The Concept of Equilibrium in Different Economic Traditions

The Concept of Equilibrium in Different Economic Traditions

An Historical Investigation

Bert Tieben

This book deals with one of the most puzzling concepts in economic science, that of economic equilibrium. In modern economics, equilibrium is considered a key assumption, but its role is contested by economists both from within the mainstream and from rival schools of thought.

Chapter 16: Disequilibrium Foundations of Equilibrium Analysis

Bert Tieben

Subjects: economics and finance, austrian economics, history of economic thought, methodology of economics, post-keynesian economics


INTRODUCTION The previous chapters discussed a variety of approaches towards the analysis of disequilibrium phenomena. It has been shown that the common motive of these approaches is the dissatisfaction with the current state of knowledge in mainstream equilibrium analysis. This type of analysis is said to lack a relevant economic meaning. It is generally considered excessively mathematical, said to rely on unrealistic assumptions and to derive results that are never confronted with the conditions of economic reality. In short, economic equilibrium is a condition that pertains to a certain class of mathematical models, but it seems entirely disconnected with the mechanisms that rule actual economies. The aspect that plays a crucial role in this analysis of the current state of knowledge in equilibrium economics is the problem of disequilibrium adjustments. This problem refers to the ability of a competitive economy to improve coordination between decentralized decision units through price and quantity adjustments. The lay public considers the explanation of this coordinative process one of the key achievements of economic science. It is not for nothing that the invisible hand has become one of the best known metaphors in economics. But what is the actual state of affairs in the field of disequilibrium theory? For sure, in partial analysis there is a rich variety of explanations for adjustment processes in many different cases. But in general analysis this is not the case. On the contrary. The theory of global stability in general equilibrium analysis is said to have reached a complete...

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