The standard macroeconomic DSGE model used by economic policy and central bank planners cannot handle questions of fragility and stability because it assumes away complex market dynamics. A promising alternative approach replaces rational expectations with adaptive expectations and a public price system (one price per market) with a multidimensional private price system. Market equilibrium in this approach consists in 'almost-clearing' in all markets and a very small standard deviation of price in each market.
About the Speaker:
Herbert Gintis (Ph.D. in Economics, Harvard University, 1969) is External Professor, Santa Fe Institute, and Professor of Economics, Central European University. He and Professor Robert Boyd (Anthropology, UCLA) head a multidisciplinary research project that models such behaviors as empathy, reciprocity, insider/outsider behavior, vengefulness, and other observed human behaviors not well handled by the traditional model of the self-regarding agent. His web site, www-unix.oit.umass.edu/~gintis, contains pertinent information. Professor Gintis published Game Theory Evolving (Princeton: Princeton University Press, 2000), and is coeditor, with Joe Henrich, Robert Boyd, Samuel Bowles, Colin Camerer, and Ernst Fehr, of Foundations of Human Sociality: Economic Experiments and Ethnographic Evidence from Fifteen Small-scale Societies (Oxford: Oxford University Press, 2004), and with Samuel Bowles, Robert Boyd and Ernst Fehr, Moral Sentiments and Material Interests: On the Foundations of Cooperation in Economic Life (Cambridge: MIT Press, 2005). He is currently completing a book with Professor Bowles entitled A Cooperative Species: Human Reciprocity and its Evolution.