Spatial Interactions in Dynamic Decentralised Economies: a Review

The paper reviews dynamic models of decentralised economies assuming spatially distributed agents who interact directly and locally. Basically, this means that: (i) agents are located in a space such as an integer lattice or a graph; (ii) the current choice of each agent is influenced by past choices of his neighbours, that is agents who are spatially closest to him. It is argued that a key feature concerns the properties displayed by the underlying ‘interaction structure’, that is assumptions about space locations and neighbourhood sets. In particular, different sub-classes of models are singled out according to their relative ability to depict evolving, time-dependent patterns of interactions (‘flexibility’). Markov random fields, cellular automata, stochastic graphs, ‘artificial’ economies and many other classes of spatial models are discussed in detail and their main drawbacks are put forth. Finally, it is pointed out that a stimulating path to follow in the future could be that of modelling spatial ‘open-ended’ economies characterised by an endogenous emergence of novelty.

[1]  P. Krugman.  Increasing Returns and Economic Geography , 1991 .

[2]  David M. Kreps,et al.  Learning Mixed Equilibria , 1993 .

[3]  A. Kirman.  Whom Or What Does the Representative Individual Represent , 1992 .

[4]  Roger B. Myerson,et al.  Viscous Population Equilibria , 1991 .

[5]  David E. Goldberg,et al.  Genetic Algorithms in Search Optimization and Machine Learning , 1988 .

[6]  M. Jackson,et al.  A Strategic Model of Social and Economic Networks , 1996 .

[7]  G. B. Pollock.  Evolutionary stability of reciprocity in a viscous lattice , 1989 .

[8]  J. M. Hammersley,et al.  Percolation theory and its ramifications , 1980 .

[9]  L. Samuelson,et al.  Evolutionary stability in repeated games played by finite automata , 1992 .

[10]  P. Krugman.  The Self Organizing Economy , 1996 .

[11]  T. Schelling.  Hockey Helmets, Concealed Weapons, and Daylight Saving , 1973 .

[12]  A. Shaked,et al.  Altruists, Egoists and Hooligans in a Local Interaction Model , 1996 .

[13]  J. Henderson.  The Sizes and Types of Cities , 1972 .

[14]  S. Bikhchandani,et al.  You have printed the following article : A Theory of Fads , Fashion , Custom , and Cultural Change as Informational Cascades , 2007 .

[15]  Jaime G. Carbonell,et al.  Machine learning: paradigms and methods , 1990 .

[16]  W. Arthur,et al.  INCREASING RETURNS AND LOCK-IN BY HISTORICAL EVENTS , 1989 .

[17]  Beth E Allen,et al.  Some Stochastic Processes of Interdependent Demand and Technological Diffusion of an Innovation Exhibiting Externalities Among Adopters , 1982 .

[18]  Ellen R. McGrattan,et al.  Money as a medium of exchange in an economy with artificially intelligent agents , 1990 .

[19]  Duncan K. Foley,et al.  A Statistical Equilibrium Theory of Markets , 1994 .

[20]  D.E. Goldberg,et al.  Classifier Systems and Genetic Algorithms , 1989, Artif. Intell..

[21]  P. Bak,et al.  Self-organized criticality. , 1988, Physical review. A, General physics.

[22]  M. Nowak,et al.  THE SPATIAL DILEMMAS OF EVOLUTION , 1993 .

[23]  Dominique Foray,et al.  Les modèles de compétition technologique. Une revue de la littérature , 1989 .

[24]  J. Snell,et al.  On the relation between Markov random fields and social networks , 1980 .

[25]  J. Scheinkman,et al.  Aggregate Fluctuations from Independent Sectoral Shocks: Self-Organized Criticality in a Model of Production and Inventory Dynamics , 1992 .

[26]  Leo W. Buss,et al.  “The arrival of the fittest”: Toward a theory of biological organization , 1994 .

[27]  A. Orléan.  Le rôle des influences interpersonnelles dans la détermination des cours boursiers , 1990, Revue économique.

[28]  H. Peyton Young,et al.  Stochastic Evolutionary Game Dynamics , 1990 .

[29]  A. Kirman,et al.  Stochastic Communication and Coalition Formation , 1986 .

[30]  H. Kunz,et al.  First order phase transition in the plane rotator ferromagnetic model in two dimensions , 1976 .

[31]  David C. Mowery,et al.  Technology and the Wealth of Nations , 1992 .

[32]  R. Bénabou.  Education, Income Distribution and Growth: The Local Connection , 1994 .

[33]  T. Lux.  Herd Behaviour, Bubbles and Crashes , 1995 .

[34]  R. Bénabou.  Workings of a City: Location, Education, and Production , 1991 .

[35]  P. Krugman.  Fluctuations, Instability, and Agglomeration , 1994 .

[36]  Giacomo Corneo,et al.  A Theory of Fashion Based on Segmented Communication , 1994 .

[37]  Des modèles de transition de phase en économie , 1995 .

[38]  Steven N. Durlauf,et al.  Nonergodic Economic Growth , 1993 .

[39]  Charles E. Taylor,et al.  Artificial Life II , 1991 .

[40]  G. Dosi,et al.  On “badly behaved” dynamics , 1994 .

[41]  Nicholas M. Kiefer,et al.  Local externalities and societal adoption of technologies , 1995 .

[42]  H. Haller.  Large random graphs in pseudo-metric spaces , 1990 .

[43]  David A. Lane,et al.  Artificial worlds and economics, part I , 1993 .

[44]  Takahiro Miyao,et al.  Dynamic Instability of a Mixed City in the Presence of Neighborhood Externalities , 1978 .

