The Art of Smooth Pasting

Routledge
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This book aims to widen the understanding of stochastic dynamic choice and equilibrium models. It offers a simplified and heuristic exposition of the theory of Brownian motion and its control or regulation, rendering such methods more accessible to economists who do not require a detailed, mathematical treatment of the subject.
The main mathematical ideas are presented in a context which with which economists will be familiar. Using a binomial approach to Brownian motion, the mathematics is reduced to simple algebra, progressing to some equally simple limits. The starting point of the calculus of Brownian motion - 'Ito's Lemma' - emerges by analogy with the economics of risk-aversion. Conditions for the optimal regulation of Brownian motion, including the important, but often mysterious, 'smooth pasting' condition, are derived in a similar way. Each theoretical derivation is illustrated by developing a significant economic application, drawn mainly from recent research in macroeconomics and international economics.
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Additional Information

Publisher
Routledge
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Published on
Nov 12, 2013
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Pages
88
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ISBN
9781317973720
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Language
English
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Genres
Business & Economics / Economics / Theory
Business & Economics / General
Business & Economics / Reference
Reference / General
Reference / Research
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Content Protection
This content is DRM protected.
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Available on Android devices
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Eligible for Family Library

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How can property rights be protected and contracts be enforced in countries where the rule of law is ineffective or absent? How can firms from advanced market economies do business in such circumstances? In Lawlessness and Economics, Avinash Dixit examines the theory of private institutions that transcend or supplement weak economic governance from the state.

In much of the world and through much of history, private mechanisms--such as long-term relationships, arbitration, social networks to disseminate information and norms to impose sanctions, and for-profit enforcement services--have grown up in place of formal, state-governed institutions. Even in countries with strong legal systems, many of these mechanisms continue under the shadow of the law. Numerous case studies and empirical investigations have demonstrated the variety, importance, and merits, and drawbacks of such institutions.


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Which is more dangerous, a gun or a swimming pool? What do schoolteachers and sumo wrestlers have in common? Why do drug dealers still live with their moms? How much do parents really matter? How did the legalization of abortion affect the rate of violent crime?

These may not sound like typical questions for an economist to ask. But Steven D. Levitt is not a typical economist. He is a much-heralded scholar who studies the riddles of everyday life—from cheating and crime to sports and child-rearing—and whose conclusions turn conventional wisdom on its head.

Freakonomics is a groundbreaking collaboration between Levitt and Stephen J. Dubner, an award-winning author and journalist. They usually begin with a mountain of data and a simple question. Some of these questions concern life-and-death issues; others have an admittedly freakish quality. Thus the new field of study contained in this book: Freakonomics.

Through forceful storytelling and wry insight, Levitt and Dubner show that economics is, at root, the study of incentives—how people get what they want, or need, especially when other people want or need the same thing. In Freakonomics, they explore the hidden side of . . . well, everything. The inner workings of a crack gang. The truth about real-estate agents. The myths of campaign finance. The telltale marks of a cheating schoolteacher. The secrets of the Ku Klux Klan.

What unites all these stories is a belief that the modern world, despite a great deal of complexity and downright deceit, is not impenetrable, is not unknowable, and—if the right questions are asked—is even more intriguing than we think. All it takes is a new way of looking.

Freakonomics establishes this unconventional premise: If morality represents how we would like the world to work, then economics represents how it actually does work. It is true that readers of this book will be armed with enough riddles and stories to last a thousand cocktail parties. But Freakonomics can provide more than that. It will literally redefine the way we view the modern world.

Bonus material added to the revised and expanded 2006 edition

The original New York Times Magazine article about Steven D. Levitt by Stephen J. Dubner, which led to the creation of this book.

Seven “Freakonomics” columns written for the New York Times Magazine, published between August 2005 and April 2006.

Selected entries from the Freakonomics blog, posted between April 2005 and May 2006 at http://www.freakonomics.com/blog/.

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