ESIC 2018 DOI: 10.26613/esic/2.1.64

Economic Theory and Social : Where We Are, Where We Are Headed

Herbert Gintis

Abstract Standard economic theory has told us for more than half a century that, to attain a high level of social , there is no viable alternative to a regulated by a powerful state. Critics often represent standard economic theory as a doctrinal defense of the . The truth is quite the opposite. Free market is unfounded. Stan- dard economic theory provides the proper framework for analyzing . This theory must of course be supplemented by a theory of state failure, as well as a theory of nonstate solutions to market failures. Standard economic theory offers a poor approach to macroeconomic dynamics, but we complexity and evolutionary theorists are working on correcting this situation. Keywords: neoclassical economic theory, general equilibrium theory, , evolutionary , complex dynamics

RADICAL ECONOMICS AND BEYOND In the midst of bloody wars at home and abroad, with my professors either oblivious While studying for my PhD in mathematics to or mildly-to-avidly supporting the war in at Harvard, I became deeply involved in the Vietnam, I was certain that the economic theory anti-Vietnam war and civil rights movements. they espoused must be deeply flawed and began Feeling an uncomfortable gap between the to develop an alternative. How deeply disaf- abstractness of mathematical theory and con- fected was I? Here are the final sentences of a creteness of radical , I completed my paper I published in the orthodox American master’s in math, and switched to the PhD pro- Economic Review at that time: gram in economics at Harvard, producing some years later, at the height of the influence of the We [young ] must be outlaws to radical student movement, a doctoral disserta- preserve our sanity and to seek a decent world tion entitled “Power and Alienation: Towards for our children. We must be outlaws because a Radical .” In the process, … our expertise is otherwise … perverted I studied , helped to found toward ends incompatible with our personal the Union for Radical Political Economics, and self-realization in our work. But we will not be penned bitter critiques of the brand of standard outlaws forever. Join us. (Gintis 1972) I learned at Harvard. I made a good living at this, and wrote a rather After finishing Schooling in Capitalist America, well-received book with my longtime coauthor Bowles and I initiated an ambitious study of Samuel Bowles entitled Schooling in Capitalist market , and we began to advocate a America (Bowles and Gintis 1976). version involving democratically organized and Herbert Gintis worker-controlled firms (Bowles and Gintis school many years ago. This theory implies that 1990, 1996). But there was a problem with a successful economy will never be a free market our theory that resisted solution: if worker- economy, but rather will exhibit a high degree controlled firms would be at least as efficient as of social to neutralize the effects of capitalist-controlled firms, why did such firms market failures. Second, the standard general not simply win out on competitive markets? equilibrium model in fact provides as strong One could offer silly reasons, such as collusion support for the viability of a state socialist econ- among capitalists to undermine democratic omy of the Soviet type as it does for a capitalist workplaces or laws that disfavor economic economy (Lange and Taylor 1938; Schumpeter . But we considered such explana- 1942; Gintis 1991). Therefore the econo- tions as implausible at best. We ­concluded, on mist’s chief model of economic exchange has the basis of standard economic reasoning, that no sociopolitical bias whatever. Unfortunately, such firms cannot enjoy the benefits of widely the standard informational assumptions of this dispersed ownership characteristic of large capi- model—especially the assumption that a state talist firms (Gintis 1989). planner has complete information concerning This experience guided me to three rather all production processes, technological alterna- momentous conclusions. First, the market tives, and consumer and worker preferences— socialist economy based on worker control is no are implausible (Hayek 1945; Gintis 1991). more feasible than the state socialist economy as This undermines its support for state socialism, an alternative to . Therefore we must but not for a socially regulated . embrace capitalism and search for correctives that provide social justice with high efficiency. COMBATTING ECONOMIC ILLITERACY Second, standard economic theory, despite its flaws, is often powerfully insightful. We should Progressives and conservatives alike tend to thus embrace this theory, dynamicize it, and characterize standard economic theory as a correct its flaws. Third and finally, Marxism is justification of free markets. Conservatives like a great way to develop a broad, dynamic, inter- the idea, and progressives do not. Therefore disciplinary view of social theory, but it is quite there is a strong tendency in progressive circles out of its depth as a serious economic theory. We simply to reject standard economic theory and should look elsewhere (especially to complexity to embrace one or another “heterodox” alterna- and evolution) for inspirational new directions tive. Both groups are misinformed, to the point in economic dynamics. I have thus spent the of being economically illiterate concerning the rest of my professional life trying to build on the received wisdom of economic theory. success and correct the flaws of standard neo- It may seem that there is no politically neutral classical economic theory using insights from received wisdom that is shared by most econo- the other behavioral disciplines and deploying mists, but this is not the case. Except in the area the tools of complexity analysis. of macroeconomic policy, there are few disagree- Most of my radical friends did ments. In the macroeconomic area, as I describe not follow this path, arguing that standard below, the standard models are pretty awful. But economic theory is simply an apology for free economic policy has a deeper problem: simple market capitalism. This view is wrong for two models can show you the general direction of reasons. First, as I shall describe below, stan- effects, but when there are offsetting tendencies, dard , fully integrated into only quantitative evidence can a credi- standard economic theory, provides a power- ble answer. For instance, increasing ful taxonomy of market failure, one that is as expenditure to lower the rate cogent today as when I learned it in graduate may be offset by the effects of

