de Andrade, Rogerio Pereira; (1998) Dynamics of conventions: A post-classical analysis. Doctoral thesis (Ph.D), UCL (University College London).

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Abstract

Conventions are a type of social structure which enable human actions and help co co-ordinate economic activities. They are prior to, and the structural conditions for, actions. Conventions are the framework upon which agents rely for decision-making processes in the face of uncertainty. It is rational for agents to fall back on conventions, because in a world where knowledge is fallible and contingent, conventions provide a sort of tacit knowledge acquired by common, intersubjective experience. So far, the study of conventions has not received an integrated theoretical treatment from the economics literature. By contrast, the thesis systematises the ciscussion of conventions by consolidating the bulk of knowledge which is dispersed in a vast number of unconnected works. The thesis brings together the economics of complexity, time, and uncertainty into one integrated framework of analysis, which has not been tried before either. This theoretical setting structures and organises the ensuing arguments of the core treatment of the nature, dynamics and rationality of conventions. In preparing the foundations for the work as a whole the thesis also reviews critically many of the key concepts of conventional economics. The core of the thesis addresses the concept of conventions by integrating and developing Keynes's version of convention and Hayek's notion of social rules of conduct. In this undertaking, the idea of limited knowledge is central and the conceptions of general equilibrium and optimising procedures are foreign. The thesis investigates how conventions change. From the point of view of the capitalist firm, conventions take the form of routines. Routines are the basis for non-conventional, non-conformative action, and, therefore, for successful innovation. The way novelty arises has been explored in the works of Schumpeter (competition through innovation), Hayek (competition as a discovery procedure), Keynes (animal spirits) and the evolutionary approach of economic change (Nelson and Winter, Dosi). The thesis integrates and develops their approaches. The thesis also examines a key convention in the discourse of economics: optimising rationality. The study of the nature of conventions suggests an alternative, more comprehensive account of rationality under uncertainty, based on the ideas of Simon, Keynes and Hayek, in which optimisation procedures are seen as a special case with limited scope. A "reconstruction of the economic man" is proposed. The analytical results of the core part are then "applied" in order to uncover the conventions underlying price formation and the operation of the labour market, both in a large measure the result of normative factors.

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