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Learning And Adaptive Artificial Agents: An Analysis Of Evolutionary Economic Models

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  • Jie-Shin Lin

    (University of Manchester)

  • Chris Birchenhall
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    Abstract

    The last years have been seen an extraordinary flourishing of works studying learning and adaptive behaviour in diverse fields. Following the fashion of computer innovation, there has been a growing interest in application to economic models of learning procedure developed in evolutionary computation tools such as genetic algorithms. Accordingly then, the use of computer simulation based on the related genetic algorithms (GAs) has largely taken by many researchers, for example, Axelord (1987), Marimon, McGrattan and Sargent (1990), Arifovic (1994, 1995a, 1995b), Arifovic and Eaton (1995), Dawid (1996a, 1996b), Birchenhall (1995), Birchenhall et al (1997), Bullard and Duffy (1997), Riechmann (1998, 1999), and Vriend (1998).We study a simple overlapping generation economy as an adaptive learning system. There are two populations co-existing in each period of time. A significant departure to representative agent in economic modelling is a release of hypothesis of perfect foresight or rational expectation. As a result, individual agents in the economy have heterogeneous beliefs concerning realisation of possible outcomes. With the existence of heterogeneity in the economy, actual outcome may or may not identical to any particular individual agent' expectation ex-ante. When the actual outcome feeds back to individual agents' beliefs, individual agents learn to correctly update their own beliefs. The learning is via a so-called genetic algorithm process.The framework proposed here is identical to the one considered in Bullard and Duffy (1998). Two prime questions raised are firstly the explanation of appearance of convergence to the Pareto superior equilibrium, and secondly how robust its convergence is to the changes in parameter value of the model, in particular, there are distinctions in two respects: within one learning scheme and between learning schemes. Moreover, we will look at what Vriend (1998) addressed a so-called "spite-effect"; in an economic setting, the effect of the economic forces might lead to significantly different results when applied computational tools between individual and social learning.We investigate performances of Holland's standard GA (SGA), Arifovic's augmented GA (AGA), and Birchenhall's selective transfer GA (STGA). Compared to modern artificial adaptive techniques, Maynard Smith's replicator model in its simple formulation highlighting the role of selection has been successfully applied in economics. In this study, the results from the replicator dynamics are compared to results of the related GAs above. In addition, we modify these learning algorithms. The results are compared to the results of their originals. Our work suggests that the stability of the Pareto superior equilibrium of the model is robust i.e. independent of the precise algorithm used. Finally, a further work for the study is necessary, even if it is a little speculative. While the learning schemes are not derived from an explicit behavioural model, one learning algorithm can be only described as a specific form of learning process. In other words, we ask which learning scheme agent will use population-wide when agent has many learning schemes available.

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    Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2000 with number 327.

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    Date of creation: 05 Jul 2000
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    Handle: RePEc:sce:scecf0:327

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    Postal: CEF 2000, Departament d'Economia i Empresa, Universitat Pompeu Fabra, Ramon Trias Fargas, 25,27, 08005, Barcelona, Spain
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    References

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    1. Sent,Esther-Mirjam, 1998. "The Evolving Rationality of Rational Expectations," Cambridge Books, Cambridge University Press, number 9780521571647.
    2. Selten, Reinhard, 1991. "Evolution, learning, and economic behavior," Games and Economic Behavior, Elsevier, vol. 3(1), pages 3-24, February.
    3. Arifovic, Jasmina, 1995. "Genetic algorithms and inflationary economies," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 219-243, August.
    4. James Bullard & John Duffy, 2010. "Using genetic algorithms to model the evolution of heterogenous beliefs," Levine's Working Paper Archive 550, David K. Levine.
    5. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
    6. Vriend, Nicolaas J., 2000. "An illustration of the essential difference between individual and social learning, and its consequences for computational analyses," Journal of Economic Dynamics and Control, Elsevier, vol. 24(1), pages 1-19, January.
    7. Herbert Dawid, 1996. "Learning of cycles and sunspot equilibria by Genetic Algorithms (*)," Journal of Evolutionary Economics, Springer, vol. 6(4), pages 361-373.
    8. Thomas Riechmann, 1999. "Genetic Algorithms and Economic Evolution," Computing in Economics and Finance 1999 1011, Society for Computational Economics.
    9. Arifovic, J. & Eaton, C., 1994. "Coordination via Genetic Learning," Discussion Papers dp94-11, Department of Economics, Simon Fraser University.
    10. Arifovic, Jasmina, 1996. "The Behavior of the Exchange Rate in the Genetic Algorithm and Experimental Economies," Journal of Political Economy, University of Chicago Press, vol. 104(3), pages 510-41, June.
    11. Marimon, Ramon & McGrattan, Ellen & Sargent, Thomas J., 1990. "Money as a medium of exchange in an economy with artificially intelligent agents," Journal of Economic Dynamics and Control, Elsevier, vol. 14(2), pages 329-373, May.
    12. Arifovic, Jasmina, 1994. "Genetic algorithm learning and the cobweb model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(1), pages 3-28, January.
    13. Sacco, Pier Luigi, 1994. "Can People Learn Rational Expectations? An 'Ecological' Approach," Journal of Evolutionary Economics, Springer, vol. 4(1), pages 35-43, March.
    14. Blume, Lawrence E. & Easley, David, 1982. "Learning to be rational," Journal of Economic Theory, Elsevier, vol. 26(2), pages 340-351, April.
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