A general task in economic reasoning is to determine whether, with variables , a hypothesis follows from assumptions , i.e. is it the case that
Ideally the answer would be
False, but in practice life is more complicated: the answer could differ depending on the value of ; or the assumptions could even be contradictory, i.e. alone is
We can categorise these possibilities via the outcome of a pair of quantified statements (Table 1). Should technology provide any one automatically then an economist gains important information: either a proof or a disproof of their theory; or an identification of where their theory may be true (a description of ); or the knowledge that their assumptions contradict.
Such technology could also allow for exploration. An economist could vary the question: the assumptions generating a
True result can be weakened, or those generating a
Mixed result strengthened, by quantifying more or less of .
For example, we can partition into and ask for . The result is a formula in the free variables that weakens or strengthens the assumptions. If generated automatically the economist gains information about how to reformulate assumptions that justify her hypothesis.
1.1 Quantifier Elimination
Such problems fall within the framework of Quantifier Elimination (QE): the generation of an equivalent quantifier-free formula from one that contains quantifiers. QE is known to be possible over real closed fields thanks to the seminal work of Tarski . Practical implementations followed with Collins’ Cylindrical Algebraic Decomposition  and Weispfenning’s Virtual Substitution . There are modern implementations of QE in many computer algebra systems.
QE has found many applications within engineering and the life sciences. Recent examples include: the derivation of optimal numerical schemes , weight minimisation for truss design , and biological network analysis . However, applications in the social sciences are lacking (the nearest we can find is ). On the few occasions when QE has been mentioned in economics it has been dismissed as infeasible, e.g. “something that is do-able in principle, but not by any computer that you and I are ever likely to see” . But that dismissal is based on theoretical complexity results rather than experience with actual software applied to actual economic reasoning. Many meaningful economics problems can be studied with modern QE implementations111A dataset of 45 economic reasoning examples that may be tackled with QE technology is available here: https://doi.org/10.5281/zenodo.1226892, with the barrier to further use acceptance by the community, and experience with the software.
1.2 A New Mathematica Package TheoryGuru
This motivated the development of a new tool to aid the application of QE to economics: a package called TheoryGuru to run in the Mathematica computer algebra system . This is able to parse input from economists, run some error and sanity checks, and then utilise Mathematica’s QE tools and offer interpretations of the results. These QE tools are accessed by the Mathematica Resolve command with some of the underlying algorithms described in , , , . The paper proceeds in Section 2 by introducing the functionality of TheoryGuru. Then in the remaining sections we describe examples of its use.
2.1 Main Functionality
The purpose of
TheoryGuru is to lower the costs of applying QE to economics. Hence it assumes the expression of reasoning in the format traditional to the field: as a conclusion to be possibly deduced from a set of assumptions.
The core functionality of TheoryGuru is then as follows:
- Check for errors:
Provide warnings on likely typographical errors in variables (e.g., when a variable appears only once in the entire formula) or formula structure (e.g. the user may have confused = with ==).
- Parse input:
This includes identifying from context whether a variable is a vector, scalar, or boolean; processing input given in apretty mathematical notation (e.g. derivatives) into a format accepted by Resolve; standardizing dot products and integrals (e.g., distribute plus and alphabetically sort arguments of commutative operators).
- Adding standard assumptions:
If dot products are present, then add to user assumptions the necessary and sufficient conditions for the Gramian matrix (representing dot products for all pairs of vectors) to be positive semi-definite. This rules out vectors with imaginary elements.
- Check assumptions:
The package will next check that the assumptions provided are not mutually contradictory: the situation of the bottom left entry in Table 1. This is done via a call to Resolve to check there is at least one solution to a fully existentially quantified QE sub-problem.
- Form main QE input:
Automatically assemble the two Tarski formulae for the main calls (as given in Table 1).
- Make algorithm choices:
Currently this refers to (a) whether to process a universal or existential sentence and (b) the variable ordering determining the sequence for eliminating quantifiers. It is well known that the choice (b), while not affecting the correctness of the output, can have a large effect on computational resources required .
- Output interpretation:
Then after making the two calls to Mathematica’s
Resolve, the package interprets the results by identifying the relevant cell from Table 1. The package also suggests what to do next: e.g., when applicable, show a counterexample, solve simultaneous equations appearing in the assumptions, or redo the QE with some free variables.
2.2 Access and Documentation
To access TheoryGuru the reader will need a modern version of Mathematica222The Resolve function has evolved and improved over the years and so the performance of TheoryGuru will alter correspondingly. and then installation follows from simply running the command:
which produces an interface as in Figure 1. Not only does this install the underlying code, it also provides links to tutorials, tips, help and a large bank of examples (as shown in Figure 1). The examples are also available online at http://examples.economicreasoning.com/ as both interactive Mathematica notebooks and static pdfs.
