Four principles of living systems (openness, isomorphism, feedbacks and steady state) formulated by Bertalanffy in his General System Theory, are fully applicable to the economy. In addition to these principles, we introduce the fifth one – the creation of information. By creating information instead of useless entropy removed from the system to the environment, the living systems increase the information component of their working potential. The growth of information potential allows them to exist, develop and evolve despite the fatal entropy tendency expressed by the second law of thermodynamics.
Socio-economic evolution is a continuation of biological evolution. The appearance of nerves in biological systems and the creation of electrical networks in the economy have been fundamental milestones, after which the information potential growth had accelerated sharply.
Both highly evolved biological organisms and economies have various levels of self-regulation. At the level of biochemical reactions and market interactions, there is a random self-regulation, while at the macro level, centrally determined regulation plays a key role.
{"title":"Physical Macroeconomics: Part III - Economy and General Living System Principles","authors":"V. Bartenev","doi":"10.2139/ssrn.3447749","DOIUrl":"https://doi.org/10.2139/ssrn.3447749","url":null,"abstract":"Four principles of living systems (openness, isomorphism, feedbacks and steady state) formulated by Bertalanffy in his General System Theory, are fully applicable to the economy. In addition to these principles, we introduce the fifth one – the creation of information. By creating information instead of useless entropy removed from the system to the environment, the living systems increase the information component of their working potential. The growth of information potential allows them to exist, develop and evolve despite the fatal entropy tendency expressed by the second law of thermodynamics.<br><br> Socio-economic evolution is a continuation of biological evolution. The appearance of nerves in biological systems and the creation of electrical networks in the economy have been fundamental milestones, after which the information potential growth had accelerated sharply.<br><br> Both highly evolved biological organisms and economies have various levels of self-regulation. At the level of biochemical reactions and market interactions, there is a random self-regulation, while at the macro level, centrally determined regulation plays a key role.","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128893723","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In their recent book, Where Economics Went Wrong, David Colander and Craig Freedman (2019) argue that economics went wrong when it abandoned the Classical liberal firewall that demanded separation of scientific theory from the art of policy making. Colander has long advanced the idea that applied economics should be classified neither as positive nor as normative economics. Instead, it should be placed in a third category, “the art of economics”; art requires vision and acumen in addition to knowledge and technique, and is thus more akin to engineering than the natural sciences. The primary contribution of Where Economics Went Wrong is thus to advance Colander’s general argument through the specific story of Chicago economics. This essay make two interconnected claims. First, while I agree with Colander and Freedman that applied economics would benefit from more art and less calculation, the Chicago school is not the best vehicle by which to tell a convincing story. Second, a thicker history of the Chicago school reminds us of the importance of institutions and rules, not only for understanding the economy but also for thinking about how economists have constructed our discipline and how internal institutions and incentives affect our behavioral choices. ( JEL A11, B20, B41, B52)
{"title":"Where Economics Went Wrong: A Review Essay","authors":"Marianne Johnson","doi":"10.2139/ssrn.3433105","DOIUrl":"https://doi.org/10.2139/ssrn.3433105","url":null,"abstract":"In their recent book, Where Economics Went Wrong, David Colander and Craig Freedman (2019) argue that economics went wrong when it abandoned the Classical liberal firewall that demanded separation of scientific theory from the art of policy making. Colander has long advanced the idea that applied economics should be classified neither as positive nor as normative economics. Instead, it should be placed in a third category, “the art of economics”; art requires vision and acumen in addition to knowledge and technique, and is thus more akin to engineering than the natural sciences. The primary contribution of Where Economics Went Wrong is thus to advance Colander’s general argument through the specific story of Chicago economics. This essay make two interconnected claims. First, while I agree with Colander and Freedman that applied economics would benefit from more art and less calculation, the Chicago school is not the best vehicle by which to tell a convincing story. Second, a thicker history of the Chicago school reminds us of the importance of institutions and rules, not only for understanding the economy but also for thinking about how economists have constructed our discipline and how internal institutions and incentives affect our behavioral choices. ( JEL A11, B20, B41, B52)","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125107998","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
