Economists have always recognised that human endeavours are constrained by our limited and uncertain knowledge, but only recently has an accepted theory of uncertainty and information evolved. This theory has turned out to have surprisingly practical applications: for example in analysing stock market returns, in evaluating accident prevention measures, and in assessing patent and copyright laws. This book presents these intellectual advances in readable form for the first time. It unifies many important but partial results into a satisfying single picture, (...) making it clear how the economics of uncertainty and information generalises and extends standard economic analysis. Part One of the volume covers the economics of uncertainty: how each person adapts to a given fixed state of knowledge by making an optimal choice among the immediate 'terminal' actions available. These choices in turn determine the overall market equilibrium reflecting the social distribution of risk bearing. In Part Two, covering the economics of information, the state of knowledge is no longer held fixed. Instead, individuals can to a greater or lesser extent overcome their ignorance by 'informational' actions. The text also addresses at appropriate points many specific topics such as insurance, the Capital Asset Pricing model, auctions, deterrence of entry, and research and invention. (shrink)

The central tradition of mainline economics deals with one way of making a living; producing goods and services. But there is another way of getting ahead through conflict or the 'dark side', by appropriating what others have produced. Parallel to military aggression and resistance, the dark side includes non-military activities such as litigation, strikes and lockouts, takeover contests, and bureaucratic back-biting struggles. This volume brings the analysis of conflict into the mainstream of economics. Part I explores the causes, conduct, and (...) consequences of conflict as an economic activity. Part II delves deeply into the evolutionary sources of our capacities, physical and mental, for both conflict and cooperation. The introductory chapter of the volume, which outlines the significance of the dark side, was the author's 1993 Presidential Address to the Western Economic Association. Other chapters investigate economic models, historical discussions, experimental tests, and applications to topics in political science and law. (shrink)

Individuals, groups, or nations — if rational and self-interested — will be balancing on the margin between two alternative ways of generating income: peaceful production and exchange, versus appropriative efforts designed to seize resources previously controlled by others. Both production and appropriation, on the assumption here, are entirely normal lines of activity engaged in to the extent that doing so seems profitable.The general-equilibrium steady-state model involves a resource partition function, a social production function, a combat power function, and an income (...) distribution equation. Solutions were obtained under thesymmetrical Cournot protocol and two alternativeasymmetrical assumptions: the familiar Stackelberg condition and a more novel hierarchical protocol called Threat-and-Promise. The analysis demonstrates that, in contrast with the harmonistic bias of orthodox economic theory, a general-equilibrium model can also encompass the hostile and destructive interactions that characterize real-world social relations. (shrink)