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Mathematical Analysis and Optimization for Economists

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Mathematical Analysis and Optimization for

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Economists, Technometrics, 65:2, 300-301, DOI: 10.1080/00401706.2023.2201131

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Mathematical Analysis and Optimization for Economists, is precisely when mathematics becomes both an indispensable
by Michael J. Panik, Chapman & Hall, 2021, 345 pp., $52.49 tool and a life-saver. Optimization is an everyday seek. Global
(HB), ISBN: 9780367759018. Extrema of Real-Valued Functions and Local Extrema of Real-
Valued Functions focus, respectively, on what they claim. Special
Mathematics plays a vital role in providing the logical and emphasis is laid on bounded functions that are ubiquitous
foundational basis for several other branches of knowledge. This in analysis and the first concern regarding the existence of
is particularly true in fields such as economics. Attempting to global extrema. It leads to several beautiful destinations such
understand economics without a reasonable grip on mathe- as the completeness axiom, Weierstrauss’ theorem, and the
matics is unwise. This has long been felt and worked upon. intermediate value theorem. There is a detailed review of the
Consequently, mathematical economics is rich in its literature derivative that comes in extremely handy in identifying and
and a large number of good books on it, both classical (Takayama classifying points of maxima, points of minima, and points of
and Akira 1985; Bushaw and Clower 1957) and modern (Yu inflection.
2019; Korn and Luderer 2021; Hoy et al. 2022; Mala 2022a, Convex and concave real-valued functions are the concern
2022b) already exist. of Chapter 8, Convex and Concave Real-Valued Functions, and
The book, Mathematical Analysis and Optimization for Chapter 9, Generalizations of Convexity and Concavity. Con-
Economists, is written with a two-fold intention—on one hand, vexity and concavity of real functions play a pivotal role in
it envisages making the power and usefulness of contemporary the determination of extreme values. A region is convex if, for
mathematical methodologies evident to the students of eco- any two points in it, the line segment joining the two points
nomics, and on the other, it attempts at illustrating how these wholly lies in it. The chapters discuss, among other things,
techniques or methodologies could be employed in the solutions supergradients of concave and subgradients of convex functions,
of macroeconomic problems. the differentiability, and extrema of these functions, conjugate
Chapters 1 through 4 are about mathematical foundations. functions, and their applications to economics. Quasiconcav-
Mathematical Foundations 1 is about preliminaries and attempts ity, quasiconvexity (along with their differentiability), pseudo-
to make sure that the book remains as self-contained as pos- concavity, and pseudoconvexity have also been discussed thor-
sible. Matrices and determinants are inevitable tools for any oughly. Chapter 9 contains two appendices—one on additional
analysis course, especially when an analysis book attempts at thoughts on the chapter’s theorems and another on additional
solving practical problems related to economics. From the very thoughts on differentiable pseudoconcave and pseudoconvex
ground-up stuff, such as the definitions of the various types of functions.
matrices to more advanced and involved concepts, such as those Constrained extrema are discussed in the next three chapters,
of linear dependence, linear independence, dimension, rank, that is Chapters 10 through 12. Starting with the introduction of
convex cones, and quadratic forms, the first chapter of the book, Lagrange’s technique, the discussion culminates in an interpre-
owing to its richness, may (in its own right) be considered a tation of the Lagrange multiplier and the generalized technique
treatise on linear algebra. Mathematical Foundations 2 is about of Lagrange and a couple of appendices.
the basics of real numbers. It discusses the important analysis Chapter 13 is about Lagrangian saddle points and duality.
notions of metric spaces, limits of sequences, point-set theory, The main emphasis is on the saddle-point problem. It discusses
continuous single-valued functions, and operators. Mathemat- several necessary and sufficient conditions in this connection.
ical Foundations 3 starts with beyond single-valued functions Chapter 14 discusses generalized concave optimization. It is
and discusses limits, continuity, and derivatives of single-valued an advanced topic and may safely be skipped by amateurs and
functions. While most contemporary analysis books miss out first-timers.
on the equality of mixed partials, this chapter contains one Chapter 15 is about three special kinds of functions—
on Young’s theorem that provides a sufficient set of condi- homogeneous, homothetic (functions that can be expressed
tions for the equality of mixed partials fxy and fyx . Deriva- as monotonic increasing transformations of homogeneous
tives of vector-valued functions and quadratic functions are functions), and almost homogeneous. It discusses, besides
also discussed. Taylor’s formula with integral remainder and other concepts, Euler’s theorem for each one of these three
Lagrange’s form of the remainder is presented lucidly and with types of functions. The chapter throws light on the connection
suitable examples. Mathematical Foundations 4 starts with the between homogeneity and convexity. There is also a section on
implicit function theorem that specifies sufficient conditions for homogeneous programming and its economic applications.
an equation or a system of equations to define certain vari- Chapter 16 is about envelope theorems. It considers the opti-
ables as functions of other variables. Chain rule and functional mization of a function that depends upon a set of arguments as
dependence are also explained with a good number of engaging well as a set of parameters.
examples. Chapter 17 is about Brouwer and Kakutani’s fixed point the-
After setting the stage in the first four chapters, the book orems. It is a miscellaneous collection of fixed-point theorems
transitions into more advanced topics. presented in a variety of forms incorporating varying sets of
Chapters 5 through 7 discuss the global and local extrema assumptions. This is one of the most exciting and engaging chap-
of real-valued functions. Global and Local Extrema of Real- ters of the book and contains exciting discussions on simplexes,
Valued Functions gives a general overview of optimization that convex polytopes (sets that can be expressed as convex hulls
is a central common concern to economics, business, and man- of finite number of points), and simplicial decomposition and
agement. More often than not, human activities and endeavors subdivision. The pick of the chapter is a section on the existence
are directed toward some maximization or minimization. This of fixed points.
 TECHNOMETRICS 301

