Prominent among the many contributions that economics has made to humanity are the ones we witness daily in the normal operations of our national economies and our …nancial systems. Less prominent is the work in econometrics that is largely done in universities developing theories and techniques, conducting empirical research, and analyzing the effects of economic policies and social programs.
Econometrics is the tool that forces our ideas about the economy and society to face the reality of observation. Its methods empower empirical modeling and evidence-based studies throughout the social and business sciences. This graduation speech recounts some experiences and lessons learnt in the author’s journey into the world of econometric research. Journeys like this begin with initial conditions rooted in our early lives and education. Teachers, colleagues, students, contemplation, and aspiration all influence our thinking and determine the directions we take in our research. This story is a personal account of the initial conditions and unit roots of experience that have had an enduring impact on my work and career as an econometrician.
Under dynamic random utility, an agent (or population of agents) solves a dynamic decision problem subject to evolving private information. We analyze the fully general and non-parametric model, axiomatically characterizing the implied dynamic stochastic choice behavior. A key new feature relative to static or i.i.d. versions of the model is that when private information displays serial correlation, choices appear history dependent: different sequences of past choices reflect different private information of the agent, and hence typically lead to different distributions of current choices. Our axiomatization imposes discipline on the form of history dependence that can arise under arbitrary serial correlation. Dynamic stochastic choice data lets us distinguish central models that coincide in static domains, in particular private information in the form of utility shocks vs. learning, and to study inherently dynamic phenomena such as choice persistence. We relate our model to specifications of utility shocks widely used in empirical work, highlighting new modeling tradeoffs in the dynamic discrete choice literature. Finally, we extend our characterization to allow past consumption to directly affect the agent’s utility process, accommodating models of habit formation and experimentation.
The 2 x 2 matrix game plays a central role in the teaching and exposition of game theory. It is also the source of much experimentation and research in political science, social psychology, biology and other disciplines. This brief paper is addressed to answering one intuitively simple question without going into the many subtle qualifications that are there. How efficient is the non-cooperative equilibrium? This is part of a series of several papers that address many of the qualifications concerning the uses of the 2 x 2 matrix games.
Socialism is conceptualized as a society in which individuals cooperate, distinguished from capitalism, characterized as involving ubiquitous economic competition. Here, I embed a formal model of cooperation in an Arrow-Debreu model, using the Kantian optimization protocol, and define a Walras-Kant equilibrium, in which firms maximize profits, consumers choose demands for commodities in the usual utilitymaximizing fashion, and the state rents capital to firms. The labor-supply decision of workers, however, is arrived at using the cooperative protocol. Incomes are redistributed through a flat income tax. Walras-Kant equilibria, with any desired degree of income equality exist, are decentralizable, and are Pareto efficient.