2 Evolutionary Studies in Imaginative Culture Economic Theory and : Where We Are, Where We Are Headed on , , and growth rates. Only Finally, the book rather slights statistical ­ careful attention to details can determine the information on the economy and gives little effect of the policy, and even this is subject historical perspective. to significant error. Tom Gorman, The Complete Idiot’s Guide to However, one cannot even begin to assess Economics (Penguin, 2003) economic policy seriously unless one knows basic economic theory. The books mentioned This book is a little out of date, and is ­especially below are basic starting points for gaining a concerned with regulatory policy in dealing facility in economic theory. Alternatively, you with market volatility (the cycle). can simply buy one of the leading undergradu- It has lots of interesting statistics, and gives a ate textbooks and plow through it. The textbook detailed explanation of the Federal Reserve and will be more demanding, very fat, and quite its operation. It is similarly strong on analyzing expensive. Before doing this, I advise that you international and exchange rates. Read tackle one or more of the following ­volumes. this after Economics for Dummies. They are all quite good, and it wouldn’t hurt Steve Slavin, Economics: A Self-Teaching to read them all. But here are my impressions. Guide (Wiley, 1999) Charles Wheelan, Naked Economics: Undressing This book does not deal with recent economic the Dismal Science (W. W. Norton, 2010) issues, but it is well worth reading. It is especially­ Wheelan explains the benefits and limitations strong on and it presents in of markets, the benefits and limitations of some detail the various schools of thought in ­government interventions, the basics of finance macroeconomic theory. It also does consid- (especially, how to avoid the costly errors that erable national , which I about 50% of are prone to make, ­consider a prerequisite to understanding current such as believing they can pick winners), and economic issues. Its ­ sections the role of international . There are rather brief. It is certainly not a substitute is nothing that Wheelan asserts that I think for Economics for Dummies. is not 100% correct, including his exposition After this, I would tackle the more formal free of development­ economics and . online course on introductory econom- Highly recommended. ics at http://www.core-econ.org, developed by my coauthor Sam Bowles and other colleagues. Sean Flynn, Economics for Dummies (Wiley, 2011) PROBLEM AREAS OF STANDARD ECONOMICS This book is the most sophisticated of the three and covers extremely important material left There are two problem areas with the standard out of the others. This includes an analysis of neoclassical model, which I will identify here rights, market , public with the Walrasian general market interaction , asymmetric information, and other model, as described below. The first is that the absolutely fundamental aspects of modern eco- model is good at equilibrium analysis, but has nomic theory, which is really the theory of the no serious treatment of economic dynamics. interaction between markets and government In fact, as I explore in my most recent book, regulation for efficiency and stability. It is rather Individuality and Entanglement (Gintis 2016b), weak on national income accounting (none of the absence of plausible dynamic models of the the books is strong in this very ­difficult area), evolution of the economy is evident in sociol- and it does no general equilibrium analysis­ (e.g., ogy and as much as in econom- the very instructive Edgeworth box is ­missing). ics. There is some hope that the maturation of

