Questions tagged [theory]

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19 views

Derive perfect risk sharing condition with CES utility and Arrow-Debreu securities

I am trying to redo the derivation of perfect risk sharing in a multi-country multi-sector RBC model (Devulder and Lisack 2020, p.8-9). I am more of an econometrician than a theorist and grad school ...
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1answer
30 views

Intuition of Shephard's Lemma in Reverse

I am not sure how to word this question. I understand the envelop theorem pretty well and as a result Shepard's Lemma. The proof is relatively straightforward. I am getting stuck on the intuition ...
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2answers
110 views

Why should prices come down (in theory) in an educated society with a well-run government?

In Chapter 1 of Robert Kiyosaki's "Rich Dad, Poor Dad", the rich dad says: "In an educated society with a well-run government, prices should actually come down". Is there any ...
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34 views

Identifiability of Non-Parametric Utility Function?

I recently learned that EU characterized by independence and weak ordering is identifiable, but a utility function like: $U(x)=v_1(x)v_2(x)$ is not identifiable. Does it mean that "cardinal ...
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88 views

Certainty equivalence when the utility is semi-continuous instead of continuous

Let $U:\mathbb R^2\to\mathbb R$ be a utility function. If $U$ is strictly increasing and continuous, then it is well known that for any $(x_1,x_2)$ there exists a certainty $(c,c)$ such that $$U(x_1,...
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1answer
308 views

Is it necessary to ask permission before including someone in the acknowledgements of a economic research paper?

Do I need permission to thank someone, even if I said “all mistakes are our own”? Do I have to make sure that the person being thanked must read the paper, or, it is fine if he just discussed about ...
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0answers
66 views

Who were the first economists arguing that utility maximization is the core of rationality and economic behavior?

I am looking for the first economists arguing that maximizing utility function is the iff condition of rational behavior. I've learned that neoclassical economics is founded on this argument. Is this ...
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1answer
72 views

What additional axiom to GARP do we need to generate a differentiable or smooth utility function

After researching for a while, I find this: https://www.jstor.org/stable/1913607?seq=2#metadata_info_tab_contents They come up with an axiom called SSARP that generates a preference with smooth demand ...
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2answers
40 views

Famous recent paper on monetary Unions

do you know any (theoretical or empirical) recent famous paper about monetary unions ? I heard that topics like "monetary unions at ZLB" or "fiscal coordination during crisis time" ...
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0answers
54 views

Conditional distributions in model with continuum of agents

Many economic models consider a continuum of agents, $i \in [0,1]$. Suppose these agents have characteristics $(x_i, y_i)$, which are independently distributed. Are all possible values of $(x_i,y_i) \...
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3answers
58 views

Theoretical economy calculation of closed country

Is there any well-known theoretical solution to the problem as described below? I am considering an ideal very simplified case. There is a closed country/community of N people. All people are working. ...
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1answer
52 views

Are there some examples of theoretical models that discuss pandemics?

I am looking for some papers/references that showcase theoretical economic models that incorporate pandemics. Most work seem to be purely empirical. Does anyone know of some papers that try to model ...
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1answer
68 views

Economics perspective of connected workers

According to the Deloitte report published here, a connected worker is defined as someone whose working life is changing due to digital and other technologies. This is due to advancement of ...
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1answer
41 views

Where can I find economics theories to learn about? [closed]

I'm a beginner to economics so I do not have much knowledge. However, I enjoy learning new economics theories. For now, I normally search for economics theories by looking at those that won nobel ...
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3answers
978 views

What is the point of all the models in an economics degree?

I am a student of Economics doing my masters degree and I have to say I am a bit tired of all the models. On the one side, there is these models where I can see how they are derived, which always ...
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1answer
89 views

Continuity of preferences

Let $\succsim$ be a transitive and reflexive relation on a metric space $X$ with closed upper and lower contour sets. If $\succsim$ is not complete, does it hold that: for all converging sequences ...
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1answer
77 views

Prove that a preference is linear

Given the following two conditions: $x\succ y$ implies $x+a\succsim y+a$, And, $x\prec y$ implies $x+a\precsim y+a$ We want to prove that $\succsim$ is a linear preference. One of the ...
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27 views

Value relevance, informative information, Financial statements, IFRS 9

What are the theories that say that the disclosures in the annexes of the report and accounts are less relevant than the figures in the financial statements, is there anything? I've been looking for ...
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1answer
88 views

When to use a lagrange multiplier?

