All Questions

36
votes
1answer
20k views

What is structural estimation compared to reduced form estimation?

I've heard a lot of definitions given for structural estimation. But it's never seemed entirely clear to me. Some times I've heard that what one person might call "reduced form" estimation should ...
13
votes
2answers
4k views

Where can I find data on income and social mobility over time? How far back is data available?

I'm interested in income and social mobility. I understand that Piketty's research deals with the the distribution of income over a long time period. I have also seen some of Chetty and Saez's ...
3
votes
0answers
95 views

Differences between LATE and Heckman Selection

I have heard that a paper by Heckman and Vytlacil demonstrate comparisons between nonparametric Heckman selection (NP Heckit) and the LATE (local average treatment effect) framework. Could someone ...
12
votes
5answers
217 views

Contest: earliest written instance of economic thought

Following part 5 of @Lateral fractal answer to "Handy Hints for Committing to the Beta" on the meta "Have fun! No fun = No play. No play = No beta. I'm sure I'm not the only one to feel that a ...
3
votes
3answers
301 views

Is technical analysis somehow a valid method for investment? [closed]

I personally think technical analysis (TA) is not useful at all but I still see lot of courses about technical analysis, and even people using it. They have the advantage of being easy to learn and ...
5
votes
2answers
58 views

Is there some kind of consensus on the determinant factors of education achievement?

There is quite a bit of literature on the economics of education. One of the most debated aspects of it arises when estimating the achievement of the student (usually in the form of standardized test ...
23
votes
4answers
2k views

From an economics perspective, what are the ramifications of a currency with fixed money supply?

I'm thinking specifically of bitcoins. What are the pros and cons of having a fixed number of coins, as opposed to more "normal" currencies? Would the currency have no inflation?
2
votes
1answer
38 views

Was there any use of scoring rules in economics or finance before Hanson published about LMSR?

Scoring rules arose in the field of meteorology, with the seminal paper published in 1950, but I can't find any references to their using in economics or finance until Hanson published in 2002. Half a ...
6
votes
1answer
230 views

Time costs and the St. Petersburg paradox

In the St. Petersburg paradox, we end up with the problem that a rational agent should be willing to play the game for any wager, if we look at expected income or utility of expected income. The ...
11
votes
1answer
479 views

When does the Divine Equilibrium refinement coincide with that of Perfect Sequential Equilibrium?

In signaling games, it seems that the Cho Kreps refinement (intuitive criterion) is the go to refinement for eliminating bad sequential equilibria. Divine equilibrium and perfect sequential ...
6
votes
1answer
591 views

What is the advantage and disadvantage of fiscal illusion policy in terms for the financial market?

What is the advantage and disadvantage of fiscal illusion policy for the financial market? Fiscal illusion suggests that when government revenues are not completely transparent or are not fully ...
13
votes
5answers
3k views

What was economics like as a field before Adam Smith, the father of *modern* economics?

Adam Smith is called the "father of modern economics" and his book The Weath of Nations, a fundamental work in the field of economics, is considered the first modern book on economics. In addition, ...
7
votes
1answer
80 views

How come the CBO reported the Federal Deficit for FY2014 was \$483 Billion when debt went up by \$1.1 trillion?

The Monthly Budget Review: Summary for Fiscal Year 2014 states that the deficit was \$483 billion. Treasury Direct shows Total Public Debt Outstanding increasing over the same period from \$16.7 ...
10
votes
2answers
520 views

Can the Machina Paradox be solved by expanding the choice set?

In another question, the Machina paradox is mentioned as a possible counterexample to the expected utility model: Adding to the list of paradoxes, consider Machina's paradox. It is described in Mas-...
11
votes
3answers
274 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 ...
22
votes
4answers
1k views

What are Giffen Goods?

