Rational Heuristics? Expectations and Behaviors in Evolving Economies with Heterogeneous Interacting Agents
We analyze the individual and macroeconomic impacts of heterogeneous expectations and action rules within an agent-based model populated by heterogeneous, interacting firms. Agents have to cope with a complex evolving economy characterized by deep uncertainty resulting from technical change, imperfect information, coordination hurdles and structural breaks. In these circumstances, we find that neither individual nor macroeconomic dynamics improve when agents replace myopic expectations with less naïve learning rules. Our results suggest that fast and frugal robust heuristics may not be a second-best option but rather “rational” responses in complex and changing macroeconomic environments.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
The author acknowledges the support by the European Union's Horizon 2020 research and innovation program under grant agreement No. 822781 - GROWINPRO.
Giovanni Dosi & Mauro Napoletano & Andrea Roventini & Joseph E. Stiglitz & Tania Treibich, 2020. "RATIONAL HEURISTICS? EXPECTATIONS AND BEHAVIORS IN EVOLVING ECONOMIES WITH HETEROGENEOUS INTERACTING AGENTS," Economic Inquiry, vol 58(3), pages 1487-1516. citation courtesy of