Questions tagged [theory]

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14
votes
5answers
749 views

Are there Utility Monsters in Economics?

Economics, especially in the modern school is broadly influenced by the utilitarian concept of utility. More so since the labor theory of value has been broadly replaced by the theory of marginal ...
11
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3answers
249 views

Influential Theory in the Economics of Poverty

As far as I can tell, research on the economics of poverty is very empirically driven, and this is probably appropriate. What kind of economic theory has been developed though? I'd also be interested ...
11
votes
3answers
330 views

What are the recent advancements in building a unified theory of bounded rationality?

It seems that bounded rationality models focus on explaining a particular psychological bias, in a very specific way. In particular, its seems that the state of the art consensus is that one size does ...
8
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2answers
928 views

When can one safely talk about decreasing marginal utility?

One thing I hear a lot is talk of decreasing marginal utility—the idea being that additional units of a good become progressively less attractive the more units of that good one has already. However, ...
8
votes
3answers
466 views

What are some theoretical explanations for deviations from the efficient market hypothesis?

According (the semi-strong form of) the efficient market hypothesis, the price of an asset should reflect all publicly available information about the 'fundamental value' of that asset. The reasoning ...
8
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2answers
329 views

Does economic theory support the notion that the wealth of the wealthy is based on the poverty of the poor?

Almost any discussion about poverty and wealth and income inequality at some point includes arguments based on the premise that the wealth of the wealthy is causally related to the poverty of the poor;...
7
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5answers
2k 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 ...
7
votes
3answers
624 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 ...
7
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3answers
831 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 ...
6
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1answer
100 views

Looking for the title of a short (~100 page) Herbert Simon book about “Bread-bricks”

I'm trying to find a short (~100 page) book by Herbert A. Simon in which he presents a simplified economics in which there is only one item of value and it is called the 'Bread-brick'. One can eat a ...
6
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1answer
138 views

State of general equilibrium theories Post Blanchard 2008

This question arose from a useful comment I received upon answering a question on this site, and a recent question from a doctoral student. The so-called theory of general equilibrium (including the ...
5
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2answers
176 views

Why the total value of the whole economy is constantly appreciating?

Take S&P for example. In the long run it just keeps climbing. Same for the market as a whole. Why would this happen? Why the market keeps going up (in the long term) all the time? (source)
5
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1answer
194 views

What term/theory describes more efficient utilization of a resource?

I may be asking the wrong question here, but I wonder if there is a term/theory that describes/studies the evolution of an economy that continually improves the utilization and allocation of certain ...
4
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1answer
160 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.
4
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1answer
55 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 ...
4
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2answers
252 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 ...
4
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2answers
573 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 ...
4
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1answer
71 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
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1answer
36 views

Prediction market based on LMSR: Sell, or buy other side?

Consider a prediction market with two outcomes (Yes and No) and a scoring rule based on Hansons’s LMSR, i.e. ln(ea+eb), where a and b are the number of Yes resp. No shares sold. Assume that I have ...
4
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0answers
60 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, ...
3
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2answers
143 views

What are the economic justifications of the size premium?

What are the economic justifications of the size premium? In factor pricing models like the intertemportal capital asset pricing model (I-CAPM) or arbitrage pricing theory (APT), it is assumed that ...
3
votes
3answers
101 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 ...
3
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1answer
65 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 ...
3
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1answer
159 views

Derive marginal productivity conditions in DW Jorgenson paper

I'm reading Jorgenson, Dale W. (1963), "Capital Theory and Investment Behavior", American Economic Review. Vol 53, No. 2, pp. 247-259. http://www.jstor.org/stable/pdfplus/1823868.pdf I would like ...
3
votes
1answer
33 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 ...
3
votes
1answer
57 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 ...
3
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1answer
65 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 ...
3
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0answers
77 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 ...
3
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0answers
39 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 ...
3
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0answers
57 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 ...
3
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0answers
431 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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3answers
834 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 ...
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^\...
2
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2answers
866 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 ...
2
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2answers
75 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
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2answers
165 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. ...
2
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2answers
94 views

Utility and the tyranny of a minority

Follow on to this question. Using similar constraints: The constraints regarding the system I'm modeling are (and looking for a general solution to): Marginal Utility for every unit of a ...
2
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1answer
79 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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1answer
164 views

Is Capitalism dying or will it prevail? [closed]

During the last decades there has been an increase of anti-capitalistic movements around the world which are fundamentally different from those of the XIX-th and XX-th centuries in the sense that they ...
2
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1answer
396 views

Intuition behind the linkage principle

An important result in auction theory is Milgrom & Weber's linkage principle, which, roughly, holds that the expected revenue from an auction is higher is the seller commits ex ante to reveal as ...
2
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2answers
74 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
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2answers
78 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 ...
2
votes
1answer
167 views

Any information on a toy economy with 3 types of agents in it

I was thinking about a theoretical economy where there are 3 types of roles for the agents. They can be : workers : produce good A criminals : steal good A cops : protects good A without going into ...
2
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1answer
85 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 ...
2
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0answers
67 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
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0answers
124 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 ...
2
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1answer
179 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 ...
1
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1answer
169 views

Have any economists ever argued that the notion of opportunity cost should be done away with?

I hold the opinion that the notion of opportunity cost "muddies the intellectual waters" so to speak, and I'd like to know if any professional economists have expressed this sentiment, or similar. ...
1
vote
1answer
45 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
vote
1answer
257 views

On closedness: commodity space

In Intriligator (2002, p. 143) we find the following statement: \begin{align} C = \{(x_1,x_2,\ldots,x_n) : x_j \geq 0,~j=1,2,\ldots,n\} \subset [0,\infty)^n \end{align} Thus commodity space ...