Alecos Papadopoulos
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Fundamental equations in economics
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53 votes

Instead of proposing specific equations, I will point to two concepts that lead to specific equations for specific theoretical set ups: A) Equilibrium The most fundamental and the most misunderstood ...

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People pathologically hoard so much cash that they impoverish the entire nation
41 votes

But when people pathologically hoard so much cash that they impoverish the entire nation This sentence seems to imply that we should fault the rich not because they are rich, but because they do ...

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Criticism of Math in Economics
36 votes

What is a reason to be against mathematics in economics? The danger that any tool creates: to impose itself on the tool-user, diluting and narrowing its view of the world. It is a matter of Human ...

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How can I obtain Leontief and Cobb-Douglas production function from CES function?
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25 votes

The proofs I will present are based on techniques relevant to the fact that the CES production function has the form of a generalized weighted mean. This was used in the original paper where the CES ...

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Why do wages not equalize across space?
21 votes

I would add two more, and rather primitive, factors in @1muflon1 long list: Labor input is not perfectly mobile with respect to the wage. We should never forget that the concept of a utility function ...

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Partial vs. general equilibrium
18 votes

Let's put the succinct answer by @TheAlmightyBob into an abstract model: We want to model the labor market. Markets' structure assumptions: goods market and labor markets are perfectly competitive. ...

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Applications of Trig functions in Economics?
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15 votes

The main property of trig functions is their cyclicality. Then one would think that they could be ideal in time series analysis, to model "fluctuations around a trend". I believe that the reasons they ...

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Solow Model: Steady State v Balanced Growth Path
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15 votes

This is when the attempt at accuracy creates confusion and misunderstanding. Back in the day, growth models were not incorporating technological progress, and led to a long-run equilibrium ...

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Is the Federal Reserve issuing money in a fair way?
14 votes

Normative questions require a standard of fairness in order to then be analyzed and answered with some degree of "objectiveness" so that the answer is not just a declaration of philosophical-...

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In simple terms: what are the implications of homothetic and nonhomothetic consumer preferences?
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13 votes

From a mathematical point of view, if the function $f(x,y)$ is homogeneous (of any degree), and $g()$ is a function whose first derivative is everywhere non-zero, then the function $$H(x, y) = g[f(x,...

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How to derive firm's cost function from production function?
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13 votes

"I am not given wealth $w$ although I suppose I could assume any firm who is purchasing has some budget." No. This is exactly where the fundamental microeconomic theory of the firm differs from the ...

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Why in most macro models technology is labor-augmenting?
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12 votes

The mathematical reason, is that this happens in order for the model to have a steady-state in terms of growth rates: variables like Consumption, Capital, Income, grow at the steady-state, but grow at ...

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

In Labor Economics, "Extensive margin" refers to "how many people work". "Intensive margin" refers to "how much a given number of people work, on average". To copy from a freely available recent study ...

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Can econometrics test for correlation or causality between prices and corruption?
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12 votes

Some related studies: Al-Marhubi, F. A. (2000). Corruption and inflation. Economics Letters, 66(2), 199-202. The analysis is based on cross-country data consisting of 41 countries from Asia and Latin ...

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P-value hacking
11 votes

Under the assumption of i.i.d. Normal characteristics, the situation described is taken care by separate Welch's t-tests that account for possibly different sample sizes and different variances. ...

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Continuity Axiom in Expected Utility Theory
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11 votes

It is. Prior to continuity, which is a property of the preference relation, the preference relation $\succsim$ itself has been defined to be a binary relation that is characterized by transitivity, ...

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Is economics a science based more on statistics (observations) rather than rigorous reasoning?
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11 votes

At the very foundation of sciences like Physics, rest relations and properties that they just are, no explanation can be given, but they have been found directly or indirectly to continue to hold, or ...

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What kind of economic freeware exists for economics students?
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11 votes

I never understood why discussion about specialized software should be off-topic in the specialty's website. And of course I don't agree. So: Before diving into R, which indeed appears to be the ...

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

There exists the... "Adam Smith of the Arabs": Ibn Khaldun. He lived during the 14th century. The work of his that focuses on Economics is Muqaddimah translated in English in 1958 as "The Muqaddimah: ...

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First Order Condition for Profit Maximization in Gambling Industry
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11 votes

The expression in question is in footnote $11$ of the referenced article. Reading the paper, we see that the decision variable here is "the payout rate", which is the reciprocal of $P$. So ...

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Screw foreign investment, lets just print money
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10 votes

"Foreign Direct Investment" is to be understood as bringing in an economy productive capital, and not just purchasing power. When an economy is seriously below full employment (of capital ...

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Is money capital?
10 votes

"...capitalists buy and sell money as though it were a productive economic good." No they don't. They buy and sell currency, because the price of currency fluctuates (due to imagination and/or ...

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Should we expect more structural technological unemployment if growth becomes more limited by natural resources and less by labour?
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10 votes

I understand that you are asking the following Up to now, we have avoided structural unemployment because we increased production by more than what the technological efficiency gains implied (...

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Use of mathematics and imprecise definition of terms
10 votes

Economics pretends to be mathematics, but it is not mathematics. God forbid, if you excuse my language. As many other scientific disciplines, Economics uses Mathematics, it most certainly is not ...

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When Optimal Control fails (?)
9 votes

I am posting this as an answer, because it continues on user @ivansml answer... which is the one that identified the catch here, a catch I naively have overlooked (although it is a narrow case, while ...

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Alternative way of deriving OLS coefficients
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9 votes

The $\mathbf M = \mathbf I-\mathbf X(\mathbf X'\mathbf X)^{-1}\mathbf X'$ matrix is the "annihilator" or "residual maker" matrix associated with matrix $\mathbf X$. It is called "annihilator" because $...

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Dynamic optimisation
9 votes

The Dynamic Programming ("Bellman' Equation") formulation incorporates the terminal boundary condition ("transversality conditions") needed in case we use the Lagrangian/Euler equation formulation. ...

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Why is CRRA utility often used in macroeconomics DSGE model?
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9 votes

Models at Dynamic Stochastic General Equilibrium level must be able to replicate real economies to an acceptable degree. One of the features of real economies has been a relatively stable growth rate (...

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Why has increased productivity over the last 100 years not affected how much people work?
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9 votes

Let's work such a very simple model. We have a Robinson Crusoe island economy, an isolated individual that lives totally alone. In order to consume something Crusoe must work. Assume for even more ...

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What are Giffen Goods?
9 votes

There is rather low probability for demand of a good to exhibit the Giffen property at market level, where averaging over heterogeneous preferences, different income levels and consequent ...

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