Author Archive

Economic Value is NOT Price

June 23, 2015 29 comments

from: Bruce Edmond

One of the areas that classical economics has been very weak is in the modelling and understanding of the value of goods and services.

Mostly it is assumed that price is a good proxy for value – this makes things a lot easier. However this formulation is clearly inadequate if given a moment’s thought – if the price was the value nobody would be bothered to sell anything since the value they gained (whether directly or indirectly via the IOU of money) would be the same as what they lost. The reality is this: the value to the buyer is greater than the price, so that they actually bother to buy the item or service, whilst for the seller the opposite is true (so they want to sell).  Some of this is due to diminishing returns – the increase in value from none to one apple is greater than from 1000 to 1001 apples (even if the apple has the same price). However diminishing returns are only part of the story of value.

The other move is to represent value as a 1D measurable utility. This is definitely an advance on price, since this can be different for different people etc., however this is either meaningless (there is no mapping from the details of the situation/state/ownership and utility) or unrealistically limited (e.g. a utility function is assumed with certain properties).  For example, it is not clear that value can be reduced to a 1D measure – the amount of love we receive, the amount we contribute to society and the money we have may not be commensurable.  That is, there may be no meaningful ‘exchange’ rate between these. Yes one may make comparisons when one has to make a decision, but this may be so sharply context-dependent that this comparison is not usefully formalisable or measurable.

The Context-Dependency of Human (Economic) Behaviour

June 12, 2015 14 comments

Let me start this post by making clear what everybody knows: people behave differently in different kinds of situation, but we can effectively recognise these kinds of situation and use them to understand, and even predict, how to behave and what people will do in these situations.  For example we all recognise a lecture and know the social norms, habits, conventions, roles etc. that pertain there.  If the lecture is declared finished and coffee or wine served to celebrate something the context has changed and everybody will behave differently.

Perhaps it is the desire to be like physics with universal laws, but economics (like other quantitative social sciences) ignores the context-dependency of human behaviour and cognition. Maybe the fact that people do not only use different information to make decisions in different contexts but seem to decide in different ways, is just too complicated and awkward to acknowledge. It certainly makes understanding and modelling economic behaviour much more difficult! Read more…

“Complexity in real world practices: reshaping the relationships” satellite workshop at ECCS’14

Complexity in real world practices: reshaping the relationships

ECCS 2014, 22-26 September, Lucca, Italy. Satellite Meeting to the main Conference.

Since the ECCS foundation in 2004, a number of meetings have been organized at the ECCS conferences dealing with how Complexity Science might inform about and provide leverage within socioeconomic contexts and policy oriented practices. This meeting is meant to keep alive that discussion and help bring together an inter-disciplinary community who, since the first event, has progressively attracted people from different domains. Thus this workshop provides a direct “interface” to the policy world for the more academic research elsewhere at ECCS, facilitating a dialogue between the policy world and the ECCS community.

In addition, over the last few years several initiatives in universities and EU projects have explored these issues with the spread of the complexity oriented literature into many disciplinary fields.

While the merits of complexity studies are praised on a methodological grounds, their impact on real-world organizations is still limited. The reasons are manifold and may be attributed to the difficulties that private and public organizations have in understanding the impact of this paradigm which, besides dismantling the old one, encroaches on the possibility created by the dramatic progress in ICT and in computational power.

The questions raised in today’s application of complexity approaches tend to polarize around two main themes: 

  1. A conceptual one: designing lines of enquire to address substantial issues for the future of organizations, such as those concerning goals definition, cooperative behaviour and agents engagement on a collective basis (e.g. learning to learn in order to cooperate and build more resilient organizations);
  2. An operational one: developing new techniques for data gathering, information processing and visualization, to manage the increasingly large data source made available by ICT devices.

These questions are also crucial to those involved in policy activities, as they underpin the emerging requirements for open government. However, the opportunity to better articulate the relationships between the above themes is however crucial and the meeting will provide ground for their discussion.

The webpage for this workshop will be linked to:

Individual rationality is the wrong starting point

October 11, 2013 63 comments

from Bruce Edmonds

Many economists used to assume that Economic Rationality (each actor evaluating possible actions in terms of predictions about resulting utility and choosing the optimal) is the right model for human decision making.  After Simon and others, this was moderated with various variations on that basic model (e.g. satisficing), or the introduction of various biases or noise. However this is surely starting at the wrong place – it is like saying bicycle wheels should be square just with slightly rounded corners to make them work. Surely, much better is to either (a) try to start from a model of rationality that more reflects how people actually behave or (b) try a wider variety of behavioural models.  Here, instead of taking an economic base, I consider what might be an evolutionary basis – what kinds of rationality we might expect given the evolution of homo sapiensRead more…

Re-evaluating Value – non-market value models for changing times

June 3, 2013 4 comments

A group of us are starting a discussion on how to model value, from more first principles.

Value is a major aspect of any economic theory: what it is, how it is produced, measured, stored and transferred between agents. Indeed, historically, these aspects characterise different schools of political economy. Some approaches focus on an objective basis for value such as labour or physical resources. Others place emphasis on subjective judgments by individual agents and free exchange between them.

