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Complexity and Endogenous Instability

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  • Sami Al-Suwailem

Abstract

The global financial crisis proved the critical impact of the gap between individual rationality and group rationality. This gap is not supposed to arise in a Neoclassical world, but it frequently arises in a world as complex as ours. The paper explores how endogenous instability might arise due to such a gap, and what behavioral rules might help to mitigate its impact.

Suggested Citation

  • Sami Al-Suwailem, 2012. "Complexity and Endogenous Instability," ASSRU Discussion Papers 1203, ASSRU - Algorithmic Social Science Research Unit.
    • Handle: RePEc:trn:utwpas:1203
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    File URL: http://www.assru.economia.unitn.it/files/DP_3_2012_I.pdf
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    More about this item

    Keywords

    fallacy of composition; empathy; n-person prisoner’s dilemma games; n-person zero-sum games; symmetry; the golden rule.;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D87 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Neuroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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