Michael Campbell




Monday, November 22, 2021 - 2:00pm to 3:00pm





We take a refreshing new look at boundedly rational quadratic models in economics using some elementary modeling of the principles put forward in the book Humanomics by Vernon L. Smith and Bart J. Wilson. A simple model is introduced built on the fundamental Humanomics principles of gratitude/resentment felt and the corresponding action responses of reward /punishment in the form of higher/lower payoff transfers. There are two timescales: one for strictly self-interested action, as in economic equilibrium, and another governed by feelings of gratitude/resentment. One of three timescale scenarios is investigated: one where gratitude /resentment changes much more slowly than economic equilibrium (“quenched model”). Another model, in which economic equilibrium occurs over a much slower time than gratitude /resentment evolution (“annealed” model) is set up, but not investigated. The quenched model with homogeneous interactions turns out to be a non-frustrated spin-glass model.  For this particular model, the Nash equilibrium has no predictive power of Humanomics properties since the rewards are the same for self-interested behavior, resentful behavior, and gratitude behavior. Accordingly, we see that the boundedly rational Gibbs equilibrium does indeed lead to richer properties.