We derive a generalisation of the New Keynesian Phillips curve in which inflation is a non-linear function of the output gap and show that the optimal response of the policy rule to inflation depends on the slope of the Phillips curve; if this is flat, manipulation of aggregate demand through monetary policy does not affect inflation and so policymakers cannot affect inflation. We estimate the monetary policy rules implied by a variety of alternative Phillips curves; our preferred model is based on a Phillips curve that is flat when output is close to equilibrium. We find that policy rates do not respond to inflation when the output gap is small, a situation that characterised most of the “Great Moderation” period.     

Schumpeter's theory of economic evolution: a Darwinian interpretation

A general Darwinian framework is employed to arrive at an interpretation of Schumpeter's work that brings out clearly its specific evolutionary aspects. Schumpeter's theory of economic evolution is seen to be still highly relevant to evolutionary economics, because it sheds light on some fundamental issues: the relationship between evolutionary theory and equilibrium analysis, the usefulness of Darwinian theory for economics, and the precise nature of the evolutionary forces at work in economic systems.     

关于地租推进型通货膨胀的价格传导机制研究

本文认为,地租推进型通货膨胀是土地产品价格上涨推动的通货膨胀,是土地产品价值上升的结果,是土地产品价值实现的要求,不是传统意义上的通货膨胀。不同类型的货币政策下,尽管地租推进型通货膨胀的价格传导机制是不同的,其基本内容都是剩余产品在初次分配中向土地所有者的倾斜。因此,地租推进型通货膨胀的治理,核心不在于消灭地租推进型通货膨胀本身,而在于缓解收入分配带来的社会阵痛。地租推进型通货膨胀在投机资本的影响下往往呈现复合式发展的特征。地租推进型通货膨胀研究的新视角,为政府宏观调控应对土地产品价格上涨提供了全新的思路。     

Wasted waste: An evolutionary perspective on industrial by-products

Every production process gives rise to unintended outputs. We argue that whether an output is desired or undesired, is not given per se, but depends on the economic circumstances which change over time. As a result, by-products of one industry, first perceived as non-marketable wastes, may become desired inputs into other production processes. By adopting an evolutionary perspective on economic dynamics, in particular by exploiting the concept of niche exclusion, we identify favorable circumstances for undesired outputs to become marketable. To cope with the pace and unpredictability of economic evolution, we argue for a flexible policy system which favors outcome- over process-oriented waste management policies and balances the responsibility between consumers and producers on the one side, and the society as a whole on the other side.     

Institutional change from an evolutionary perspective: the Mexican experience

The fall of the Institutional Revolutionary Party (PRI) in July 2000 marked a milestone in Mexico’s political history. Throughout its 71 years of incumbency, the PRI had incarnated the set of social, political and economic institutions of the country to the extent of becoming synonymous with governance and stability. Using a simple model in which institutional change is the result of the strategic interaction between citizens, an incumbent ruler and a potential new ruler or entrant, we provide a systematic interpretation of this experience emphasizing the role of evolutionary factors such as history, uncertainty, learning and experimentation.

Using pre-EMU money market rates to assess monetary policy in the euro area

This note addresses the problems arising when using national pre-EMU interest rate data in the estimation of monetary policy reaction functions for the euro area. We provide evidence that failing to adjust for interest rate risk premia leads to an overestimation of the response of monetary policy both to inflationary pressures and to the output gap. A method for adjusting pre-EMU interest rate data for risk premia is proposed.     

Equilibrium selection in bargaining models

This paper examines evolutionary equilibrium selection in bargaining models. We show that random best-response and continuous best-response learning dynamics give rise to (different) simple sufficient conditions for identifying outcomes as stochastically stable. This allows us to characterize the implications of these dynamics in simple bargaining games.     

On the geography of conventions

Summary. We study an evolutionary model in which heterogenous boundedly rational agents interact locally in order to play a coordination game. Agents differ in their mobility with mobile agents being able to relocate within a country. We find that mobile agents enjoy a higher payoff and always benefit from increased mobility, while immobile agents benefit from increased mobility at low levels of mobility only. This wedge in payoffs weakly increases as mobility increases. Some extensions are discussed. Received: January 10, 2001; revised version: December 4, 2002 RID="*" ID="*" We thank, without implicating in any way, George Mailath for helpful discussions. Some of the ideas in this paper were developed during the V Conference of the Society for the Advancement of Economic Theory in Ischia, Italy. The NSF provided financial support. Correspondence to: T. Temzelides     

