Affiliation:
1. Xavier Gabaix is Martin J. Gruber Professor of Finance, Stern School of Business, New York University, New York City, New York. His email address is .
Abstract
Many of the insights of economics seem to be qualitative, with many fewer reliable quantitative laws. However a series of power laws in economics do count as true and nontrivial quantitative laws—and they are not only established empirically, but also understood theoretically. I will start by providing several illustrations of empirical power laws having to do with patterns involving cities, firms, and the stock market. I summarize some of the theoretical explanations that have been proposed. I suggest that power laws help us explain many economic phenomena, including aggregate economic fluctuations. I hope to clarify why power laws are so special, and to demonstrate their utility. In conclusion, I list some power-law-related economic enigmas that demand further exploration. A formal definition may be useful.
Publisher
American Economic Association
Subject
Economics and Econometrics,Economics and Econometrics
Cited by
259 articles.
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