165:, there still remains to be seen a unified model that can make useful predictions that incorporates the entirety of cognitive biases and rational limitations in most humans. Further, there even exists debate as to whether it is necessary to incorporate such psychological limitations into economic models. While some economists insist they are necessary to fully appreciate the complexity of the market, others still contend that a model that incorporates human biases is either unrealistic or question its usefulness arguing that a model that doesn't approximate agents as being perfectly rational, with the possibility of minimal exceptions, is unlikely to be successful.
97:: Does revealed preference theory truly reveal consumer preference when the consumer is able to afford all of the available options? For example, if a consumer is confronted with three goods and they can afford to purchase all three (A, B, and C) and they choose to first purchase A, then C, and then B – does this suggest that the consumer preference for the goods is A > C > B? The debate rests on the fact that since the consumer can afford all three goods and does not need to make a preferential decision, does the order of consumption reflect any preference?
76:: The transformation problem is the problem specific to Marxist economics, and not to economics in general, of finding a general rule by which to transform the values of commodities based on socially necessary labour time into the competitive prices of the marketplace. The essential difficulty is how to reconcile profit in the form of surplus value from direct labour inputs and the ratio of direct labour input to capital input that vary widely between commodities, with the tendency toward an average rate of profit on all capital invested.
68:: The Cambridge capital controversy is a dispute in economics that started in the 1950s. The debate concerned the nature and role of capital goods and a critique of the neoclassical vision of aggregate production and distribution. The question of whether the natural growth rate is exogenous, or endogenous to demand (and whether it is input growth that causes output growth, or vice versa), lies at the heart of the debate. The resolution of the debate has not been agreed upon by economists.
109:. The claim is that if an initial contract does not lead to an equilibrium, it is ended and new contracts are formulated. If the initial contract is not called off, it will likely lead to a different set of prices, depending on the degree of error in the original process. The question is whether successive re-contracting continues with the parties forgetting the previously planned positions taken or whether the parties engage in a form of tâtonnement to achieve optimality. See also
186:: The equity premium puzzle is thought to be one of the most important outstanding questions in neoclassical economics. It is founded on the basis that over the last one hundred years or so the average real return to stocks in the US has been substantially higher than that of bonds. The puzzle lies in explaining the causes behind this equity premium. While there are a number of different theories regarding the puzzle, there still exists no definitive agreement on its cause.
272:: This puzzle concerns the observation that individuals and institutions in many countries only hold modest amounts of foreign equity, despite the ability for vast diversification of their portfolios in the global economy. While some explanations do exist, such as that local individuals and firms have greater access to information about local firms and economic conditions, these explanations are not accepted by the majority of economists and have been mostly refuted.
280:: The Backus–Kehoe–Kydland consumption correlation puzzle is the empirical observation that consumption is much less correlated across countries than output. Standard economic theory suggests that country-specific output risks should be collective and domestic consumption growth should not depend strongly on country-specific income shocks. Thus, we should not see the observation that consumption is much less correlated across countries than output; and yet we do.
264:: The home bias in trade puzzle is an empirical observation that even when factors such as economic size of trading partners and the distance between them are considered, trade between regions within a given country is substantially greater than trade between regions in different countries, even when there are no substantial legal barriers. There is currently no framework to explain this observation.
239:. While the models are widely used, they have many significant limitations. Chief among them are the model's inability to account for historical market movements and their frequent overpricing of options, with the overpricing increasing with the time to maturity. The development of a model that can properly account for the pricing of call options on an asset with
333:: The exchange rate disconnect puzzle, also one of the so-called real exchange rate puzzles, concerns the weak short-term feedback link between exchange rates and the rest of the economy. In most economies, the exchange rate is the most important relative price, so it is surprising, and thus far unexplained entirely, that the correlations are not stronger.
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asserted that the neoclassical model of economics could be applied to any society if appropriate modifications are made, arguing that its principles have universal validity. Critics of the formalist position question its central assumptions, in particular that the universality of rational choice and
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countries, averages of long-term national savings rates are highly correlated with similar averages of domestic investment rates. Standard economic theory suggests that in relatively open international financial markets, the savings of any country would flow to countries with the most productive
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129:, as a way of studying economics. In the period spanning the 1970s to the 1990s, research began to emerge that suggested that people were subject to cognitive biases such as the
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Samuelson, Paul A. (1971). "Understanding the
Marxian Notion of Exploitation: A Summary of the So-Called Transformation Problem Between Marxian Values and Competitive Prices".
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and more persistent than most models would suggest. The only clear way to understand this volatility would be to assign substantial roles to monetary and financial
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investment opportunities; hence, saving rates and domestic investment rates would be uncorrelated, contrary to the empirical evidence suggested by
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48:. Some of these are theoretical in origin and some of them concern the inability of orthodox economic theory to explain an empirical observation.
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suggests that the puzzle can (only) be explained by some combination of taxes, bankruptcy costs, market inefficiency (including that due to
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Backus, David K.; Kehoe, Patrick J.; Kydland, Finn E. (1995), "International
Business Cycles: Theory and Evidence", in Cooley, Tom (ed.),
231:: The Black–Scholes model and the more general binomial options pricing models are a collection of equations that seek to model and price
123:: Neoclassical economics has concentrated on the development of models that reflect an idealized economic agent, sometimes referred to as
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301:. While numerous articles regarding the puzzle have been published, none of the explanations put forth have adequate empirical support.
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inconsistent with economic models that did not incorporate human psychological limitations. While some models have begun to include
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Alessandro
Innocenti (1995). "Oskar Morgenstern and the Heterodox Potentialities of the Application of Game Theory to Economics".
