AdaptiveBehavior and Economic Theory
AdaptiveBehavior and Economic Theory
Theprimary task of economic theory is to elucidate the economicprospects of a decentralized market segment. Economic theory isoccupied with the interaction process of various individual agents ina decentralized economy. Various economic systems are classified ascomplex adaptive and decentralized entities that are made up ofnetworks of interacting agents. Viable economic systems also exhibitdynamic aggregate behaviors that emanate from the activities ofindividual agents that comprise the financial system. The behavior isdescribable without any form of detailed knowledge of agents. At thesame time, an agent in economic systems is adaptive if he or shesatisfies the environmental demands within the environment such asutility, pay off, and performance. Most important is the fact thatthe behavior of the agent should be able to increase in value overtime.
Acomplex economic system should also comprise of complex adaptiveagents, interconnected through the discords of the environment inwhich they live. It should be understood that the complex web ofadaptive systems operate within the scope of global optimum wherebythey exhibit numerous levels of interaction and aggregation acrossdifferent economic levels. Each economic level, in this case, has itscharacteristic behavior and time scale. As a result, each economiclevel can be clearly described in regards to local niches and marketsegments that can be explicated by appropriate adaptations. Theincreasing rates of technological advancements and improvementstrategies offer viable adaptive systems where different individualagents can fit and expand their business activities (Bexker, 1962).
Moreover,a complex theory of adaptive systems promotes the development offlexible, well-defined models that exhibit emergent behavior in abusiness environment. According to Arrow (1986), most economists willagree that economics theory and its scientific discords began withAdam Smith. Smith’s intent was to ascertain the systematic analysisof the behavior of individual agents in using personal interests tomotivate their actions within the context of competition. Competitionin business is a complex entity that significantly determines thebehavior of entrepreneurs. According to the Porter’s five economicstrategies, industry rivalry may prompt business people to engage inillicit business activities in a bid to make profits. It is,therefore, arguable that most entrepreneurs are more engrossed inprofit making as opposed to meeting the needs of the customers.
Beingprofit oriented has instigated various aspects such as unfair andunhealthy business practices. A clear evidence of the adaptivebehavior in a competitive market segment is the current shake out inthe fast food industry. Today, the fast food industry is expandingand taking new shapes with each passing day. As a result, many peoplehave invested in the businesses. The competition is stiff and forsome of the businesses to thrive amidst the competition, they have toutilize unhealthy competitive strategies. Many businesses are beingquickly eliminated from the market. Therefore, only the large scalebusiness premises such as the MacDonald’s can survive in theindustry. Accordingly, more than 100 business premises in the fastfood industry have been closed over the last six months in the UnitedStates. Thus, there is a tendency for the individual agents to adaptto certain behaviors so as to remain competitive in the marketsegment.
Therelationship between adaptive behaviors and economic is based on thefact that the ultimate motive taken by the individual agent relies onthe desire of the agent to achieve specific financial goals. Theaspect of the economic theory is based on the fact that factors inany business environment gain motivation through personal benefitsand the desire to acquire as much profit as possibility. In anyeconomy, the desire of the investor is to obtain profitability. Theamount of the benefits garnered may vary depending on the strategiesthat the entrepreneur puts in place. Here, agents come up withpreferences and actions that they believe would help them collect asmuch profit as possible. The underlying assumption in economic theoryis that a consumer usually wants to purchase a specified unit of acommodity (Lucas, 1986). As such, the role of the suppliers is toavail that commodity to the convenience of the customer. In a bid toensure that the products are availed to the consumer, competitionemerges among the suppliers. This competition becomes stiff if themarket is oligopolistic. In such market segments, only theaccomplished and large businesses will ensure survival.
Theprice of the commodities also determines the flow of customs to thefirm. This assertion elucidates why today`s businesses sellingcounterfeit products get more customers than the manufacturers oforiginal products. The production of counterfeit goods is as a resultof the desire to fit in a market segment due to industry rivalry.Thus, the adaptive behaviors may not always be ethical. Without theright legal measures, the markets will always remain folded withillegal goods and unethical strategies to garner profits from thebusiness activities. In a nutshell, the relationship between adaptivebehaviors of the individual agents depends highly on the economy ofparticular market segments.
Arrow,K. J. (1986). Rationality of Self and Others in an Economic System.TheJournal Of Business,59(S4),S385. doi:10.1086/296376
Bexker,K. (1962). Investingin human capital.Singapore: World Scientific.http://public.eblib.com/choice/publicfullrecord.aspx?p=731121
Lucas,R. E. (1986). . TheJournal Of Business (1986-1998),59(4),IIS401.