P. Glandon, Kenneth N. Kuttner, Sandeep Mazumder, C. Stroup
How is macroeconomic research conducted and what is it trying to accomplish? We explore these questions using information gleaned from 1,894 articles published in 10 leading journals. The emphasis on quantitative, computation-intensive theory-based analysis has grown over the past 40 years, while the use of econometric methods to test economic hypotheses has diminished. Applied micro techniques and micro data have displaced time series methods. Market imperfections are pervasive and financial frictions have received increasing attention in the past 10 years. The frequency with which non-macro JEL codes appear in macro articles indicates a great deal of overlap between macroeconomics and other fields. (JEL A14, B41, C10, C18, E00, E10)
{"title":"Macroeconomic Research, Present and Past","authors":"P. Glandon, Kenneth N. Kuttner, Sandeep Mazumder, C. Stroup","doi":"10.2139/ssrn.3225417","DOIUrl":"https://doi.org/10.2139/ssrn.3225417","url":null,"abstract":"How is macroeconomic research conducted and what is it trying to accomplish? We explore these questions using information gleaned from 1,894 articles published in 10 leading journals. The emphasis on quantitative, computation-intensive theory-based analysis has grown over the past 40 years, while the use of econometric methods to test economic hypotheses has diminished. Applied micro techniques and micro data have displaced time series methods. Market imperfections are pervasive and financial frictions have received increasing attention in the past 10 years. The frequency with which non-macro JEL codes appear in macro articles indicates a great deal of overlap between macroeconomics and other fields. (JEL A14, B41, C10, C18, E00, E10)","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116279018","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper aims to contribute to the literature on the intellectual history of the economics discipline by delving into the history of the the sawtooth wages model, namely: the behavior of periodically-adjusted fixed nominal wages under persistent inflationary conditions. Ranging from the immediate post-War years to the end of the 1960s, our narrative reveals that, prior to Nicholas Kaldor’s statement of the sawtooth model of real wages, other contributions sprung from various traditions. To this effect, we underscore this model’s ancestor in the Operations Research research program and its the early neoclassical version by Bent Hansen (1951). Later analogous representations by Celso Furtado and Nicholas Georgescu-Roegen maintain the model’s legacy until it is fully rehabilitated as workhorse for theoretical and policy analysis, in the 1980s, as the inertial inflation hypothesis gains terrain in the second round of the monetarist-structuralist debate on economic stabilization in Latin America.
{"title":"A Phillips Curve for the Poor: The Development of the Sawtooth Wages Model of Inflation","authors":"André Roncaglia de Carvalho","doi":"10.2139/ssrn.3404953","DOIUrl":"https://doi.org/10.2139/ssrn.3404953","url":null,"abstract":"This paper aims to contribute to the literature on the intellectual history of the economics discipline by delving into the history of the the sawtooth wages model, namely: the behavior of periodically-adjusted fixed nominal wages under persistent inflationary conditions. Ranging from the immediate post-War years to the end of the 1960s, our narrative reveals that, prior to Nicholas Kaldor’s statement of the sawtooth model of real wages, other contributions sprung from various traditions. To this effect, we underscore this model’s ancestor in the Operations Research research program and its the early neoclassical version by Bent Hansen (1951). Later analogous representations by Celso Furtado and Nicholas Georgescu-Roegen maintain the model’s legacy until it is fully rehabilitated as workhorse for theoretical and policy analysis, in the 1980s, as the inertial inflation hypothesis gains terrain in the second round of the monetarist-structuralist debate on economic stabilization in Latin America.","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127802824","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Islamic economics is not a social science yet. It is a work in progress. Islamic economists differ on methodology for developing Islamic economic thought into a social science. They face several dilemmas surrounding religion, Islamic law, conventional economics, contents of Islamic economics, current practice of Islamic finance and zakah, etc. Until fog clears around these dilemmas the objective of developing Islamic economics as a social science will remain unaccomplished. The paper discusses 11 dilemmas and suggests possible way forward. It aims at providing a platform for discussing and developing the Islamic economic thought into a social science.
