Microeconomics: Behavior, Institutions, and Evolution

Microeconomics: Behavior, Institutions, and Evolution

Microeconomics: Behavior, Institutions, and Evolution

Microeconomics: Behavior, Institutions, and Evolution

Synopsis

In this novel introduction to modern microeconomic theory, Samuel Bowles returns to the classical economists' interest in the wealth and poverty of nations and people, the workings of the institutions of capitalist economies, and the coevolution of individual preferences and the structures of markets, firms, and other institutions. Using recent advances in evolutionary game theory, contract theory, behavioral experiments, and the modeling of dynamic processes, he develops a theory of how economic institutions shape individual behavior, and how institutions evolve due to individual actions, technological change, and chance events. Topics addressed include institutional innovation, social preferences, nonmarket social interactions, social capital, equilibrium unemployment, credit constraints, economic power, generalized increasing returns, disequilibrium outcomes, and path dependency.


Each chapter is introduced by empirical puzzles or historical episodes illuminated by the modeling that follows, and the book closes with sets of problems to be solved by readers seeking to improve their mathematical modeling skills. Complementing standard mathematical analysis are agent-based computer simulations of complex evolving systems that are available online so that readers can experiment with the models. Bowles concludes with the time-honored challenge of "getting the rules right," providing an evaluation of markets, states, and communities as contrasting and yet sometimes synergistic structures of governance. Must reading for students and scholars not only in economics but across the behavioral sciences, this engagingly written and compelling exposition of the new microeconomics moves the field beyond the conventional models of prices and markets toward a more accurate and policy-relevant portrayal of human social behavior.

Excerpt

Microeconomics grew out of two courses for doctoral candidates at the University of Massachusetts that I have taught over the past decade, one addressed to new developments in micro-economic theory, and the other a seminar in institutional, behavioral, and evolutionary economics. These courses develop economic models to address real world problems using a series of mathematical problem-solving exercises. The book is intended for readers not only interested in a synthesis of contemporary social science reasoning applied to problems of economic institutions and behavior but also wanting to learn the basic modeling skills necessary to participate—as a user or a producer—in further development of the field.

The book is intended for use in graduate-level microeconomics courses, as well as courses in institutional and evolutionary economics and formal modeling courses in sociology, anthropology, and political science. It could also be used in advanced undergraduate courses in these subjects. General readers may find the book a useful introduction to the emerging paradigm of evolutionary social science. Little previous exposure to economics is presumed. The mathematical techniques are limited to what is generally covered in a two-semester calculus sequence.

The book originated long ago when over a period of years I taught the advanced microeconomic theory course to doctoral candidates at Harvard University. While the content of the course reflected the thenunquestioned neoclassical model, seeds of doubt were nurtured in long discussions with my co-teachers, Wassily Leontief, Tibor Scitovsky, and David Kendrick, as well as from reflection on our students' often puzzled reactions to the material. The difference between the text published based on that course (Bowles, Kendrick, and Dixon 1980) and this book measures the distance traveled by economic theory in the intervening decades.

But the two books share a common emphasis on the importance of acquiring basic modeling skills through exposure to intellectually challenging yet mathematically tractable problem-solving exercises. The extensive problem sets at the end of this book offer practice in developing these skills as well as examples of applications of the theory to important real world problems. In the body of the text I have italicized frequently used terms where they are first introduced (and defined) in the text (the definitions can be located by consulting the index). To reduce footnote clutter, I have gathered extensive suggestions for readings on . . .

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