The Dynamics of General EquilibriumEconomic Journal (2007)
AbstractThe Walrasian general equilibrium model is the centerpiece of modern economic theory. While the equilibrium properties of the model have been well known since the seminal work of Arrow and Debreu a half century ago, progress in understanding its dynamical properties has been meager. Some rethinking of Walrasian dynamics is in order. This paper shows that the instability of Walras' tatonnement process is due to the public nature of prices, which leads to excessive correlation among the behaviors of economic agents. When prices are private information, a dynamic with a globally stable stationary state obtains in economies that are unstable in the tatonnment process. We provide an agent-based model of a multi-sector Walrasian economy with production and exchange, in which prices are private information. This economies is dynamically well-behaved.
- General Equilibrium;dynamical systems; agent-based model
Publication DateOctober, 2007
Citation InformationHerbert Gintis. "The Dynamics of General Equilibrium" Economic Journal (2007)
Available at: http://works.bepress.com/hgintis/2/