Time and money. How long and how much money is needed to regulate a viable economy (Q395131): Difference between revisions

The book under review is a continuation of the author's book [Dynamic economic theory. A viability approach. Berlin: Springer (1997; Zbl 0876.90032)]. Economic motivation of these two books of the well-known and fruitful contributor to economic mathematics (nonlinear analysis, optimization, and game theory) is dissatisfaction with the contemporary state of economic theory and, especially, Walrasian general equilibrium theory, which is understood by the author as a dynamic one in view of the tâtonnement process and where ``transactions are forbidden before reaching equilibrium, so that the economic part of the system is never viable\dots before infinity''. The author suggests describing and investigating economy as `evolutionary system' from the beginning, unlike physics, where the static theory is the basis of the dynamics. Thus, time is the inalienable mark of an economy, and money is not considered here as a financial tool but it is a polysemous notion which is being revealed implicitly. The viability concepts and mathematics, used in the reviewed book, are presented (on a more abstract level involving biology, engineering, environmental processes) in the author's book (with co-authors \textit{A. M. Bayen} and \textit{P. Saint-Pierre}) [Viability theory. New directions. 2nd ed. Berlin: Springer (2011; Zbl 1238.93001)]. The viability of a dynamic system (generally non-deterministic) means the satisfaction of some phase necessity constraints. An economy under investigation within the frame of viability theory is regarded as a simultaneous evolution \(\left\{ {x(\cdot),p(\cdot)} \right\}\) of the state \(x(t) \in X\), where \(X: =\mathbb R^{l}\) is a commodity space, and \(p\left( {t} \right) \in X^{\ast} \), where the dual space \(X^{\ast} : =\mathbb R^{l\ast }\) is the space of prices. The velocity \(x'(t)\) of the evolution \(x(\cdot)\) is regarded as a transaction as well as endowment, and the velocity \(p'(t)\) of the evolution \(p(\cdot)\) is regarded as a price fluctuation. The duality product \(\left\langle {p,x} \right\rangle \) is interpreted as a patrimonial value. The basic economic problem is the \textit{endowment problem} which consists of providing viability of the pair \((x(t),p(t))\) in the sense that it remains in a given economic environment \(K(t) \subset X \times X^{\ast} \). The viability of the economic system induces financial (monetary) constraints that should be accepted. The behavioral assumption is described by the datum of the economic potential function \(U(x)\) which is a generalization of the classical utility function. The book consists of nine chapters. The first one presents economic motivations, and the next three chapters state and present the concept of endowment and its use for particular problems: the case of one commodity, one agent, and one endowment provider; keeping the endowment above a viability threshold; uncertain endowment and economic cycles. Chapter 5 is devoted to ``nonstandard considerations on time and duration, prediction and anticipation, and extrapolation from the past''. The main mathematical results are presented in Chapter 6, `Endowing fundamental values: willingness to pay', and Chapter 7, `Endowing exchange values: Adam Smith's invisible man'. The latter describes the economy with many agents. Chapter 8, `Why viability theory?', ``describes the basic concepts (viability kernel and capture basin) and proposes a minimal viability survival kit''. Chapter 9 is entitled `What is to be done'. The presented nonconventional approach to the research of economy and very challenging problems on its application to real problems the author delegates ``to younger generations of mathematicians and economists to really collaborate by questioning the pages of this (and other) books''.