This latest blog post will explore some ideas that I have gathered by reading Noah Smith's blog. In a blog post about two interesting articles read by Noah Smith about new paradigms in economic theory, it is definitely interesting to think about new possible paradigms in economic theory as the field of theory has somewhat stagnated as of late. While it is interesting to think about all of the stuff Nick Hanauer and Eric Liu have to offer, I want to nail it down to an idea that I have on what they have written.
In the article, they talk about social preferences and cooperative games. I have explored both of these interesting concepts in previous thought bubbles, with some of the others as well and it has given me an excellent idea to write a working paper on this particular issue, which excentuates what some others have worked on in social preferences and cooperative games. What I'm going to do differently in this working paper is utilize them to talk about methods of how it interacts with certain fields in Political Economy. While I can elaborate in person about these issues, it would be utmost difficult to surmise that I can find a solution here to the question at hand right away. For those who are interested in these new possible paradigms in Political Economy, I am also combining it with other more established methods of research that has been conducted it before. For those who are interested in what Hanauer and Liu have written in this short, but rather informational piece, the link is here.
Showing posts with label Game Theory. Show all posts
Showing posts with label Game Theory. Show all posts
Friday, March 25, 2016
Wednesday, October 28, 2015
Concerning Short Working Paper on Application of Game Theory in Political Economy And the Nash Equilibrium
One of the professors in the program have given me an idea of writing a short working paper on the application of game theory in political economy. If you didn't know, I was quite fond of political economy charts and typology charts in R^1 when I was a teenager. This included websites such as the Political Compass, the Nolan Chart and many others like it that are numerous in size and scope. What I want to do here is to rummage through the hordes of papers on this particular subject and write a very short working paper on the Application of Game Theory in Political Economy and how it pertains to the Nash Equilibrium.
In the meantime, I also just started a working paper on economics and public policy and how these are intertwined and how we can utilize powerful tools in both fields to further study income inequality. I'm not exactly sure what the narrow subjects I will focus on this particular working paper, but I will have a good idea as next year rolls around.
In the meantime, I also just started a working paper on economics and public policy and how these are intertwined and how we can utilize powerful tools in both fields to further study income inequality. I'm not exactly sure what the narrow subjects I will focus on this particular working paper, but I will have a good idea as next year rolls around.
Monday, May 25, 2015
Rest In Peace John Forbes Nash
Here is a special post about the death of the mathematician, John Forbes Nash. While he is most well known for his theory in the field of game theory, most notably the non-cooperative game and the Nash equilibrium, he also published papers in the field of partial differential equations and geometry. While his theories in the field of game theory are quite impressive and has had an enormous impact from disciplines such as economics and biology, his works on pure mathematics are not to be underestimated. He had been traveling back from Norway after receiving the Abel Prize in Mathematics from the King of Norway. Up to this date, he is the only mathematician to have won the Nobel Prize, which is says something about the versatility of his intellect. I will go to sleep tonight reading his brilliant 27 page dissertation that is among one of my favorite math-related literature. He will surely be remembered for his brilliance in the field of economics and mathematics and not just for the fame that the Academy Award-winning movie that Russell Crowe starred in had brought him.
Thursday, February 19, 2015
Greek Finance Minister, Game Theory and the Big Showdown
In an earlier and rather detailed blog post, I had talked about the Greek debt situation and the stories that surround it. I have decided to post another blog entry primarily about the game theory and the Greek financial minister, Yanis Varoufakis, especially due to his showdown with Germany and the developing crisis in the European Union. The news has just hit today that Germany has rejected the Greek proposal to extend the bailout program by an additional 6 months. The Syriza government had been under enormous pressure by both the European monetary authorities and the officials of various European financial ministries to continue the bailout program despite rejecting the program itself. This article will try to explain the background of the Greek Finance Minister, Yanis Varoufakis, in more detail, but also will go deeper into how his research interest in economics, Game Theory, has also come into play during the midst of this big showdown between the new leftist Syriza government and the European monetary authorities.
The Greek Finance Minister, Yanis Varoufakis, has now become very well-known within the politics of the continent due to his showdown with the European monetary authorities and his penchant for his plain dress combined with a defiant attitude towards what the Troika had committed to his native country of Greece, but also within the economic world with his unorthodox economic views. In two articles, one commentary article written by him in the Guardian newspaper several years back and another article on the left-liberal activist site, CounterPunch, it illustrates a man who is determined not to just change the policies of austerity and liberal capitalism in Greece, but throughout the entire European Union. In the first article, we can picture a man who was trained within the confines of mainstream economics, but had defined himself in 2012 as a Marxist. He did not describe himself as the prototypical Marxist, but one that is committed to changing the economic dimensions within Europe. In the article, he described the economics within the continent as one that is committed to the form of neoliberal capitalism, but his progressive politics of the left will be rejuvenated from the doldrums to saving European capitalism. From this article, we can see a man who is dedicated to the leftist ideology of changing Europe and the economics within the continent towards one that is certainly socialist both in policy and in application.
