Preface to a Computational Economic Theory of Democracy

Andres Rius - University of Notre Dame

The paper provides the foundations for a computational economic theory of democracy, in which political and economic institutions — markets, elections — are societies' responses to the problems arising from failures of rational decision-making. The paper presents a formal demonstration of the need for exogenous (arbitrary) "stopping rules" in strategic settings populated by algorithmic maximizing agents. It then suggests that institutions whose theoretical justification has eluded economic analysis may acquire a new meaning when they are linked to this need for stopping devices. It is argued that this view provides a formal theoretical framework to some existing research programs in economics and politics, and has some significant implications for our assessment of alternative institutional designs.

Scheduled for Session 4.2 Computation And Economic Theory - I