I have a question in regards to the use of Lagrange multipliers in macro models. I have seen that when writing a Lagrange there are two ways to write the Lagrange multiplier: 1) Indexed or 2) ...
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1answer
91 views

MWG Proposition 2.F.1

Is homogeneity of degree zero necessary in proposition 2.F.1? It seems like the proof does not assume homogeneity of degree zero to establish the proposition. If this is true, it seems that ...
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1answer
27 views

The notation cl co (A)

I stumbled upon this notation, (cl co(A+C), while reading "Set Optimization—A Rather Short Introduction" by Andreas H. Hamel, Frank Heyde, Andreas Löhne, Birgit Rudloff and Carola Schrage. Is it ...
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1answer
201 views

How does expected utility theory treat losses?

I've been reading about prospect theory lately and have read often that prospect theory predicts people will be risk averse in gains and risk seeking in losses. This statement is typically ...
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42 views

Rotation of Quasilinear Utility

Let $u(x,y)=f(x)+y$ be a quasilinear utility. Now we rotate it by 45 degrees, (such that the $x-$axis becomes the direction of $(1,1)$) $v(x,y)=f(x-y)+x+y$. Is $v$ also a quasilinear utility? What is ...
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1answer
66 views

Envelope Theorem in Hopkins and Kornienko (2010)

This is from Hopkins and Kornienko (2010). In this model, $x$ is investments, $s$ is status, and $y=z-x$ is leisure, where $z$ is endowments. $x(r)$ is the optimal investment, and the relative ...
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1answer
119 views

GARP and SARP assumed mononticity?

Monotonicity means the decision maker prefer more goods than less. It is not mentioned in textbook that SARP and GARP preasumed monotonicity. GARP: if $a$ is indirectly revealed preferred to $b$, ...
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1answer
259 views

Is First Order Stochastic Dominance (FOSD) relation convex?

A convex relation is that $x\succeq y$ implies $\alpha x+(1-\alpha)y\succeq y$. Let $>_{FOSD}$ be $\succ$, is the FOSD convex? Intuitively it seems convex.
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1answer
73 views

Understanding agents selecting among markets

Let's say an entrepreneur can choose between starting a business in a competitive market with zero economic profit, and starting a business in a market that is not perfectly competitive with positive ...
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1answer
68 views

Factor-augmenting technologies (Acemoglu and Restrepo 2018c)

In that paper, they consider the following production function: $Y = F(A_KK,A_LL)$. Where: K denotes capital, L is labor, and $A_K$ and $A_L$ denote capital-augmenting and labor-augmenting ...
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1answer
132 views

Why does socialism not work? [closed]

There are many arguments that socialism doesn't work. It's becoming an increasingly popular topic as congresspeople such as Bernie Sanders and Alexandria Ocasio-Cortez push for policies that are ...
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1answer
35 views

Implication of the concavity of u

Suppose that we have the following inequality: $u( y- d) - u(y-d') \ge u(y' - d) - u( y' -d')$. The concavity of $u$ together with $y\le y'$ then implies that $d \le d'$. I sometimes come across this ...
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1answer
114 views

Statistical Learning and Econometrics

The principal goal of Econometrics is to find causal effects between economic variables. But the growing technology level seems to show us that Big Data and Statistical Learning result in a tradeoff ...
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1answer
55 views

Calculating Market Concentration without sales data

I want to calculate market concentration (HHI and C4) but I don't have sales data. Is it accurate to use the share of establishments of each firm as a proxy for market power? Could you list some ...
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0answers
41 views

proof verification in George J. Mailath and Andrew Postlewaite (2001b)

I am reading George J. Mailath and Andrew Postlewaite (2001), and this is the lemma 1 in this paper. I don't understand the induction process in this proof. I think that we should use the fact that $...
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1answer
45 views

Theories that complement/contradict prospect theory?

