Towards New Tools for Temporal Dimensions in Models of Economics – Novo Tempus

This research proposal is motivated by the conviction that the understanding of time within economic models is still largely unsatisfactory and that progress towards the apprehension of the new and not yet well understood time dimensions of economic activity is to be made in order to provide a range of tools that could be used in real-world analysis and the design of policy. As a basic illustration, whilst the modelling device for temporal dimensions in models of economics oscillates between formulations with a continuous flow and representations with discrete sequences, none of them is satisfactory. Indeed, the accelerated flow of economic activity is to be considered together with the inescapable discrete nature of decision rules, noticeably when the latters obey to strict agendas such as budgetary rules. Other examples would follow from the persisting consideration of atemporal building blocks, i.e, preferences and the technology, for economic models, or the ever increasing use of numerical tools for facing with competitive equilibra over time whilst such tools suffer from a damaging inability to carefully relate assumptions to the predictions of the calibration or simulation exercises.

This research proposal is then explicitly aimed at asking for funds that could federate the energies of isolated scholars, one third of the participants belonging to foreign ones. By allowing for regular meetings, it is hence firstly intended to create new opportunities that will result in a burgeoning network of people who share a common characteristic : they are highly motivated by their research agenda and very much concerned about the relevance and the importance of a more accurate account of temporal mechanisms into models of economics.

The aim of this research program will then be to build new tools within areas or topics retained for their importance, their currently flourishing development and finally their potential relevance in renewing the tools available to both academic researchers and applied analysis. A first step will be aimed at reconsidering from scratch the representation of time in models of economics. Its chief part reconsiders the definition of time in order to overcome the discrepancy between the flow of economic activity and the need for discrete decisions over time and will, e.g., provide a more satisfactory aggregate account of daily economic life where agents with distinct horizons are to take decisions subject to highly differentiated constraints but also to interact and complete contracts with the others. A second step of the research agenda will then be to reconsider the building blocks of economic analysis in light of temporal dimensions. It aims at putting a new consideration on the production sphere and preferences in the neoclassical approach when both are envisioned with explicit time dependencies. It tries to partially circumvent some difficulties, e.g., non-convexities or time inconsistencies in decisions that have long led to modeling devices that are at odds with a satisfactory appraisal of time in economic activity. A third step will then be intended to carefully circumscribe the increasing importance of strategic interactions over time and to suggest that these may augment and enrich the usual intertemporally perfectly competitive markets metaphor whilst simultaneously remaining manageable and being thence relevant for designing new tools for economic analysis. Finally, a fourth step will be aimed at understanding the comparative time properties of some of the « work-horse » models that are currently used in numerous institutions and commonly involves complex market structures or various financial constraints and imperfections. The completion of the « operators over time » approach is then intended to introduce a unified approach for intertemporal equilibria that could deal with various setups and equip the analysis with robust conclusions together with constructive numerical tools.