The Disequilibrium Theory of Changes in Total Economic Activity

Thor Hultgren

American Journal of Economics and Sociology, 1975, vol. 34, issue 1, 15-28

Abstract: Abstract. It is widely taught that national product departs from, but returns toward, an “equilibrium” level. Return from sub‐equilibrium, it is believed, involves depleting inventories; return from super‐equilibrium involves building them up; in both cases, at a diminishing rate. Observable product and observable aggregate stocks of goods, however, usually rise and fall together; they do not change in opposite directions, as implied. Stocks are not large enough to support the supposed depletion at low income levels. “Intended” changes contrary to the actual changes are not documented. The disequilibrium theory does not promote understanding of historical cycles in product.

Date: 1975
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