econ: What’s Wrong With This Picture?

Have at it boys and girls:

When you teach a graduate course in price theory, you typically are teaching solutions to a “constrained optimization” problem.  Thus the calculus along with Lagrangean multipliers and all that.  Those who think there’s too much math in economics don’t deny that this is the problem; they only think that forcing the problem into a calculus form oversimplifies and ignores some real, important issues.

All would agree that part of the problem has to be an agreement on what it is you are trying to maximize or minimize.  You are either maximizing profits subject to some constraints on cost or quantity of inputs, or you are minimizing cost subject to some level of output.  We believe people make decisions this way even if they can’t write a function down on paper.  They’re impelled to do so by the never-ending quest for more.

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Much of my research work since the 1950s has been focused on issued in welfare economics viewed from an informational perspective. The ideas of Hayek (whose classes at the London School of Economics I attended) have played a major role in influencing my thinking. — Leonid Hurwicz

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