
on History and Philosophy of Economics 
By:  K. Vela Velupillai 
Abstract:  Economic theory, game theory and mathematical statistics have all increasingly become algorithmic sciences. Computable Economics, Algorithmic Game Theory ([28]) and Algorithmic Statistics ([13]) are frontier research subjects. All of them, each in its own way, are underpinned by (classical) recursion theory  and its applied branches, say computational complexity theory or algorithmic information theory  and, occasionally, proof theory. These research paradigms have posed new mathematical and metamathematical questions and, inadvertently, undermined the traditional mathematical foundations of economic theory. A concise, but partial, pathway into these new frontiers is the subject matter of this paper. Interpreting the core of mathematical economic theory to be defined by General Equilibrium Theory and Game Theory, a general  but concise  analysis of the computable and decidable content of the implications of these two areas are discussed. Issues at the frontiers of macroeconomics, now dominated by Recursive Macroeconomic Theory, are also tackled, albeit ultra briefly. The point of view adopted is that of classical recursion theory and varieties of constructive mathematics. 
Keywords:  General Equilibrium Theory, Game Theory, Recursive Macroeconomics, (Un)computability, (Un)decidability, Constructivity 
JEL:  C60 C63 C68 C70 C79 
Date:  2008 
URL:  http://d.repec.org/n?u=RePEc:trn:utwpde:0806&r=hpe 
By:  Fontana Magda 
Date:  2008–05 
URL:  http://d.repec.org/n?u=RePEc:uto:cesmep:200801&r=hpe 
By:  Gil Kalai 
Date:  2008–06–09 
URL:  http://d.repec.org/n?u=RePEc:cla:levrem:122247000000002211&r=hpe 
By:  Thomas Lux 
Abstract:  This chapter reviews recent research adopting methods from statistical physics in theoretical or empirical work in economics and finance. The bulk of what has recently become known as 'econophysics' in broader circles draws its motivation from observed scaling laws in financial markets and the abundance of data available from the economy's financial sphere. Sec. 2 of this review presents the robust power laws encountered in financial economics and discusses potential explanations for scaling in finance derived from models of stochastic interactions of traders. Sec. 3 provides an overview over other applications of statistical physics methodology in finance and attempts to evaluate the impact they have had so far on financial economics. With the following section, the review turns to recent work on the emergence of wealth and income heterogeneity and the recent inception of new strands of research on this topic, both within econophysics and the neoclassical economics tradition. Sec. 5 reviews the new stylized facts that have been identified in crosssectional data of firm characteristics and agentbased approaches to industrial organization and macroeconomic dynamics that have been motivated by these findings. We conclude with an assessment of the major methodological contributions of this new strand of research 
Keywords:  stylized facts, power laws, agentbased models, econophysics 
JEL:  C10 C51 G12 
Date:  2008–06 
URL:  http://d.repec.org/n?u=RePEc:kie:kieliw:1425&r=hpe 
By:  Frédéric Marty (GREDEG  Groupe de Recherche en Droit, Economie et Gestion  CNRS : UMR6227  Université de Nice SophiaAntipolis, OFCE  Observatoire français des conjonctures économiques  FNSP) 
Abstract:  The purpose of the paper is to highlight the role of economists in the institutional building of the electric systems in the first part of the twentieth century. It aims at showing how the organization of electricity sector and its regulation were largely the fruits of the economists’ works not only at a theoretical point of view, but also trough their individual commitment in the public regulation building. <br />Economists participate to the electricity sector reorganization by their academic researches and by their intervention in the new legislative framework building or directly in the firms’ management. Both US experience of private regulated firms and French experience of a publicowned monopoly testimony of such commitment.<br />Through these two examples, the communication will aim at putting into relief the dynamics between scholar debates and electricity sector reforms and the links between economic history and history of economic thought. Finally, the purpose will be to highlight to what extent these two historical experiences and the related economics debates can help us in the current European reform. 