ESIC | Vol. 2 | No. 1 | Spring 2018 3 Herbert Gintis complexity theory and In this model, the economy consists of indi- might correct this situation. viduals and firms. Firms make products using The second problem area is in the model- labor, goods (buildings, machines), and ing of human decision-making. The standard products (called intermediate goods) that they rational actor is very powerful in principle, but buy from other firms. Individuals own labor it rests on four untenable assumptions. First, it and capital goods, which they supply to firms in tends to assume that economic actors are self- return for a (labor) and a rental (cap- interested, whereas, in fact, actors often satisfy ital goods). It would be more realistic to have all the axioms for rational choice, but they care the firms own their capital goods and simply about others and use moral reasoning in making borrow to pay for them from individuals decisions. Second, the standard rational actor (e.g., through financial markets, such as model assumes agents are consequentialist in the and bonds). But it amounts to the same thing sense of valuing alternatives only according to as simply assuming capital goods, like labor, can the way their choices promote their preferred be costlessly moved from one firm to another, outcomes. In fact, in many characteristically and the capital goods are owned by individu- human collective actions, such as in a als and rented to firms. Of course, when we get large or participating in a mass demon- to market dynamics, ignoring fixed capital can stration, no single individual (except for a few be treacherous, but we will deal with dynamics leaders) makes any difference at all. Yet this par- later. Finally, individuals own shares entitling ticipatory behavior exhibits the major character- them to the profits generated by the firms. istics of truly rational behavior (Gintis 2016a). Firms produce marketable goods, which they Third, the standard theory takes beliefs as sub- sell to individuals and to other firms. Individuals jective (the ’s so-called subjective prior), consume whatever they purchase from firms, whereas in fact beliefs tend to be distributed and and whatever funds that remain are used to buy validated across social networks. For instance, capital goods and shares in the firms, which is the often excessive certainty with which individ- their . If individuals are short of income, uals profess their beliefs likely derives from the they can sell some of their capital goods to other fact that virtually all individuals in their social individuals. This is often called the double cir- networks share these beliefs. Contemporary cular flow of goods and money: (1) individuals behavioral and experimental game theories supply labor and capital to firms, and (2) firms provide powerful tools for repairing these weak- supply income to for . nesses of the standard rational actor model. The economy is in market equilibrium when the wage and rental price of capital goods (inter- THE GENERAL MARKET INTERACTION MODEL est rates, rates) and the of goods equate supply and in the labor market, Walras (1874) developed a general model of the , and all goods markets, assum- competitive market exchange. In the 1950s ing firms maximize profits and individuals maxi- several researchers contributed to showing mize their over consumption and . that a market-clearing equilibrium for Walras’s The general market equilibrium model model exists under quite general conditions is attractive because it abstracts from details, (Arrow and Debreu 1954). We call this the allowing us to state and understand clearly the general equilibrium model of the market econ- nature of market failures and evaluate possible omy. I think the term general market interaction measures to correct them at the highest level of model is more appropriate, however, because, as generality. In many cases, adding more detail I explain below, it is just as relevant to market would not add much, if anything, to the anal- dynamics as to market equilibrium. ysis. When it would be useful, we may simply