Kahneman and Tversky's prospect theory, which they developed to contradict expected utility theory, is obviously an interesting result. But, after their experiments has anyone tried to completement ...
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2answers
401 views

Is utility in neoclassical economics a circular argument/concept?

Neoclassical economics as a utility function that represents a consumer's preference ordering over a choice set. Joan Robinson criticized utility for being a circular concept: "Utility is the ...
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3answers
112 views

Can measures of “efficiency” be objective?

So I've noticed the reliance on the term "efficiency" on some cases of economic practice. But I've also recognized problems, e.g. problems of abstraction or problems of pseudo-objectivity, related to ...
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2answers
77 views

What are “the fundamental categories of economics”?

I had an introductory class in marketing last week, and the professor wanted to test our previous knowledge of economics (we are juniors). He asked us this simple question: "What are the fundamental/...
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1answer
82 views

need help from theorists: proof in Cole, Mailath, and Postlewaite (2001)

I have one question in the proof for section 4.1. in Cole, Mailath, and Postlewaite (2001). $$\lim_{\varepsilon \to 0}\frac{1}{2\varepsilon}\int_{\overline{l}-\varepsilon}^{\overline{l}+\varepsilon} ...
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0answers
89 views

Afriat's number

I discovered the Afriat's theorem on the possible rationalization of a given data set of demand observations and would like to ask for your help in understanding how to compute Afriat numbers in ...
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2answers
107 views

Rationale for discounting

I am interested in understanding the rationale behind discounting in the context of government policy appraisal. As far as I understand it, there are three main components to the discount values ...
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1answer
375 views

When can one read the general theory of employment,interest and money?

I am a first-year undergrad econ student and was interested in reading Keynes' book. in the preface, Keynes pointed out that the text deals in the abstract and is meant for his fellow economists. ...
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88 views

Open Foundational Problems in Mathematical Economics

What are some open problems in mathematical economics which are treated as if they have been solved in economics papers? As an example, one of my teachers has previously pointed out to me that there ...
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2answers
63 views

When does an economic theory become true?

When does an economic theory become true? When does it satisfy requirements for true knowledge, e.g. similar to those in empirical sciences?
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1answer
56 views

Post Brexit Referendum employment theory

According to Chuka Umunna, Labour MP for Streatham and prominent pro-EU campaigner: People were told: "if immigration levels fall, it will be easier to get a job, and easier to get a job that's ...
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44 views

Is there a theoretical basis for any popular income- or wealth-distribution model?

When modelling income or wealth, we probably want a continuous distribution with a lower bound; statisticians have named many, but Pareto and log-normal distributions have been among the most ...
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2answers
52 views

A unique global currency and a balanced macroeconomic system

During my last trip, I traveled in Bolivia for two months, and I was struck seeing how life was cheap there, from a European point of view. I believe that is the same in the great majority of the "...
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2answers
44 views

understanding the proof of stochastic dominance.

$\int_a^b u(x)dF(x)$ (1)$ = u(t)F(t)|_a^b - \int_a^b F(t)u^\prime(t)dt$ (2)$ = u(b)-\int_a^b F(t)u^\prime(t)dt$ $= u(b)-(\Phi(t)u^\prime(t)|_a^b-\int_a^b \Phi(t)u^{\prime\prime}(t)dt=u(b)-\Phi(b)u^\...
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0answers
64 views

Market efficiency in software, music, news, etc

I'm not an ecomonist, but have been tossing around some ideas in my head for a long time and thought I might ask here what resources or existing work might be out there. There are a lot of market ...
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5answers
4k views

Can the stock market grow faster than GDP indefinitely?

My understanding of conventional wisdom is that average long-term growth of advanced economies is expected to be significantly lower than the average long-term growth of the value of the largest firms ...
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74 views

Homothetic preferences [duplicate]

I want to prove that if a utility function that represents $\succsim$ has constant marginal elasticity of substitution (MRS) in proportional expansions along rays, that is: $$ MRS(x,y) = MRS(\alpha x, ...