{"title":"Dilemmas of Islamic Economics","authors":"Muhammad Khan","doi":"10.2139/ssrn.3402378","DOIUrl":"https://doi.org/10.2139/ssrn.3402378","url":null,"abstract":"Islamic economics is not a social science yet. It is a work in progress. Islamic economists differ on methodology for developing Islamic economic thought into a social science. They face several dilemmas surrounding religion, Islamic law, conventional economics, contents of Islamic economics, current practice of Islamic finance and zakah, etc. Until fog clears around these dilemmas the objective of developing Islamic economics as a social science will remain unaccomplished. The paper discusses 11 dilemmas and suggests possible way forward. It aims at providing a platform for discussing and developing the Islamic economic thought into a social science.","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-05-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125072940","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper deals with the analysis of the nature of economic relations from the perspective of Mario Bunge’s idea of causality. According to Bunge, causality cannot be regarded as the universal connection of phenomena. The application of Bunge’s concept to economics leads to the development of the hypothesis of the non-causal determination of economic phenomena. The contradiction between the non-causal nature of economic phenomena and the dominant causal paradigm in economic theory are shown and discussed. The hypothesis of non-causal determinations allows to explain an ongoing argument between monetarists and Keynesians, the viability of the different schools of economic thought, the existence of the radical criticism of neoclassical economics, the isolation of economic theory from applied economic disciplines.
{"title":"Bunge’s Causality and the Laws of Economics","authors":"Alexander Slutsky","doi":"10.2139/ssrn.3383942","DOIUrl":"https://doi.org/10.2139/ssrn.3383942","url":null,"abstract":"This paper deals with the analysis of the nature of economic relations from the perspective of Mario Bunge’s idea of causality. According to Bunge, causality cannot be regarded as the universal connection of phenomena. The application of Bunge’s concept to economics leads to the development of the hypothesis of the non-causal determination of economic phenomena. The contradiction between the non-causal nature of economic phenomena and the dominant causal paradigm in economic theory are shown and discussed. The hypothesis of non-causal determinations allows to explain an ongoing argument between monetarists and Keynesians, the viability of the different schools of economic thought, the existence of the radical criticism of neoclassical economics, the isolation of economic theory from applied economic disciplines.","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-05-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129972278","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper offers an immanent critique of Peter Boettke's recent book, 'F.A. Hayek: : Economics, Political Economy and Social Philosophy'. That is to say, it takes some of the goals Boettke sets out to achieve and suggests how they might have been pursued more effectively. Issues addressed include the nature of epistemic institutionalism, the relationship between rules and social order, the significance of Hayek's work on complexity, and the importance of debates over the nature of liberalism.
{"title":"Epistemic Institutionalism: Rules and Order, Complexity, and Liberalism","authors":"P. Lewis","doi":"10.2139/ssrn.3380593","DOIUrl":"https://doi.org/10.2139/ssrn.3380593","url":null,"abstract":"This paper offers an immanent critique of Peter Boettke's recent book, 'F.A. Hayek: : Economics, Political Economy and Social Philosophy'. That is to say, it takes some of the goals Boettke sets out to achieve and suggests how they might have been pursued more effectively. Issues addressed include the nature of epistemic institutionalism, the relationship between rules and social order, the significance of Hayek's work on complexity, and the importance of debates over the nature of liberalism.","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134186956","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Keynes’s original IS-LM (LP) model of 1933, although a major conceptual breakthrough, was technically and mathematically flawed because Keynes incorporated realized and expected variables in the same set of equations.
Keynes had solved this problem by early 1936 by formulating a completely new model that David Champernowne and Brian Reddaway had never seen or heard of before in Keynes’s lectures between 1933 and 1935 – the D-Z model of chapters 20 and 21. Keynes provided a brief introduction, outline and summary of the D-Z model on pages 24-32 of chapter 3 of the General Theory. The D-Z model focused exclusively on expectations and uncertainty. The IS-LM (LP) model focused exclusively on the realized, actual outcomes taking place in the economy in the Goods and Money sectors. The labor market, production function, marginal optimizing conditions and theory of the firm, with uncertainty and profit expectations integrated into the formal model, was done within the framework of the D-Z model in chapters 20 and 21. Both Kahn and Joan Robinson had no inkling about what was transpiring in chapters 20 and 21 of the General Theory.
Keynes’s final IS-LM(LP) model represents a major improvement over Keynes’s first exposition of his IS-LM model in December, 1933. Keynes’s consumption function, C, has an explicit marginal propensity to consume incorporated and investment multiplier defined. The variable, Y, is explicitly incorporated into the LM (LP) equation,M=L, as M=L(Y,r).
