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Traditional work on economic dynamics (such as, for example, growth theory and real business cycles) postulates as a starting point the existence of a set of phase variables, whose values fully characterise the economy at any point in time. Despite relying on a general equilibrium framework, such approaches do not justify this assumption in terms of the underlying theory, thereby failing to link economic dynamics with fundamental static principles. This thesis aims to suggest a remedy by introducing dynamics explicitly into Debreu's essentially static framework. This situation can be modelled in a certain well-defined sense. The suggested approach is novel to the economics literature, yet it preserves the fundamental notion of excess demand functions as the driving force behind trade, consumption and production processes. The formulated model yields a system of partial differential equations. For our purposes the most important aspect of this system is that despite its infinitedimensional phase space, we can show that conditions imposed by the economic nature of the underlying problem imply the existence of a finite-dimensional global attractor. In turn, the essential property of a finite-dimensional global attractor is the fact that it can be parameterised using a finite number of variables. These need not have been expliciljly present in the original equations, and therefore are not directly related to goods produced, consumed, and traded. In other words, it is shown that operations of free markets as postulated by Debreu imply the existence of a finite number of phase coordinates that characterise the economy at any point in time, as postulated by existing work on economic growth, business cycles, learning, etc.

In this thesis I consider the extent to which macroeconomic theory and policy evaluation should be based upon behavioural models of human decision making. I review the literature on decision making, and contrast it with the rational paradigm on which economic modelling is traditionally predicated. I also review that part of the macroeconomic literature which is based, explicitly or implicitly, on behavioural theories. I develop a model of behavioural decision making in which investors base their portfolio decision on a choice between two simple heuristical forecasting rules. By simulating the model, I conclude that it can account for the observed history of the FTSE All-Share Index. By comparing this result with the ability of rational expec tations models to account for historical asset prices, I conclude that behavioural theories of decision making do have a useful role in explaining macroeconomic time series. Given that sub-rationality is important in helping to explain the macroecon- omy, the question then arises as to whether there is scope for policy to correct for the misallocation of resources that is caused by this irrationality. I introduce the heuristical decision making model into a wider dynamic stochastic general equilibrium model of the entire economy. This allows me to assess whether using monetary policy to target asset price misalignments can enhance welfare. I find that in my particular model, a counter-intuitive 'running with the wind' monetary policy could enhance welfare. This result is clearly specific to the specification of decision making that I use, and runs counter to other intuitive arguments in favour of a 'leaning against the wind' policy. I, therefore, conclude that a system atic monetary policy response to asset mis-pricing is unlikely to enhance welfare.

The main purpose of this thesis has been to estimate and simulate a general equilibrium model of growing small open economies by taking a new testing approach. The effect of business tax and regulation on growth, together with potential effects of government spending on education and R&D, is embodied in this model. We argue that regressions of growth on its supposed causes are not on their own persuasive evidence of these causes. Instead we propose to test theories by a two-stage Popperian procedure in which rejection can occur at each stage. The structural model is estimated on post-war panel data for 76 countries and the bootstrap is used to produce the model's sampling variation for the analysis of panel regressions of growth. In the first stage the model as tightly specified must pass an estimation test in its structural form in the second its bootstrapped implications must be consistent with the growth regressions it implies. We test two main classes of growth theory: one is the Incentivist theory in which growth is caused by incentives for people to engage in entrepreneurial activity, the other is the Activist theory where direct government intervention to stimulate particular activities---specifically education and R&D---causes growth. We are able to reject the latter for education at both the structural and the bootstrap levels and for R&D at the bootstrap level, though not the structural. We accept the Incentivist theory at both levels.

