From constrained optimization to constrained dynamics: extending analogies between economics and mechanics
Erhard Glötzl (),
Florentin Glötzl and
VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association
Economic equilibrium models have been inspired by analogies to stationary states in classical mechanics. To extend these mathematical analogies from constrained optimization to constrained dynamics, we formalize economic (constraint) forces and economic power in analogy to physical (constraint) forces and the reciprocal value of mass. Agents employ forces to change economic variables according to their desire and their power to assert their interest. These ex-ante forces are completed by constraint forces from unanticipated system constraints to yield the ex-post dynamics. The differential-algebraic equation framework seeks to overcome some restrictions inherent to the optimization approach and to provide an out-of-equilibrium foundation for general equilibrium models. We transform a static Edgeworth box exchange model into a dynamic model with procedural rationality (gradient climbing) and slow price adaptation, and discuss advantages, caveats, and possible extensions to the modeling framework.
Keywords: Disequilibrium Dynamics; Lagrangian Mechanics; Behavioral Microeconomics; Constrained Dynamics; Edgeworth Box; Tatonnement (search for similar items in EconPapers)
JEL-codes: A12 B00 C62 D50 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Journal Article: From constrained optimization to constrained dynamics: extending analogies between economics and mechanics (2019)
Working Paper: From constrained optimization to constrained dynamics: extending analogies between economics and mechanics (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc18:181627
Access Statistics for this paper
More papers in VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().