{"title":"Comparing the Original 1933, IS-LM (LP) Model of Keynes With the Advanced Version of February, 1936 Contained in Chapter 21 of the General Theory","authors":"M. E. Brady","doi":"10.2139/ssrn.3378252","DOIUrl":"https://doi.org/10.2139/ssrn.3378252","url":null,"abstract":"Keynes’s original IS-LM (LP) model of 1933, although a major conceptual breakthrough, was technically and mathematically flawed because Keynes incorporated realized and expected variables in the same set of equations.<br><br>Keynes had solved this problem by early 1936 by formulating a completely new model that David Champernowne and Brian Reddaway had never seen or heard of before in Keynes’s lectures between 1933 and 1935 – the D-Z model of chapters 20 and 21. Keynes provided a brief introduction, outline and summary of the D-Z model on pages 24-32 of chapter 3 of the General Theory. The D-Z model focused exclusively on expectations and uncertainty. The IS-LM (LP) model focused exclusively on the realized, actual outcomes taking place in the economy in the Goods and Money sectors. The labor market, production function, marginal optimizing conditions and theory of the firm, with uncertainty and profit expectations integrated into the formal model, was done within the framework of the D-Z model in chapters 20 and 21. Both Kahn and Joan Robinson had no inkling about what was transpiring in chapters 20 and 21 of the General Theory.<br><br>Keynes’s final IS-LM(LP) model represents a major improvement over Keynes’s first exposition of his IS-LM model in December, 1933. Keynes’s consumption function, C, has an explicit marginal propensity to consume incorporated and investment multiplier defined. The variable, Y, is explicitly incorporated into the LM (LP) equation,M=L, as M=L(Y,r).<br>","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130054780","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Keynes’s style in presenting his technical analysis in the General Theory was not purely mathematical or purely literary. It was a blend of both. This is especially the case when Keynes decided to bring all of the elements in his IS-LM(LP) model together in section four of chapter 21 of the General Theory after he had gone over the underlying D-Z model in chapter 20 of the General Theory. Keynes incorporated uncertainty and expectations within the theory of purely competitive firms in his D-Z model. Keynes deployed the standard, technical exposition of the goal of (expected) profit maximization using the necessary and sufficient first and second order marginal conditions. This allowed Keynes to derive his Aggregate Supply Curve, a locus of all expected D and Expected Z outcomes that represents a set of multiple equilibria.
Keynes’s IS-LM(LP) model of chapter 21 DOES NOT deal with uncertainty and expectations, although Keynes does show how to do so within the context of chapter 20 when he extends his D-Z model of chapter 20 on pp.304-306 of chapter 21 to incorporate the LM curve in his elasticity analysis dealing with the elasticity ed.
There are NOT two different competing models in the General Theory, since the IS-LM(LP) model in chapter 21 is built on the foundation of the D-Z model chapter 20.
Keynes’s style of presentation has created a great deal of difficulty for economists looking for either a purely mathematical exposition or looking for a purely Marshallian, literary exposition. In fact, Keynes blends both together.
Mainstream economists, like Dimand, Young, Hoover, de Vroey, and Rubin, claim that there was no IS-LM model in the GT. They agree with the Post Keynesian school. Their differences with the Post Keynesian position is that they claim that it was Hicks, Harrod, Meade, or Lange, or some combination of the four, who tediously gathered all of the scattered parts of Keynes’s verbal, literary, prose, non formal, non mathematical, Marshallian analysis from the GT and created the IS-LM model in 1937. It is unclear to this author how these types of “interpretations” were ever taken seriously by the economics profession.
Keynes’s mathematical constructions supporting the three elements listed on pp.298-299 are in the GT explicitly on p.115, p.137 and p.199. It is unclear to me how Keynes’s system of equations was supposedly strewn throughout the GT for Hicks, Harrod, Meade, and Lange to dig out and reconstitute. What exactly is being reconstituted by Hicks, Harrod, Meade and Lange?