4 Evolutionary Studies in Imaginative Culture Economic Theory and Social Policy: Where We Are, Where We Are Headed add in more detail. We may thus use this model is practically relevant because the economy­ is to state what are called the “fundamental theo- normally rather close to ­equilibrium, although rems of welfare economics.” it can experience rather dramatic excursions far from equilibrium for some number of time The Fundamental Theorems of Welfare Economics periods, as in the case of financial­ bubbles and persistent stagnation. To state the famous First Fundamental Theorem of Welfare Economics, we say an allocation of THE THEORY OF MARKET FAILURE labor and capital to firms and goods to individuals is Pareto optimal if any reallocation that makes one The basic question of when unregulated ­markets individual better off must make at least one other of the sort described above are the most effec- individual worse off. This is, of course, the stan- tive instruments of was dard definition of efficiency in economic theory. worked out in the post–World War II period, We then have, under very general conditions, and remains valid today, a half century later (Musgrave 1959, Atkinson and Stiglitz 1980). Theorem 1. First Theorem of Welfare This theory is called the theory of market failure. Economics: Every market equilibrium is Pareto There are four types of market failure: optimal. The proof of this theorem is extremely simple, 1. Increasing . In some but not worth going through here. The inter- ­production sectors, the efficient firm size is so ested reader can find a proof on Wikipedia. large that either efficiency or market compe- By the way, and to avoid confusion, the term tition must be sacrificed. For instance, a city’s “welfare” in economics does not mean subsidies water supply may be most efficiently supplied to the poor, but rather individual and social using one large reservoir and a ­unified system well-being in general. of delivery and waste removal. There is simply no room for multiple firms to compete, so the Theorem 2. Second Fundamental Welfare is supplied by the local government. Economics: Every Pareto-optimum can be The problem can ­sometimes be handled achieved by an initial of ownership of alternatively by requiring firms to share the labor and capital, followed by market exchange. resource that accounts for increasing returns, This theorem is interesting, but is of no prac- such as railroad tracks or an electric grid. tical use because it is not politically or ethically 2. Public Goods. Some goods are nonexclusion- feasible to redistribute ownership arbitrarily ary—they are consumed equally by many or all to attain goals. Moreover, a one- individuals, although they may be valued dif- time egalitarian redistribution would likely ferently by different individuals. For instance, return to another inegalitarian state in subse- national defense protects all equally, and many quent periods. Of course, continual arbitrary forms of public health measures affect the redistributions­ are possible (if neither ethical incidence of diseases for the entire population. nor politically ­feasible), but these interfere Public goods must be publicly provided, or at with incentives and so lead to severe economic least publicly financed, in most cases. inefficiencies. 3. Market Externalities. Some goods are pro- The First Fundamental Theorem, by con- duced using technologies that release waste trast, is extremely important not because it accu- products into the environment at zero or rately reflects actual economic conditions, but low cost to the producer but that impose because it helps to understand when it does not, high costs on everyone else. Economic and why. The general market ­interaction model theory suggests that the costs imposed by

ESIC | Vol. 2 | No. 1 | Spring 2018 5 Herbert Gintis

these effluents be charged to producers, continual updating of prices by traders until an example being tradeable effluent equilibrium was attained. However, he believed (Atkinson and Stiglitz 1980). that a model where economic agents individ- 4. Quality Goods. There are many market sec- ually update their prices would be analyti- tors in which the quality of a product cannot cally intractable, whereas a simple centralized be ascertained until after purchase, and in model of price adjustment, which he called the which reputation effects are not sufficient tâtonnement process (tâtonnement means “grop- to ensure a minimum quality level. In such ing around” in French), would more easily lend sectors, quality can be maintained by legal itself to a proof of the stability of equilibrium. regulation. For instance, most countries have Walras modeled the tâtonnement process health standards for restaurants and quality on the Paris Bourse ( exchange), where standards for hotels that prevent an upstart an auctioneer calls out prices to a multitude of from profiting at the expense of consumers buyers and sellers, and sets the final price as that and the high-quality firms. Similarly, profes- which equates the number of buyers and the sionals may be licensed (e.g., medical and legal number of sellers. As it turns out, Walras was services), and pharmaceuticals may be regu- quite mistaken in thinking that such a mecha- lated for safety and effectiveness. Of course, nism leads to dynamic stability. licensing can also be imposed to give a special The stability of the Walrasian economy group an unmerited position. This became a central research focus much later, successful rent-seeking is form of state failure, in the years after the proof of the existence of to which I turn. equilibrium prices (Arrow and Debreu 1954). Following Walras’s tâtonnement process, these It is not feasible to correct all market failures models assumed that there is no production or through government intervention because reg- trade until equilibrium prices are attained, and, ulation may be excessively costly or susceptible out of equilibrium, there is a price profile shared to manipulation by powerful special interest by all agents, with the time rate of change of groups. State failure is quite as endemic as market prices being a function of excess demand. failure. That is, the political dynamics that give These efforts at proving stability were rise to particular forms of state intervention are unsuccessful (Fisher 1983). Indeed, subsequent governed by forces that may place little analysis showed that chaotic price movements are on public welfare. Special interest groups, for the generic case for the tâtonnement adjustment instance, may agitate for interventions that ben- processes (Saari 1985). efit their members at the expense of the public. Similarly, some forms of regulation invite cor- COMPLEXITY AND EVOLUTION PROVIDE A ruption by officials. These behaviors are known MARKET DYNAMIC as rent-seeking in the economics literature (Buchanan, Tollison, and Tullock 1980). A novel approach to the dynamics of ­large-scale social systems, called “evolutionary game GENERAL MARKET INTERACTION THEORY’S theory,” was initiated by biologists Maynard CRIPPLED DYNAMICS Smith and Price (1973), and adapted to dynam- ical systems theory in subsequent years (Taylor Walras was aware that his model required a and Jonker 1978; Weibull 1995; Gintis 2009). price-adjustment mechanism that would ensure The application of these models to economics stability of equilibrium. He considered the key involved the shift from biological reproduction force leading to equilibrium to be market com- to behavioral imitation, otherwise known as petition, which he thought would result in the “adaptive dynamics” as the mechanism for the

