Questions tagged [theory]
The theory tag has no usage guidance.
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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 ...
4
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1answer
55 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 $b$, ...
4
votes
1answer
55 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.
3
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1answer
40 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 ...
0
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1answer
40 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 ...
1
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1answer
63 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 ...
1
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1answer
34 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 ...
2
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1answer
64 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 ...
1
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1answer
43 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 ...
1
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0answers
34 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 $...
0
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1answer
34 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 ...
4
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2answers
167 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 ...
3
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3answers
90 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 ...
2
votes
2answers
72 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/...
2
votes
1answer
77 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} ...
2
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0answers
46 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 ...
2
votes
2answers
63 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 ...
1
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1answer
84 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. ...
2
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0answers
58 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 ...
0
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2answers
59 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?
1
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1answer
49 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 ...
3
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0answers
38 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
49 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 "...
2
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2answers
39 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
55 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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4answers
1k 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 ...
4
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0answers
50 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, ...
7
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3answers
531 views
Are there any instances where short run demand/supply is more elastic than long run cases?
Conventionally both demand and supply for goods and services are both more elastic in the long run than in the short run.
My Question
Is there ever an instance where demand and/or supply for a ...
0
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1answer
72 views
Is there any good textbook for theoretical economics mathematical modelling? [duplicate]
I am currently reading some theoretical economics books and, of course, many mathematical expressions appear. I kind of guess their meaning, but it takes a lot of time and, after all, my guesses are ...
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0answers
74 views
Consequences of a positive uncovered interest rate parity (UIP) spread for an emerging market economy
Empirically we observe that the uncovered interest rate parity (UIP) does not hold; in fact the exchange rate adjusted return on an emerging market bond is higher than the return on US bonds; I know ...
0
votes
3answers
105 views
Looking for a term that explains market participants that lie about their participation to gain access to said market
I'm Looking for a term that explains the behavior of a market participants that will lie or exaggerate how much or what they offer in order to gain access to a market that would otherwise be ...
0
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1answer
87 views
Leontief utility with producer goods
This question may require some explanation. Also, I'm way out of my depths so please let me know if this question is misguided.
The standard Leontief utility seems to assume the goods are consumed in ...
3
votes
1answer
31 views
Type of good that can be owned but not consumed when used
I'm an econ noob so apologizes if this is a dumb question.
I'm trying to find if there is categorization of a good that can be owned but is not consumed when used. Tools are an example of this. A ...
2
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0answers
119 views
Money in New Keynesian models
I have been doing some reading on general equilibrium theory and it has made me highly confused regarding the logic behind NK models. If I have understood correctly, NK models are based on Walrasian ...
3
votes
1answer
64 views
Does the existence of insurance markets negate the broken window fallacy?
In the wake Harvey and Irma, I did some reading on the Broken window fallacy. It makes sense on it's face that after paying the glazier for the broken window, the shopkeep could not spend his six ...
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0answers
152 views
Most important but untested theories in economics? [closed]
In the opinion of the economists here, what are some of the more important theories in economics that remain untested? By untested I mean theories that, though perhaps evaluated using empirical data, ...
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2answers
57 views
Gresham's Law applied to wampum and gold/silver coins in the 1600s
So I was reading an article by Nick Szabo called "Shelling Out"
And in his introduction paragraph he explains how American Indians use bones and shells as a currency called "wampum".
This currency ...
3
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0answers
333 views
How to self-study graduate level macroeconomics? Is there even a point?
As I had hoped to learn enough macroeconomic theory to get some research ideas, my goal at the beginning of this summer was to read through and complete the problems in an introductory advanced ...
2
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1answer
165 views
What is the correct economic term for beneficial “transaction frequency”?
I am not an economist but I am trying to track down and understand an economic principal (and/or theory) that I think is called "transaction frequency" but when I go searching on that term I find only ...
2
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2answers
752 views
Monopoly and Taxes (Nicholson Exercise)
Hello I'm working through Microeconomic Theory : Basic Principles and Extensions of Nicholson and Snyder 10e, for an exam and I fail to get how to answer this question (p.517) :
A specific tax is a ...
1
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1answer
150 views
Difference between LMSR and Liquidity-Sensitive LMSR
What is the difference between the LMSR (logarithmic market scoring rule) and the Liquidity-Sensitive LMSR (LS-LMSR) and what would cause prediction markets like Augur to focus on the later model?
4
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2answers
415 views
Do contemporary Marxist economists still deny the utility/value theory which underpins classical economics?
Do contemporary Marxist economists still apply the labor theory of value when analysing economic phenomena? Or do they e.g. acknowledge that value (and utility) is subjective as is common knowledge in ...
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1answer
317 views
What consumer preferences exhaust the budget?
Suppose that a consumer has a complete and transitive preference relation over R+. Further suppose that the consumer faces prices p = (p1,p2,...,p) 0 and has ...
2
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2answers
74 views
Economic Confirmation Biases
I'm not sure if this is the right place to post this, since my question is a bit more general to all of social sciences (indeed sciences in general), but I figured since Economics is a social science ...
2
votes
2answers
141 views
How to theoretically explain an exponential income distribution?
I have been working on income distributions for a while, and I've been asked to do a theoretical justification for the idea that income distribution follows an exponential function for low incomes. ...
7
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3answers
733 views
Core elements of Marxist Economics
I am interested in understanding the differences between mainstream economics and marxist economics. For that, a guide about what is central to the marxist economic theory (not political or cultural ...
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2answers
81 views
Are there strains of economics that are “no (political) economics”? [closed]
To support my belief in the arbitrariness of economic theory and thought, since different economic systems have their own rules, theories etc., which contradict the rules of other systems and which ...
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1answer
225 views
Transforming expected utility functions
I am using the following theorem:
To better understand how I can transform expected utility functions.
An example with which to work:
I want to show that the preferences represented here satisfy ...
2
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3answers
814 views
Jokes in Economics; Challenging Assumptions in the Dismal Science [closed]
We've delved into questions about the history of economics. We've pondered what the most important equations in economics are. But in every science, academic culture inevitably forms a special set of ...
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0answers
34 views
Limits of utilitarianism?
In all of economics that I know, people maximize their Utility $U_i=f(x_1,...,x_n)$, and therefore make some kind of cost-benefit analysis.
One obvious criticism to this model is that we often do not ...
