Models as Economies

Robert Townsend

Economic Journal, 1987, vol. 98, issue 390, 1-24

Abstract: The distinction between actual economies and stylized general equilibrium models is no t sharp. General equilibrium models with such key elements as uncerta inty, spatial separation, private information, limited communication, and limited commitment provide a catalogue that one can use to inter pret actual economies. Further, a general equilibrium model can provi de a framework one can use to trace out the logic of some premise for joint, economy-wide phenomena, a web to tie together seemingly unrel ated observations. Also, in tolerating wide variations in environment s, general equilibrium models provide laboratories one can use to con duct relatively inexpensive policy experiments. Copyright 1987 by Royal Economic Society.

Date: 1987
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