A micro foundational episode of the early history of macroeconomics: a 1932 debate on Walrasian economics and multiple equilibria

Michaël Assous and Vincent Carret

The European Journal of the History of Economic Thought, 2024, vol. 31, issue 2, 227-244

Abstract: This paper documents an early fork in the development of macroeconomics, by examining a debate between the Dutch economists Jan Tinbergen and Johan Koopmans. In a 1932 paper, Tinbergen argued that two firms could be stuck in a “bad” equilibrium in the absence of a coordinated action to increase employment. Koopmans replied with a paper demonstrating that multiple equilibria in an exchange economy could not be ranked on the basis of their productive efficiency. This debate contributed to a larger turn away from dynamising the general equilibrium model, towards the new field of macrodynamics, with long-ranging consequences for the field.

Date: 2024
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DOI: 10.1080/09672567.2024.2305952

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