The main functionality is accessed via the function TheoryGuru which requires two arguments: a collection of assumptions and a hypothesis.
3 Examples of TheoryGuru Use
3.1 Tax Incidence
Our first, admittedly simple, Tax Incidence example is about the effect of a tax on buyers and sellers in a market. Each transaction involves the buyer paying price to the seller in addition to paying tax to the government. The symbolic functions demand(.) and supply(.) represent the quantities that buyers purchase and sellers sell, respectively, as a function of the price they pay or receive (so for the buyer that includes the tax). A market equilibrium price has the quantity demanded equal to the quantity supplied. The equilibrium condition can be input to Mathematica as shown in the top cell of Figure 2, which assigns the condition the natural language name
The first argument of the call to TheoryGuru in the second cell of Figure 2 is a set of assumptions. The first of these is that changing the tax changes the market from one equilibrium to another333The notation is consistent with an economist saying that she “totally differentiates the equilibrium condition”. This differentiation is automatically performed by Mathematica when the TheoryGuru function is evaluated.. The remaining two constrain the slope of the demand and supply curves in the neighborhood of the market equilibrium. The second argument is the hypothesis the user wishes to test, in this case whether the price impact is negative or zero.
The call causes TheoryGuru to automatically assemble Tarski formulae, in which it recognizes demand'(price+tax) and supply'(price) as partially interpreted functions [7, page 73]. Following the generic format presented above, there are two QE problems for TheoryGuru to consider: the existence of an example and the existence of a counterexample. Here the output is simply True because there is no counterexample: i.e., no way to have a positive price impact while satisfying the assumptions.
When TheoryGuru evaluates, a dashboard (Figure 3) appears summarizing the calculation and offering the user possible next steps. In the tax incidence example, the user may be wondering what else can be concluded about the price impact. The button labelled ''Deduce univariate hypotheses'' on the dashboard serves this purpose. Pressing it automatically generates a call to the function TheoryPossibilities as shown in Figure 4. Here, one or more free variables are provided by the user, or else variables are chosen by the software (giving priority to total derivative variables and alphabetical order). The assumptions are then projected on each of the free variables separately (eliminating existential quantifiers from all variables except that one), with the resulting formulae simplified. In this example we discover the price impact must be strictly between and .
Users can be forgetful or have an imperfect understanding of an economic model. In the top cell of Figure 5 no definitive conclusion about price impact is reached because the user has forgotten to constrain the supply curve’s slope.
The forgotten assumption can be discovered with
TheorySufficient. It assembles the formula defining counterexamples. It then projects that set on each of the axes (three in this example). It then shows the disjunction of each formula, after each is simplified based on the assumptions and then negated. Here two formulae are discarded because they are
False or identical to . The third is the missing supply-slope restriction output in the second cell of Figure 5. Note that, by construction, any of
TheorySufficient’s disjunction branches, together with the user’s (insufficient) assumptions, imply the user’s hypothesis.
3.2 Gender Wage Gap
We now look at a more involved Gender Wage Gap example that studies the effect of wage inequality on women’s supply of human capital to the market. Women are assumed to have (possibly correlated) skills and in market work and non-market activities, respectively. These skills have a population distribution modelled with the joint density function , which is normalized to have unconditional means of zero. Women work if and only if their non-market log wage is less than , their market log wage . It follows that mean non-market and market log wages are and , respectively. The employment rate of women is as defined in the top cell of Figure 6, and the average skill in the market is as defined in the next cell.
In  the Gaussian model is used to show how wage inequality, as modelled by , affects the average skill in the market. However, the selection rule result – that is, the effect of on holding constant by varying – does not require the Gaussian assumption.
To show this, we define to be any change in and that increases and holds constant, as defined in the third cell of Figure 6 (
DefineExperiment). Figure 7 then assigns natural language to two definitions (top and bottom cells) as well as restrictions on partially interpreted functions (middle cell).
The top cell of Figure 8 shows that a positive skill impact can be deduced from the assumed properties of the partially interpreted functions. In economics terms: inequality increases the average skill that women supply to the market, thereby narrowing the measured wage gap with men.
At first glance, the gender wage gap example appears to involve integrable probability density functions rather than the scalar variables required by the QE algorithms employed byMathematica’s
Resolvefunction. But the reasoning in this and many other examples depends on the probability density functions only as they are summarized by various scalars.
TheoryGuruautomatically discovers these scalar variables, which can be viewed by the user who clicks ''Show space'' on
TheoryGuru’s dashboard. The result of that click is the last cell of Figure 8.
4 Run Times
Figure 9 shows the run times for several of the function calls shown above. As explained, each evaluation involves preparation of a QE problem for Mathematica’s Resolve function, followed by that QE call. The cell numbers refer to those used by Mathematica in the screen shots above. The figure’s first run time column is for the entire evaluation of the TheoryGuru command. The next column shows, when applicable, the amount of time it took for just the “universal” QE regarding the existence of a counterexample. The final column is the amount of time it took for just the “existential” QE regarding the existence of an example (the faster QE for calls that have no counterexamples).
