An Historical Investigation
Chapter 13: The Impact of Uncertainty
INTRODUCTION In modern economics, the equilibrium concept elicits many critical comments. It is said to be unrealistic or to be unworkable. It supports theories like Walrasian general equilibrium analysis which revel in mathematical modeling, but are unable to generate empirical claims about the behaviour of actual economic systems. This has led to a situation in which even the founding fathers of GE theory concede that ‘the cost of that mathematization sometimes outweighs its benefit’ (Debreu 1991, 5). There is danger that in the training of economic researchers ‘the part of economics will become secondary’ (ibid.). In addition, theories adopting the equilibrium framework like GE theory wrestle with difficult analytical problems, such as explaining the role of money or finding a suitable notion of stability to prevent that equilibrium is nothing more than an end-state. Problems of this kind motivate economists to look beyond the equilibrium framework. What are the disequilibrium foundations of equilibrium theory? Would economics without the equilibrium concept generate better results? In sum, what are the alternatives to the dominance of the equilibrium concept in economics? Strictly, one would not expect an investigation of the prospects for disequilibrium analysis in a book discussing the role of economic equilibrium. However, I consider the question of disequilibrium theorizing closely related to the track record of equilibrium theorizing. The former often arises as a result of the criticism of the latter and, what is more important, in spite of its criticism disequilibrium analysis always adopts its own version of the equilibrium...
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