Problems with modelling equilibrium attainment
This chapter briefly discusses three key articles about equilibrium attainment that were all published in 1959. These three articles are Kenneth Arrow’s ‘Towards a theory of price adjustment’, Robert Clower’s ‘Ignorant monopolist’, and George Richardson’s ‘Equilibrium, expectations and information’. These articles and their three different perspectives on equilibrium models will often be referred to throughout this book. The chapter then discusses three aspects of general equilibrium theories: the idea that a general equilibrium produces a maximal social good; the single behavioural assumption of neoclassical explanations (essentially the idea that every market participant tries to maximize); and the recent development of Dynamic Stochastic General Equilibrium models.
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