Related papers: Classical Economics: Lost and Found
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…
This short paper proposes a simple general equilibrium approach within a Markov-switching regime to explain how asymmetric information between lenders and speculators may lead to currency crises. The paper concludes by providing necessary…
The notion that economies should normally be in equilibrium is by now well-established; equally well-established is that economies are almost never precisely in equilibrium. Using a very general formulation, we show that under dynamics that…
The modeling of complex systems such as ecological or socio-economic systems can be very challenging. Although various modeling approaches exist, they are generally not compatible and mutually consistent, and empirical data often do not…
Although classical economic theory is based on the concept of stable equilibrium, real economic systems appear to be always out of equilibrium. Indeed, they share many of the dynamical features of other complex systems, e.g., ecological…
A number of macroeconomic theories, very popular in the 1980s, seem to have completely disappeared and been replaced by the dynamic stochastic general equilibrium (DSGE) approach. We will argue that this replacement is due to a tacit…
We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on…
Machine learning algorithms can now outperform classic economic models in predicting quantities ranging from bargaining outcomes, to choice under uncertainty, to an individual's future jobs and wages. Yet this predictive accuracy comes at a…
A representation of economic activity in the form of a law of conservation of value is presented based on the definition of value as potential to act in an environment. This allows the encapsulation of the term as a conserved quantity…
This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly…
A general information equilibrium model in the case of ideal information transfer is defined and then used to derive the relationship between supply (information destination) and demand (information source) with the price as the detector of…
Linear Fisher market is one of the most fundamental economic models. The market is traditionally examined on the basis of individual's price-taking behavior. However, this assumption breaks in markets such as online advertising and…
General equilibrium is the dominant theoretical framework for economic policy analysis at the level of the whole economy. In practice, general equilibrium treats economies as being always in equilibrium, albeit in a sequence of equilibria…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
The problem of emergence in physical theories makes necessary to build a general theory of the relationships between the observed system and the observing system. It can be shown that there exists a correspondence between classical systems…
Classical quantitative finance models such as the Geometric Brownian Motion or its later extensions such as local or stochastic volatility models do not make sense when seen from a physics-based perspective, as they are all equivalent to a…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
We analyze complexity of financial (and general economic) processes by comparing classical and quantum-like models for randomness. Our analysis implies that it might be that a quantum-like probabilistic description is more natural for…
Although production is an integral part of the Arrow-Debreu market model, most of the work in theoretical computer science has so far concentrated on markets without production, i.e., the exchange economy. This paper takes a significant…
Matching markets are of particular interest in computer science and economics literature as they are often used to model real-world phenomena where we aim to equitably distribute a limited amount of resources to multiple agents and…