Equilibrium and Disequilibrium Dynamics in the 1930s
Carlo Zappia ()
Journal of the History of Economic Thought, 2001, vol. 23, issue 1, 55-75
Notwithstanding considerable efforts by at least two generations of economic theorists, the state of art of general equilibrium theory in the Arrow-Debreu framework is still extremely unsatisfactory, especially with respect to the treatment of the time dimension. Indeed, it is now taken for granted even among general equilibrium theorists that, to play a significant role, equilibrium analysis must account for individual agents' expectations about the uncertain future, and that the Arrow-Debreu procedure of collapsing the entire decision process at an initial date is to be interpreted, at most, as a counterfactual argument, the main message of the Arrow-Debreu approach being that â€œone cannot argue that markets co-ordinate activity if there are many of them missingâ€ (Hahn 1995, p. 12).
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