Applying maximum entropy to econometric problems

About this book

To develop the pure ME formulation, we focus on economic problems with one or more of the following: (1) A population within an economic setting that involves a large but countable number of individuals, outcomes or members; (2) A desire to obtain information that would permit one to understand and predict individual behavior or the state of the economic system; (3) An inability to identify or establish the initial-boundary conditions, relative to the current state of the system, and to identify the paths (trajectories) of the many members that comprise the population; (4) The economic models relating to the individual behavior of members of the population contain unknowns that are unobserved and not accessible to direct measurement; (5) Consistent with the statement of the problem, some moments or aggregate measures such as overall averages for the members of the population are observed; and (6) The unknowns may be greater than the observable population data points and the problem may be ill-posed or underdetermined.