The one qualitative and two empirical chapters of this thesis addresses the following theory fragments of organizational ecology: (1) the theoretical construction and empirical evidence in support of a frequency code, (2) organizational vital rates with respect to multiple category membership (3) measuring population dynamics: diversity and the engagement niche. (1) the theoretical construction and empirical evidence in support of a frequency code. The theory of the code (Polos et al, 2002; Hannan et al., 2007) is a relatively novel theoretical construction in ecology, with little - if any - explicit empirical/qualitative research conducted in this area. This chapter highlights how the present construction of a code is unsuited in its application to a specific sub - set of the audience: critics. General audience members are unable to dedicate time and effort in understanding all aspects of an offering or organization; they look at only a small set of feature values. Should an object satisfy this schema, the object takes on a taken for granted character. The fewer the feature values assessed by an audience member, the higher the taken for grantedness of the object. By devising a frequency code, the role of the critic - reducing uncertainty to audience members by assessing all aspects of an object - can be fully appreciated. Although all aspects of the objects are scrutinized, some feature values might come under more scrutiny than others. It is this aspect of the frequency code that determines an object’s taken for granted character. Should all of the features be subjected to low scrutiny, the taken for granted character of the object is high; should the feature values be subjected to higher scrutiny, the taken for granted character of the object is lower. Restating aspects of the theory leads to insights that can be qualitatively assessed with respect to critical reviews of kit cars. By using content analysis to support the theory development, it is hoped the issue of defining and measuring codes is progressed further by researchers, and the insight garnered from qualitative data analysis can be applied more often to studies assessing codes. (2) organizational vital rates with respect to multiple category membership. Category generalism (those which claim membership of more than one labeled category) and category specialism (those which claim membership of a single labeled category) have focussed on audience appeal, whether it be via critical attention of securities (Zuckerman, 1999; 2000), film reviews (Zuckerman and Kim, 2003; Zuckerman, Kim, Ukanwa, and von Rittman, 2003; Hsu, 2006) or wine reviews (Negro et al, 2010). Category specialists have higher audience appeal and fitness at a given position than category generalists. Such appeal might manifest itself in the form of greater coverage by critics (Hsu, 2006) and more favorable reviews (Hsu, 2006; Negro et al., 2010), to a higher probability of selling a product at online auction (Hsu et al., 2009). One of the limitations of these studies is that they do not have sufficient temporal length to investigate core ecological and evolutionary dynamics of entry and exit rates. By having the complete history of the UK kit car movement from its inception in 1949 to 2009, attempts can be made at applying multiple category membership to a long term evolutionary perspective. Empirical evidence supports the hypotheses that the interaction of density of category generalists (those organizations which produce both type authentic and craft authentic product offerings) inhibits the legitimation of the category specialist identities (type authentic category specialists and craft authentic category specialists). This interaction between density of category generalists and category specialists lowers the founding rate and increases the failure rate of category specialists. Although the lower appeal of category generalists has been documented, the deleterious effect of increasing category generalist density on the vital rates (and legitimation) of category specialist identities has not been assessed. (3) measuring population dynamics: diversity and the engagement niche. Measuring the engagement niche (Hannan et al., 2007) of an organization is a complex task, with different ways in which a variable can be constructed (Hannan et al., 2007; Hsu et al., 2009). This chapter examines the effect of constructing variables that capture the engagement niche of an organizationin a competitive environment. It starts with a relatively basic construction, then builds up to one that considers competition within a product category, and then one within the population. The merits or otherwise of each variable and their implications to researchers are discussed in detail. It concludes with comparing the Simpson Index of diversity against the Shannon entropy measure with the intention of analyzing the particular strengths of each diversity measure. The differing variables capturing the engagement niche illustrate the attention required by the analyst when deciding on how to conceptualize the engagement niche.  .

Behavioural Finance relaxes the neoclassical assumption that investors consistently apply Bayes Rule when updating their expectations, and identifies the behavioural attributes that affect asset prices. This thesis extends this literature by examining deviations from the Bayesian model that arise due to i) ambiguity aversion, ii) investor sentiment and iii) decision heuristics. Bayesian Updating assumes that investors are able to always estimate a single generating process for expected returns. However, in reality investors analyze noisy information signals that relate to this unknown distribution in a latent way, and it is likely that they are not always able to determine a single probability distribution. Behavioural economists have shown that in such conditions of uncertainty about probabilities people become pessimistic. The first chapter examines whether the pricing of analyst earnings is affected by ambiguity aversion, offering confirmatory evidence. A behavioural literature shows that people in good sentiment make optimistic choices, relative to objective probabilities. The second chapter examines whether investor sentiment affects the performance of the momentum trading strategy, an anomaly related to the pricing of good and bad information. The results indicate that sentiment strongly affects the momentum phenomenon, suggesting that it is triggered from investors’ behavioural biases. It has been suggested that deviations from Bayesian Updating arise due to heuristics triggered by the characteristics of the information used. The last chapter examines the validity of one such important hypothesis proposed by Griffin and Tversky (1992) using rigorous experimental economics techniques. The results confirm this hypothesis, indicating that investors are likely to overreact to salient information signals with low predictive validity.

