forwarded message from Kimberly Bodelson

From: John Conover <>
Subject: forwarded message from Kimberly Bodelson
Date: Mon, 27 Jan 1997 16:00:19 -0800

The attached is a very interesting presentation. If you deal with any
kind of economics, (legal theory, capitalist theory, financial theory
of operating a company, accounting, social theory, etc.,) you would
probably benefit from the perspective.

Classical economics was actually postulated in the last century by
Alfred Marshall. (Keynes was to expand the concepts into the supply
and demand theory in the 1920's.) These concepts depended on the
paradigm of equilibrium theory, (which worked reasonably well in the
field of classical physics,) and Marshall knew it. (It was a skeleton
in the economist's closet-in 1939, the English economist John Hicks
made the statement that if the equilibrium paradigm was ever
disproven, it would result in "the wreckage of the greater part of
economic theory.")

In the late 1930's, the wreckage began, and the skeleton began to
rattle its bones. Morgenstern and Von Neumann attempted to integrate
game-theoretic concepts into classical economic theory, making what is
now termed neo-classical economic theory. There were many enigmatic
problems in the theory which were patched together by what is called
economic utility theory. Economic utility theory is what is taught in
undergraduate school today.

In the early 1980's, statistical calculus, (ie., the statistical
mechanics from the quantum mechanics of physics,) was integrated into
the game-theoretic concepts of economics, making what is termed
contemporary economics, and is the theory of preference that the
programmed traders, etc., use.

The field of economics is re-inventing itself around these new
concepts.  The attached attempts to give some insight into what the
new economics means.


BTW, if the new economics is correct, it will mean that there will be
a lot of re-invention initiated in other fields that rely on economic
theory for their foundational paradigm. For example, accounting, (and
its implications to the general ledger, and the share holders of a
company,) legal and social optimization, etc. For example, one of the
short comings of neo-classical economics was that it could not handle
the social welfare function, (ie., what to do about a society's
infrastructure.) Yet most of what Congress and the legal system does
is related to this specific agenda, ie., the function of the legal
system is to protect the weak, etc.)

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From: (Kimberly Bodelson)
Subject: SANTA FE INSTITUTE COLLOQUIUM SERIES--Axel Leijonhufvud (Tues, 1/28, 12:15 PM)
Date: Mon, 27 Jan 97 14:18:58 MST

The Santa Fe Institute Colloquium Series
is pleased to announce


Axel Leijonhufvud
UCLA and Trento

Tuesday, January 28, 12:15 p.m.
Santa Fe Institute Main Conference Room


Traditionally, we have two types of theories in economics. Call them
"Classical" and "Modern."  Classical models were adaptive/evolutionary.
Modern ones are optimizing/equilibrium models. Historically, not much was
made of the distinction for a long time -- mostly, perhaps, because
"classical" economists could only deal with the point attractors of the
processes postulated (which were often indistinguishable from the
equilibria of optimizing models).

In the last 25 years or so, Modern theory has almost completely
displaced Classical theorizing in economics. As a consequence, certain
classes of problems are almost altogether neglected. Some of these are
important. I will discuss a couple of examples from macroeconomics.

                Kimberly S. Bodelson         505-984-8800 (phone)
                Santa Fe Institute           505-982-0565 (fax)
                1399 Hyde Park Road
                Santa Fe, NM   87501
                USA                    ||

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John Conover,,

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