{"title":"On the Style Used by Keynes in Presenting His IS-LM(LP) Model in Chapter 21 of the General Theory: Literary Prose, Formal Mathematics or Both?","authors":"M. E. Brady","doi":"10.2139/ssrn.3376368","DOIUrl":"https://doi.org/10.2139/ssrn.3376368","url":null,"abstract":"Keynes’s style in presenting his technical analysis in the General Theory was not purely mathematical or purely literary. It was a blend of both. This is especially the case when Keynes decided to bring all of the elements in his IS-LM(LP) model together in section four of chapter 21 of the General Theory after he had gone over the underlying D-Z model in chapter 20 of the General Theory. Keynes incorporated uncertainty and expectations within the theory of purely competitive firms in his D-Z model. Keynes deployed the standard, technical exposition of the goal of (expected) profit maximization using the necessary and sufficient first and second order marginal conditions. This allowed Keynes to derive his Aggregate Supply Curve, a locus of all expected D and Expected Z outcomes that represents a set of multiple equilibria.<br><br>Keynes’s IS-LM(LP) model of chapter 21 DOES NOT deal with uncertainty and expectations, although Keynes does show how to do so within the context of chapter 20 when he extends his D-Z model of chapter 20 on pp.304-306 of chapter 21 to incorporate the LM curve in his elasticity analysis dealing with the elasticity ed.<br><br>There are NOT two different competing models in the General Theory, since the IS-LM(LP) model in chapter 21 is built on the foundation of the D-Z model chapter 20.<br><br>Keynes’s style of presentation has created a great deal of difficulty for economists looking for either a purely mathematical exposition or looking for a purely Marshallian, literary exposition. In fact, Keynes blends both together.<br><br>Mainstream economists, like Dimand, Young, Hoover, de Vroey, and Rubin, claim that there was no IS-LM model in the GT. They agree with the Post Keynesian school. Their differences with the Post Keynesian position is that they claim that it was Hicks, Harrod, Meade, or Lange, or some combination of the four, who tediously gathered all of the scattered parts of Keynes’s verbal, literary, prose, non formal, non mathematical, Marshallian analysis from the GT and created the IS-LM model in 1937. It is unclear to this author how these types of “interpretations” were ever taken seriously by the economics profession.<br><br>Keynes’s mathematical constructions supporting the three elements listed on pp.298-299 are in the GT explicitly on p.115, p.137 and p.199. It is unclear to me how Keynes’s system of equations was supposedly strewn throughout the GT for Hicks, Harrod, Meade, and Lange to dig out and reconstitute. What exactly is being reconstituted by Hicks, Harrod, Meade and Lange?","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133339412","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Since Paul Samuelson introduced the theory of revealed preference, it has become one of the most important concepts in economics. This chapter surveys some recent contributions in the revealed preference literature. We depart from Afriat's theorem, which provides the conditions for a data set to be consistent with the utility maximization hypothesis. We provide and motivate a new condition, which we call the Varian inequalities. The advantage of the Varian inequalities is that they can be formulated as a set of mixed integer linear inequalities, which are linear in the quantity and price data. We show how the Varian inequalities can be used to derive revealed preference tests for weak separability, and show how it can be used to formulate tests of the collective household model. Finally, we discuss measurement errors in the observed data and measures of goodness-of-fit, power and predictive success.
{"title":"Samuelson's Approach to Revealed Preference Theory: Some Recent Advances","authors":"T. Demuynck, P. Hjertstrand","doi":"10.2139/ssrn.3500537","DOIUrl":"https://doi.org/10.2139/ssrn.3500537","url":null,"abstract":"Since Paul Samuelson introduced the theory of revealed preference, it has become one of the most important concepts in economics. This chapter surveys some recent contributions in the revealed preference literature. We depart from Afriat's theorem, which provides the conditions for a data set to be consistent with the utility maximization hypothesis. We provide and motivate a new condition, which we call the Varian inequalities. The advantage of the Varian inequalities is that they can be formulated as a set of mixed integer linear inequalities, which are linear in the quantity and price data. We show how the Varian inequalities can be used to derive revealed preference tests for weak separability, and show how it can be used to formulate tests of the collective household model. Finally, we discuss measurement errors in the observed data and measures of goodness-of-fit, power and predictive success.","PeriodicalId":226815,"journal":{"name":"Philosophy & Methodology of Economics eJournal","volume":null,"pages":null},"PeriodicalIF":0.0,"publicationDate":"2019-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125191170","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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