Mathematical methods in economics and social choice. (Q1414380)

This book is derived from graduate courses in mathematical methods, the author has taught over the years, with an emphasis on the emerging applications of optimization techniques in topological spaces. Chapter 1 introduces the basics of set theory, boolean algebras, topology, functions, groups, morphisms, fields, and preference relations. The level of formalism may be judged by the statement of Arrow's Theorem in the latter part of the first chapter: If \(\sigma: O(X)^{M} \to O(X)\) and \(M \in D_{\sigma}\), with \(| M| \) finite, then there is a dictator \(\{i\}\), say, such that \(\{i\} \in D_{\sigma}\). Chapter 1 also includes a discussion of the Nakamura lemma. Many of the examples in Chapter 1 make use of matrices and in Chapter 2, the author covers vector spaces, linear transformations, eigenvalues and eigenvectors, quadratic forms and diagonalization for symmetric matrices. This chapter is purely mathematical; there are no applications to or examples from economics or social choice theory. In Chapter 3, the author turns to topologies, beginning with norms and metrics before defining topological spaces and introducing the idea of continuity. The next sections define compactness and convexity. Here, the author does include economic examples such as an application of the separating hyperplane theorem to finding price vectors that allocate resources among individuals, and the Kuhn-Tucker theorem. The final section of the chapter is devoted to exploring some social choice and economic consequences of the results explained in the chapter, especially focussing on the Ky Fan theorem. Chapter 4 picks up the notion of continuous function to consider differentiable functions in normed vector spaces. A brief exposition of Taylor series and critical points serves as an introduction to optimization, featuring numerous economic and social choice examples such as production optimization and uses of Pareto sets building up to the Core theorem. In the final chapter, the author introduces the general ideas of singularity theory for functions in topological spaces and the approximation of smooth functions by Morse functions. The author sketches a proof of the Debreu-Smale theorem and shows how phase portraits can be used to model price adjustments in an economy. He closes with some speculations on the role of dynamics in understanding economic behavior. The book contains a great deal of mathematics and the emphasis is squarely on mathematical methods and their applications, rather than development of theory to its fullest extent. It is largely self-contained as the author takes pains to include introductory definitions for each topic covered, but students using this text would need a degree of mathematical maturity as the development of each area is rapid.