Knowledge Directed Economic Selection and Growth
The single most important postulate in economics is what you assume about the totality of all possible states that the economy can be in (the state space). The assumption you make determines the costs of information and learning when exploring that state space, the nature of the equilibrating forces of the markets of the economy, towards what kind of equilibrium the economic system is heading and what that means for the modes of behavior of individuals and firms, in short the dynamics of the economy. The mainstream model of economics assumes a very narrow and, for all practical purposes, fully transparent state space and thus excludes all interesting dynamics from the analysis by assumption. I argue for the alternative assumption of a very large and non-transparent state space, or investment opportunities space that takes us into the unpredictable world of an Experimentally Organized Economy that is more compatible with economic reality. In that brave new world of economics new answers to old questions appear. Above all, using the tools of analysis developed from, and for the mainstream neoclassical model to study the realities of an EOE will place the analyst in a misinformation situation. I illustrate that through simulation on the Swedish micro to macro (MM) model and with one Swedish business case.
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Volume (Year): 27 (2009)
Issue (Month): 4 ()
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