Thierry Bréchet, Carmen Camacho, and Vladimir M. Veliov
This chapter extends the use of integrated assessment models (IAMs) by defining rational policies based on predictive control and adaptive behavior. After a review of the main IAMs, the concept of Model Predictive Nash Equilibrium (MPNE) is introduced within a general model involving heterogeneous economic agents operating in (and interfering with) a common environment. This concept captures the fact that agents do not have a perfect foresight for several ingredients of the economy and the environment. The canonical IAM (DICE) is used as a benchmark. The concept of MPNE is then enhanced with adaptive learning about the environmental dynamics and the damages caused by global warming. The approach is illustrated by some numerical experiments in a two-region setting.
This chapter reviews recent developments in the analysis of macroeconomic panel data which typically involve aggregate variables from various countries. In contrast to the large N, small T framework that characterizes microeconomic panels, the two dimensions of a macroeconomic data set are more balanced, often providing a comparable number of time periods and countries (regions). Although this is inconsequential for the analysis based on the linear static panel data framework, it becomes crucial when estimating a dynamic model. A second important feature of macroeconomic data is cross-section dependence among countries. In many cases this dependence cannot be accommodated by a simple function of the geographical distance but also depends on trade relations and the level of economic development. Furthermore, cross-country data often exhibit a much richer pattern of heterogeneity that cannot be represented just by letting the intercept vary across countries. While it is often infeasible to allow for individual specific regression coefficients in a large N, small T panel framework, this may be a reasonable option when analyzing macroeconomic data.
Marine Carrasco, Jean-Pierre Florens, and Eric Renault
This chapter studies the estimation of φ in linear inverse problems Tφ = r, where r is only observed with error and T may be given or estimated. The unknown element φ belongs to a Hilbert space E. Four examples are relevant for econometrics: the density estimation, the deconvolution problem, the linear regression with an infinite number of possibly endogenous explanatory variables, and the nonparametric instrumental variables estimation. In the first two cases T is given, whereas it is estimated in the two other cases, respectively at a parametric or nonparametric rate. This chapter will recall the main results on these models: concepts of degree of ill-posedness, regularity of φ, regularized estimation, and the rates of convergence usually obtained. The main contributions are, moreover, related to the asymptotic normality of the regularized solution φ obtained with a regularization parameter α. If α → 0, we particularly consider the asymptotic normality of inner products <φ, ϕ>, where ϕ is an element of E. These results can be used to construct (asymptotic) tests on φ.
Naomi Beck and Ulrich Witt
This chapter discusses the challenges raised by the inclusion of evolutionary elements in the theories of Carl Menger, Joseph Schumpeter, and Friedrich Hayek. Each adopted an idiosyncratic position in terms of method of inquiry, focus, and general message. The breadth of the topics and phenomena they cover testifies to the great variety of interpretations and potential uses of evolutionary concepts in economics. Menger, who made no reference to Darwin’s theory, advanced an “organic” view of the emergence of social institutions. Schumpeter elaborated an original theory of industrial development based on the recurrent emergence and dissemination of innovations. Hayek adopted the biological notion of group selection and made it the central element in his theory of cultural evolution and the rise of the free market. The chapter concludes with a preliminary evaluation of the possible role that evolutionary theorizing might play in the future development of Austrian economics.
This chapter offers a synthetic account of the key methodological ideas espoused by prominent Austrian economists. It focuses on the contributions of Carl Menger, Ludwig von Mises, Friedrich Hayek, Ludwig Lachmann, and Donald Lavoie, arguing that epistemological concerns fail to encapsulate their overlapping but distinctive and complementary methodological arguments. Their methodological positions are better explained as flowing from a shared and distinctive social ontology that underlies Austrian economic theory. Austrian social ontology is distinct because of its commitment to three key concepts: radical subjectivism, sheer ignorance, and spontaneous order. The chapter then presents a stylized schema of social processes that embodies these key concepts and shows that the schema both accommodates distinctively Austrian theories and allows for a synthesis of the key methodological contributions of all the Austrian economists discussed earlier.
As bettors become more sophisticated, there is an increasing focus on bankroll risk management or how much to bet on certain opportunities. Bettors often face situations where multiple games are played simultaneously. Thus, the problem of allocating capital across different games or events must be considered, much the same as an investor allocating capital to different stocks in a portfolio. In this chapter, the use of accumulator bets (parlays) as part of a portfolio betting strategy is explored.