This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2024
  4. Program
  5. Advances in the Application of Information Theory to Political Economy
« Back to Results

Advances in the Application of Information Theory to Political Economy

Paper Session

Friday, Jan. 5, 2024 8:00 AM - 10:00 AM (CST)

Marriott Riverwalk, Alamo Ballroom Salon A
Hosted By: Union for Radical Political Economics
  • Chair: Emanuele Citera, St. Lawrence University

The Informational Index of Inequality

Paulo Dos Santos
,
New School for Social Research

Abstract

A new informational index of income inequality is proposed. Based on a combinatorial characterisation of entropy and
on its generalisation by multivariate measures of co-information, the index addresses a limiting analytical choice
embedded in Theil’s two indices of income inequality. This yields a positive measure of inequality of opportunity in
income-generating processes, defined in relation to probabilities that the population-wide distribution
of income describes the set of possible income levels facing specified sub-groups of that population. Its measure
across a population is given when sub-groups consist of each individual. This can be successively decomposed
linearly by sub-groups defined by covariates of income. In those instances, the index also provides informational
measures of phenomenological association and interaction between income and those covariates. On those bases
the index improves on mean-log deviations as measures of “luck egalitarian” notions of equity; casts new light on and
uncovers new properties in the Theil-Finezza index of segregation; offers a non-parametric generalisation of
the Kitagawa-Oaxaca-Blinder decomposition; and lays new conceptual foundations for work on the determinants and
normative content of patterns of income differentiation in decentralised market economies.

The Neutrality of Money Reconsidered: A Statistical Equilibrium Model of the Labor Market

Ellis Scharfenacker
,
University of Utah

Abstract

Economic analysis has approached the problem of the neutrality of money through methods of supplydemand
equilibrium in which changes in aggregate demand due to monetary or fiscal policy are
equivalent to changes in the denomina;on of the monetary standard. We re-examine this ques;on using
sta;s;cal equilibrium methods adapted from sta;s;cal physics, which address both the central tendency
of prices in equilibrium and the systema;c fluctua;on of prices around the central tendency. From this
perspec;ve the neutrality of money in the sense of the invariance of real economic out- comes to
aggregate demand shocks depends on the adjustment of both expecta;ons of the average level of wages
and prices and the further adjustment of an;cipa;ons of the scale of fluctua;ons in prices and wage
offers. We illustrate these conclusions through a model of wage and employment outcomes in a labor
market model comprised of informa;onally constrained workers and employers whose interac;ons have
a non-zero impact on wages. The model endogenizes employment interac;ons between workers and
employers in terms of a quantal response equilibrium and produces an equilibrium level of
unemployment as a sta;s;cal feature of a decentralized labor market. Shocks to the economy can
produce short-run increases in involuntary unemployment arising from iner;a in the adjustment of
expecta;ons. Even aHer agents align their expecta;ons with market outcomes, unless they also adjust
their expecta;ons of the scale of sta;s;cal fluctua;ons in wages, a nega;ve shock to demand can result
in higher levels of equilibrium unemployment. In this way the model exhibits a par;cular type of nonneutrality
of money in the short-run and long-run.

Investment-Saving Equilibrium in Reliable Markets

Doguhan Sundal
,
California State University-San Bernardino

Abstract

Formation and dynamics of expectations and their impacts on economic dynamics are central to economic modeling in competing schools of thought. This paper uses information-theoretical models to study the savings market in an ontologically oriented ergodic/nonergodic context and derives the capacity of the communication channels between savers and investors for single-agent and multiple-agent cases.

Is the Cryptocurrency Market Efficient? Insights from an Information Theoretical Framework

Emanuele Citera
,
St. Lawrence University

Abstract

We study the stochastic structure of cryptocurrency returns by focusing on the associated cross-sectional
distributions of rates of return. We retrieve weekly data for individual cryptocurrencies from CoinMarketCap, from
April 2013 until March 2023. Then, we focus on the major cryptocurrencies (ranked by volume and market
capitalization) traded over time and we apply the Quantal Response Statistical Equilibrium (QRSE) (Scharfenaker
and Foley, 2017, Citera, 2022) model to recover the cross-sectional frequency distribution over different time
horizons. This allows us to analyze the degree of efficiency of the cryptocurrency market. We aim to contribute to the
literature on the Efficient Market Hypothesis and its applicability to the cryptocurrency market, providing insights that
can inform future research and investment decisions.
JEL Classifications
  • C4 - Econometric and Statistical Methods: Special Topics
  • P1 - Capitalist Economies