Keywords:  electricity, regulation, economic theory 
Date:  2008–06–09 
URL:  http://d.repec.org/n?u=RePEc:hal:papers:halshs00286530_v1&r=hpe 
By:  K. Vela Velupillai 
Abstract:  Frank Ramsey's classic framing of the dynamics of optimal savings, [51] as one to be solved as a problem in the calculus of variations and Ragnar Frisch's imaginative invoking of a felicitous Wicksellian metaphor to provide the impulsepropagation dichotomy, in a stochastic dynamic framework, for the tackling the problem of business cycles [17], have come to be considered the twin fountainheads of the mathematization of macroeconomics in its dynamic modes  at least in one dominant tradition. The intertemporal optimization framework of a rational agent, viewed as a signal processor, facing the impulses that are propagated through the mechanisms of a real economy, provide the underpinnings of the stochastic dynamic general equilibrium (SDGE) model that has become the benchmark and frontier of current macroeconomics. In this paper, on the 80th anniversary of Ramsey's classic and the 75th anniversary of Frisch's Cassel Festschrift contribution, an attempt is made to characterize the mathematization of macroeconomics in terms of the frontier dominance of recursive methods. There are, of course, other  probably more enlightened  ways to tell this fascinating story. However, although my preferred method would have been to tell it as an evolutionary development, since I am not sure that where we are represents progress, from where we were, say 60 years ago, I have chosen refuge in some Whig fantasies. 
Keywords:  Macrodynamics, Mathematical Economics, Dynamic Economics, Computational Economics. 
JEL:  B16 B22 B23 C60 
Date:  2008 
URL:  http://d.repec.org/n?u=RePEc:trn:utwpde:0807&r=hpe 
By:  Karolina Safarzynska; Jeroen C.J.M. van den Bergh 
Abstract:  In this paper we present an overview of methods and components of formal economic models employing evolutionary approaches. This compromises two levels: (1) techniques of evolutionary modelling, including multiagent modelling, evolutionary algorithms and evolutionary game theory; (2) building blocks or components of formal models classified into core processes and features of evolutionary systems  diversity, innovation and selection  and additional elements, such as bounded rationality, diffusion, path dependency and lockin, coevolutionary dynamics, multilevel and group selection, and evolutionary growth. We focus our attention on the characteristics of models and techniques and their underlying assumptions. 
Keywords:  bounded rationality, evolutionary algorithms, evolutionary game theory, evolutionary growth, innovation, multilevel evolution, neoSchumpeterian models Length 51 pages 
JEL:  B52 C60 C73 
Date:  2008–06 
URL:  http://d.repec.org/n?u=RePEc:esi:evopap:200806&r=hpe 
By:  Stensholt, Eivind (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration) 
Abstract:  A very close link of GS, the GibbardSatterthwaite theorem to Arrow’s "impossibility" theorem is shown. GS is derived as a corollary: from a strategyproof singleseat election method F is constructed an election method G that contradicts Arrow’s theorem. 
Keywords:  Preferential election methods; impossibility theorem 
JEL:  D72 
Date:  2008–06–12 
URL:  http://d.repec.org/n?u=RePEc:hhs:nhhfms:2008_012&r=hpe 
By:  Leonidas Enrique de la Rosa (School of Economics and Management, University of Aarhus, Denmark) 
Abstract:  In this paper, I study the effects of overconfidence on incentive contracts in a moralhazard framework in which principal and agent knowingly hold asymmetric beliefs regarding the prob ability of success of their enterprise. Agent overconfidence can have conflicting effects on the equilibrium contract. On the one hand, an overconfident agent disproportionately values success contingent payments, and thus prefers higherpowered incentives. On the other hand, if the agent is overconfident in particular about the extent to which his actions affect the likelihood of success, lowerpowered incentives are sufficient to induce any given effort level. If the agent is overall moderately overconfident, the latter effect dominates; because the agent bears less risk in this case, he actually benefits from his overconfidence. If the agent is significantly overcon fident, the former effect dominates; the agent is then exposed to an excessive amount of risk, which is harmful to him. An increase in overconfidence  either about the base probability of success or the extent to which effort affects it  makes it more likely that high levels of effort are implemented in equilibrium. 
Keywords:  overconfidence, heterogeneous beliefs, moral hazard 
JEL:  A12 D81 D82 
Date:  2007–07–10 
URL:  http://d.repec.org/n?u=RePEc:aah:aarhec:200708&r=hpe 