Evenly rotating economy: A new modeling technique for an old equilibrium construct

William Luther

The Review of Austrian Economics, 2014, vol. 27, issue 4, 403-417

Abstract: In the middle of the twentieth century, just five years before Arrow and Debreu proved the existence of an equilibrium for a competitive economy in the Walrasian system, Ludwig von Mises introduced the English-speaking world to his alternative equilibrium construct: the evenly rotating economy. In contrast to Arrow and Debreu, which characterizes equilibrium as a unique vector of prices and quantities, Mises depicts equilibrium as a pattern of behavior. After reviewing the Misesian conception of equilibrium and its failure to take hold in the profession, I turn to the modern literature. I contend that the evenly rotating economy is a special case of the now-prevalent class of search-theoretic exchange models. As such, I argue that this class of models is particularly well suited for applications considered by economists working in the Austrian tradition. Copyright Springer Science+Business Media New York 2014

Keywords: Austrian economics; Evenly rotating economy; General equilibrium; Matching; Mises; Search; Walrasian; B53 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/s11138-013-0242-8

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