The Guidance of an Enterprise Economy (The MIT Press)

A rigorous theory of money, credit, and bankruptcy in the context of a mixed economy, uniting Walrasian general equilibrium with macroeconomic dynamics and Schumpeterian innovation. This book offers a rigorous study of control, guidance, and coordination problems of an enterprise economy, with attention to the roles of money and financial institutions. The approach is distinctive in drawing on game theory, methods of physics and experimental gaming, and, more generally, a broader evolutionary perspective from the biological and behavioral sciences. The proposed theory unites Walrasian general equilibrium with macroeconomic dynamics and Schumpeterian innovation utilizing strategic market games. Problems concerning the meaning of rational economic behavior and the concept of solution are noted. The authors argue that process models of the economy can be built that are consistent with the general equilibrium system but become progressively more complex as new functions are added. Explicit embedding of the economy within the framework of government and society provides a natural, both formal and informal, control system. The authors describe how to build and analyze multistate models with simple assumptions about behavior, and develop a general modeling methodology for the construction of models as playable games. Résumé éditeur : "This book offers a rigorous study of control, guidance, and coordination problems of an enterprise economy, with attention to the roles of money and financial institutions. The approach is distinctive in drawing on game theory, methods of physics and experimental gaming, and, more generally, a broader evolutionary perspective from the biological and behavioral sciences. The proposed theory unites Walrasian general equilibrium with macroeconomic dynamics and Schumpeterian innovation utilizing strategic market games. Problems concerning the meaning of rational economic behavior and the concept of solution are noted. The authors argue that process models of the economy can be built that are consistent with the general equilibrium system but become progressively more complex as new functions are added. Explicit embedding of the economy within the framework of government and society provides a natural, both formal and informal, control system. The authors describe how to build and analyze multistate models with simple assumptions about behavior, and develop a general modeling methodology for the construction of models as playable games." This book is devoted to the study of the guidance, control and coordination problems of an enterprise economy. Our basic approach requires an understanding of the roles of money and financial institutions. Our viewpoint differs from most current approaches in stressing together specifically game theory, methods of physics and experimental gaming; together with and more generally a broader evolutionary approach from the biological and other behavioural sciences. Our intended audiences are economists, physicists, experimental gamers, accounting theorists , legal scholars and other behavioural scientists willing to explore beyond their own specialist disciplines. Our biases run primarily to an exposition most congenial to economists, experimental gamers and physicists, but we aim to have all basic concepts understandable regardless of technical background. A mathematically precise unification of Walrasian general equilibrium with macroeconomic dynamics and Schumpeterian innovation is provided utilizing strategic market games. Contents 8 Acknowledgments 10 1 The Context of Competition 12 2 Minimal Institutions: Game Theory and Gaming 32 3 Formalizing Measurement and Modeling: The Preinstitutional Society 52 4 Supporting Attainable Solutions: Symmetry and Complexity in One-Period Exchange Mechanisms 90 5 Endogenizing the Choice of a Monetary System 128 6 The Economy: Time, Size, and Complexity 190 7 Building Theories of Economic Process 270 8 Uncertainty and Velocity 318 9 Innovation and Breaking the Circular Flow 356 10 Innovation and Evolution: Growth and Control 406 11 Mathematical Institutional Economics and the Theory of Money and Financial Institutions 452 12 Process, Strategy, and Behavior 486 13 The Guidance of an Enterprise Economy 520 Bibliography 558 Name Index 578 Subject Index 582