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Fellow's Opinion: Tastes and Technology, Curvature is not Sufficient for Regularity

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  • William A. Barnett

    (Washington University)

Abstract

In specifications of tastes and technology, econometricians often impose curvature globally, but monotonicity only locally or not at all. In fact monotonicity rarely is even mentioned in that literature. But without satisfaction of both curvature and monotonicity, the second order conditions for optimizing behavior fail, and duality theory fails. The resulting first order conditions, demand functions, and supply functions become invalid. Although unconstrained specifications of technology are more likely to produce violations of curvature than monotonicity, I believe that induced violations of monotonicity become common, when curvature alone is imposed. Hence the now common practice of equating regularity with curvature is not justified. Much of the research that supports this Journal of Econometrics Fellow's Opinion Article is forthcoming in a special issue of Econometric Reviews.

Suggested Citation

  • William A. Barnett, 2001. "Fellow's Opinion: Tastes and Technology, Curvature is not Sufficient for Regularity," Econometrics 0110007, EconWPA.
  • Handle: RePEc:wpa:wuwpem:0110007 Note: Type of Document - Microsoft Word; prepared on IBM PC; to print on HP; pages: 5 ; figures: included. This article is a Journal of Econometrics Fellow's Opinion Article forthcoming in that journal. Much of the research that supports this opinion is forthcoming in an Econometric Reviews article coauthored with Meenakshi Pasupathy
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    References listed on IDEAS

    as
    1. Barnett, William A. & Geweke, John & Wolfe, Michael, 1991. "Seminonparametric Bayesian estimation of the asymptotically ideal production model," Journal of Econometrics, Elsevier, vol. 49(1-2), pages 5-50.
    2. Barnett, William A & Kirova, Milka & Pasupathy, Meenakshi, 1995. "Estimating Policy-Invariant Deep Parameters in the Financial Sector When Risk and Growth Matter," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1402-1429, November.
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    More about this item

    Keywords

    curvature technology regularity monotonicity;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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