Decision Economics Complexity Of Decisions And Decisions For Complexity

This book is based on the International Conference on Decision Economics (DECON 2019). Highlighting the fact that important decision-making takes place in a range of critical subject areas and research fields, including economics, finance, information systems, psychology, small and international business, management, operations, and production, the book focuses on analytics as an emerging synthesis of sophisticated methodology and large data systems used to guide economic decision-making in an increasingly complex business environment. DECON 2019 was organised by the University of Chieti-Pescara (Italy), the National Chengchi University of Taipei (Taiwan), and the University of Salamanca (Spain), and was held at the Escuela politécnica Superior de Ávila, Spain, from 26th to 28th June, 2019. Sponsored by IEEE Systems Man and Cybernetics Society, Spain Section Chapter, and IEEE Spain Section (Technical Co-Sponsor), IBM, Indra, Viewnext, Global Exchange, AEPIA-and-APPIA, with the funding supporting of the Junta de Castilla y León, Spain (ID: SA267P18-Project co-financed with FEDER funds)

The special session on Decision Economics (DECON) is a scientific forum held annually, which is focused on sharing ideas, projects, research results, models, and experiences associated with the complexity of behavioural decision processes and socio-economic phenomena. In 2018, DECON was held at Campus Tecnológico de la Fábrica de Armas, University of Castilla-La Mancha, Toledo, Spain, as part of the 15th International Conference on Distributed Computing and Artificial Intelligence. For the third consecutive year, this book have drawn inspiration from Herbert A. Simon's interdisciplinary legacy and, in particular, is devoted to designs, models, and techniques for boundedly rational decisions, involving several fields of study and expertise. It is worth noting that the recognition of relevant decision-making takes place in a range of critical subject areas and research fields, including economics, finance, information systems, small and international business management, operations, and production. Therefore, decision-making issues are of fundamental importance in all branches of economics addressed with different methodological approaches. As a matter of fact, the study of decision-making has become the focus of intense research efforts, both theoretical and applied, forming a veritable bridge between theory and practice as well as science and business organisations, whose pillars are based on insightful cutting-edge experimental, behavioural, and computational approaches on the one hand, and celebrating the value of science as well as the close relationship between economics and complexity on the other. In this respect, the international scientific community acknowledges Herbert A. Simon's research endeavours to understand the processes involved in economic decision-making and their implications for the advancement of economic professions. Within the field of decision-making, indeed, Simon has become a mainstay of bounded rationality and satisficing. His rejection of the standard (unrealistic) decision-making models adopted by neoclassical economists inspired social scientists worldwide with the purpose to develop research programmes aimed at studying decision-making empirically, experimentally, and computationally. The main achievements concern decision-making for individuals, firms, markets, governments, institutions, and, last but not least, science and research. This book of selected papers tackles these issues that Simon broached in a professional career spanning more than sixty years. The Editors of this book dedicated it to Herb.

The special session on Decision Economics (DECON) is a scientific forum held annually and intended to share ideas, projects, research results, models and experiences associated with the complexity of behavioural decision processes and socio‐economic phenomena. DECON 2017 was held at the Polytechnic of Porto, ISEP, Portugal, as part of the 14th International Conference on Distributed Computing and Artificial Intelligence. For the second consecutive year, the Editors of this book have drawn inspiration from Herbert A. Simon’s immense body of work and argue that Simon precipitated something akin to a revolution in microeconomics focused on the concept of decision‐making. Further, it is worth noting that the recognition of relevant decision‐making takes place in a range of critical subject areas and research fields, including economics, finance, information systems, small and international business management, operations, and production. Therefore, decision‐making issues are of fundamental importance in all branches of economics addressed both deductively and inductively. Not surprisingly, the study of decision‐making has seen growing empirical research efforts in the economic literature over the last sixty years and, more recently, a variety of insightful cutting‐edge experimental, behavioural and computational approaches. Additionally, the awareness regarding generalizations and reductions to express economic concepts has led, on the one hand, to an increasing risk of spreading the language of mathematics as a rhetorical tool and, on the other hand, to an oversimplification and overlooking of some crucial details, especially when it comes to human decisions and, hence, economic behaviour. That awareness, however, has helped to produce an extraordinary volume of empirical research aimed at discovering how economic agents cope with complex decisions. In this sense, the international scientific community acknowledges Herbert A. Simon’s research endeavours to understand the processes involved in economic decision‐making and their implications for the advancement of economic professions. Within the field of decision‐making, indeed, Simon’s rejection of the standard decision‐making models used in neoclassical economics inspired social scientists worldwide to develop research programmes in order to study decision‐making empirically. The main achievements concern decision‐making for individuals, firms, markets, governments, institutions, and, last but not least, science and research.

In economics agents are assumed to choose on the basis of rational calculations aimed at the maximization of their pleasure or profit. Formally, agents are said to manifest transitive and consistent preferences in attempting to maximize their utility in the presence of several constraints. They operate according to the choice imperative: given a set of alternatives, choose the best. This imperative works well in a static and simplistic framework, but it may fail or vary when 'the best' is changing continuously. This approach has been questioned by a descriptive approach that springing from the complexity theory tries to give a scientific basis to the way in which individuals really choose, showing that those models of human nature is routinely falsified by experiments since people are neither selfish nor rational. Thus inductive rules of thumb are usually implemented in order to make decisions in the presence of incomplete and heterogeneous information sets.

Our socio-economic systems continue to grow and evolve. We need to acknowledge that, consequently, our decisions often fail – they are ineffective and create unexpected side effects. The speed of execution is increasing constantly and markets and systems respond almost immediately, making decision-making challenging. There is little or no room for failure.This important new book analyses real world strategy and policy challenges, addressing the interconnectedness of the markets/systems we live in. It provides a step-by-step approach using systems thinking to solve complex problems in socio-political as well as business environment. It proposes a technique with which to better understand the problems and the context in which they arise, and tools to directly inform each step of the decision-making process. The book explores the main innovation that systemic thinking introduces – the emphasis on defining the problem creating system, which is made up of interacting parts, rather than prioritizing events that need immediate fixing.The case studies, examples and the approach proposed can be used to better understand reality and its complexity, and to integrate stakeholders for a better solution. Practically, it can be used to identify problems, analyse their boundaries, design interventions, forecast and measure their expected impacts, implement them and monitor and evaluate their success/failure. The book touches upon global issues related to policy making and strategic management, as well as issues related to sustainable development for both the public and private sector.

The uneven geographical distribution of economic activities is a huge challenge worldwide and also for the European Union. In Krugman’s New Economic Geography economic systems have a simple spatial structure. This book shows that more sophisticated models should visualise the EU as an evolving trade network with a specific topology and different aggregation levels. At the highest level, economic geography models give a bird eye’s view of spatial dynamics. At a medium level, institutions shape the economy and the structure of (financial and labour) markets. At the lowest level, individual decisions interact with the economic, social and institutional environment; the focus is on firms’ decision on location and innovation. Such multilevel models exhibit complex dynamic patterns – path dependence, cumulative causation, hysteresis – on a network structure; and specific analytic tools are necessary for studying strategic interaction, heterogeneity and nonlinearities.

Unlike other publications on decision making, the book focuses on discovering the problem, analyzing it and on developing and assessing solution options. One whole chapter describes a case study. It illustrates how the proposed decision making procedure is used in practice. Executives get an approach to systematically and successfully solving complex problems.