Computational aspects of general equilibrium theory. Refutable theories of value (Q2465188)

This book is a monograph containing ten papers and an appendix (by Charles Steinhorn) guaranteeing the necessary mathematical framework that have been written over the last decade. Each paper is self-contained and they can be read in any order. The short but very adequate report about the book is nicely expressed by the authors' words: ``This monograph presents a general equilibrium methodology for microeconomic policy analysis intended to serve as an alternative to the now classical, axiomatic general equilibrium theory as exposited in \textit{G. Debreu}'s ``Theory of Value''. New York: John Wiley (1959; Zbl 0193.20205) or \textit{K. J. Arrow} and \textit{F. H. Hahn}'s ``General Competitive Analysis''. San Francisco: Holden-Day (1971; Zbl 0311.90001). The methodology proposed does not presume the existence of market equilibrium, accepts the inherent indeterminacy of nonparametric general equilibrium models, and offers effective algorithms for computing counterfactual equilibria in these models.'' To be more detailed, below each of the papers of this monograph is listed together with the author/authors, title and with a short information about its contents. \noindent 1. (D. J. Brown and F. Kubler) \textit{Refutable theories of values}: This article has an form of a valuable introductory essay introducing readers into the problems discussed in all the papers of the monograph. Besides, it gives a review of literature items related to those problems and discusses them. \noindent 2. (D. J. Brown and R. L. Matzkin) \textit{Testable restrictions on equilibrium manifold}: The authors present a finite system of polynomial inequalities and market date that observations on market prices, individual incomes, and aggregate endowments must satisfy to be consistent with the equilibrium behavior of some pure economy. Also a characterization of observations on aggregate endowments and market prices, consistent with a Robinson Crusoe's economy, is provided. \noindent 3. (D. J. Brown and C. Shannon) \textit{Uniqueness, stability, and comparative statics in rationalizable Walrasian markets}: The authors study the extend to which qualitative features of Walrasian equilibria are refutable given a finite data set. In their main result, it is shown that a finite set of observations of prices, individual incomes and aggregate consumption vectors is rationalizable in an economy with smooth characteristics if and only if rationalizable in an economy in which observed price vector is locally unique and stable under tâtonnement. \noindent 4. (D. J. Brown and C. Calsamiglia) \textit{The nonparametric approach to applied welfare analysis}: Here necessary and sufficient conditions are proposed for rationalizing individual and aggregate consumer demand data with individual quasilinear and homothetic utility functions. For nonmarketed goods, the authors provide necessary and sufficient conditions on imput market data for production at minimum cost. \noindent 5. (Y.A. Lee and D.J. Brown) \textit{Competition, consumer welfare, and the social cost of monopoly}: In this paper, the authors discuss an alternative method of measuring the social cost of monopoly, different from the conventional deadweight loss. \noindent 6. (D. J. Brown and Ravi Kannan) \textit{Two algorithms for solving the Walrasian equilibrium inequalities}: Here two algorithms are proposed, which can be used for deciding if the Walrasian equilibrium inequalities are solvable. The authors also show that these algorithms may serve as nonparametric tests for multiple calibration of applied general equilibrium models, and can be used to compute a counterfactual eqilibria in applied general equilibrium models defined by the Walrasian equilibrium inequalities. \noindent 7. (F. Kubler) \textit{Is intertemporal choice theory testable?}: The author shows that with Kreps-Porteus preferences utility maximization does not impose any observable restrictions on a household's saving decisions or on choices in good markets over time. Also, the consequences of such preferences are discussed in a model with uncertainty. \noindent 8. (F. Kubler) \textit{Observable restrictions of general equilibrium models with financial markets}: The author study the problem whether general equilibrium models of exchange economy with incomplete financial markets impose restrictions on prices of commodities, assets and aggregate endowments. \noindent 9. (F. Kubler) \textit{Approximate generalizations and computational experiments}: The author shows for a very wide class of economic models, that in order to prove that a certain conclusion holds for a set of parameters of Lebesgue measure close to 1, it is sufficient to verify the conclusion only for a sufficiently large finite of parameters. He demonstrates how one can generalize finitely many examples to statements about infinite classes of economic models. \noindent 10. (F. Kubler and K. Schmedders) \textit{Approximate versus exact equilibria in dynamic economies}: This paper develops theoretical foundations for an error analysis of approximate equilibria in dynamic stochastic general equilibrium models with heterogeneous agents and incomplete financial markets. An error analysis is presented for two models, an overlapping generations (OLG) model with stochastic production and an asset pricing model with infinitely lived agents. \noindent 11. (C. Steinhorn) \textit{Tame topology and o-minimal structures}: This paper covers all the elements of o-minimal structures used in considerations of the monograph. Among other things, there is here a proof of Tarski's theorem on quantifier elimination and a proof of Laskowski theorem on the VC-property of a semi-algebraic family of sets, used in the Brown-Kannan algorithm for effectively computing counterfactual equilibria. Also Wilkie's theorem on Pfaffian functions is discussed.