Pareto Efficiency notes
I.
A.
B.
C.
D.
E.
II.
A.
B.
C.
D.
E.
F.
III.
A.
B.
The Many Meanings of Efficiency
The Merriam-Webster College Dictionary defines "efficiency"
as "effective operation as measured by a comparison of
production with cost (as in energ
Intertemporal Consumption notes
Arrow-Debreu Contingent Claims Markets
A.
General equilibrium already seems rather general. But
Arrow and Debreu noticed that it was much more general than
anyone realized.
B.
G.E. can handle intertemporal markets. Just thi
Comparing Efficiency notes
Kaldor-Hicks Efficiency versus Utilitarianism
A.
Kaldor-Hicks efficiency is based on dollar valuations, not
utility or happiness.
1.
You can know that I'm willing to pay $100 for something
without having any idea about how much
Examples of General Equilibrium notes
Examples of General Equilibrium
A.
Simple example: Suppose I consumers have identical
preferences and endowments in a two-good economy. U=a ln x
+ b ln y; a+b=1. These agents make exchanges in markets
where they know
Conditions for General Equilibrium notes
Sufficient Conditions for Existence of General Equilibrium
A.
Caveat: General equilibrium might still exist even though
sufficient conditions not met!
B.
First, note that the inequalities can be replaced with
equal
Kaldor Hicks Efficiency notes
Kaldor-Hicks Efficiency, I
A.
In practice, then, economists almost always switch to KaldorHicks efficiency, aka "cost-benefit efficiency."
B.
A situation is Kaldor-Hicks efficient iff the dollar value of
social resources is m
Strategic Interaction notes
Strategic Interaction Between Maximizers
A.
Economists usually think of individual agents as maximizing
something, but rarely analyze individuals in isolation. For social
scientists, interesting questions almost always involve
Two Welfare Theorems notes
The Two Welfare Theorems
A.
Market-clearing prices in individual markets have familiar
welfare properties. At the intersection of S&D, total surplus is
maximized, so the allocation must be Pareto efficient.
B.
But can these resu
Probability Objective and Subjective notes
Probability, Objective and Subjective
A.
Probability language allows us to quantify
uncertainty. There is more to say in an uncertain world than "I
don't know."
B.
Least controversial interpretation:
objective pr
Bayes Rule notes
Conditional Probability and Bayes' Rule
A.
Subjective probability theory puts no constraints on preevidential beliefs, but it does restrict the way that people
can update their beliefs when new evidence comes in.
B.
Conditional probabilit