What exactly are Giffen goods and are they of purely theoretical interest or has there been empirical evidence of their existence?
6
votes
1answer
80 views

Pricing a negative externality under high uncertainty and severe non-linearity

Take a negative externality such as excess greenhouse gas emissions. We know some awkward things about the economic cost of this externality: There is fairly large uncertainty about the timing of ...
7
votes
1answer
179 views

A market correction for an industry which has had long-run negative externalities

Take a market where there have been long-run negative externalities. That is to say, the negative externalities have been in place long enough to have played a part in the investment decisions for all ...
10
votes
5answers
923 views

What are the arguments against the rational expectations hypothesis?

I believe the rational expectations hypothesis says that agents in a model bear expectations that are the same as mathematical expectations. Under what circumstances does this hypothesis become ...
11
votes
3answers
221 views

Self-selection bias during the course of experiments

Suppose you are running a randomized experiment to assess the effect of $X$, say some training program for unemployed people, on $Y$, say the chance of finding a job in the coming year. Suppose also ...
2
votes
1answer
97 views

What makes a factor valid in a factor pricing model of assets?

This question is related to another question here. The question linked to asks for examples of factors commonly used in ICAPM models (intertemporal capital asset pricing model). What I want to know ...
6
votes
5answers
1k views

Book recommendations on empirical methods in economic research and econometrics?

This question is more so geared toward anyone with research experience within economics, though of course, anyone is welcome to respond. I'm an undergraduate math major with a minor in economics. I'...
2
votes
0answers
38 views

Have any chemical reactions been used to simulate CTMC for economic simulations

Assumption and Question Given that many economic models can be viewed as Continuous Time Markov Chains, and that many chemical reactions are also described as such, have any experiments been ...
7
votes
2answers
462 views

Examples of Factors in the ICAPM

The intertemporal capital asset pricing model (ICAPM) is different from the CAPM in that in the ICAPM, utility is conditioned on some set of state variables. The ICAPM results in a multifactor pricing ...
3
votes
2answers
150 views

Is there a theory of financial regulation?

I wonder whether there exists (even a young) theory of financial regulation in the sense of "how to regulate a financial institution/system in an optimal manner"? I mean, there is experience about ...
4
votes
1answer
95 views

Lifecycle Consumption Models and Dispersion in Consumption

Lifecycle models base on the assumption that households want to maximize their consumption and at the same time insure themselves against income shocks. However, there is a lot of (c.p.) consumption ...
7
votes
4answers
660 views

Simulating a Hamilton-Jacobi-Bellman

Say I have solved an HJB of the form: $\rho V(k) = \max_c g(c) + V'(k)(z - c)$ I have calibrated $\rho$ to monthly parameters. I would like to simulate the development of $k$. I start with $k(0)$. ...
16
votes
6answers
481 views

Experiments contradicting the expected utility model

This is a question I asked on the cognitive science beta, but which never got any answer. I do not know what the policy should be for question migration/reposting (maybe worth discussing in the meta?),...
6
votes
1answer
112 views

Objections to total surplus as tool for welfare measurement

I think people would agree that the most common tool for welfare measurements in economics is the notion of total surplus. Throughout it's history, total surplus has been criticized several times ...
6
votes
2answers
326 views

Unemployment and the Frisch-Elasticity

There is the long debate on the Frisch-Elasticity being the driver of unemployment over the business cycle. One argument against the voluntary-unemployment mechanism of RBC models is that if we ...
22
votes
5answers
3k views

How do Marxist economists solve the Diamond-Water Paradox?

