Mechanisms leading to equilibrium in economy with financial market

Agnieszka Lipieta and Ilona Ćwięczek

International Journal of Finance & Economics, 2022, vol. 27, issue 4, 4166-4182

Abstract: Joseph Schumpeter pointed to the important role of the economic mechanism, understood as a set of rules and regularities explaining the economic life, within the evolution of the economy. Innovative mechanisms as well as mechanisms of adaptation of innovations into agents' activities were at the core of his interest. This paper aims at designing some kinds of innovative and non‐innovative mechanisms that can appear within the economic evolution. Hurwicz mechanisms are used to rigorously study the processes within which real and financial innovations are adopted into routine agents' activities. Mechanisms that could result in the existence of equilibrium in the economy with financial markets and private ownership are specifically under our consideration. Due to the above, qualitative properties of analysed mechanisms can be examined with respect to Schumpeter's concepts.

Date: 2022
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