The second article describes Mr. Varoufakis' plans in detail about changing the dynamics of the European economic system into one that promotes growth and not austerity. The tone of the article also described how a previously unknown Greek economist had stared down the monetary bureaucrats of the European Union and sent some of them scared. It could be best said that Varoufakis had utilized some of his training as an economist, especially in the arts of game theory, to give what little the Greek government had previously into an enormous advantage over the people at the Eurogroup. For those, who are not familiar with Game theory, here's a short BBC article that explores the dimensions of the games (which include possible applications of zero-sum games and of the prisoner's dilemma) that Greece has been playing with the Troika, the Eurogroup and other European countries like Germany. He also has written an article in the New York Times on the big showdown with the European monetary authorities, which includes Germany and Angela Merkel. In the article, he lambasted how they "should not" be utilizing game theory with each other over the debt deal, but should be best focused on how to provide the average population a way out of desperate poverty and destitution. It does make a lot sense to anyone who has read his article, but Varoufakis has been utilizing all sorts of strategies that are based on game theory in dealing with the European monetary authorities! In an article by a popular Forbes contributor, Tim Worstall, there's absolute no room for game theory here! Regardless of whether most people have agreed with Greece's accession into the Eurozone or with the following policy decisions that the European monetary authorities have undertaken, Greece and the European Union are in trouble.
Exactly how much trouble are the European Union, Greece and the Eurozone in? A good question might be to ask about the other debt troubles that various European nations such as Spain, Italy, Portugal and even France have in the future. Germany is not even immortal with its enormous debt burden that it has also managed to start decreasing in the last couple of years, but another crisis could exacerbate the debt levels even in Germany which are already alarmingly high. I strongly disagree with a recent Economist article on how Greece could have made the Eurozone work better. Greece could not have made the Eurozone work better, as there are numerous other economies that are facing similar problems as Greece. I believe that with the Greek Finance Minister's dangerous moves may put the European Union and the Eurozone at its brink, but there is also ample room for finding a balance between the views of both Germany and Greece. By rejecting each other's counter-proposals, they are putting the world economy at risk with their latest proposals. Worried Greek depositors and international investors will now brace for the final showdown between Greece and the European monetary authorities. Let's hope we don't wake up to see an avoidable financial crisis.
The Greek Finance Minister, Yanis Varoufakis, has now become very well-known within the politics of the continent due to his showdown with the European monetary authorities and his penchant for his plain dress combined with a defiant attitude towards what the Troika had committed to his native country of Greece, but also within the economic world with his unorthodox economic views. In two articles, one commentary article written by him in the Guardian newspaper several years back and another article on the left-liberal activist site, CounterPunch, it illustrates a man who is determined not to just change the policies of austerity and liberal capitalism in Greece, but throughout the entire European Union. In the first article, we can picture a man who was trained within the confines of mainstream economics, but had defined himself in 2012 as a Marxist. He did not describe himself as the prototypical Marxist, but one that is committed to changing the economic dimensions within Europe. In the article, he described the economics within the continent as one that is committed to the form of neoliberal capitalism, but his progressive politics of the left will be rejuvenated from the doldrums to saving European capitalism. From this article, we can see a man who is dedicated to the leftist ideology of changing Europe and the economics within the continent towards one that is certainly socialist both in policy and in application.
The second article describes Mr. Varoufakis' plans in detail about changing the dynamics of the European economic system into one that promotes growth and not austerity. The tone of the article also described how a previously unknown Greek economist had stared down the monetary bureaucrats of the European Union and sent some of them scared. It could be best said that Varoufakis had utilized some of his training as an economist, especially in the arts of game theory, to give what little the Greek government had previously into an enormous advantage over the people at the Eurogroup. For those, who are not familiar with Game theory, here's a short BBC article that explores the dimensions of the games (which include possible applications of zero-sum games and of the prisoner's dilemma) that Greece has been playing with the Troika, the Eurogroup and other European countries like Germany. He also has written an article in the New York Times on the big showdown with the European monetary authorities, which includes Germany and Angela Merkel. In the article, he lambasted how they "should not" be utilizing game theory with each other over the debt deal, but should be best focused on how to provide the average population a way out of desperate poverty and destitution. It does make a lot sense to anyone who has read his article, but Varoufakis has been utilizing all sorts of strategies that are based on game theory in dealing with the European monetary authorities! In an article by a popular Forbes contributor, Tim Worstall, there's absolute no room for game theory here! Regardless of whether most people have agreed with Greece's accession into the Eurozone or with the following policy decisions that the European monetary authorities have undertaken, Greece and the European Union are in trouble.