For class surveying different economic systems, I read a book on Marxism and its core beliefs. As I read, I came to learn that the Marxist view of economics depends heavily on the Labor Theory of ...
3
votes
2answers
148 views

Currency Values, Developing Economies and Balance of Trade

For a developing economy like India, where balance of trade is negative, is it good to have a weak dollar or a strong dollar? Dollar value increases (Rupee, the local currency, weakens), imports (...
21
votes
4answers
63k views

Partial vs. general equilibrium

Microeconomic models are usually classified as partial and general equilibrium models. As a layman, I understand that partial equilibrium focuses attention on a few economic variables to find the ...
1
vote
1answer
80 views

Are there studies that empirically validate results in contract theory? [closed]

I have started learning contract theory of late, and I find some of the assumptions and findings of the theory are too technical. Are there empirical studies that have validated concepts in contract ...
6
votes
2answers
150 views

Modified core for cooperative games

In the core of cooperative games, the total cost of forming a coalition is shared by all members in a coalition (efficiency). However for my problem I only require that all members are individually ...
6
votes
3answers
331 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 ...
13
votes
3answers
576 views

Are there theories that invalidate the “tragedy of the commons”?

Wikipedia states: The tragedy of the commons is an economics theory by Garrett Hardin, according to which individuals, acting independently and rationally according to each one's self-interest, ...
7
votes
5answers
1k views

Are there real world examples of a shoe event horizon?

This is a famous quote from Douglas Adam's The Restaurant at the End of the Universe: Many years ago this was a thriving, happy planet – people, cities, shops, a normal world. Except that on the ...
-3
votes
1answer
108 views

Help a writer worldbuild a failing economy [closed]

I'm writing fanfiction for the superhero serial novel Worm. The main setting in Worm is Brockton Bay, a failing city of about 300,000 people. The economy has been in decline since the decline of ...
1
vote
0answers
79 views

What is the relationship between real growth and stock market [closed]

I am interested in understanding when the stock market can influence real growth and the opposite, when real growth can influence the stock market. In other words, in which way causation is more ...
7
votes
1answer
117 views

How much impact does memory have on risk pricing?

Have studies been done that demonstrate the limits of human memory on reputation in the Iterated Prisoner's Dilemma? i.e. at what point (on average) does a player start to "forget" the actions of a ...
5
votes
0answers
77 views

Simulations Using Binomial Coefficients

In closed loop toy models with a fixed money supply, what are the downsides of calculating probable outcomes with a binomial coefficient? For example, given a toy economy where trades yield a profit ...
15
votes
2answers
2k views

How is price elasticity determined in practice?

Price elasticity of demand and Price elasticity of supply are two of the most important concepts of microeconomics, but they're generally explained from a hypothetical standpoint, and little effort is ...
11
votes
4answers
7k views

Is complex analysis used in economics?

It's frequently useful in physics and engineering applications; are there any applications in theoretical economics? (If not, were there any attempts at incorporating CA that just never caught on?) ...
17
votes
5answers
1k views

Unemployment and the Minimum Wage---what are the main counter-arguments to Card and Krueger?

Card and Krueger's paper (AER 1994, "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania") uses a difference-in-difference identification strategy to ...
28
votes
6answers
2k views

What benefits do governments receive from not eliminating debt?

Most major economies have substantial government debt; for example among the OECD countries the lowest debt rate is Estonia with around 6% of GDP. Now we may be in a global recession at the moment, ...
8
votes
5answers
3k views

How does a reduction in consumer spending in favour of consumer saving, affect economic activity?

Let's say our government runs an advertising campaign, encouraging its citizens to reduce spending money on consumer items, and instead save more money. Let's say the campaign is successful, and ...
5
votes
2answers
78 views

How are economic principles applied to non-financial models, such as a democratic election?

Economic agents make decisions in particular models. These models do not need to be related to financial contexts, and economics can be used to describe how agents will act in any other field in which ...
64
votes
13answers
14k views

Fundamental equations in economics

For the other sciences it´s easy to point to the most important equations that ground the discipline. If I want to explain Economics to a physicist say, what are considered to be the most important ...
7
votes
2answers
105 views

Identification of switching costs from price shocks

What, if anything, can we learn about customer switching costs by looking at price, revenue, profit, and quantity responses of producers to cost shocks? For example, we can define the profit equation ...

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