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Economics went through great development in the 20th century. This
development, which was based mainly on mathematical methods, is not
an appropriate method of analyzing markets that change every hour
and every day. In a stock market, prices constantly change
depending on speculation. U-Mart, a manmade market, has been
proposed in order to study such instantly moving markets. Although
the U-Mart system is internationally acclaimed for being at the
forefront of market research, its use is by no means limited to a
small number of researchers on the fringe. The whole system,
including its source code, is open and is distributed without
charge, testifying to a philosophy of creating and providing a
common test bed for research into financial markets.
This book provides for the first time the microfoundations of
evolutionary economics, enabling the reader to grasp a new
framework for economic analysis that is compatible with
evolutionary processes. Any independent approach to economics must
include a value theory (or price theory) and price and quantity
adjustment processes. Evolutionary economics has rightly and
successfully concentrated its efforts on explaining evolutionary
processes in technology and institutions. However, it does not have
its own value theory and is not capable of explaining the workings
of everyday economics processes, in which any evolutionary process
would take place. Our point of departure is the addition of myopic
agents with severely limited rational and forecasting capacities
(in stark contrast to mainstream economics). We show how myopic
agents, in a complex world, can produce a stable price system and
demonstrate how they can adjust their production to changing demand
flows. Agents behave without any knowledge of the overall process,
and they generate a stable economy as large as the global network
of exchanges. This is the true "miracle" of the market mechanism.
In contrast to mainstream general equilibrium theory, this miracle
can be explained without the need for an auctioneer or infinitely
rational agents. Thanks to this book, evolutionary economics can
now claim to be an independent approach to economics that can
completely replace mainstream neoclassical economics.
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