Abstract
This chapter discusses adaptive processes and economic theory. Adaptive economics is defined as the study of economic processes using concepts of adaptation. The chapter explains that the theory of adaptation must begin with a breakdown of reality into two parts, one representing the behavior of a part of the process of special interest called agent, and one representing the other parts of reality called environment. The agent may be a person, a household, a firm, a group of firms, or even an entire economy, depending on the purpose at hand. The chapter presents a formally precise framework of definitions. It discusses how economizing or optimizing must be construed if it is to have adaptive content. A general model of adaptive economizing is posed, a model that incorporates strategic considerations of the dynamic programming genre, but which is based on the behavioral principle of bounded rationality. The chapter also discusses how economic theory has incorporated one or another of the several concepts of adaptation.
Published Version
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