Niches in evolutionary theories of technical change

In this article, the use of the niche concept for explaining radical technical change is explored. Contributions of various strands of literatures are elaborated and systematized in a taxonomy. Radical change or technological discontinuity is defined as the establishment of a new sociotechnical regime. Sociotechnical regimes carry and store rules for how to produce, use and regulate specific technologies. They perform the task of genes and define the boundary between technological species. It is proposed that radical change is generated by four different evolutionary mechanisms and patterns: natural selection, punctuated equilibrium, market niche selection, and technological niche selection. In each pattern, a different type of niche is implicated in the change process. The difference between niches results from differentiating between two dimensions: (1) whether niches are internal or external to the prevailing sociotechnical regime; (2) whether rules for design and use of a specific technology are stable or unstable within the niche.

Coevolution of economic behaviour and institutions: towards a theory of institutional change

Traditionally, economics has regarded institutions, notably norms and regulations, as fixed or exogenous. Surprisingly few insights on institutional evolution from natural and social sciences have made their way into economics. This article gives an overview of evolutionary theories of institutions in biology, sociology, anthropology and economics. These theories are subsequently compared with non-evolutionary theories of institutions. Next, the insights and approaches are integrated into a framework for analysis of institutions based on the notion of coevolution.JEL Classification: B52, D10, D70, D64, Z13J.C.J.M. van den Bergh     

Monetary policy transmission mechanisms in Serbia: evidence from the fully-fledged inflation targeting regime

This article examines the effectiveness of monetary transmission mechanisms in the Serbian economy, covering the period from January 2009 (the point at which the formal switch to the fully-fledged inflation targeting regime was made) to December 2013. The results of the recursive VAR models suggest that the exchange rate and credit channels play a major role in the monetary transmission process, whereas this is not true in the case of the interest rate channel. However, the results of the non-recursive VAR models show that the role of the exchange rate has diminished over time. On the other hand, the credit channel has become much more influential. Thus, if one of the overriding objectives of adopting the explicit inflation targeting regime is to enhance the importance of other channels apart from the exchange rate channel, which could make monetary policy more effective in achieving price and financial stability, the switch to the inflation targeting regime is justified.     

Efficient communication in the electronic mail game

The literature on the electronic mail game shows that players' mutual expectations may lock them into requiring an inefficiently large number of confirmations and confirmations of confirmations from one another. This paper shows that this result hinges on the assumption that, with the exception of the first message, each player can only send a message when receiving an immediately preceding message. We show that, once this assumption is lifted, equilibria involving confirmations of confirmations no longer pass standard refinements of the Nash equilibrium, and are no longer evolutionary stable.     

EMU and the transmission of monetary policy: evidence from business lending rates

This paper analyses the pass-through of money market rates to short-term and long-term business lending rates in the four largest euro area countries. The main findings of the paper are (1) that since the start of EMU loan rates appear to have become more responsive to money market rate changes in France, Italy and Spain, but not in Germany, and (2) that German loan rates are significantly more sluggish than loan rates in the other three large euro area countries. I also test for non-linear pass-through based on an asymmetric error-correction model but do not find much evidence of non-linearity in euro area interest rate pass-through.The views expressed in this paper do not necessarily represent the views of the Deutsche Bundesbank.     

Two simple proofs of the feasibility of the linear tracing procedure

Summary. Theories of equilibrium selection in non-cooperative games, as well as the notion of risk dominance, depend heavily on the so-called linear tracing procedure. This is the first paper to give direct, simple proofs of the feasibility of the linear tracing procedure. The first proof utilizes a result that is related to Kakutani's fixed point theorem and that is an extension of Browder's fixed point theorem. The second proof shows that it is even possible to avoid the use of correspondences. Received: June 8, 1998; revised version: November 8, 1998     

The election cycle in the inflation bias: evidence from the G-7 countries

This paper derives and evaluates empirical implications which separate the naive voters view [Nordhaus, W.D., 1975. The political business cycle. Review of Economic Studies 42, 169–190.] from the rational-voters view [Barro R., Gordon, D., 1983. Rules, discretion, and reputation in a model of monetary policy. Journal of Monetary Economics 12, 101–121.] under rational expectations. The observational equivalence of the two approaches obtained under a natural rate vanishes as output persistence is introduced. An analysis of inflation in the G-7 countries reveals election patterns supporting the joint hypothesis that demand shocks persist and that monetary policy courts retrospective voters. Patterns turn weaker as central banks become more independent, but do not disappear. Reducing inflationary bias not only requires more central bank independence, but as well less persistence.