The first 17 chapters of the book deal exclusively with static Number systems: A path into rigorous mathematics, grew out of
optimization procedures; however, the subject matter of Chapter a module that the author taught at Loughborough University.
18 is dynamic optimization. Its main focus is on optimal control Although no serious or conscious attempt to provide a coher-
modeling problems such as the infinite time horizon problem ent account of the history of number systems has been made,
frequently encountered in economic modeling for which the the book contains several snippets on the subject’s historical
planning period is of infinite duration. development, scattered throughout the book. Akin to a typical
Chapter 19 is a revision of comparative statics which is undergraduate text, the book contains new presentations of the
commonly employed to study changes in supply and demand. existing knowledge on the subject but hardly any new research
It is a methodological concept in economic theory used to results.
study the change from one equilibrium position to another. The book is divided into 11 chapters and an appendix on
The chapter begins with a discussion of the fundamental how to read proofs. The chaptering is quite uneven. While
equation of comparative statics and transcends to its economic
some chapters are surprisingly brief, such as Chapter 11 with
applications. It discusses the constrained utility maximization
2 pages, others are extremely long, such as Chapter 9 with 53
problem (that focuses on choosing a commodity bundle that
pages. However, equity is exercised throughout the book with
results in maximizing a strictly quasiconcave utility function
regards to the role and the necessity of maintaining rigor in
subject to certain budget constraints), the constrained cost min-
imization problem (e.g., minimizing advertising expenditures mathematics.
subject to some constraints) usually encountered in manage- The first chapter is an introduction that explains the purpose
rial decision making and the long-run profit maximization of the book. It begins with a brief historical overview of how
problem. mathematical ideas were developed for practical applications in
The book contains a good number of references for further ancient times. The axiomatic method is discussed before the
reading and a very rich index is appended for a quick look-up. discussion of number systems in mathematics and mathematics
Despite attempts to keep the book self-contained, the book is not writing, which discusses notations and terminology. The chapter
an introductory text on mathematical analysis and optimization. concludes with an engaging section on logic and methods of
It could safely be classified as an intermediate-level textbook. proof, in which the author briefly mentions various methods of
Having said that, it is a very rich source of literature on math- proof, such as proof by contradiction, proof by exhaustion, and
ematical analysis and optimization for economists. the concept and the role of counterexamples.
Sets and relations are discussed in Chapter 2. It establishes
References the tone for several other chapters of the book. This chapter
is about sets, relations, and binary operations. Sets are central
Bushaw, D., and Clower, R. W. (1957), Introduction to Mathematical Eco-
nomics, Homewood, IL: R. D. Irwin. [300] to almost every branch of modern mathematics. The chapter
Hoy, M., Livernois, J., McKenna, C., Rees, R., and Stengos, T. (2022), has been written with this goal in mind, as well as the goal of
Mathematics for Economics, Cambridge, MA: MIT Press. [300] exhibiting the rigor of mathematics.
Korn, R., and Luderer, B. (2021), Money and Mathematics, Springer Texts in Natural numbers, also known as counting numbers, are dis-
Business and Economics, Wiesbaden: Springer. [300]
Mala, F. A. (2022a), Kam Yu, Mathematical Economics: Prelude to the cussed in Chapter 3. The fact that 1 is the first number is obvious
Neoclassical Model, Cham: Springer. [297,300] but still needs to be classified as an axiom demonstrates the
Mala, F. A. (2022b), “Ralf Korn and Bernd Luderer, Money and Mathemat- extent of rigor that is evident in mathematics. This chapter
ics: A Conversational Approach to Modern Financial Mathematics and begins with a description of Peano’s axioms, which were first
Insurance,” Journal of Economics, 137, 281–283. [300]
Takayama, A., and Akira, T. (1985), Mathematical Economics, Cambridge: published in 1889. Other fundamental concepts, such as addi-
Cambridge University Press. [300] tion, multiplication, and natural number exponentiation, are
Yu, K. (2019), Mathematical Economics, Cham: Springer. [300] explained formally and rigorously. Order and boundedness have
also been discussed in depth. The famous Hilbert’s hotel example
beautifully explains the intriguing concept of infinite sets, which
Firdous Ahmad Mala
are sets that are equivalent to some of their proper subsets. The
Government Degree College Sopore, Baramulla,
Jammu and Kashmir, India chapter concludes with a look at subtraction as the inverse of
http://orcid.org/0000-0003-2023-8529 addition.
Chapter 4 discusses integers, including their definition, arith-
metic, algebraic structure, order, cardinality, and boundedness.
Notably, the section on the algebraic structure of integers goes
beyond the scope of an elementary textbook on number systems
Number Systems: A Path into Rigorous Mathematics, by by addressing integers from a group-theoretic perspective. Even
Anthony Kay, CRC Press, 2022, 317 pp., $130.00 (hcb), ISBN: beyond groups, the author introduces integers as a popular
9780367180614. example of rings.
Chapter 5 is a brief but well-thought-out introduction to the
Mathematics is known for its rigor and beauty. While not theory of numbers. It starts with the famous division algorithm
everyone is able to appreciate the beauty that mathematics pos- and discusses integer division, base representations, primes,
sesses, the rigor of mathematics is easily discernible. The book, and prime factorizations and congruences among others. The

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