Recent, often ICT mediated, developments such as “commons based peer production”, “crowd funding”, “freecycling” and new virtual currencies do not fit easily into existing economic models of value. On the other hand “complexity science” tools and approaches allow for a widening of traditional models of value.

Traditional models have focused on agents using either object or subjective notions of value and equilibrium points. Agent-based modelling allows for experimentation with new and hybrid notions of value in non-equilibrium conditions. In these, value might be an emergent phenomena where agents construct notions of value through the interplay of subjective and objective factors supporting novel forms of exchange and cooperation.

There will be a workshop (see below),17th & 18th June in Marseilles sponsored by NESS ( For details see:

If you intended to participate you need send an email to Juliette Rouchier <> before 9th June (sorry for late notice).

If you can not make it, you can discuss here of course!

Non-Equilibrium Social Science (a new EU network project)

February 15, 2012 4 comments

from Bruce Edmonds

An EU Coordinated action project called “Non-Equilibrium Social Science” (NESS) has now started.

The aim of NESS is to ensure that the social sciences are put on a proper footing for the 21st century. A key focus of the group is economics, where the equilibrium approach (though dominant) struggles to capture the economic realities we observe in the world today. But we are interested in all the social sciences. Read more…

Economics and the arrow of time

October 12, 2011 12 comments

from Bruce Edmonds

The question of the importance of the “arrow of time” has come up in the “Unpicking the anti-neo-classical” thread here. It really deserves a seperate thread so I am “restarting” the discussion. It was raised as an argument as to why physics and economics are different, that the arrow of time was inherent in economic phenomena but not physical. Read more…

Unpicking the anti-neo-classical “hairball”, so that what we are for is not defined by what we are against

July 7, 2011 36 comments

from Bruce Edmonds

Neo-classical economics (NCE) defines the view of the contributors to this blog/discussion!

It does so by defining what people are against.  NCE has dominated economics for such a period and with such intolerance that it has polarised the debate to such a degree that the only significant fact about individuals’ viewpoints is which of the two broad camps do they belong.  Thus two undifferentiated clusters of approaches have developed – what I call the Neo-Classical and Hetrodox “Hairballs“.  These Hairballs are summarised in the following table.  Read more…

Call for Papers: a planned special issue/section of “Real World Economics Review”

March 2, 2011 3 comments

from Bruce Edmonds

Call for contributions on the Social Complexity of Informal Value Exchange: A special issue or section of an issue of “Real World Economics Review
Whilst traditionally Economics focuses on markets where the mechanisms of price and economic rationality might dominate, we call for contributions that consider a wider class of social phenomena.  Read more…

If you are in Lisbon/at ECCS 2010 16th next week…

September 8, 2010 Leave a comment

…at the end of the day at the SCIVE workshop we will be discussing next steps we might take together to further the broader simulation modelling of a broad class of social phenomena which include exchange. This might include EU/ESF grant applications or other networking activities. All welcome. (IF you cant be there but are interested, email us – addresses at link below).

Event details from

5 suggested common themes for an Economics that takes its subject matter seriously

August 10, 2010 13 comments

from Bruce Edmonds

This is another contribution under the theme of Geoff Davies’ essay “The Nature of the Beast”, which considers the question of how do we build a narrative linking the various heterodoxies.  5 possible uniting themes are suggested.

1.  Economic phenomena are social phenomena

Economics involve all sorts of intelligent, social and adaptive behaviour including: social norms, fashions, identity, context-dependency, trust, friendship etc.  Economic exchange can involve all these things, is embedded in our social and cultural life and can often only be fully understood in its social context.  The deliberate exclusion of “non economically rational” elements of sociology and psychology is simply not supported by evidence.  Economic phenomena is just that part of social phenomena which involves the exchange or transfer of items of value.  Social behaviour undoubtably came before economic behaviour in the development of humankind, it is the more fundamental category.    Read more…

In the Economist: Conventional economic models failed to foresee the financial crisis. Could agent-based modelling do better?

from Bruce Edmonds

Agents of change
Conventional economic models failed to foresee the financial crisis. Could agent-based modelling do better?

Jul 22nd 2010

Social Complexity of Informal Value Exchange

February 15, 2010 Leave a comment

from Bruce Edmonds

Informal value transfer and credit networks involve people or institutions providing credit or value transfer services based on social trust rather than laws and contracts. Such networks constitute a complex system that have been relatively unstudied yet have a significant impact on people’s lives.  Examples range from small baby-sitting circles up to the Hawala/Hundi systems of value transfer. Such exchange often involves many social processes and mechanisms other than those usually considered by economists, including: social norms, altruism, reputation, trust, group membership, friendship, kinship, identity, status etc.

A group of academics who aim to use empirical case-studies and agent-based simulation are forming to study these systems.  It will initially organise workshops and aim to apply for network/project funding later.

Its first event is a workshop: “SCIVE 2010” to be held at the European Conference on Complex Systems in September 2010 in Lisbon.  Details at:

If you want to join this effort, or merely be kept in touch with its activities, please email me, Bruce Edmonds on