6 Evolutionary Studies in Imaginative Culture Economic Theory and Social Policy: Where We Are, Where We Are Headed replication of successful­ agents (Mandel and Perhaps surprisingly, my dynamical model Gintis 2014, 2016). of general market interdependence, which is I do not have the space here to describe the clearly a complex adaptive system in the sense mathematical structure of complex evolution- of Beinhocker 2006, stabilizes rather quickly ary market dynamics. For this, I refer the inter- to a stationary distribution in which prices ested reader to one of the above references, are approximately at their market-clearing and to Gintis 2013. Rather, I will describe values, profits are approximately zero, and an agent-based simulation of the proposed the unemployment rate averages about 4%. dynamics. Agent-based computer simulations, But the devil is in the details. My economy by the way, represent a common method for exhibits “fat tails” with many large excursions dealing with complex systems whose defining from equilibrium, even in the absence of any equations are difficult or impossible to solve systemic shock (see figure 2). Moreover, in the analytically. general case firms experience excess supply for I develop an agent-based model of a general their product and have positive excess demand market interaction system with many sectors, for labor, even while labor is in aggregate firms and consumers, capital and labor, in excess supply. This is partially illustrated in which there is no public information (Gintis figure 1 for one of the sectors in my agent- 2007). Prices in this system are private infor- based model of the economy. In effect, firms mation, in the sense that each firm generates evolve by developing reaction functions to its own prices and must engage in a costly changing economic conditions that maximize search to discover the pricing strategies of its profits, but not by solving complicated maxi- competitors. Moreover, each worker has his mization problems with extensive knowledge own private discount rate, disutility of labor, of demand and supply conditions in all input and reservation wage, and consumers discover and markets, but simply by “muddling favorable goods prices through using a search through” with judicious jiggling of their reac- strategy. Change in this economy results from tive behavior and occasional switching to a agents experimenting with their own param- strategy of a better-performing competitor. eters and assessing the results, and agents copying the behavior of others that have been more successful. This is in operation.

FIGURE 2 Sectoral Prices. Since conditions of production are the same in all sectors, relative prices are unity in equilibrium.

FIGURE 1 Demand and Supply in Sector 1 of a Like complex adaptive systems in general, Multi-Sector Economy. Note that there is consider- my agent-based model does not achieve opti- able period-to-period volatility. Excess supply aver- mality. Average consumption reaches about ages about 8% of average supply. 75% of Pareto-optimal consumption after about

ESIC | Vol. 2 | No. 1 | Spring 2018 7 Herbert Gintis two hundred periods, and oscillates thereafter at market displayed excess demand, then the cus- between 72% and 80% efficiency (figure 3). tomers of one firm could not shift to another, so each seller had a (temporary) monopoly and could raise prices. I used this as a justification for the “ and demand,” but I failed to notice that, during the equilibration process, different firms might be charging different prices. You have formalized the matter, but, much more importantly, set conditions on the adjustment process to insure .

