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32 votes

Why does economics escape Godel's theorems?

The Incompleteness Theorems apply to computable, first-order, deductive systems. That means that there must be both a computable set of axioms and a computable inference system. In other words, you ...
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19 votes

Why does economics escape Godel's theorems?

Every science using mathematical reasoning is in some sense subject to Goedel's first incompleteness Theorem, but in a rather trivial sense. This didn't diminish the success of, e.g., physics, and it ...
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16 votes
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What is the point of all the models in an economics degree?

Models are more than just math. Model is a simplification of a reality that allows you to study the underlying mechanisms. Models do not need to be mathematical. Many people actually create models ...
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14 votes

Why does economics escape Godel's theorems?

Kurt Gödels Incompleteness Theorem is the negative answer to the quest of the mathematician Davild Hilbert in the early 20th century to find a set of complete and consistent axioms upon which to build ...
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  • 241
11 votes

Influential Theory in the Economics of Poverty

To extend @Majoko's comment, you may be very interested in the book Poor Economics which discusses many of the issues you note. It specifically discusses issues with theory, and of course has a lot of ...
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  • 1,048
9 votes
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When can one safely talk about decreasing marginal utility?

The concept of "marginal utility" (and therefore of decreasing such) has meaning only in the context of cardinal utility. Assume we have an ordinal utility index $u()$, on a single good, and three ...
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8 votes

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

The concept of Opportunity Cost is not used in order to net the direct benefit of a choice, but in order to compare it to the direct benefit of alternative choices. How do we go about using it in ...
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8 votes
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Are there any instances where short run demand/supply is more elastic than long run cases?

It is possible. We normally think demand and supply are more elastic in the long run because consumers/firms have more options in the long run. For example if gas becomes more expensive consumers ...
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8 votes
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Can the stock market grow faster than GDP indefinitely?

There are trends that has allowed stock markets in advanced economies to grow faster than GDP for a long time: Branching out abroad. This gives access to faster growing markets in developing ...
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7 votes

Are there Utility Monsters in Economics?

There is a type of protection called a liability rule, where I, $A$, can take something from $B$, if I pay the damages $c$ which are court-ordered preemptively. Copyright law is all about liability ...
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7 votes

Core elements of Marxist Economics

From reading a selection of writings by Marx, I have come to understand the following three as the core elements of Marxian economics. The labour theory of value. It asserts that the exchange value ...
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7 votes
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Is First Order Stochastic Dominance (FOSD) relation convex?

The first order stochastic dominance relation is convex. An easy way to prove this is to use the property that a cdf $F$ FOSD another cdf $G$ if and only if $F(x)\le G(x)$ for all $x$. That is, $F$ ...
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7 votes
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When can one drop time subscripts? Example from Angrist and Kugler (2003)

Because "adjustment costs are linear and there is no aggregate uncertainty", the FOC for $N_t$ is $$f'\theta g_N(N_{t}, I_{t}) - w_N = \phi \lambda C_N$$. Notice that this is exactly the ...
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  • 2,099
7 votes
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Effect of bounding action space on the set of equilibria

Let $N=2$ and for $(x,y)$ and $(p,q)$ in $[0,1]^2$ let $d_{p,q}(x,y)$ be the Euclidean distance between $(p,q)$ and $(x,y)$, i.e. $d_{p,q}(x,y)=[(p-x)^2+(q-y)^2]^{1/2}$. Choose $k>0$ such that $k&...
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  • 4,557
7 votes
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What is the difference between Impression Management and Signaling Theory?

I don't believe those two terms are used in the same spheres. To me, an economic theorist, signaling plays a role in models with asymmetric information when the informed party moves first and the ...
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6 votes

Are there Utility Monsters in Economics?

Your toy example does not really happen in standard economic models. For one, because we assume identical preferences. Therefore, to the extent that we similarly care about different individuals, we ...
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  • 10.4k
6 votes

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

Roughly, people produce "stuff" by spending their time working (labour) and by employing machinery/tools/land/etc. (capital). If you have more workers or more machinery then it should not come as a ...
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6 votes

How does expected utility theory treat losses?

Gains and losses presuppose a reference point, which is not a feature in standard expected utility theory. In this theory, the only argument in the utility over wealth is $w$, the absolute level of ...
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  • 14.4k
6 votes
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Is it necessary to ask permission before including someone in the acknowledgements of a economic research paper?

In short, no it is not necessary. I have never asked anyone for permission and I have never been asked. The people I thank usually have not read my paper (rarely anyone does, to be honest), but we ...
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  • 5,090
6 votes
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For any small perturbation dx, utility cannot change, or else, x* would not be optimal

It is basically a restatement of the first order condition - at an extrema (maxima or minima) of a well-behaved function its first derivative is equal to zero. If you are at the point of maximization, ...
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6 votes
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Does Debreu's representation theorem of ordinal utility require Hausdorff topology?

No. However, the problem can be reduced to representing preferences on a Hausdorff space. Instead of trying to represent a complete preorder on a set, one can try to represent linear orders on the ...
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5 votes

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

Let me preface this answer with a word of caution: your question is a very good and important one but it is also one that depends tremendously on the definitions of the terms it uses. I'm going to ...
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5 votes
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What are the recent advancements in building a unified theory of bounded rationality?

The term bounded rationality was introduced by Herbert Simon. He wrote "The term, bounded rationality, is used to designate rational choice that takes into account the cognitive limitations of ...
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5 votes

Monopoly and Taxes (Nicholson Exercise)

First let's look at the specific tax. The profit is $$\pi_s=[P(q)-\tau_s]q-C(q).$$ Differentiating to establish the first-order condition: $$P'(q)q+P(q)-\tau_s-C'(q)=0.$$ If we write $A=\tau_s q$ for ...
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5 votes
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understanding the proof of stochastic dominance.

That's just a question of notation. Note that $$\mathcal{d}F(t) = f(t)\mathcal{d}t$$ Then the proof should be easy to understand.
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  • 181
5 votes
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Is utility in neoclassical economics a circular argument/concept?

Let's be clear--the concept of utility is both unfalsifiable (as a singular proposition) and useful. Joan Robinson is right, of course: Utility as a definition is circular. If you read a textbook ...
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  • 66
5 votes

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

First, I have to say that mathematics is the most elegant and precise language to communicate ideas. My wife's been doing research on aesthetics and philosophy, and she spends a lot of time thinking "...
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  • 199
5 votes
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Salop (1979) model for labor markets

I have provided one reference where Salop (1979) is applied to labor markets: Staiger et. al (2010) 'Is There Monopsony in the Labor Market? Evidence from a Natural Experiment' Journal of Labor ...
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  • 3,177
5 votes
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What does omitting capital from production function assume about capital?

One way to think about it is the following: Given a production function $F(L, K)$ of two inputs $L$ and $K$, if $K$ is fixed at $\overline{K}$ in the short run, then we can define the short run ...
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  • 5,112
4 votes

Influential Theory in the Economics of Poverty

Below I'll give you a partial answer by talking about research on poverty traps. Before that, though, let me point out that it is a bit difficult to find any theory that is not motivated by ...
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