Friday, April 15 – 3:00
Collective-Action and Exchange: A Game-Theoretic Approach to Contemporary Political Economy
William Ferguson, Professor
Department of Economics
Abstract:Development (economic or otherwise) requires resolution of collective-action problems (CAPs)– divergences between the pursuit of individual interest or inclinations and the well-being of some group. CAPs underlie both market success and market failure. Using collective-action as a unifying concept, along with a predominantly game-theoretic approach—classical, behavioral, evolutionary and epistemic, complemented somewhat with agent-based modeling—this book develops modeling foundations for a contemporary approach to political economy. In so doing, it unifies many cutting-edge theoretical developments including information economics, behavioral economics, institutional theory, and network theory. More specifically, these developments address asymmetric information, exercises of power, social preference, bounded rationality, social norms, formal institutions, relationships between self-organization and third-party enforcement along with social, political, and economic networks, evolutionary emergence, the conduct of policy, and prospects for economic development. A flexible game-theoretic approach facilitates drawing connections among these diverse concepts.
Chapter 6: Foundations of Motivation: Social Preference and Rationality: Social preference can motivate cooperation and enforcement. A cognition-difficulty gap distinguishes substantive rationality from bounded rationality. Models indicate the importance of framing.
Part III: Informal and formal institutions generate cognitive understandings that facilitate the coordination and enforcement needed to resolve CAPs.
Chapter 7: Informal Institutions: Conventions, social norms, and informal rules coordinate cognition and behavior. Social norms influence social preference and identity concepts.
Chapter 8: Internal Resolution via Group Self-Organization: Group self-organization can sometimes resolve CAPs, with attendant strengths and weaknesses.
Part IV: Complex Networks and Dynamics of Collective Action: Network theory allows representation of systemic interactions and spillovers, potentially illustrating the ecology of political economy. Agent-based modeling can represent dynamic, generative political-economic processes related to CAPs and economic development.
Chapter 10: Networks and Economics: Network models can represent communication, market exchange, internal firm transactions, and the spatial location of economic activity with implications on development, power, and growth.
Chapter 11: Agent-Based Models and the Emergence of Resolution or Lack Thereof
Topics include: the evolution of norms of fairness, within-group provision of public goods, residential segregation, worker prejudice, and financial instability.