A game theoretic approach to the theory of money and financial institutions
In: Handbook of Monetary Economics
This is a sketch of a game theoretic and gaming approach to the development of an appropriate microeconomic theory of money and financial institutions. The phrase "money and financial institutions" is used to stress that a theory of money alone cannot be fruitfully constructed in an institutional vacuum. The monetary and financial system of an economy are part of the socio-politico-economic control mechanism used by every state to connect the economy with the polity and society. This neural network provides the administrative means to collect taxes, direct investment, provide public goods, trade. The money measures provide a crude but serviceable basis for the accounting system which in turn, along with the codification of commercial law and financial regulation are the basis for economic evaluation and the measurement of trust and fiduciary responsibility among the economic agents. A central feature of a control mechanism is that it is designed to influence process. Dynamics is its natural domain. Equilibrium is not the prime concern, the ability to control the direction of motion is what counts. Bagehot (1962) noted that a financial instrument originally designed for one purpose may take on a life of its own and serve a different purpose. In particular most of the instruments may have been invented to facilitate trade but they provided a means for control. Money and financial institutions provide the command and control system of a modern society. The study of the mechanism, how they are formed, how they are controlled and manipulated and how their influence is measured in terms of social, political, and economic purpose pose questions not in pure economics, not even in a narrow political economy, but in the broad compass of a political economy set in the context of society. A basic purpose of the approach adopted here is to show the minimal conditions which require that financial institutions and instruments emerge as a necessary carriers of process. Th
(This abstract was borrowed from another version of this item.)
|This chapter was published in: ||This item is provided by Elsevier in its series Handbook of Monetary Economics with number
1-05.||Handle:|| RePEc:eee:monchp:1-05||Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Shubik, Martin, 1975. "On the Eight Basic Units of a Dynamic Economy Controlled by Financial Institutions," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 21(2), pages 183-201, June.
- Koopmans, Tjalling C, 1977.
"Concepts of Optimality and Their Uses,"
American Economic Review,
American Economic Association, vol. 67(3), pages 261-74, June.
- Tjalling C. Koopmans, 1976. "Concepts of Optimality and Their Uses," Cowles Foundation Discussion Papers 421, Cowles Foundation for Research in Economics, Yale University.
- Koopmans, Tjalling C., 1975. "Concepts of Optimality and Their Uses," Nobel Prize in Economics documents 1975-2, Nobel Prize Committee.
- Douglas Gale & Martin Hellwig, 1984. "A General-Equilibrium Model of the Transactions Demand for Money," STICERD - Theoretical Economics Paper Series 100, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
- Grossman, Sanford J & Stiglitz, Joseph E, 1980.
"On the Impossibility of Informationally Efficient Markets,"
American Economic Review,
American Economic Association, vol. 70(3), pages 393-408, June.
- Sanford J Grossman & Joseph E Stiglitz, 1997. "On the Impossibility of Informationally Efficient Markets," Levine's Working Paper Archive 1908, David K. Levine.
- Rogawski, J. & Shubik, M., 1986.
"A strategic market game with transactions costs,"
Mathematical Social Sciences,
Elsevier, vol. 11(2), pages 139-160, April.
- Shapley, Lloyd S & Shubik, Martin, 1977. "Trade Using One Commodity as a Means of Payment," Journal of Political Economy, University of Chicago Press, vol. 85(5), pages 937-68, October.
- Amir, Rabah & Sahi, Siddharta & Shubik, Martin & Yao, Shuntian, 1990.
"A strategic market game with complete markets,"
Journal of Economic Theory,
Elsevier, vol. 51(1), pages 126-143, June.
- Dubey, Pradeep & Shubik, Martin, 1977. "Trade and Prices in a Closed Economy with Exogeneous Uncertainty, Different Levels of Information, Money and Compound Futures Markets," Econometrica, Econometric Society, vol. 45(7), pages 1657-80, October.
- Martin Shubik & Ward Whitt, 1973. "Fiat Money in an Economy with One Nondurable Good and No Credit (A Noncooperative Sequential Game)," Cowles Foundation Discussion Papers 355, Cowles Foundation for Research in Economics, Yale University.
- Gale, Douglas M, 1986. "Bargaining and Competition Part I: Characterization," Econometrica, Econometric Society, vol. 54(4), pages 785-806, July.
- Dubey, Pradeep & Mas-Colell, Andreau & Shubik, Martin, 1980. "Efficiency properties of strategies market games: An axiomatic approach," Journal of Economic Theory, Elsevier, vol. 22(2), pages 339-362, April.
- Forges, F., 1991.
"Correlated equilibrium and sunspot equilibrium,"
CORE Discussion Papers
1991053, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
- Scarf, Herbert E, 1986.
"Neighborhood Systems for Production Sets with Indivisibilities,"
Econometric Society, vol. 54(3), pages 507-32, May.
- Herbert E. Scarf, 1984. "Neighborhood Systems for Production Sets with Indivisibilities," Cowles Foundation Discussion Papers 728, Cowles Foundation for Research in Economics, Yale University.
- Debreu, Gerard, 1974. "Excess demand functions," Journal of Mathematical Economics, Elsevier, vol. 1(1), pages 15-21, March.
- Hurwicz, Leonid, 1973. "The Design of Mechanisms for Resource Allocation," American Economic Review, American Economic Association, vol. 63(2), pages 1-30, May.
- Shubik, Martin, 1970. "On Different Methods for Allocating Resources," Kyklos, Wiley Blackwell, vol. 23(2), pages 332-37.
- Radner, Roy, 1979. "Rational Expectations Equilibrium: Generic Existence and the Information Revealed by Prices," Econometrica, Econometric Society, vol. 47(3), pages 655-78, May.
- Fama, Eugene F., 1980. "Banking in the theory of finance," Journal of Monetary Economics, Elsevier, vol. 6(1), pages 39-57, January.
- Nti, Kofi O. & Shubik, Martin, 1984. "Noncooperative exchange using money and broker-dealers," Mathematical Social Sciences, Elsevier, vol. 7(1), pages 59-82, February.
- Peck, James & Shell, Karl, 2001.
"Equilibrium Bank Runs,"
01-10r, Cornell University, Center for Analytic Economics.
- Dubey, Pradeep & Geanakoplos, John & Shubik, Martin, 1987. "The revelation of information in strategic market games : A critique of rational expectations equilibrium," Journal of Mathematical Economics, Elsevier, vol. 16(2), pages 105-137, April.
- Smale, Steve, 1976. "A convergent process of price adjustment and global newton methods," Journal of Mathematical Economics, Elsevier, vol. 3(2), pages 107-120, July.
- Jaynes, Gerald David & Okuno, Masahiro & Schmeidler, David, 1978. "Efficiency in an Atomless Economy with Fiat Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(1), pages 149-56, February.
- Pradeep Dubey & Lloyd S. Shapley, 1977. "Noncooperative Exchange with a Continuum of Traders," Cowles Foundation Discussion Papers 447, Cowles Foundation for Research in Economics, Yale University.
When requesting a correction, please mention this item's handle: RePEc:eee:monchp:1-05. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.