Ergodicity Economics – Formal economics without parallel universes

DISTRIBUTIONS OF MONEY IN MODEL MARKETS OF ECONOMY

We study the distributions of money in a simple closed economic system for different types of monetary transactions. We know that for arbitrary and random sharing with locally conserving money transactions, the money distribution goes to the Gibb's distribution of statistical mechanics. We then consider the effects of savings, etc. and see how the distribution changes. We also propose a new model where the agents invest equal amounts of money in each transaction. We find that for short time-period, the money distribution obeys a power-law with an exponent very close to unity, and has an exponential tail; after a very long time, this distribution collapses and the entire amount of money goes to a tiny fraction of the population.

Exocapitalism: economies with absolutely no limits

There is a touch of destiny with this one. We have real…

Exponential Economist Meets Finite Physicist | Do the Math

[An updated treatment of some of this material appears in Chapter 2 of the Energy and Human Ambitions on a Finite Planet (free) textbook, also mirrors a 2022 article in Nature Physics..]

Routledge International Handbook of Complexity Economics | Ping Chen,

The Routledge International Handbook of Complexity Economics covers the historical developments and early concerns of complexity theorists and brings them into

Rational Inattention: A Review

We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot process all available information, but they can choose which exact pieces of information to attend to. Several important results in economics have been built around imperfect information. Nowadays, many more forms of information than ever before are available due to new technologies, and yet we are able to digest little of it. Which form of imperfect information we possess and act upon is thus largely determined by which information we choose to pay attention to. These choices are driven by current economic conditions and imply behavior that features numerous empirically supported departures from standard models. Combining these insights about human limitations with the optimizing approach of neoclassical economics yields a new, generally applicable model.

The Fallacy of Endless Economic Growth

What economists around the world get wrong about the future.

Power: A Primer for Perplexed Economists

Let's Assume an Unfettered Marketplace of Ideas! Or Actually, Let's Not.

The Machines of Capital

The Machines of Capital As Benjamin Graham famously articulated, in the short run the markets are a voting machine; in the long run the markets are a weighing machine. Price exists in both machines, but the deterministic mechanisms are different. During the voting machine phase, price is a funct...

A Theory of the Consumption Function, with and without Liquidity Constraints

This paper argues that the modern stochastic consumption model, in which impatient consumers face uninsurable labor income risk, matches Milton Friedman's (1957) original description of the Permanent Income Hypothesis much better than the perfect foresight or certainty equivalent models did. The model can explain the high marginal propensity to consume, the high discount rate on future income, and the important role for precautionary behavior that were all part of Friedman's original framework. The paper also explains the relationship of these questions to the Euler equation literature, and argues that the effects of precautionary saving and liquidity constraints are often virtually indistinguishable.

Thoughts on narratives and the role of AI and validators going forward

I wanted to quickly share some reflections and connect some dots around ongoing work with Prashant on causal claims and language in Economics. We have extended

Economics for the future – Beyond the superorganism

Our environment and economy are at a crossroads. This paper attempts a cohesive narrative on how human evolved behavior, money, energy, economy and th…

Regenerative Economics - Principles

Our hope is that the Regenerative Economics materials act like a wildflower, taking root in even the smallest of cracks and spreading seeds to change the way economics is understood by young people around the world. The guiding principles: Facilitate change from the ground up: We recognise the

Regenerative Economics

Regenerative economies strengthen social and ecological systems. It's time for economics education to show us how.

Mythos, Muse, and the Opportunity Cost of Compute

Does Aggregation Theory survive in a world of constrained compute? Yes, insomuch as controlling demand will give power over supply.

Regenerative economics

Regenerative economics is an economic system that works to regenerate capital assets. In standard economic theory, one can either “regenerate” one's capital assets or consume them until the asset cannot produce a viable stream of goods and/or services. Regenerative economics accounts for and gives economic value to Earth and the Sun. Most of regenerative economics focuses on the earth and the goods and services it supplies.