Exactly how much trouble are the European Union, Greece and the Eurozone in? A good question might be to ask about the other debt troubles that various European nations such as Spain, Italy, Portugal and even France have in the future. Germany is not even immortal with its enormous debt burden that it has also managed to start decreasing in the last couple of years, but another crisis could exacerbate the debt levels even in Germany which are already alarmingly high. I strongly disagree with a recent Economist article on how Greece could have made the Eurozone work better. Greece could not have made the Eurozone work better, as there are numerous other economies that are facing similar problems as Greece. I believe that with the Greek Finance Minister's dangerous moves may put the European Union and the Eurozone at its brink, but there is also ample room for finding a balance between the views of both Germany and Greece. By rejecting each other's counter-proposals, they are putting the world economy at risk with their latest proposals. Worried Greek depositors and international investors will now brace for the final showdown between Greece and the European monetary authorities. Let's hope we don't wake up to see an avoidable financial crisis.
Saturday, January 10, 2015
Some Ideas on the possible application of Game Theory in exploring the lifting of the US embargo on Cuba
As I mentioned in a past blog post, there has been a lot of banter about the current restoration of diplomatic relations with the nation of Cuba. This post concerns something else that has been on my mind the last couple of weeks. It is probable application of game theory towards the field of international economics. Game theory is already used most intensively in several branches of economics (industrial organization, behavioral economics, information economics, political economy), but there's a lack of full application in other branches of economics such as international economics.
I have been intensely reading parts of a book by the late Stanford economics professor, John McMillan. The book goes through the lack of game theory application, despite obvious game theory-like applications within international economics. This book had given me several ideas on the possible wider probable usage of certain mathematical games within the fixture of game theory in order to be applied in the inner-working of international economics, especially in international trade. By utilizing the trade between Cuba and US as a possible example, we could possibly apply game theory to the increased link between the two countries versus the chief adversary of the US in Russia. Here are some possible applications that can be utilized, which also includes some articles on similar topics that I found, which had given me the impetus to write this article.
1. Embargo or No embargo payoff
By utilizing the simple stochastic multi-player games, we can determine payoff costs by comparing the embargo or no embargo payoff between the two different multi-layer outcomes of (Embargo) or (No Embargo). This is a rather simplistic explanation of such a multi-player stochastic game that we will need to construct in order to measure the payoffs in of the each quadrants, but there might be a need to construct algorithmic stochastic multi-player games. This need is not just based on the complexity of the variables, but also on the need to have more well-defined variables, especially when it comes to find the advantages to each variable. To further explore the information, you need to perhaps construct a more complex model, with the help of computer software, in which there needs to be a various number of factors included. These factors include the trade flow variables, the number of zero-sum games and cooperative games performed in each of the variables, etc. There needs to be a construction of a model that is complex enough to find the actual numbers of payoffs for each of the two factors, but I'm sure it'll indicate that the
This article by Professor Dobre Claudia Ioana strikes to me as an interesting implication of certain principles within the mathematical realm of game theory to something found in international economics -> international trade. It also has given me some impetus in coming up with the idea of implicating the methods of game theory in dealing with rather complex trade relations between the countries of Cuba and the US. By utilizing the basic idea around Part 2.3 of the article, we can calculate for the strategic trading policies that could potentially benefit both Cuba and the US. In this simplified case, we can solve for the Nash equilibrium within the confines of a non-cooperative game, the payoffs are as follows:
2. Extensive Form Games
Another factor that should possibly be calculated is how the United States has to deal with how Russia responds to Cuba and vice versa. This particular situation can be characterized as a multi-player game where we need to figure out the payoffs and similar equilibriums. In this situation, we could potentially utilize extensive form games to factor each of the important factors between these three competing nations. It might be hard to characterize entire large economies as a single one micro body/ individual, but I believe that it can be surmised that all of these countries act as one single body.
The first series of extensive form games you could possibly calculate for certain payoffs between US-Cuba and between Russia-Cuba. By factoring the payoff decision-making numbers of this series of extensive form games (factors including certain firms, certain economic sectors, certain competitive indicators), you could potentially compare the numerical payoffs in each of these insistences.
After this, you could potentially utilize a second series of extensive form games to calculate the numerical payoff results that are resultant from the previous extensive form game. The numerical payoffs, along with certain control variables such as competitive advantage, gains/losses from trade and other indicators, are then calculated to determine whether or not the options are valid through the applicability of such a model.
The calculated effects on Cuba's trade policies in certain segments of their economy and the US economy could potentially benefit the US tremendously in that particular arena versus what the main US adversary has, which is Russia. By calculating for the potential benefits/pitfalls from them, one could be derive a simulation for a potential new international trade model.
(An introduction to Extensive Form games is found here, written/presented by Jonathan Levin, the winner of the 2011 John Bates Clark medal. These explanations are mostly meant for his field of concentration, which is industrial organization, but I think it gives a good idea of what extensive form games are.)
