ECON 251: Financial Theory
Lecture 04 - Efficiency, Assets, and Time. Over time, economists' justifications for why free markets are a good thing have changed. In the first few classes, we saw how under some conditions, the competitive allocation maximizes the sum of agents' utilities. When it was found that this property didn't hold generally, the idea of Pareto efficiency was developed. This class reviews two proofs that equilibrium is Pareto efficient, looking at the arguments of economists Edgeworth and Arrow-Debreu. The lecture suggests that if a broadening of the economic model invalidated the sum of utilities justification of free markets, a further broadening might invalidate the Pareto efficiency justification of unregulated markets. Finally, Professor Geanakoplos discusses how Irving Fisher introduced two crucial ingredients of finance - time and assets - into the standard economic equilibrium model. (from oyc.yale.edu)
| Lecture 04 - Efficiency, Assets, and Time |
| Time | Lecture Chapters |
| [00:00:00] | 1. Is the Free Market Good? A Mathematical Perspective |
| [00:11:20] | 2. The Pareto Efficiency and Equilibrium |
| [00:38:42] | 3. Fundamental Theorem of Economics |
| [00:46:27] | 4. Shortcomings of the Fundamental Theorem |
| [00:52:39] | 5. History of Mathematical Economics |
| [01:00:21] | 6. Elements of Financial Models |
| References |
| Lecture 4 - Efficiency, Assets, and Time Instructor: Professor John Geanakoplos. Transcript [html]. Audio [mp3]. Download Video [mov]. |
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