WHAT’S WRONG WITH STANDARD MACROECONOMIC THEORY? FIGURE 3 The Efficiency of the Simulated Economy. Note that after only 100 periods, the Critics of standard economic theory usually do ­system has attained nearly 79% efficiency. After not understand or do not care about the sort of 100 periods, average utility appears to be a random microeconomics that I defend above, but rather walk between 72% and 80% (the apparent declin- they identify economics with , ing trend in the figure is an artifact of truncation to which deals with the of economic 3,000 periods). fluctuations, including the and financial instability. This concern with the frail- Finally, my model clearly exhibits the failure ties of macroeconomics is well founded, but of the , as shown for a ten-­sector using this lever to undermine economic theory as economy in figure 2. Note that after about 100 a whole is at best disingenuous. Like many of its periods the standard deviation of prices settles to critics, I have no respect for standard macroeco- an average level, which persists throughout the nomics, in either its Keynesian or New Classical 3,000-period run, punctuated by price excur- forms (Mankiw 2014). I do not believe we have a sions of as much as 50% of the equilibrium price superior alternative yet, but complexity and evo- (which is unity for all goods, by construction). lutionary theories are moving towards one. These excursions are not due to any systematic It is easy to see why macroeconomics is such disturbance applied to the underlying model. a mess. The microeconomic model described Rather, they are local resonances that account for above simply has had no plausible dynamics. the some of the “fat tails” of stochastic variables in But the management of economic volatility is a complex economy. an inherently dynamical endeavor. Therefore, When my mentor read the macroeconomists long ago abandoned the paper by Mandel and me proving the stability general market interaction model in favor of of equilibrium, he sent me the following e-mail: toy models with just a very few variables—one I have still not quite gone through every detail firm, one type of labor, one good, one capital of your proof of the stability of your process good, and one “representative agent.” It is easy for getting into equilibrium, but I get the idea, to write dynamic models for such a toy system. and it is very good. I thought about this issue But the resulting models have virtually nothing when beginning my career, and wrote down a to do with a real dynamic economy, which has very vague model. (I did not prove anything, a plethora of firms, goods, and agents. Volatility and I did not include the paper in my Collected is an emergent property of complex market Works). I simply noted that, if, for example, the dynamics, as we have seen above.

8 Evolutionary Studies in Imaginative Culture Economic Theory and Social Policy: Where We Are, Where We Are Headed

Because these models are so weak, the is increased by the payments to unemployed main idea they deploy to explain financial and workers ­ behavior——is It is difficult to devise a reasonable set of completely inappropriate. The macroecono- financial shock absorbers from pure economic mists’ argument is that rational agents can be theory because money and tradable securities, assumed to know the correct model of the econ- believe it or not, are not part of microeconomic omy, and they base their future expectations by general market interaction models. The agent- essentially running this model and seeing the based models described above do integrate such results. This argument is fine if the real econ- institutions with real goods, labor, and capital omy is a toy economy. But it is not. There is goods markets, thus allowing us to assess the virtually no way for rational economic partici- sources of volatility and ways to attenuate their pants to predict the future except by extrapolat- effects. The task for the future, then, is to make ing from the past. This process is called adaptive realistic models of this type based on data from expectations and is the basis for all agent-based functioning (Di Guilmi et al. 2011; models of economic dynamics. Rational expec- Mandel et al. 2015). tations theory is simply a fairy tale. This does not mean that all attempts at CONCLUSION macro modeling must be a failure. Adaptive expectations might well do better in a complex­ Standard economic theory has told us for more model of the economy, but then only for a than half a century that there is no viable alterna- ­short-term forecast, much like weather report- tive for a high level of social welfare to a market ing before the development of ­large-scale economy regulated by a powerful state. Critics hydrodynamic models. But long-term eco- of economic theory have ignored this basic fact. nomic modeling faces basic unknowns, includ- Standard economic theory provides the proper ing the nature and pace of technical and framework for analyzing market failure. This governmental regime change. Therefore, reduc- theory must, of course, be ­supplemented by a tion in economic volatility must be integrated theory of state failure, along with a theory of directly into our model of the economy—the nonstate solutions to the tragedy of the com- sort of automatic stabilizers that react to shocks mons (Ostrom 1990; Colander and Kupers by providing countershocks without the need 2014). Standard theory has a poor approach to for active government intervention. One exam- macroeconomic dynamics, but we complexity ple of this today is unemployment insurance.­ and evolutionary theorists are ­working on cor- When ­unemployment rises, consumer demand recting this situation.

