# All Questions

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### When treating a relative, normalized utility function as a pmf, what is the interpretation of Shannon entropy or Shannon information?

Suppose $\Omega$ is a set of mutually exclusive outcomes of a discrete random variable and $f$ is a utility function where $0 < f(\omega) \leq 1$, $\sum_\Omega f(\omega) = 1$, etc. When $f$ is ...
2k views

### Under what conditions is a monopoly undesirable?

First of all, I realize that "undesirable" is an ambiguous term. So, to clarify, when is a monopoly undesirable under the following metrics? Pareto efficiency Reduces consumer surplus Social Welfare (...
1k views

### CES Production Function with $\rho>1$

In using CES production functions of the form $f(x_1,x_2)=(x_1^\rho+x_2^\rho)^{1/\rho}$, we always assume that $\rho\leq1$. Why do we make that assumption? I understand that if $\rho>1$, the ...
208 views

### When should a receiver randomize across actions in a signaling game?

Suppose there is a signaling game with a finite message space $M$, finite action space $A$, and finite type space $T$. Even simpler, all sender types have identical preferences (the receiver just ...
672 views

### Examples of Applied Micro Paper with R (!) Code and Data in Public Repository

Can anyone suggest examples of relatively simple applied micro papers (e.g. an RCT or straightforward regression model) of possible interest to a general audience, that have their data and code, ...
133 views

### Does 'ethical investing' have any effect?

Some mutual funds make a point of only investing in ethical companies (eg avoiding arms companies, polluters, human rights violators, etc). Or other organisations pressure funds to stop investing in ...
175 views

### Fair voting procedure when there are many issues

When several people have to decide about a single yes/no issue*, the natural decision rule to use is the majority rule. But when there are many issues to decide upon, the majority rule is "unfair" ...
335 views

### Are there fundamental reasons why (exponential) economic growth is highly desirable?

One of the most widely published measures of the economy is the economic growth as a % of the GDP; i.e. the degree to which an economy grows exponentially. In my understanding, when the rate of ...
1k views

### Why is the Cobb-Douglas production function so popular?

As relatively novice quantitative analyst/ Cost analyst, Ive been asked to estimate the level of a given organizations productivity more than once, and then forecast for the next couple of periods. ...
317 views

### Straub and Werning, 2014, on zero capital taxation

This is a test balloon to see whether these kinds of questions are appreciated/welcome on Econ.SE: I had a hard time grasping Straub and Werning (2014) (no paywall). I understand the general ...
174 views

### Do large public companies ever “quit while they're ahead”?

Large public companies (e.g. S&P 500) seem to end their lives in one of two ways: either they're acquired (or taken private), or they go bankrupt. Theoretically it seems like there should be a ...
677 views

### Modern theory of integrability of demand?

I am aware of Hurwickz Uzawa work in integability, neatly summarized by Border http://people.hss.caltech.edu/~kcb/Notes/Demand4-Integrability.pdf I am wondering if there is any modern treatment of the ...
503 views

### What kind of economic freeware exists for economics students?

Can anyone recommend some free software for students studying economics for use in senior projects, theses, or dissertations?
1k views

### Is Marx considered an important classical economist?

In a post on the politics stack exchange, I came across the following description of how Marxism fits into the history of economic thought: Most professional economists consider Marx' work on ...
3k views

### Why is economic growth measured exponentially rather than linearly?

If economic growth is indeed highly desirable (see this question), why must this growth be exponential? With finite resources, exponential growth might hit limits rapidly (or be impossible?). Why not ...
1k views

### Are terrorists rational?

Terrorism in general, and suicidal terrorism in particular, is popularly seen as “irrational,” but many economists and political scientists argue otherwise. This quote is from Terrorism: The ...
2k views

### Has the world become poorer?

This question is not backed by serious economic research but mainly by a very simple attempt to look at how the world economy has changed. I am asking whether and why the world has, over the past 50 ...
4k views

### What are the known / alleged problems against using energy as currency?

What are the known (and alleged) problems of using Joules (i.e. a measure of energy/work) as a currency? I tried to find such idea in Google (searched terms like "technocracy", since someone told me ...
972 views