Influences upon judgment revision are issues of both theoretical and applied interest. Many studies in the extant literature have been categorized as Judge Advisor Systems (JAS) research, and algorithmic decompositions of estimation problems. JAS researchers acknowledge the differentiated social roles of advisor(s) and decision-makers; and seek to isolate the influence of advice from advisor(s), upon the deliberations of decision-makers or judges. JAS research commonly operationalizes advice in solely numeric terms, which undermines the JAS paradigm’s claims of ecological validity. Algorithmic decompositions of estimation problems provides judges with knowledge of the process of advice generation, and differs from advice provided by advisors in JAS studies, as advice is self-generated by users of algorithmic decompositions. The current work sets out why both the JAS paradigm, and algorithmic decompositions are limited (particularly in terms of single judge-advisor information exchange episodes), as means to aid beneficial judgment revision. Six studies are reported that frame, and operationalize research questions that extend understanding of potentially beneficial judgment revision. ‘Conformity to advice’ emerges as an important explanatory factor in judgment revision. Chapter 4 examines participants’ preferences for solely numeric or reasons-based advice, and explores process measures of depth of information search. Participants report an overwhelming preference for reasons-based advice. Chapter 5 investigates the cognitive weighting strategies participants utilize when considering reasons-based or solely numeric advice. Here, participants are insensitive to the type of advice, and discount advice to the same extent - irrespective of type. Chapter 6 investigates the influence of algorithmic decomposition upon beneficial judgment revision. Here, participants were provided with a step-by-step process for solving seemingly intractable estimation problems, or given advice constituted as a testimonial assertion. Results highlight conformity to advice, and the limitations of experimenter generated algorithmic decompositions of estimation problems of unknown effectiveness. Chapter 7 and 8 sought to develop the idea that algorithmic decompositions should influence judgment revision (both for extremely large, and small numerical quantities). Results show that algorithmic decompositions did not facilitate beneficial judgment revision. Instead conformity to advice, irrespective of the quality of advice, was observed only for estimates of large numerical quantities. Chapter 9 was framed as a final attempt to establish if people are able to successfully distinguish between objectively beneficial, and spurious advice. Results indicate that people are unsuccessful in doing so, and find such a task cognitively demanding. Methodological limitations of both the current state of the JAS paradigm, and research involving algorithmic decompositions of estimation problems are identified, in addition to the limitations of the work presented here. Ultimately, methodological suggestions are formulated that may improve understanding of advice giving and taking, in the context of JAS research.

The expectations clock illustrates how expectations of future performance are driven by human biases tied to current and past changes in relative performance. The clock is a model of reversion and over- and under- reaction. Depending on initial expectations, disruptive events (or change events) may have different relationships with future performance. Leadership succession is utilized as a proxy for disruption and over- and under-reaction refer to reactions to negative circumstances. The interaction of expectations and disruption may be associated with a counterintuitive inverse relationship with future relative performance. When expectations are low, disruption may be related to over-reaction and when expectations are high disruption may reduce under-reaction. This occurs if expectations cycle, much like a clock, since the level of expectations is related to the level of inertia. Expectations appear to revert; although, the expectations clock exhibits "stickiness” at key points. Stickiness refers to how top and bottom performing institutions tend to rotate between improving and deteriorating performance but not cross over between the bottom and top halves, respectively. Disruption (or lack of disruption) at key points may influence reversion and stickiness. Contrary to prior studies, this research finds no relationship between initial expectations and the succession event itself.

This study investigates some of the reasons why countries spend public money on education, the impact of education on economic growth, why and how political regimes interfere in the impact of education on growth and how education can be a lever for political change. Conclusions are derived from theoretical models and modern econometric techniques. The research puts forward altruism as one of the determinants of the cross-country variation in public subsidies to education: altruism tends to act as a deterrent for public subsidies to education. The research into altruism and education subsidies exploits previously underused data to present a new proxy to make international comparisons between levels of altruism. The analysis of this thesis shows how the defence-education trade-off constrains the extractive powers of a dictator, it illustrates why dictatorial regimes may have incentives to undermine the effects of education on economic growth, and how this relates to regime transitions. The analysis also demonstrates that more redistributive policies should be expected in democracies than in non-democracies. Finally, this research provides evidence of the more tangible effects of education on growth once the democratic environment is taken into account, clearing the 'micro-macro' paradox of the effects of education on income. This thesis sets an agenda for future research, including the need to observe the evolution of altruism over time and how it relates to variations in cross-country expenditure in education. Also, it demands a continuous re-test of the relationship between education and growth under different political regimes as longer and more informative time series become available.

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