chapter  7
19 Pages

Language and economics: Barton L. Lipman

This is an unfortunate state of affairs. The world people live in is a world of words, not functions, and many real phenomena might be more easily analyzed if we take this into account. For example, consider incomplete contracts. Our models treat contracts as mathematical functions and hence find it difficult to explain why agents might not fully specify the function. Of course, real contracts are written in a language and may not unambiguously define such a function - not its domain or range, much less the function itself. More broadly, language is the means by which we communicate with others (or with the self) for information, coordination, persuasion, etc. Given that we interact in language, we should expect language to affect and be affected by our interactions.