34 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 ...
Daniel Walker's user avatar
20 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 ...
VARulle's user avatar
  • 6,805
17 votes
Accepted

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 ...
1muflon1's user avatar
  • 56.4k
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 ...
AnoE's user avatar
  • 241
10 votes
Accepted

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 ...
Klas Lindbäck's user avatar
9 votes
Accepted

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 ...
Bayesian's user avatar
  • 5,290
8 votes
Accepted

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 ...
dsmithecon's user avatar
8 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 ...
Elias's user avatar
  • 983
8 votes
Accepted

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&...
VARulle's user avatar
  • 6,805
8 votes
Accepted

Language of theoretical economic papers

The language you refer to is the same in economics and in mathematics, for the simple reason that economics uses this language borrowed from mathematics, as it uses mathematics. So, you have to look ...
BakerStreet's user avatar
  • 3,697
7 votes
Accepted

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, $F$ ...
Herr K.'s user avatar
  • 15.4k
7 votes
Accepted

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 ...
Alalalalaki's user avatar
  • 2,419
7 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 ...
Michael Greinecker's user avatar
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 ...
Herr K.'s user avatar
  • 15.4k
6 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 "...
Lin Jing's user avatar
  • 319
6 votes
Accepted

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 ...
Bayesian's user avatar
  • 5,290
6 votes
Accepted

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, ...
LudwigNagasena's user avatar
6 votes
Accepted

Does the Rybczynski theorem also hold in modern trade theory models?

The Rybczynski theorem is not directly applicable to the Melitz (2003) model, because the model the Rybczynski theorem is originating from, the Heckscher-Ohlin model, is built on different assumptions ...
Hans-Peter Schrei's user avatar
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 ...
Ubiquitous's user avatar
  • 16.9k
5 votes
Accepted

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.
saguru's user avatar
  • 181
5 votes
Accepted

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 ...
ZCB's user avatar
  • 66
5 votes
Accepted

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 ...
Jesper Hybel's user avatar
  • 3,356
5 votes
Accepted

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 ...
Amit's user avatar
  • 8,466
4 votes

Jokes in Economics; Challenging Assumptions in the Dismal Science

Not to suggest that this should become a list of the best econ related https://xkcd.com/552/ and http://phdcomics.com/comics.php but I always really liked that one:
Martin Van der Linden's user avatar
4 votes

Jokes in Economics; Challenging Assumptions in the Dismal Science

A physicist a chemist and an economist are stranded in a deserted island after a wreckage. They have managed to salvage a case of canned food, but they have nothing to open the cans, and the island is ...
Alecos Papadopoulos's user avatar
4 votes
Accepted

Does the existence of insurance markets negate the broken window fallacy?

No, they don't negate the broken-window fallacy. You're overthinking it, and that's leading you to the wrong conclusion. The breaking of the window represents a loss of wealth. The activities around ...
410 gone's user avatar
  • 8,158
4 votes

Calculating Market Concentration without sales data

Why not using the number of workers? And simply replacing sales (or output) by workers in the HHI or C4 indices. I saw this in the literature, but where? May be in a report of the German "...
Bertrand's user avatar
  • 3,351
4 votes
Accepted

Why does socialism not work?

Socialism doesn't work because an elite does not like to give up their privileges easily. After it took a wave of bourgeous revolution over a number of centuries to force the aristocracy to give up ...
Mozibur Ullah's user avatar
4 votes
Accepted

Lecture notes competitive labor market with minimum wage

In the Varian textbook Intermediate Microeconomics (I am guessing in most micro textbooks), the chapter on Equilibrium discusses price controls in the presence of a demand and supply function. You can ...
Giskard's user avatar
  • 29.5k

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