In order to explore the limits of the software, we consider queries regarding the concavity of quasiconcave production functions, whose economics and algebra we discuss in . The three-input version evaluates in less than two seconds. The four-input version is considerably more complicated, and evaluates in about eight minutes primarily because of a long search to find a relatively efficient order for eliminating quantifiers444It is once that order is obtained that the corresponding QE needs only 8.89 seconds.. The problem can be solved more elegantly with vectors, with a quicker run time as shown in the final row (see also ).
5 Final Thoughts
We have demonstrated how economic reasoning may be automated using QE procedures and how the TheoryGuru tools greatly reduce the costs to an economist of accessing that technology. We note that a set of benchmark examples that originate from economics and may be tackled with QE is now available at https://doi. org/10.5281/zenodo.1226892 and described in . Future work will involve considering how the underlying QE technology could be optimised for such examples, whose structure is often not well represented in the broader QE literature.
-  Bradford, R., Davenport, J., England, M., Errami, H., Gerdt, V., Grigoriev, D., Hoyt, C., Košta, M., Radulescu, O., Sturm, T., Weber, A.: A case study on the parametric occurrence of multiple steady states. In: Proc. ISSAC ’17. pp. 45–52. ACM (2017)
-  Caviness, B., Johnson, J.: Quantifier Elimination and Cylindrical Algebraic Decomposition. Texts & Monographs in Symbolic Computation, Springer-Verlag (1998)
-  Charalampakis, A., Chatzigiannelis, I.: Analytical solutions for the minimum weight design of trusses by cylindrical algebraic decomposition. Archive of Applied Mechanics 88(1), 39–49 (2018)
-  Collins, G.: Quantifier elimination for real closed fields by cylindrical algebraic decomposition. In: Proc. 2nd GI Conference on Automata Theory and Formal Languages. pp. 134–183. Springer-Verlag (reprinted in ) (1975)
-  Erascu, M., Hong, H.: Real quantifier elimination for the synthesis of optimal numerical algorithms (Case study: Square root computation). J. Symb. Comp. 75, 110–126 (2016)
Huang, Z., England, M., Wilson, D., Davenport, J., Paulson, L., Bridge, J.: Applying machine learning to the problem of choosing a heuristic to select the variable ordering for cylindrical algebraic decomposition. In: Proc. CICM ’14 (LNAI vol. 8543), pp. 92–107. Springer International (2014)
-  Kroening, D., Strichman, O.: Decision Procedures: An Algorithmic Point of View. Springer, New York (2013)
-  Li, X., Wang, D.: Computing equilibria of semi-algebraic economies using triangular decomposition and real solution classification. J. Math. Econ. 54, 48–58 (2014)
-  Mulligan, C.: Automated Economic Reasoning with Quantifier Elimination. NBER working paper no. 22922 (2016)
-  Mulligan, C., Bradford, R., Davenport, J.H., England, M., Tonks, Z.: Non-linear Real Arithmetic Benchmarks derived from Automated Reasoning in Economics. To Appear In: Proc. 3rd International Workshop on Satisfiability Checking and Symbolic Computation () (2018)
-  Mulligan, C., Rubinstein, Y.: Selection, investment, and women’s relative wages over time. Q. J. Econ. 123(3), 1061–1110 (2008)
-  Steinhorn, C.: Tame Topology and O-Minimal Structures, pp. 165–191. Springer Berlin Heidelberg (2008)
-  Strzeboński, A.: Cylindrical algebraic decomposition using validated numerics. J. Symb. Comp. 41(9), 1021–1038 (2006)
-  Strzeboński, A.: Computation with semialgebraic sets represented by cylindrical algebraic formulas. In: Proc. ISSAC ’10, pp. 61–68. ACM (2010)
-  Strzeboński, A.: Solving polynomial systems over semialgebraic sets represented by cylindrical algebraic formulas. In: Proc. ISSAC ’12, pp. 335–342. ACM (2012)
-  Strzeboński, A.: Cylindrical algebraic decomposition using local projections. J. Symb. Comp. 76, 36–64 (2016)
-  Tarski, A.: A Decision Method For Elementary Algebra And Geometry. RAND Corporation, Santa Monica, CA (reprinted in ) (1948)
-  Wada, Y., Matsuzaki, T., Terui, A., Arai, N.: An automated deduction and its implementation for solving problem of sequence at university entrance examination. In: Proc. ICMS 2016 (LNCS vol. 9725), pp. 82–89. Springer (2016)
-  Weispfenning, V.: The complexity of linear problems in fields. J. Symb. Comp. 5(1/2), 3–27 (1988)
-  Wolfram, S.: The Mathematica Book. Wolfram Research Inc. (2000)