ABSTRACT

This book has been something of a walk through the foothills of economics. It reached no lofty heights nor, I hope, was there so much formalism that the reader felt as if he lacked oxygen. It is possible that someone who had not passed along the path of theoretical economics sometimes felt a little out of breath but surely no more than that. My idea and aim has been to suggest that we should recentre economics on different themes than the traditional ones of efficiency and equilibrium and that we should place interaction and coordination at the centre of our interests. In particular, we should focus on interaction and its consequences for aggregate behaviour. To do this requires, I believe, rethinking, in a fundamental way, how we model economic activity. Doing this does not simply mean taking on board each criticism or suggestion from psychology, biology, physics or sociology and then putting our usual tools to work. This can and has been done by those who are past masters at using principal agent, game-theoretic or other standard economic models. However, I would like to see a much more fundamental revamping of our discipline. We should accept that individuals are suspended in a web of relations and linked directly and indirectly to others. Our preferences cannot be defined only in terms of an ordering over material opportunities but are rather, at least in part, determined by the preferences and actions of others. Since this is true of all the individuals, one is faced with a system which is in evolution with no special reason as to why it might converge to some stationary state.