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 Unreasonable Sufficiency of Protocols Web

The Unreasonable Sufficiency of Protocols Venkatesh Rao, Tim Beiko, Danny Ryan, Josh Stark, Trent Van Epps, and Bastian Aue 1. Introduction Complex coordination problems have an air of doomed intractability about them. We speak in fatalistic terms of economics being a “dismal” science, of sociological phenomena being dominated by the

Three views on economic power

We investigate the concept of economic power in the three main paradigms of economic thinking in the 20th century: neoclassical, marxist and institutionalist. We propose a reconstruction, based on a new taxonomy, of the various forms of power conceptualized by each of them. In particular, we claim that the neoclassical paradigm contains a consistent although often implicit theory of power. We then show that many controversies between these paradigms were debates on power and that some shifts in mainstream economics in the 1970s and 1980s are a reaction to the criticisms leveled against the neoclassical conceptualization of power.

The Fallacy of Endless Economic Growth

What economists around the world get wrong about the future.

L’incontournable trilemme de l'économie mondiale

Traduction française de Dani Rodrik (2012), « The inescapable trilemma of the world economy »

How the Economic Machine Works [Animation] by Ray Dalio

In this animation, Ray Dalio explains How The Economic Machine Works. He covers important points such as credit, interest rates, leveraging and deleveraging.

Power: A Primer for Perplexed Economists

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

Stackelberg Mean Field Games: convergence and existence results to the problem of Principal with multiple Agents in competition

In a situation of moral hazard, this paper investigates the problem of Principal with $n$ Agents when the number of Agents $n$ goes to infinity. There is competition between the Agents expressed by the fact that they optimize their utility functions through a Nash equilibrium criterion. Each Agent is offered by the Principal a contract which is divided into a Markovian part involving the state/production of the Agent and a non--Markovian part involving the states/productions of all the other Agents. The Agents are in interactions. These interactions are characterized by common noise, the empirical distribution of states/productions and controls, and the contract which is not assumed to be a map of the empirical distribution. By the help of the mean field games theory, we are able to formulate an appropriate $limit$ problem involving a Principal with a $representative$ Agent. We start by solving the problem of both the Principal and the $representative$ Agent in this $limit$ problem. Then, when $n$ goes to infinity, we show that the problem of Principal with $n$ Agents converges to the $limit$ problem of Principal with a $representative$ Agent. A notable result is that, despite allowing a general type of contracts, it is approximately optimal for the Principal to offer contracts to the $n$ Agents that are maps of the empirical distribution of states/productions and controls of the Agents.

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...

Milton Friedman

Blog de sciences économiques et sociales de Martin Anota. Traductions, revues de presse.

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.