 The Futility of Utility: how market dynamics marginalize Adam SmithJoseph McCauley (jmccauley@uh.edu) MPRA Paper from University Library of Munich, Germany Abstract: General Equilibrium Theory in econometrics is based on the vague notion of utility. Prices, dynamics, and market equilibria are supposed to be derived from utility. Utility is sometimes treated like a potential, other times like a Lagrangian. Illegal assumptions of integrability of actions and dynamics are usually made. Economists usually assume that price is the gradient of utility in equilibrium, but I observe instead that price as the gradient of utility is an integrability condition for the Hamiltonian dynamics of an optimization problem. I discuss both deterministic and statistical descriptions of the dynamics of excess demand and observe that Adam Smith's stabilizing hand is not to be found either in deterministic or stochastic dynamical models of markets nor in the observed motions of asset prices. Evidence for stability of prices of assets in free markets has not been found. Keywords: Utility; general equilibrium; nonintegrability; control dynamics; conservation laws; chaos; instability; supply-demand curves; nonequilibrium dynamics (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:2163 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
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