REVIEW SYMPOSIUM ON CARS HOMMES’ BEHAVIORAL RATIONALITY AND HETEROGENEOUS EXPECTATIONS IN COMPLEX ECONOMIC SYSTEMS: The foundations of economic complexity in behavioral rationality and heterogeneous expectations

摘要

This is the second book by Cars Hommes, his first in 1991 being his Ph.D. thesis, and it provides an excellent summary of the work he has been doing over the past two decades both by himself and with numerous coauthors, most importantly, William (‘Buz’) Brock, by people in the Center for Nonlinear Dynamics, Econometrics, and Finance (CeNDEF) at the University of Amsterdam that he founded in 1998 and long directed, and also in papers that have appeared in recent years in the Journal of Economic Dynamics and Control (JEDQ of which he was a coeditor for several years and which reflect the influence of this research, as well as related research outside this circle. It can be viewed as a graduate textbook for a course on nonlinear economic dynamics, and he states upfront in the Preface that indeed it is based on material that he has used in teaching just such a course over many years. Nevertheless, as with the best textbooks, it stands as an excellent summarizing monograph on the topic of the title, with the added virtue of being right up to date on the topic as well. That it is well and clearly written and accompanied by high numerous high quality figures, along with exhibiting an admirable and substantial comprehensiveness, makes it work well for either purpose.While it deals with a broad topic, the book seems to be substantially motivated by the recent crises in the financial markets that have been interconnected with the Great Recession and subsequent difficulties in recovering from it. Hommes does not accept rational expectations and clearly states that the crash and related events disprove macroeconomic theories of the Frisch-Slutsky-Tinbergen ‘rocking horse’ type that only fluctuate due to exogenous shocks and are otherwise stable and wellbehaved. Nevertheless, an important theme of the book is to avoid going hog wild on possible ad hoc alternative behavioral theories and to attempt to bound the bounding of rationality by imposing certain conditions, the most important of these being consistency. He favors studying what he calls ‘simple complex systems.’ While he generally supports agent-based computational economics, most of the discussion, particularly of financial market models, involves only small number of types of agents, oftenonly two: fundamentalists and trend-chasers or some other single alternative to fundamentalists.