The Theory of Money and Financial Institutions - 9780262518031

This is the third and last volume of Martin Shubik's exposition of his vision of"mathematical institutional economics"--a term he coined in 1959 to describe thetheoretical underpinnings needed for the construction of an economic dynamics. The goal is todevelop a process-oriented theory of money and financial institutions that reconciles micro- andmacroeconomics, using strategic market games and other game-theoretic methods. There is as yet nogeneral dynamic counterpart to the elegant and mathematically well-developed static theory ofgeneral equilibrium. Shubik's paradigm serves as an intermediate step between general equilibriumand full dynamics. General equilibrium provides valuable insights on relationships in a closed,friction-free economic structure. Shubik aims to open up this limited structure to the richenvironment of sociopolitical economy without dispensing with conceptual continuity. Volume 3considers the specific roles of financial institutions and government, aiming to provide the linkbetween the abstract study of invariant economic and financial functions and the ever-changinginstitutions that provide these functions. The concept of minimal financial institutions is stressedas a means to connect function with form in a parsimonious manner.