The Guidance of an Enterprise Economy

591 Pages·2016·3.371 MB·English

by  Martin Shubik, Eric Smith

TheGuidanceofanEnterpriseEconomy

TheGuidanceofanEnterpriseEconomy
MartinShubikandEricSmith
TheMITPress
Cambridge,Massachusetts
London,England
(cid:13)c 2016MassachusettsInstituteofTechnology
Allrightsreserved.Nopartofthisbookmaybereproducedinanyformbyanyelectronicor
mechanicalmeans(includingphotocopying,recording,orinformationstorageandretrieval)with-
outpermissioninwritingfromthepublisher.
ThisbookwassetinTimesRomanbydiacriTech,Chennai.PrintedandboundintheUnitedStates
ofAmerica.
LibraryofCongressCataloging-in-PublicationDataisavailable.
ISBN:978-0-262-03463-0
10 9 8 7 6 5 4 3 2 1
To my wife Julie and daughter Claire and her family. Julie bore the brunt of
thevariousegoflightsanddepressionsassociatedwithattemptstogetthings
right.
ToNerissa,forforbearanceinamarathonshedidn’tasktorun.

Contents
Acknowledgments ix
1. TheContextofCompetition 1
2. MinimalInstitutions:GameTheoryandGaming 21
3. FormalizingMeasurementandModeling:The
PreinstitutionalSociety 41
4. SupportingAttainableSolutions:SymmetryandComplexity
inOne-PeriodExchangeMechanisms 79
5. EndogenizingtheChoiceofaMonetarySystem 117
6. TheEconomy:Time,Size,andComplexity 179
7. BuildingTheoriesofEconomicProcess 259
8. UncertaintyandVelocity 307
9. InnovationandBreakingtheCircularFlow 345
10. InnovationandEvolution:GrowthandControl 395
11. MathematicalInstitutionalEconomicsandtheTheoryof
MoneyandFinancialInstitutions 441
12. Process,Strategy,andBehavior 475
13. TheGuidanceofanEnterpriseEconomy 509
Bibliography 547
NameIndex 567
SubjectIndex 571

Acknowledgments
This could not have been written without many discussions and collabora-
tions with colleagues in different disciplines and occupations. Many of the
conversationswereatPrinceton,Yale,theInstituteforAdvancedStudyinthe
Behavioral Sciences, General Electric, IBM research, the Rand Corporation,
the Cowles Foundation, and the Santa Fe Institute. We note by name only
coauthors whose direct contributions helped us to meld together a consider-
ablenumberofdiverseelementsintoawholeintegratedentitytogivemean-
ingtoamathematicalinstitutionaleconomicsthatmustunderlieanyevolving
society.OurspecificthanksaretoLloydShapley,PradeepDubey,Siddhartha
Sahi, William Sudderth, Ioannis Karatzas, Ward Whitt, Gerald Thompson,
Matthew Sobel, Lode Li, Sidney Siegel, Charles Wilson, John Rogowski,
Gerrit Wolf, John Miller, John Geanakoplos, Imre Baranyi, Andreu Mas-
Colell, Dimitri Tsomocas, Charles Goodhart, Michael Powers, Rabah Amir,
Jingang Zhao, Thomas Quint, Chen Zhong Qin, Per Bak, Maya Paczuski,
KaiNagel,DoyneFarmer,DuncanFoley,AlokKumar,DavidSchizer,Martin
Whitman, Shyam Sunder, Supriya Krishnamurthy, Rogier Braakman, Harold
Morowitz,BenjaminGood,andJuergenHuber.EricSmithgratefullyacknowl-
edges Jerry Murdock for support over more than a decade of our joint work,
andWilliamMeltonforsupportduringitscompletion.WewishtothankGlena
Amesforherconstantaidinvolvingmanuscriptpreparation.