ABSTRACT
Urban and regional planning and specific government policy at all levels require an improved understanding of the complex interplay of forces that influence the form and quality of urban life and govern the evolving relationships among various economic regions. Many of these influences are economic in nature, but since their illumination must clearly involve basic considerations of human behavior and organization, it would appear that the comparative static, equilibrium methodology of orthodox economics needs to be augmented by a broader framework that incorporates dynamic structure and disequilibrium behavior. Such a framework is provided by adaptive economic theory and models.
Adaptive economics involves the extension of economic theory to incorporate the point of view that economic decision-makers are "boundedly rational" (have imperfect information, limited foresight, finite cognitive powers, and changing preferences) and consequently can make plans that are only suboptimal or temporarily optimal. It stresses the implication that economic decisions are imperfectly coordinated so that transactions and behavior must evolve out of equilibrium. It represents economizing behavior as governed by various adaptive processes such as feedback control, behavioral rules, trial and error search, suboptimization with feedback and other sequential decision procedures. It emphasizes that the basic economic entities (firms, households, banks, government agencies) evolve: their activities, numbers, rules of behavior and organization development in a complex process displaying various modes of change (growth, oscillations, decay), and that exhibit changing phases which represent stages or epochs with distinct structural characteristics.
104Although the economic concepts of individual optimality, market equilibrium and social efficiency are essential in the theoretical development and evaluation of adaptive economic models, attention is shifted from the traditional concern with desirable static or steady economic states to a new emphasis on obtaining an improved understanding of how economics work dynamically and how their development over time might be influenced by new policies governing behavior and organization.