I believe the ideas that Professor Dobre Claudia Ioana and the late Professor John McMillan brought up offers a lot of hope for game theory to become a great potential tool for international economics/international trade researchers to continue to build onto. There could be lots of different ways to utilize these tools in its eventual development into useful tools for analyses of complex international trade situations/conflicts, such as that in this particular situation.
I have been intensely reading parts of a book by the late Stanford economics professor, John McMillan. The book goes through the lack of game theory application, despite obvious game theory-like applications within international economics. This book had given me several ideas on the possible wider probable usage of certain mathematical games within the fixture of game theory in order to be applied in the inner-working of international economics, especially in international trade. By utilizing the trade between Cuba and US as a possible example, we could possibly apply game theory to the increased link between the two countries versus the chief adversary of the US in Russia. Here are some possible applications that can be utilized, which also includes some articles on similar topics that I found, which had given me the impetus to write this article.
1. Embargo or No embargo payoff
By utilizing the simple stochastic multi-player games, we can determine payoff costs by comparing the embargo or no embargo payoff between the two different multi-layer outcomes of (Embargo) or (No Embargo). This is a rather simplistic explanation of such a multi-player stochastic game that we will need to construct in order to measure the payoffs in of the each quadrants, but there might be a need to construct algorithmic stochastic multi-player games. This need is not just based on the complexity of the variables, but also on the need to have more well-defined variables, especially when it comes to find the advantages to each variable. To further explore the information, you need to perhaps construct a more complex model, with the help of computer software, in which there needs to be a various number of factors included. These factors include the trade flow variables, the number of zero-sum games and cooperative games performed in each of the variables, etc. There needs to be a construction of a model that is complex enough to find the actual numbers of payoffs for each of the two factors, but I'm sure it'll indicate that the
This article by Professor Dobre Claudia Ioana strikes to me as an interesting implication of certain principles within the mathematical realm of game theory to something found in international economics -> international trade. It also has given me some impetus in coming up with the idea of implicating the methods of game theory in dealing with rather complex trade relations between the countries of Cuba and the US. By utilizing the basic idea around Part 2.3 of the article, we can calculate for the strategic trading policies that could potentially benefit both Cuba and the US. In this simplified case, we can solve for the Nash equilibrium within the confines of a non-cooperative game, the payoffs are as follows:
- If Cuba does want to open up, the US wants to retain the trade embargo.
- If Cuba does want to open up, the US removes the trade embargo, the US places favorable conditions for Cuba.
- If Cuba does want to open up, the US removes the trade embargo and the US places unfavorable conditions for Cuba.
This is just the basic approach to the multi-faceted approach to determining the payoffs and the Nash equilibrium for this particular international trade situation. These are just some ideas of a possible design that could be brought forth and I'm still currently thinking about the various formulas and variables that could be realized to achieve a full and sustained approach to developing a solution to the problem.
2. Extensive Form Games
Another factor that should possibly be calculated is how the United States has to deal with how Russia responds to Cuba and vice versa. This particular situation can be characterized as a multi-player game where we need to figure out the payoffs and similar equilibriums. In this situation, we could potentially utilize extensive form games to factor each of the important factors between these three competing nations. It might be hard to characterize entire large economies as a single one micro body/ individual, but I believe that it can be surmised that all of these countries act as one single body.
The first series of extensive form games you could possibly calculate for certain payoffs between US-Cuba and between Russia-Cuba. By factoring the payoff decision-making numbers of this series of extensive form games (factors including certain firms, certain economic sectors, certain competitive indicators), you could potentially compare the numerical payoffs in each of these insistences.
After this, you could potentially utilize a second series of extensive form games to calculate the numerical payoff results that are resultant from the previous extensive form game. The numerical payoffs, along with certain control variables such as competitive advantage, gains/losses from trade and other indicators, are then calculated to determine whether or not the options are valid through the applicability of such a model.
The calculated effects on Cuba's trade policies in certain segments of their economy and the US economy could potentially benefit the US tremendously in that particular arena versus what the main US adversary has, which is Russia. By calculating for the potential benefits/pitfalls from them, one could be derive a simulation for a potential new international trade model.
(An introduction to Extensive Form games is found here, written/presented by Jonathan Levin, the winner of the 2011 John Bates Clark medal. These explanations are mostly meant for his field of concentration, which is industrial organization, but I think it gives a good idea of what extensive form games are.)
I believe the ideas that Professor Dobre Claudia Ioana and the late Professor John McMillan brought up offers a lot of hope for game theory to become a great potential tool for international economics/international trade researchers to continue to build onto. There could be lots of different ways to utilize these tools in its eventual development into useful tools for analyses of complex international trade situations/conflicts, such as that in this particular situation.
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