Title: The Sea Battle Tomorrow: The Identity of Reflexive Economic Agents
Abstract: This paper develops a conception of reflexive economic agents as an alternative to the standard utility conception, and explains individual identity in terms of their ability to adjust the grounds for their behavior in a self-organizing way, an idea taken from Herbert Simon. The paper distinguishes closed equilibrium and open process conceptions of the economy, and argues the former fails to explain time in a before and after sense in connection with Aristotle's sea battle problem. A causal model is developed to represent the process conception, and the adjustment behavior of reflexive economic agents is illustrated using Merton's self-fulfilling prophecy example. Simon's understanding of how adjustment behavior has stopping points is then shown to underlie how agents' identities are disrupted, then self-organized, and the identity analysis this involves is applied to the different models of Merton, Ross, Arthur, and Kirman. Finally, the self-organization idea is linked to the recent 'preference purification' debate in bounded rationality theory over the 'inner rational agent trapped in an outer psychological shell,' and it is argued that the behavior of self-organizing agents involves them taking positions toward their own individual identities.
John B. Davis, Professor of Economics, Marquette University, Professor of Economics, University of Amsterdam, and Fellow of the Tinbergen Institute, is author of Keynes's Philosophical Development (Cambridge, 1994), The Theory of the Individual in Economics (Routledge, 2003), Individuals and Identity in Economics (Cambridge, 2011), and co-author with Marcel Boumans of Economic Methodology: Understanding Economics as a Science (2nd ed., Palgrave, 2016). He has been a visiting professor at the University of Paris Sorbonne, Cambridge University, Erasmus University, Duke University, and University of Reims. He is co-editor with Wade Hands of the Journal of Economic Methodology. His current research addresses the principle of reflexivity in complex evolutionary systems with particular attention to the nature of reflexive economic agents. His personal website is here.