An Historical Investigation
Chapter 1: Introduction
THE AIM OF THIS BOOK This book deals with one of the most puzzling concepts of economic science, namely that of economic equilibrium. One may call this concept puzzling, because for what is generally considered a relatively young science it has a remarkably long tradition. The first ideas concerning economic equilibrium can be found in the works of the Ancient Greeks, as will be shown below. Another puzzling feature of economic equilibrium is its centrality to modern economics. It is said that ‘[w]herever economics is used or thought about, equilibrium is a central organizing concept’ (Hahn 1984, 43). Whether it concerns policy makers or theorists, of the neoclassical, Keynesian or Austrian school, all use some form of equilibrium theory to develop their ideas and support their main theoretical and political claims. The equilibrium concept has also greatly advanced the mathematization of economics. Mathematical neoclassical general equilibrium theory is considered by many as one of the peak achievements of economics, and finds applications well beyond the domain of economics (for example Rosenberg 1992, 250). Yet no part of economics raises more questions than general equilibrium theory. Philosophers are puzzled by its explanatory role (Hausman 1981a, Rosenberg 1992). General equilibrium theory sets a standard of mathematical sophistication, but its assumptions are in irredeemable conflict with economic reality and the theory is thought by many to have no applications at all (for example Blaug 1992, 161). For that and other reasons, non neoclassical economists reject this theory as a starting point of...