In their recent book, Colander and Kupers (2014) argue that viewing the economy as a complex adaptive system should change the way in which we make economic policy. This would necessitate a paradigm shift. Economics has, over time, tried to produce a coherent model to underpin the dominant laissez-faire liberal approach. But we have never proved, in that model, that left to their own devices, the participants in an economy will self-organize into a satisfactory state. This is an assumption. Complex interactive systems with direct interaction between heterogeneous agents may show no tendency to self-equilibrate and will undergo endogenous crises. Economists should concentrate on the emergence of certain patterns. Colander and Kupers suggest that we may be able to nudge the system into “good” basins of attraction. A more radical view is that there are no fixed basins of attraction; these change with the evolution of the system and it is illusory to believe that we can choose good basins. We may be able to recognize and influence the emergence of certain states of the economy, but we are far from Leon Walras's dream of economics as a science like astrophysics.

It is shown that any informationally decentralized mechanism that realizes fair allocations over the class of classical pure exchange environments has a message space of dimension no smaller than the number of agents times the number of commodities. Since the equal income Walrasian mechanism, in which all agents take prices parametrically and maximize utility subject to the average income constraint, realizes fair outcomes over the class of classical pure exchange environments and has a message space of that dimension it is informationally efficient. Further, it is shown that it is the unique informationally efficient mechanism realizing fair allocations.

Journal Article Size Removes Inequity Get access Werner Hildenbrand, Werner Hildenbrand University of Bonn and CORE Search for other works by this author on: Oxford Academic Google Scholar Alan P. Kirman Alan P. Kirman CORE Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 3, July 1973, Pages 305–319, https://doi.org/10.2307/2296452 Published: 01 July 1973

Standard neoclassical economic analysis is typically concerned with individual utility maximization. In this paper we shall consider a problem of constrained social welfare maximization. Our criterion of social welfare is and we shall discuss how this may be maximized by a move from an initial allocation to a final fairer allocation, subject to the constraint that no one be made worse off by the move. We think the goal of fairness maximization characterizes, albeit in a simplistic way, the goals pursued by enlightened governments in their redistributional policies. We shall also discuss a concept of complete fairness and illustrate some of its weaknesses. The fairness problem is ancient and dates back at least to classical Greece. It has been treated recently by mathematicians who typically are concerned with the existence of a of a nonuniform object among n persons; that is, a division with the property that each party thinks he is getting at least t/nth of the value of the object. (See, for example, Lester Dubins and Edwin Spanier, Harold Kuhn, and Hugo Steinhaus.) This is not the approach we will take, since we will assume a world of homogeneous infinitely divisible goods in which the mathematical fair division problem becomes trivial. The concept of fairness has also been treated extensively by philosophers. The most recent philosophical approach is that of John Rawls, who argues at length for a social contract theory of justice: a society which maximizes the welfare of its worst off members is most just and that is the sort of society people will, from an initial position of ignorance about their endowments and interests, contract to enter. Rawls' approach has been extended to a theory of taxation by Edmund Phelps. Again, Rawlsian fairness, or justice, is not the fairness we are interested in; we do not assume a precontractual state of ignorance, we do assume that knowledge of wealth and tastes is given. In fact, knowledge about one's own and others' bundles of goods is crucial in our discussion. What then is our notion of fairness? It is fairness in the sense of non-envy. A completely fair social state is one in which no citizen would prefer what another has to what he himself has; a relatively fair social state is one in which few citizens would prefer what others have to what they themselves have; a totally unfair state is one in which every citizen finds his position to be inferior to that of everyone else. This concept of fairness is appealing because it only depends, like other economic concepts, on individual tastes and endowments. Fairness in the non-envy sense has been discussed in several recent papers by economists. Serge Christophe Kolm considers allocative fairness, and shows that there exist allocations which are both completely fair and efficient.' David Schmeidler and Karl Vind define fair trades as

This paper develops a dynamic model of oligopoly and discusses the existence and characteristics of optimal policies for firms in such a model. The firms are assumed to face a random demand so they hold inventories which fluctuate from one period to the next. This necessitates a dynamic model rather than a static one. Our extension of the equilibrium concept to the oligopoly model is founded on recent generalizations of Shapley's stochastic game. We show the existence of equilibrium price-quantity strategies for the firms and also (i) an equilibrium strategy may be found by solving an appropriate static game and (ii) the quantity part of the strategy is often a constant (time invariant).

Beyond DSGE Models: Toward an Empirically Based Macroeconomics by David Colander, Peter Howitt, Alan Kirman, Axel Leijonhufvud and Perry Mehrling. Published in volume 98, issue 2, pages 236-40 of American Economic Review, May 2008