Impact of Environmental Dynamics on Economic Evolution: Uncertainty, Risk Aversion, and Policy

Volker Nannen, Jeroen van den Bergh and A. E. Eiben

MPRA Paper from University Library of Munich, Germany

Abstract: The general question of how environmental dynamics affect the behavioral interaction in an evolutionary economy is considered. To this end, a basic model of a dynamic multi-sector economy is developed where the evolution of investment strategies depends on the diversity of investment strategies, social connectivity and relative contribution of sector specific investments to production. Four types of environmental dynamics are examined that differ in how gradual and how frequent environmental change occurs. Numerical analysis shows how the socially optimal level of diversity increases with the frequency and rapidity of the changes. When there is uncertainty about which type of environmental dynamics will prevail, the socially optimal level of diversity increases with the degree of risk aversion of the policy maker or the society.

Keywords: evolutionary economics; agent-based economics; dynamic environments; public policies; risk aversion; uncertainty (search for similar items in EconPapers)
JEL-codes: B52 D81 O31 Q51 (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/13834/1/MPRA_paper_13834.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/43673/1/MPRA_paper_43673.pdf revised version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:13834

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().