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. 1996. “Efficient Redistribution: New Rules for Markets, States, and Communities.”Politics & Society 24 (4): 307–42. doi.org/10.1177/0032329296024004003. Buchanan, James, Robert Tollison, and Gordon Tullock. 1980. Toward a Theory of the Rent-seeking Society. College Station: Texas A&M University Press. Colander, David, and Roland Kupers. 2014. Complexity and the Art of : Solving Society’s Problems from the Bottom Up. Princeton, NJH: Princeton University Press. doi.org/10.1515/9781400850136. Di Guilmi, Corrado, Mauro Gallegati, Simone Landini, and Joseph E. Stiglitz. 2011. “Towards an Analytical Solution for Agent-Based Models: An Application to a Credit Network Economy.” SSRN. doi:10.2139/ssrn.1943280. Fisher, Franklin M. 1983. Disequilibrium Foundations of Equilibrium Economics. Cambridge: Cambridge University Press. doi.org/10.1017/CBO9781139052108. Gintis, Herbert. 1972. “Consumer Behavior and the Concept of .” American Economic Review 62 (2): 267–78. . 1989. “Financial Markets and the Political Structure of the Enterprise.” Journal of Economic Behavior and 1 (3): 311–22. . 1991. “Where Did Schumpeter Go Wrong? Understanding Capitalism, Socialism, and Democracy.” Challenge 34 (1): 27–33. doi.org/10.1080/05775132.1991.11471482. . 2007. “The Dynamics of General Equilibrium.” Economic Journal 1 (523): 1280–1309. doi:10.1111/j.1468- 0297.2007.02083.x. . 2009. Evolving. Princeton, NJ: Princeton University Press. . 2013. “Markov Models of Social Exchange: Theory and Applications,” ACM Transactions in Intelligent Systems and Technology 4 (3): article no. 53. doi:10.1145/2483669.2483686. . 2016a. “Homo Ludens: Social and Political Behavior.” Journal of Economic Behavior and Organi- zation. 126 (Part B): 95–109. doi.org/10.1016/j.jebo.2016.01.004. . 2016b. Individuality and Entanglement: The Moral and Material Bases of Human Social Life. Princeton, NJ: Princeton University Press. Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review 35 (4): 519–30. Lange, Oskar, and F. M. Taylor. 1938. On the Economic Theory of Socialism. Minneapolis: University of Minnesota Press. Mandel, Antoine, and Herbert Gintis. 2014. “Stochastic Stability in the Scarf Economy.” Mathematical Social Sciences 67:44–49. doi.org/10.1016/j.mathsocsci.2013.09.002. . 2016. “Decentralized Pricing and the Strategic Stability of Walrasian General Equilibrium,” Journal of Mathe- matical Economics 63:84–92. doi.org/10.1016/j.jmateco.2015.12.008. Mandel, Antoine, Simone Landini, Mauro Gallegati, and Herbert Gintis. 2015. “Price Dynamics, , and Aggregate Volatility.” Journal of Economic Dynamics & Control 51:257–77. doi.org/10.1016/j.jedc.2014.11.001. Mankiw, Gregory. 2014. Principles of Macroeconomics. Stamford, CT: Cengage Learning. Maynard Smith, John, and George R. Price. 1973. “The Logic of Animal Conflict.”Nature 246:15–18. doi. org/10.1038/246015a0. Musgrave, Richard Abel. 1959. The Theory of . New York: McGraw-Hill. Ostrom, Elinor. 1990. Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press. doi.org/10.1017/CBO9780511807763. Saari, Donald G. 1985. “Iterative Price Mechanisms.” Econometrica 53 (5): 1117–31. doi.org/10.2307/1911014. Schumpeter, Joseph A. 1942. Capitalism, Socialism, and Democracy. New York: Harper & Row. Taylor, Peter, and Leo Jonker. 1978. “Evolutionarily Stable Strategies and Game Dynamics.” Mathematical Biosciences 40 (1-2): 145–56. doi.org/10.1016/0025-5564(78)90077-9. Walras, Léon. 1874. Elements of Pure Economics. London: George Allen and Unwin. Weibull, Jörgen W. 1995. Evolutionary Game Theory. Cambridge, MA: MIT Press.

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