### Why don't Burgers cost 5 cents?

In this blog post, economist Bob Murphy raises a puzzle involving the principle that in a competitive market, the price equals the marginal cost: There’s a general principle from intro to ...
333 views

### Which capital accumulation is right? $K_t = (1-\delta)K_{t-1} +I_t$ or $K_t = (1-\delta)K_{t-1}+I_{t-1}$?

In a lot of models with capital, I find different variants of capital accumulation formula as follows: $K_t = (1-\delta)K_{t-1} +I_t$ or $K_t = (1-\delta)K_{t-1}+I_{t-1}$ Which one is more ...
1k views

### In log-linearized New Keynesian model, what do $Y$, $Y_t$, $y_t$ actually mean?

This may be a weird question, but I am unfortunately confused by terms. Let us suppose log-linearized New Keynesian model as suggested by Gali here: http://crei.cat/people/gali/pdf_files/monograph/...
2k views

### Why absolute value in elasticities and marginal rate of substitution?

This is a point I find very confusing and very hard to justify to students. Depending on the books, one finds many different conventions regarding the sign of elasticities and marginal rate of ...
1k views

### Can the stock market show indefinite exponential growth?

In a comments on a question on money.SE, the following dialog took place: Eventually there will not be enough matter to represent all the money, so we know for certain that the answer is "No" for a ...
889 views

### Piracy/File sharing - Why aren't songs, movies or books given for free?

Why aren't songs, movies or books given for free (+ads)? i. Every minute, people are pirating and there is no stopping that. If people see 0.99 for a song on iTunes and 0.00 for a song on a torrent ...
47k views

### What is the difference between intensive margin and extensive margin in labor economics?

What is the difference between intensive margin and extensive margin in labor economics, or general RBC model, where we talk about labor-hours supplied changing with extensive margin or intensive ...
1k views

### Why is capital often not included in New Keynesian models? Is there a reason other than modeling difficulty?

In New Keynesian models, like the ones in Gali's simple New Keynesian model or even Mankiw-Reis NK model on sticky information, capital is often not included. Now people do say that there are ...
818 views

478 views

### Would healthcare costs increase (in the long term) if all smokers quit?

According to research by Jan J. Barendregt, M.A., Luc Bonneux, M.D., and Paul J. van der Maas, Ph.D.: RESULTS Health care costs for smokers at a given age are as much as 40 percent higher than ...
100 views

### Are the figures quoted in this liblabcon's blog post accurate? (topic: UK banks)

Background With regards to the UK government. I have recently been involved in a debate stemming from figures mentioned in this blog post (the blogger was advocated by Occupy London's facebook page ...
390 views

### Why wouldn't competition prevent “usurious” payday loan rates?

The current Wiki page on "Payday Loans" claims loans are priced above marginal cost. The justification is that If a lender chooses to innovate and reduce cost to borrowers in order to secure a ...
282 views

### What does Battigalli really mean by “Players can not choose strategies, they can only choose actions.”?

In this video (from 7: 30 to 9: 00)on Youtube, Battigalli mentions the state of world for a simple three-legged centipede game, which, in his own word, is "$\ldots$a description of everything ...
311 views

### Causes of income inequality in the US

I read an article in BusinessWeek that talked about income inequality in the US. The article attributed the difference to the Intel chip that came in 1971. Since that time big hi-tech companies have ...
460 views

### Regression over the whole population

What's the meaning of the standard error of a coefficient in a regression when the whole population is included? I've been so puzzled by this question. Because it seems to me, standard errors make no ...
11k views

107 views

### Are options a form of insurance?

In my economics classes we have studied some really rudimentary concepts about insurance. I'm not really sure what qualifies as insurance to be honest. I was wondering if options are considered a ...
633 views

### Dynamic Optimization: What if the second order condition does not hold?

Consider the following dynamic optimization problem \begin{align} &\max_u \int^T_0{F(x,u)dt}\\ \text{s.t.}~& \dot{x} = f(x,u) \end{align} FOCs The Hamiltonian is given by \begin{align} H(x,u,...
178 views

### Banking Regulatory Frameworks, between the 1973 collapse of Bretton Woods and the introduction of the Basel Accords in 1988?

Does anyone know of any work on banking system behaviour, and in particular the governing regulatory frameworks that applied between the 1973 collapse of the gold standard based Bretton Woods system ...