What Can Economists Compute?

Marcel K. Richter () and Kam-Chau Wong ()
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Marcel K. Richter: University of Minnesota
Kam-Chau Wong: Chinese University of Hong Kong

No 1121, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: We present a theoretical view of computation, delineating what types of approximations are possible and what types are impossible. A practical consequence is an approximation algorithm with numerous applications. For several classical problems (finding maximizers, fixed points, equilibrium prices, zeros) we provide a general digital algorithm to approximate solutions (without taking subsequences). We show, however, that no general effective approximation method exits. Controllability of error levels thus emerges as a dividing line between the possible and the impossible. The results highlight the importance of finding special contexts in which special algorithms can be effective. We compare our methods and results with those of Scarf.

Date: 1999-03-01

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