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Baggett, L. Scott; Thompson, James; Williams, Edward; Wojciechowski, William (October 2006). "Nobels for nonsense".
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Peter J. Boettke (Winter 1998). "Formalism and contemporary economics: A reply to
Hausman, Heilbroner, and Mayer".
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288:: The Feldstein-Horioka puzzle originates from an article in the 1980s that found that among
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1131:; Konstantin Magin (2009). "The U.S. Equity Return Premium: Past, Present, and Future".
458:"Foundations of Behavioral and Experimental Economics: Daniel Kahneman and Vernon Smith"
33:
and may never be able to satisfy particular standards for completeness. You can help by
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194:: The dividend puzzle is the empirically observed phenomenon that companies that pay
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105:: The act of tâtonnement (trial-and-error) plays a key role in the formulation of
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This is a list of some of the major unsolved problems, puzzles, or questions in
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145:, and many others. Further, these effects could produce anomalies such as
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206:. At present, there is no explanation widely accepted by economists. The
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1010:(1972). "Thirteen critical points in contemporary economic theory".
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Investor psychology: a behavioral explanation of six finance puzzles
428:(1972). "Thirteen critical points in contemporary economic theory".
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859:(July 2005). "Information Immobility and the Home Bias Puzzle".
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752:"The Pricing of Options on Assets with Stochastic Volatilities"
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Note 8a from course 316–632 "International
Monetary Economics"
483:"Choice under Uncertainty: Problems Solved and Unsolved"
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utility maximization can be assumed across all cultures.
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Financial economics § Departures from rationality
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is considered an open problem in financial economics.
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and formalist economic models was first proposed by
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1074:(2000). "God Gave Physics the Easy Problems".
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543:"Has Barro solved the equity premium puzzle?"
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307:: The PPP puzzle, considered one of the two
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1034:Journal of the History of Economic Thought
963:: CS1 maint: location missing publisher (
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568:"The Equity Premium: It's Still a Puzzle"
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982:. Stanford: Stanford University Press.
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874:Backus, David K.; Kehoe, Patrick J.;
750:Hull, John; White, Alan (June 1987).
524:"How Did Economists Get It So Wrong?"
465:The Royal Swedish Academy of Sciences
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923:Frontiers of Business Cycle Research
880:"International Real Business Cycles"
646:"Tax Policy and the Dividend Puzzle"
595:Is The Dividend Puzzle Solved ?
18:List of unsolved problems in finance
716:Journal of Post Keynesian Economics
331:The exchange rate disconnect puzzle
771:10.1111/j.1540-6261.1987.tb02568.x
25:
1134:Journal of Economic Perspectives
592:Borges, Maria Rosa (July 2008),
491:Journal of Economic Perspectives
311:, concerns the observation that
809:NBER Macroeconomics Annual 2000
625:Prast, Henriette (March 2004),
228:binomial options pricing models
1012:Journal of Economic Literature
575:Journal of Economic Literature
431:Journal of Economic Literature
397:Journal of Economic Literature
351:Formalist–substantivist debate
121:Unified models of human biases
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644:Bernheim, B. Douglas (1991).
65:Cambridge capital controversy
888:Journal of Political Economy
1090:10.1177/1354066100006001003
953:. New York. pp. 44–49.
863:. FIN-04-026. ssrn 1294476.
368:(1944). Formalists such as
277:Backus–Kehoe–Kydland puzzle
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1307:Lists of unsolved problems
927:Princeton University Press
807:; Rogoff, Kenneth (eds.),
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107:general equilibrium theory
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855:Van Nieuwerburgh, Stijn;
654:RAND Journal of Economics
354:: The opposition between
261:Home bias in trade puzzle
208:Modigliani–Miller theorem
951:The Great Transformation
564:Narayana R. Kocherlakota
365:The Great Transformation
285:Feldstein–Horioka puzzle
269:Equity home bias puzzle
254:International economics
248:International economics
198:tend to be rewarded by
481:Machina, Mark (1987).
216:asymmetric information
73:Transformation problem
1312:Society-related lists
980:Economic Anthropology
978:Plattner, S. (1989).
344:Economic anthropology
338:Economic anthropology
241:stochastic volatility
183:Equity premium puzzle
1157:10.1257/jep.23.1.193
1115:(1&2): 173–186.
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522:(2 September 2009),
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81:Behavioral economics
35:adding missing items
1129:DeLong, J. Bradford
1068:Gross Stein, Janice
1062:Bernstein, Steven;
505:10.1257/jep.1.1.121
467:. 17 December 2002.
374:Harold K. Schneider
313:real exchange rates
212:investor psychology
170:Financial economics
155:bounded rationality
94:Revealed preference
58:Capital (economics)
1251:Information theory
1064:Ned Lebow, Richard
757:Journal of Finance
529:The New York Times
151:momentum investing
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1008:Oskar Morgenstern
989:978-0-8047-1645-1
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861:NYU Working Paper
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797:Obstfeld, Maurice
463:(Press release).
426:Oskar Morgenstern
143:confirmation bias
139:gambler's fallacy
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102:Tâtonnement
1291:Categories
1276:Statistics
1246:Geoscience
699:2009-12-08
612:2009-12-08
382:References
305:PPP Puzzle
204:valuations
174:See also:
161:, such as
29:This is a
1236:Economics
1226:Chemistry
1216:Astronomy
1165:154758290
1143:CiteSeerX
1098:144814459
1055:154980751
959:cite book
844:(Handout)
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675:155058492
222:Improved
200:investors
196:dividends
46:economics
1261:Medicine
909:55482662
878:(1992),
581:: 42–71.
317:volatile
1271:Physics
1221:Biology
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