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NEO-CLASSICAL ECONOMICS AND GAUGE THEORY


 

Problem

Economic theory is based around the hidden assumption that consumer tastes are absolutely ‘stable’ over time despite the fact that a world with static tastes cannot even be considered a plausible simplification of the world in which we live. Many rationalizations have been given for this fiction which are at times both ingenious and embarrassing. The key problem for economic theory is that the field simply failed to develop mathematical methods for analyzing changes in dynamic preferences.

 

Partners, Sponsors, and Hosts

Alfred P. Sloan Foundation, Harvard University Department of Economics, National Bureau of Economic Research, Pia N. Malaney (collaborator). Richard Freeman.

 

Challenge

Create a new ‘upgrade’ of the foundations of intertemporal economic theory which incorporates taste change.

 

Customized Toolkit

For this problem we chose an ambitious approach using modern gauge theory developed within particle theory, relativistic physics, and differential topology/geometry.

 

Solution

We discovered that neo-classical economics is built around a naturally occurring (infinite dimensional) principal bundle and a naturally occurring (finite dimensional) vector bundle. We then went on to show that parallel translation on these bundles defines a solution to the changing preference problem in the first case and the index number problem in the later case. In the first case, the bundle appears to be without a distinguished choice of connection. However we showed that a slight augmentation of the bundle has a distinguished connection. We used this connection to write down the first dynamic extension of the ‘True’ or ‘Economic’ Konus index.

 

Lectures, Publications, Articles, Reports

Video I: “A Science Less Dismal

Video II: “Gauge Theory and Inflation

Video III: “A New Marginalism: Gauge Theory in Economics” [Pia Malaney presenting]

 

Announcements for past talks on the subject are maintained at universities like Dartmouth, and UIUC.

 

 

Contact

If you are interested in this topic, we invite you to contact us at  gauged_markets@eric-weinstein.net

 


 

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