Exchange and Optimality

Macroeconomic Dynamics, 2014

This paper surveys the contributions of David Cass, Tjalling Koopmans, and Edmond Malinvaud over the decades during which modern optimal growth theory was developed. By utilizing material ranging from dissertations, drafts, and working papers through conference presentations, discussions, and published papers, we show that both Malinvaud and Cass had significant impacts on the evolution of Koopman's thought, and the development of his part of what is known as “the Cass–Koopmans model.” Based on our findings, we conclude that the modern optimal growth model should include the contributions of Malinvaud, and be retitled “the Cass–Malinvaud–Koopmans” model accordingly.

2010

This paper is prepared for the forthcoming publication of Frisch’s 1930 Yale lecture notes, A Dynamic Approach to Economic Theory: The Yale Lectures of Ragnar Frisch (details at: http://www.routledgeeconomics.com/books/A-Dynamic-Approach-to-Economic-Theory-isbn9780415564090). As the lecture series was given just as the Econometric Society was founded in 1930. We provide as background, a blow-by-blow story of how the Econometric Society got founded with emphasis on Frisch’s role. We then outline how the Yale lecture notes came into being, closely connected to Frisch’s econometric work at the time. We comment upon the lectures, relating them to Frisch’s later works and, more important, to subsequent developments in economics and econometrics.

International journal of business, 2017

We have first demonstrated that Debreu’s view regarding the publication of The Theory of Games and Economic Behavior by von Neumann and Morgenstern in 1944 as the birth of modern mathematical economics is not convincing. In this paper, we have proposed the hypothesis that the coordinated research programs in the 1930’s, initiated by the Econometric Society and the Cowles Commission for Research in Economics with the objective of unifying economic theory, mathematics and statistics, can be regarded as the beginning of modern mathematical economics as well as econometrics. We have argued that this unification has failed to satisfactorily bridge the gap between mathematical economics and the real world economic issues. However, contrary to Marshall's view that mathematics is not an engine of inquiry in economics but is only a shorthand language, we have established in this paper that the application of mathematics in modern mathematical economics can, under certain conditions, pr...

There is a large potential for improving individual risk management through new risk management contracts and associated newindex-settled derivatives. However, there are some difficult problems in designing contracts so that they will be used effectively. Individuals have idiosyncratic individual risks that can be hedged only at some real resource cost due to moral hazard. Individuals seem to exhibit behavior indicative of lack of appreciation of the principles of risk management. These problems are discussed, and some potential new risk management contracts that would make improvements in the management of major income risks are proposed. Despite a proliferation of derivative contracts around the world in recent decades, most of the risks that people face are still not being effectively hedged. Consider, for example, the risk to personal income that the representative individual in a country has. We can obtain an impression of the potential magnitude of this risk by looking a...

2015

This paper focuses on the use of interest rates as a tool for hedging against the default risk of heterogeneous hedge funds (HFs) in a leveraged market. We assume that the banks study the HFs survival statistics in order to compute default risk and hence the correct interest rate. The emergent non-trivial (heavy-tailed) statistics observed on the aggregate level, prevents the accurate estimation of risk in a leveraged market with heterogeneous agents. Moreover, we show that heterogeneity leads to the clustering of default events and constitutes thus a source of systemic risk.