Bruna Mirelle Alvarez

A guide for students of economics: Ten statements that demonstrate that someone does not understand modern economics or what an equilibrium is, and that you can safely ignore everything else they say. 1. “Equilibrium means the economy is stable or at rest.” Many assume that an equilibrium is a peaceful state with no forces at play. Instead, an equilibrium is just an arrangement of actions and expectations over time that are mutually consistent. It can be locally unstable, explosive, or fragile. Nothing in the definition of equilibrium implies stability. 2. “Equilibrium implies optimality or social efficiency.” Equilibrium is often conflated with efficiency, but equilibrium merely reflects decentralized consistency, not welfare maximization. Market power, externalities, incomplete markets, nominal rigidities, and frictions routinely produce inefficient equilibria. I often teach a first-year macro graduate course, and not a single one of the equilibria I define is efficient. 3. “Equilibrium is a unique outcome.” Many often expect models to have one equilibrium. In reality, multiple equilibria arise naturally in dynamic, strategic, and incomplete-market environments. Models of coordination failures, self-fulfilling expectations, bubbles, overlapping generations, and liquidity traps all hinge on the existence of equilibrium multiplicity. 4. “Equilibrium requires perfect foresight or perfect information.” Equilibrium does not assume agents know the future. In fact, equilibria are often stochastic. The definition of equilibrium only requires that beliefs are consistent with the (perceived) stochastic laws of motion implied by the model. Bayesian learning, noisy signals, ambiguity, and subjective uncertainty all fit well within an equilibrium framework, provided beliefs converge to an internally consistent (but possibly incorrect) distribution. Bonus point: equilibria are compatible with agents having diverging beliefs that never converge to a single Dirac distribution. 5. “Real economies are rarely in equilibrium, so the concept is unrealistic.” Equilibrium is not meant to describe the daily state of the world. It is a conceptual device used to understand the outcome of our models under the assumptions we make. Also, see point 1 above. 6. “Equilibrium requires agents to be fully rational in a psychological sense.” Equilibrium only assumes internal consistency: agents optimize given preferences and constraints. It does not assume realism about human cognition. We can and do define equilibria in models with behavioral biases, bounded rationality, inattention, or rule-of-thumb behavior. We only need to ensure that the resulting actions and beliefs are mutually compatible. 7. “Equilibrium eliminates dynamics or learning.” Equilibrium is sometimes misinterpreted as a static state in which nothing evolves. In fact, many equilibria are sequences of probability distributions over states driven by shocks, policy rules, and endogenous responses. Learning dynamics (Bayesian updating, adaptive rules, experience-based expectations) can occur within equilibrium if the evolution of beliefs is self-consistent. 8. “Equilibrium renders expectations unimportant.” A common misconception is that equilibrium mechanically determines outcomes. In reality, expectations are often central: they determine investment, consumption, asset prices, and policy responses. Many equilibria differ only in their expectations. This is why communication, credibility, and forward guidance matter even in fully rational models. 9. “Equilibrium excludes policy intervention.” Some interpret equilibrium as a laissez-faire concept. In fact, equilibrium analysis is the foundation of modern policy evaluation. Fiscal, monetary, and regulatory interventions work through equilibrium responses (prices, wages, interest rates, quantities) and must satisfy equilibrium conditions to be credible. Equilibrium is a tool for policy design, not a barrier to it. 10. “Equilibriums…” Aequilibrium is a Latin neuter noun of the second declension, which forms a nominative plural in “a”. It is composed of aequus (equal; the same root as equality or equity) and libra (balance or scales or the name of several currencies over history). A final thought: “equilibrium” is a term of art. Its meaning in economics differs from its use in the natural sciences or in everyday language. Terms of art are ubiquitous across academic disciplines, and the first act of intellectual diligence when one starts studying a discipline is to learn what they mean.

Ótima matéria do @valoreconomico sobre o nosso artigo "Does University Expansion Promote Entrepreneurship?", escrito em conjunto com @Bruna_AbreuM e @DaMataDan

@EconFGVSP @SBEconometria @bmsalvarez @Bruna_AbreuM If someone is interested, their paper’s abstract is here:

Hi, #EconTwitter! I want to share my JMP with you! How do firms find and replace managerial talent? Well, they can go out there and try to hire a good employee from another firm, which might be costly and involve frictions... ...or they can look for them inside the firm! (1/n)

Today, we congratulate our students whose papers will be presented at the @Lacea_lames2024 conference! @bmsalvarez (sites.google.com/view/brunamire…) and @Bruna_AbreuM: Does University Expansion Promote Entrepreneurship? (ssrn.com/abstract=49093…).

@PossebomVitor @EconFGVSP @Lacea_lames2024 @Bruna_AbreuM Yes, that's right

@EconFGVSP @Lacea_lames2024 @bmsalvarez @Bruna_AbreuM .@Bruna_AbreuM and @bmsalvarez, your session is at 15:35 on Saturday, isn’t it?

Alvarez (@bmsalvarez) is a post-doctoral researcher and Martins (@Bruna_AbreuM) is a Ph.D. Candidate at @EconFGVSP! Both are excellent young scholars and it is a pleasure to see them competing for this prize! If you want to know more about their research, follow them here!

🎉We are pleased to announce the finalist articles for the Imds-SBE Award 2024! 🏆The big winner will be revealed on 12/12/2024, during the 46th EBE. Who will take first place?🤔 🔗Registration: sbe.org.br/.../46o-encont… See you there! 😉 #46EBE2024 #ImdsSBE Prize #Econometrics

Total de MEIs cresce, e pejotização preocupa www1.folha.uol.com.br/mercado/2024/0…

Ao analisar o fenômeno da pejotização no Brasil, a economista e pós-doutoranda da FGV-EESP, Bruna Mirelle Alvarez, comprovou que 53% dos microempreendedores individuais (MEIs). Leia mais: fea.usp.br/fea/noticias/e… #seminariaacademico #economiafeausp #ppgefeausp #pejotização

“Mais da metade do MEI é ‘pejotização’ disfarçada” Estudo da economista Bruna Alvarez, da @EconomiaGV, indica que cenário contrafactual sem MEI é superior, em termos de bem-estar para a sociedade, que a situação atual, em que o programa existe. estadao.com.br/economia/ferna…

Thanks for the shoutout, @PossebomVitor! For those interested in the topic, the paper is available at ssrn.com/abstract=45984…. Any comments will be welcome!

@rodrigo_toneto @lafalvarez @FEAUSPcomunica Que bonito :')

Sou amigo do @lafalvarez desde a recepção de calouros de 2013. A pessoa mais inteligente e humilde que já conheci. Hoje ele virou professor da @FEAUSPcomunica. Inexplicável a alegria de saber que gerações da nossa querida escola poderão ter o mesmo encantamento que eu ainda tenho

🚨É amanhã, inscrições no link buff.ly/3r7vryv

Today, we congratulate our students whose papers were presented at the @LaceaLames2022 conference! @bmsalvarez (sites.google.com/view/brunamire…): Firm Size Distribution and Informality Effects of a Revenue-Dependent Tax Policy, dropbox.com/s/0dxh6bn0umqk…