> We may dislike rational choice theory but I am afraid that it is the only
> theory that has a coherent and consistent set of assumptions by which we
> can predict prices, and it is the theoretical/behavioral basis of hedonic
> prices models (a fancy term for regressions). As I see it ABMs have to be
> combined at some level with rational choice theory.
It's not like there is a great deal of work involved in combining ABMs
with rational choice
theory: one simply needs to construct the ABM to include a model of the
deliberative
process by which agents arrive at a decision. ABMs, in many senses, are
ideal for modeling the
deliberative processes of boundedly rational individuals, as such
individuals are typically
conceived of as arriving at choices by employing inductive generalizations
of past
experiences or heuristics. If it fit the problem at hand, you could model
agents as Bayesians,
initially endowed with a somewhat random prior, who updated their prior in
the light
of new experience from time to time.
In my own work, I've modelled boundedly rational agents faced with simple
distribution problems (a simple version of the Nash bargaining problem and
the ultimatum
game) as well as coordination games. Although I typically assume that the
agents
usually follow imitative learning rules (it makes the analysis afterwards
easier), I've also modeled
them as using fictitious play. There's no reason why more complex choice
processes couldn't
be modelled. If you can describe it, you can model it.
From my point of view, the most natural point of contact between rational
choice theory and
ABMs is through evolutionary game theory. Traditional models of rational
choice, i.e.,
von Neumann-Morgenstern game theory, lack a proper treatment of the
dynamic aspect of
choice. Evolutionary game theory (at least the economic interpretations a
la Binmore, Samuelson,
and others) seeks to provide such a dynamic component, and usually assumes
that agents
are boundedly rational. ABMs provide a framework for a detailed study of
both of
these elements.
As an aside: the problem mentioned with markets points out what, to my
mind, is a more interesting
problem for ABMs. Namely, how does one smoothly incorporate, into a
single problem, problems
involving group action with problems involving individual action. One
could always force upon the model
some way of having aggregative individual action lead to group action (if,
say, 50%+1 of the group make
an individual choice to do X, then the group does X) but, in many cases,
this requires making
substantive assumptions as to the causal relations holding between
individuals and the group.
Ideally, one would like to frame very general rules of interaction which
allowed group action
to develop out of individual action. This is a hard problem, though.
Cheers,
Jason
--
J. McKenzie Alexander
Co-ordinator, MSc in Philosophy of the Social Sciences
Department of Philosophy, Logic and Scientific Method
London School of Economics, Houghton Street, London WC2A 2AE