These notes review two simple heterogeneous agent models in economics and finance. The first is a cobweb model with rational versus naive agents introduced in Brock and Hommes (1997). The second is an asset pricing model with fundamentalists versus technical traders introduced in Brock and...

In dynamic economic models derived from optimization principles, the forward equilibrium dynamics may not be uniquely de…fined, while the backward dynamics is well de…fined. We derive properties of the global forward equilibrium paths based on properties of the backward dynamics. We propose...

Consumption fluctuations in a simple 2-D addiction model are investigated. The behavioural equations of the model are suggested by a related `rational addiction' model of Becker and Murphy [2]. Our model generates erratic, seemingly unpredictable consumption patterns of the addicted persons. The...

This paper analyses the basic features of technical and distributional changes in the US since the Civil War as the expression of the gradual emergence of a new paradigm, corresponding to a Managerial Revolution, and its replacement of the earlier organization inherited from the Industrial...

We discuss recent work on bounded rationality and learning in relation to Soros' principle of reflexivity and stress the empirical importance of non-rational, almost self-fulfilling equilibria in positive feedback systems. As an empirical example, we discuss a behavioral asset pricing model with...

We propose behavioral learning equilibria, where boundedly rational agents learn to use a simple univariate linear forecasting rule with correctly specified unconditional mean and first-order autocorrelation. In the long run, agents learn the best univariate linear forecasting rule, without...