Richard H. Day

Bulls, bears and market sheep

Abstract A deterministic excess demand model of stock market behavior is presented that generates stochastically fluctuating prices and randomly switching bear and bull markets.

Rational Choice and Erratic Behaviour

In this paper we show that rational choice in a stationary environment can lead to erratic behaviour when preferences depend on experience. We mean by erratic behaviour choice sequences that do not converge to a long-run stationary value or to any periodic pattern. Early investigations of the effects of experience on choice goes back to Pareto (see also Benhabib (1979)); some Keynesian theories of the consumption function incorporate the effects of experience and habit formation on current levels of consumption (Duesenberry (1949), Modigliani (1949) and Brown (1952)); a general model of experience dependent choice was described in Day (1970) and investigated in Day and Kennedy (1971) while the specific issue of the existence of stable representable long-run consumer demand when tastes vary endogenously has been treated by Gorman (1967), Pollak (1970, 1976), Weizsaicker (1971), McCarthy (1974) and Hammond (1976). Pollak gave conditions for the representability of long-run choice when the equations of preference dependence are linear and utility additive. Hammond, in a generalization of these findings, provides conditions for stable, representable long run choice when preferences are acyclic, a condition which in essence assures convergence to a long-run choice.

The Emergence of Chaos from Classical Economic Growth

This paper shows how fluctuations of an erratic and unstable nature can emerge from the classical, deterministic economic growth process. Implications of the analysis would appear to be at least two. First, pronounced changes in the way an economy behaves need not cause us to reject our understanding of how it works. Second, we need not seek in exogenous forces an explanation as to why behavioral patterns change and why it may be so difficult to anticipate future events from the profile of past experience.

Statistical dynamics and economics

Abstract It is shown in this paper how complex economic dynamics can be characterized using the statistical or distributional theory of dynamical systems. The basic concepts of the latter are summarized. Then applications to supply and demand adjustments in competitive markets, aggregate business fluctuations and economic growth in the very long run are briefly reviewed.

Modes of economizing behavior: Experimental evidence

Abstract In addition to more or less elaborate, explicity rational procedures, economic choices in reality are frequently made by trial and error, imitation, following an authority, habit, thoughtless impulse, and hunch. Presenting results from a number of experiments that explicity incorporate decision cost, this paper explores the extent to which these alternative decision making modes can lead to ‘optimal’ choices.

Disequilibrium economic dynamics : A post-Schumpeterian contribution

Adaptive economizing in a decentralized economy with alternative technologies and scarce resources leads to various kinds of locally unstable behavior. Economic disequilibrium is the rule in such a world and requires the presence of market mechanisms that make possible continued viability. If in addition to local instability economies are also globally unstable, as considerable evidence suggests, then the discovery and application of new structure is essential. A complete dynamic theory of economic change must therefore be based not only on conventional rationality and routinely adapting behavior but on a superior faculty which may perhaps best be called creative intelligence.

Profits, Learning and the Convergence of Satisficing to Marginalism

Introduction, 302. — The learning model, 304. — Demand, cost, and environmental feedback, 307. — Satisficings convergence to marginalism, 308. — A simple example, 310.

A Sufficient Condition for Continuity of Optimal Sets in Mathematical Programming.

Abstract This paper develops a sufficient condition for continuity (as opposed to upper semicontinuity) of the optimal set of a mathematical program. Applications to the theory of economic choice are discussed.

Ergodic fluctuations in deterministic economic models

Abstract Nonperiodic business fluctuations are shown to exist with positive measure generically and to behave like stationary stochastic processes in the standard dynamic macro model. The implication is that so called ‘chaotic’ fluctuations are probable for random initial conditions in a large class of recursive economies.

Adaptive Processes and Economic Theory

Publisher Summary This chapter discusses adaptive processes and economic theory. Adaptive economics is defined as the study of economic processes using concepts of adaptation. The chapter explains that the theory of adaptation must begin with a breakdown of reality into two parts, one representing the behavior of a part of the process of special interest called agent, and one representing the other parts of reality called environment. The agent may be a person, a household, a firm, a group of firms, or even an entire economy, depending on the purpose at hand. The chapter presents a formally precise framework of definitions. It discusses how economizing or optimizing must be construed if it is to have adaptive content. A general model of adaptive economizing is posed, a model that incorporates strategic considerations of the dynamic programming genre, but which is based on the behavioral principle of bounded rationality. The chapter also discusses how economic theory has incorporated one or another of the several concepts of adaptation.