Of ticks and tigers: Subjective event spaces in complexity economics

Standard economic models assume a common event space shared by all agents and the observing economist. This assumption is present in Aumann’s (1976) agreement theorem and in related work on expected utility, bounded rationality (Simon 1955), ambiguity (Gilboa and Schmeidler 1989), and unawareness (Dekel et al. 1998). It is ubiquitous. This paper argues that event spaces are often subjective, evolving, and incommensurable across agents and that assuming otherwise can obscure important economic phenomena. Recognizing subjective event spaces has concrete implications for economic analysis. It yields a principled case for institutions that sustain viewpoint diversity, illuminates the epistemic risks of monopoly expertise and the mechanisms of expert failure, undermines the confidence of paternalist interventions grounded in behavioral economics, and clarifies the long-standing difficulty of central planning and industrial policy.