[45]  Michael Chisholm.  Regions in recession and resurgence , 1990 .

[46]  W. Lenz,et al.  Beitrag zum Verständnis der magnetischen Erscheinungen in festen Körpern , 1920 .

[47]  Steven N. Durlauf.  Multiple Equilibria and Persistence in Aggregate Fluctuations , 1991 .

[48]  Masahisa Fujita,et al.  A monopolistic competition model of spatial agglomeration : Differentiated product approach , 1988 .

[49]  George J. Mailath,et al.  Introduction: Symposium on evolutionary game theory , 1992 .

[50]  B. Allen.  A Stochastic Interactive Model for the Diffusion of Information , 1982 .

[51]  A. Orléan.  Contagion des opinions et fonctionnement des marchés financiers , 1992, Revue économique.

[52]  J M Smith,et al.  Evolution and the theory of games , 1976 .

[53]  Luigi Marengo,et al.  Speculation, Heterogeneity and Learning: A Model of Exchange Rate Dynamics , 1995 .

[54]  Peter Nijkamp,et al.  Interaction, evolution, and chaos in space , 1992 .

[55]  G. Dosi,et al.  Learning in Evolutionary Environments , 1996 .

[56]  J. Laurie Snell,et al.  Markov Random Fields and Their Applications , 1980 .

[57]  Paul R. Milgrom,et al.  Adaptive and sophisticated learning in normal form games , 1991 .

[58]  B. Bernheim,et al.  A Theory of Conformity , 1994, Journal of Political Economy.

[59]  G. Dosi,et al.  An introduction to evolutionary theories in economics , 1994 .

[60]  T. Schelling.  The Strategy of Conflict , 1963 .

[61]  Hiroaki Hayakawa,et al.  Consumer Interdependence via Reference Groups , 1977, Journal of Political Economy.

[62]  M. Nowak,et al.  Evolutionary games and spatial chaos , 1992, Nature.

[63]  John H. Holland,et al.  Induction: Processes of Inference, Learning, and Discovery , 1987, IEEE Expert.

[64]  Sanjeev Goyal,et al.  Learning from Neighbors , 1995 .

[65]  Michael I. Taksar,et al.  Stochastic equilibria on graphs,I , 1992 .

[66]  Victor Polterovich.  Rationing, Queues, and Black Markets , 1993 .

[67]  Masanao Aoki,et al.  Economic Fluctuations With Interactive Agents: Dynamic And Stochastic Externalities , 1995 .

[68]  A V Herz,et al.  Collective phenomena in spatially extended evolutionary games. , 1994, Journal of theoretical biology.

[69]  P. Krugman,et al.  A Dynamic Spatial Model , 1992 .

[70]  H. Föllmer.  Random economies with many interacting agents , 1974 .

[71]  W. Brian Arthur,et al.  On designing economic agents that behave like human agents , 1993 .

[72]  Andrew John,et al.  Coordinating Coordination Failures in Keynesian Models , 1988 .

[73]  Stephen Wolfram,et al.  Universality and complexity in cellular automata , 1983 .

[74]  M. Nowak,et al.  MORE SPATIAL GAMES , 1994 .

[75]  A. Banerjee,et al.  A Simple Model of Herd Behavior , 1992 .

[76]  Jacques Lesourne,et al.  Economie de l'ordre et du désordre , 1991 .

[77]  Steven N. Durlauf.  Path Dependence in Aggregate Output , 1991 .

[78]  Yannis M Ionnides.  Trading Uncertainty and Market Form , 1990 .

[79]  Ulrich Schwalbe,et al.  Evolution, interaction, and Nash equilibria , 1996 .

[80]  L. Blume.  The Statistical Mechanics of Strategic Interaction , 1993 .

[81]  W. Brock,et al.  Discrete Choice with Social Interactions I: Theory , 1995 .

[82]  F. Westhoff,et al.  Complexity, organization, and Stuart Kauffman's The Origins of Order , 1996 .

[83]  C. Manski.  Identification of Endogenous Social Effects: The Reflection Problem , 1993 .

[84]  Paul Davidson,et al.  Reality and Economic Theory , 1996 .

[85]  R. Glauber.  Time‐Dependent Statistics of the Ising Model , 1963 .

[86]  L. Blume.  The Statistical Mechanics of Best-Response Strategy Revision , 1995 .

[87]  L. Anderlini,et al.  Path Dependence and Learning from Neighbors , 1996 .

[88]  R. Rob,et al.  Learning, Mutation, and Long Run Equilibria in Games , 1993 .

[89]  D. Scharfstein,et al.  Herd Behavior and Investment , 1990 .

[90]  C. Shapiro,et al.  Network Externalities, Competition, and Compatibility , 1985 .

[91]  Christopher G. Langton,et al.  Artificial Life III , 2000 .

[92]  W. Arthur.  ‘Silicon Valley’ locational clusters: when do increasing returns imply monopoly? , 1990 .

[93]  Richard Topol,et al.  Bubbles and Volatility of Stock Prices: Effect of Mimetic Contagion , 1991 .

[94]  J. Holland,et al.  Artificial Adaptive Agents in Economic Theory , 1991 .

[95]  L. Marengo,et al.  Speculation, Heterogeneity and Learning: A Simulation Model of Exchange Rates Dynamics , 1996 .

[96]  D. Foray.  Exploitation des externalités de réseau versus évolution des normes : les formes d'organisation face au dilemme de l'efficacité, dans le domaine des technologies de réseau , 1990 .

[97]  Alan Kirman,et al.  Ants, Rationality, and Recruitment , 1993 .

[98]  Alan Kirman,et al.  Economies with Interacting Agents , 1998 .