General Equilibrium Models in the Economy and in the Field of Development Policy

Abstract

Economics is heavily reliant on mathematics, and with the advent of computers we can now make better decisions based on vast amounts of data. This article provides an overview of the mathematical structure underlying decision-making, which is motivated by elements of optimisation theory, which are currently supported by algorithms developed in equilibrium models in economics. We show a motivational overview of the theory of general equilibrium models and their advantage today. Although the approach of a computable general equilibrium model is a complicated task, it undoubtedly allows better decision making, especially in governmental decisions and little has been done in some developing countries.