Computability and Algorithmic Complexity in Economics

This is an outline of the origins and development of the way computability theory and algorithmic complexity theory were incorporated into economic and finance theories. We try to place, in the context of the development of computable economics, some of the classics of the subject as well as those that have, from time to time, been credited with having contributed to the advancement of the field. Speculative thoughts on where the frontiers of computable economics are, and how to move towards them, conclude the paper. In a precise sense - both historically and analytically - it would not be an exaggeration to claim that both the origins of computable economics and its frontiers are defined by two classics, both by Banach and Mazur: that one page masterpiece by Banach and Mazur ([5]), built on the foundations of Turing’s own classic, and the unpublished Mazur conjecture of 1928, and its unpublished proof by Banach ([38], ch. 6 & [68], ch. 1, #6). For the undisputed original classic of computable economics is Rabinís effectivization of the Gale-Stewart game ([42];[16]); the frontiers, as I see them, are defined by recursive analysis and constructive mathematics, underpinning computability over the computable and constructive reals and providing computable foundations for the economist’s Marshallian penchant for curve-sketching ([9]; [19]; and, in general, the contents of Theoretical Computer Science, Vol. 219, Issue 1-2). The former work has its roots in the Banach-Mazur game (cf. [38], especially p.30), at least in one reading of it; the latter in ([5]), as well as other, earlier, contributions, not least by Brouwer.

Planning with Information-Processing Constraints and Model Uncertainty in Markov Decision Processes

Information-theoretic principles for learning and acting have been proposed to solve particular classes of Markov Decision Problems. Mathematically, such approaches are governed by a variational free energy principle and allow solving MDP planning problems with information-processing constraints expressed in terms of a Kullback-Leibler divergence with respect to a reference distribution. Here we consider a generalization of such MDP planners by taking model uncertainty into account. As model uncertainty can also be formalized as an information-processing constraint, we can derive a unified solution from a single generalized variational principle. We provide a generalized value iteration scheme together with a convergence proof. As limit cases, this generalized scheme includes standard value iteration with a known model, Bayesian MDP planning, and robust planning. We demonstrate the benefits of this approach in a grid world simulation.Comment: 16 pages, 3 figure

Computation in Economics

This is an attempt at a succinct survey, from methodological and epistemological perspectives, of the burgeoning, apparently unstructured, field of what is often – misleadingly – referred to as computational economics. We identify and characterise four frontier research fields, encompassing both micro and macro aspects of economic theory, where machine computation play crucial roles in formal modelling exercises: algorithmic behavioural economics, computable general equilibrium theory, agent based computational economics and computable economics. In some senses these four research frontiers raise, without resolving, many interesting methodological and epistemological issues in economic theorising in (alternative) mathematical modesClassical Behavioural Economics, Computable General Equilibrium theory, Agent Based Economics, Computable Economics, Computability, Constructivity, Numerical Analysis

Rationality of the zeta function of the subgroups of abelian pp-groups

Given a finite abelian $p$-group $F$, we prove an efficient recursive formula for $\sigma_a(F)=\sum_{\substack{H\leq F}}|H|^a$ where $H$ ranges over the subgroups of $F$. We infer from this formula that the $p$-component of the corresponding zeta-function on groups of $p$-rank bounded by some constant $r$ is rational with a simple denominator. We also provide two explicit examples in rank $r=3$ and $r=4$ as well as a closed formula for $\sigma_a(F)$

Generating functions for generating trees

Certain families of combinatorial objects admit recursive descriptions in terms of generating trees: each node of the tree corresponds to an object, and the branch leading to the node encodes the choices made in the construction of the object. Generating trees lead to a fast computation of enumeration sequences (sometimes, to explicit formulae as well) and provide efficient random generation algorithms. We investigate the links between the structural properties of the rewriting rules defining such trees and the rationality, algebraicity, or transcendence of the corresponding generating function.Comment: This article corresponds, up to minor typo corrections, to the article submitted to Discrete Mathematics (Elsevier) in Nov. 1999, and published in its vol. 246(1-3), March 2002, pp. 29-5

Two parallel insurance lines with simultaneous arrivals and risks correlated with inter-arrival times

We investigate an insurance risk model that consists of two reserves which receive income at fixed rates. Claims are being requested at random epochs from each reserve and the interclaim times are generally distributed. The two reserves are coupled in the sense that at a claim arrival epoch, claims are being requested from both reserves and the amounts requested are correlated. In addition, the claim amounts are correlated with the time elapsed since the previous claim arrival. We focus on the probability that this bivariate reserve process survives indefinitely. The infinite- horizon survival problem is shown to be related to the problem of determining the equilibrium distribution of a random walk with vector-valued increments with reflecting boundary. This reflected random walk is actually the waiting time process in a queueing system dual to the bivariate ruin process. Under assumptions on the arrival process and the claim amounts, and using Wiener-Hopf factor- ization with one parameter, we explicitly determine the Laplace-Stieltjes transform of the survival function, c.q., the two-dimensional equilibrium waiting time distribution. Finally, the bivariate transforms are evaluated for some examples, including for proportional reinsurance, and the bivariate ruin functions are numerically calculated using an efficient inversion scheme.Comment: 24 pages, 6 figure

Combinatorial structure of colored HOMFLY-PT polynomials for torus knots

We rewrite the (extended) Ooguri-Vafa partition function for colored HOMFLY-PT polynomials for torus knots in terms of the free-fermion (semi-infinite wedge) formalism, making it very similar to the generating function for double Hurwitz numbers. This allows us to conjecture the combinatorial meaning of full expansion of the correlation differentials obtained via the topological recursion on the Brini-Eynard-Mari\~no spectral curve for the colored HOMFLY-PT polynomials of torus knots. This correspondence suggests a structural combinatorial result for the extended Ooguri-Vafa partition function. Namely, its coefficients should have a quasi-polynomial behavior, where non-polynomial factors are given by the Jacobi polynomials. We prove this quasi-polynomiality in a purely combinatorial way. In addition to that, we show that the (0,1)- and (0,2)-functions on the corresponding spectral curve are in agreement with the extension of the colored HOMFLY-PT polynomials data.Comment: 40 pages; section 10 addressing the quantum curve was added, as well as some remarks regarding Meixner polynomials thanks to T.Koornwinde