In many parts of the economy, stabilizing forces appear not to operate. Instead, positive feedback magnifies the effects of small economic shifts; the… - W. Brian Arthur
" "In many parts of the economy, stabilizing forces appear not to operate. Instead, positive feedback magnifies the effects of small economic shifts; the economic models that describe such effects differ vastly from the conventional ones. Diminishing returns imply a single equilibrium point for the economy, but positive feedback – increasing returns – makes for many possible equilibrium points. There is no guarantee that the particular economic outcome selected from among the many alternatives will be the “best” one.
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About W. Brian Arthur
William Brian Arthur (born 21 July 1946) is an economist, Emeritus Professor of Economics and Population Studies at Stanford University, external faculty member at the , and a Visiting Researcher at the Intelligent Systems Lab at PARC. He is an authority on economics in relation to complexity theory, technology and financial markets, and is credited with influencing and describing the modern theory of increasing returns, and the invention of the .
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William Brian Arthur
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Additional quotes by W. Brian Arthur
The inductive-reasoning system I have described above consists of a multitude of “elements” in the form of belief-models or hypotheses that adapt to the aggregate environment they jointly create. Thus it qualifies as an adaptive complex system. After some initial learning time, the hypotheses or mental models in use are mutually co-adapted. Thus we can think of a consistent set of mental models as a set of hypotheses that work well with each other under some criterion—that have a high degree of mutual adaptedness. Sometimes there is a unique such set, it corresponds to a standard rational expectations equilibrium, and beliefs gravitate into it. More often there is a high, possibly very high, multiplicity of such sets. In this case we might expect inductive reasoning systems in the economy—whether in stock-market speculating, in negotiating, in poker games, in oligopoly pricing, in positioning products in the market—to cycle through or temporarily lock into psychological patterns that may be non-recurrent, path-dependent, and increasingly complicated. The possibilities are rich.
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