Customer Reviews

Recursive Methods in Economic Dynamics

5 star:		(10)
4 star:		(0)
3 star:		(6)
2 star:		(3)
1 star:		(2)

 

 

Let's get three things straight. This book is (1) a textbook, (2) in mathematical techniques, and (3) aimed at economists. As a textbook, it contains a large number of exercises with which students can test their understanding. As it is written for economists, it is not as rigorous as a mathematics text, but is pitched at a level of rigor appropriate for an economics graduate program at a school like Chicago. As it is a mathematics text, it does not emphasize the economics underlying the problems.

Given this, I think the book does a wonderful job. It is beautifully intuitive, illustrated with lots of examples, and is just rigorous enough to provide the grounding necessary to go on to more advanced mathematics texts.

And for those who want a solutions manual, one is on the way ... Harvard University Press expects to release one some time in 2002. Early drafts are available from the authors: Irigoyen, Rossi-Hansberg and Wright, who are all graduate students at Chicago....

This is basically a handbook of mathematical methods necessary to study dynamic economic modells. As such it does a very good job, since as the authors note, just presenting the applications without developing the necessary mathematics would require the reader to keep quite a few math books alongside to keep going at an acceptable pace. It should be clear that the applications developed in this book are idiosyncratic (Carnegie-Mellon/Chicago/Minnesota school).
The book certainly doesn't work too well in a first year graduate Macro course, for that it is simply too terse. That a lot of material is left to the exercises certainly has to do with the fact that the book is already quite thick. In general this is going to be a textbook for a course and won't be used for self-study. Therefore i don't think that missing solutions to exercises are too much of a problem.
I think the book is useful for someone with an "ok" math backround, who has not yet had the chance to study dynamic programming, measure theory and lesbesque integration etc. and who wants to go beyond the typical first year macro stuff. If you have a strong math backround this book is rather unnecessary, save maybe the chapters on applications. I give the book 5 stars as a mathematical compendium, as a macro textbook (which the authors to not claim to have produced) it should get less.

As a research economist or graduate student, especially if working in economic theory or dynamic macroeconomics, it is difficult to overstate the value of this book as a handy guide for a set of essential facts (re: theorems) regarding the existence of solutions to dynamic programming problems or markov decision processes, as well as characterizing the properties of the set of solutions.
That being said, this is not the book a budding theorist wants to learn techniques from (For the mathematical prerequisites: measure theory, topology, probability, stochastic processes, hilbert spaces, there are better treatments in the math literature. For dynamic programming in discrete time itself: Bertsekas and Shreve's 1978 text is far superior). Though I am not an expert in macroeconomics, I believe Sargent's sequence of books is a better source for learning the how-to-do, while keeping the economic questions crystal clear: neither of these is a strong point of this book.

First, let me say that this is an IMPORTANT book; about as important a book on macro that has come out in the last 30 years. That said, it is a horrible book to learn by. It should not bill itself as anything other than a reference book. It doesn't have any examples; just a lot of exercises. By trying to be general, it leaves the beginning student without a clue as to how to apply this in a more concrete context. In short, if ever there was a book in need of a study guide with examples worked out, this is it.

If you want to do modern dynamic models of macroeconomics, and need the basic tools, this is an essential part of the toolkit. The book has been out for a while, and there have been developments in the field that probably need to be in the next edition. But it does present the basics of what could be described as the CarnegieMellon-Minnesota-Chicago approach to modern dynamic macroeconomics developed by Lucas and Prescott in the early seventies, the work that led to the Rational Expectations Revolution and current work in Real Business Cycle Theory. This is what you need to read papers in Econometrica or the Journal of Economic Theory. This is a standard graduate macroeconomics text. Some reviewers have criticized it without fully understanding the objectives of the authors. For instance, read Chapter 5, with its careful, and explicit examples of how to use these methods in constructing simple and parsimonious models. Yes, some of it is a rehash of standard theorems in dynamic programming, and measure theory, and so on, but the goal was to provide these in one location, so that you don't have to learn these by digging through the appendices of Bob Lucas' papers, or the first 100 pages of Dunford and Schwarz's Linear Operators or Halmos, or the Annals of Mathematical Statistics where Blackwell published the results that are now used.

I would recommend Sargent's books as an useful accompaniment, and also perhaps the Exercises by Sargent and Manuelli.

This is a really challenging book, worth fighting through. Some of the exercises are impossible without outside help, so for self-study the solutions manual by Irigoyen, et al is *essential*.

This is among the worst books I've seen in economics. I suggest you read something else in maths such as dynamic programming, stochastic dynamic programming, measure theory to get the neccessary tools instead of reading this book. By studying these serious books in maths, you get the foundations. The arguments do not flow. To much exercises are left for the readers. The explanations are bad and too terse. The references are really bad and creat a lot of diffculties for you to keep track. This book teachs you many thing you can find in Sargent's three books: Dynamic macroeconomics, recursive macroeocnomics and macro theory. But I found those books are much,much more entertaining and systematic. Forget about this book. I first studied this just to get pass with my course requirement however, after that I switched to more serious mathematic books and read Sargent's in complement. That helps.

This is a really nice book by many standards, particularly in Chapters 4 and 9 which form the heart of the book. But certain aspects of the surrounding formal math chapters are ridiculous: a nice amount of material is in there, but they seem to prove what is trivial and leave what students would really like to see as exercises. This is a pedagogic no-no. They also make a big deal about what should be corollaries and give but a passing mention to fundamentally important theorems - this is a logical no-no.

Structurally, notation is also not consistent across chapters. Some chapters are misleadingly titled, e.g. "Markov Processes" is really only about integration of product measures. Another no-no. FINALLY, the authors also seem to have a HIGHLY selective and suspiciously idiosyncratic way of making references. Here there is a deep, deep ethical no-no.

Otherwise, it is really the only thing on the market and, in achieving what it sets out to achieve, it does quite well. Perhaps some more micro examples would make it better.

This book is a first great step into the theory and results that you need to really understand the technicalities behind current research on Dynamic General Equilibrium Macroeconomics.
Further, it's an excellent complement of Sargent and Ljungqvist's Recursive Macroeconomic Theory.

Essential for understanding modern macroeconomic theory, for better or worse. Chapter 4 on Dynamic Programming under certainty and bounded returns is beautiful. I recommend using this book in conjunction with Sargent's RMT.