Walrasian General Equilibrium Theory Research Articles

“RISE AND FALL” OF THE WALRASIAN PROGRAM IN ECONOMICS: A SOCIAL AND INTELLECTUAL DYNAMICS OF THE GENERAL EQUILIBRIUM THEORY

This paper aims at understanding social practices and institutions that ensured the transnational diffusion, recognition, and renewal of the research program in the General Equilibrium Theory (GET), in spite of multiple critics and apparent theoretical dead ends. First, we trace the main conceptual developments of the Walrasian GET program since the 1950s and thus elaborate on its intellectual identity. Then, based on a systematic study of the educational and professional trajectories typical for several generations of GET scholars, we analyze a social form taken by this transnational and multidisciplinary “scientific community”: an institutional dynamics of the Walrasian GET program, most common career patterns, and the forms of international and intergenerational transmission. We construct a database of GET theorists and apply to this dataset a technique of Multiple Correspondence Analysis (MCA) in order to investigate the relational patterns between attribution of scientific credit (symbolic capital) and biographical properties in a transnational space of the GET scholars.

A Pupil and the Tough Assignment: Monetary Issues and the Walrasian General Equilibrium Theory

A Pupil and the Tough Assignment: Monetary Issues and the Walrasian General Equilibrium Theory

General Equilibrium with Price Adjustments—A Dynamic Programming Approach

This research article develops a dynamic framework for the Walrasian pure exchange economy and thus extends the static Walrasian general equilibrium theory into a dynamic one with price adjustments. An evolution equation for the price vector is derived from dynamic programming considerations. The economy tries to move from disequilibrium to general equilibrium by minimizing certain cost functional. The cost functional measures transactions costs and the total expenditure of agents when they optimize individually. Price determination is directly related to a gradient search. The general equilibrium is shown to be stable in the sense of Lyapunov if price adjustments can be large, when needed. The conditional stability could be one reason for volatility clustering in financial time series.

Aggregate excess demand on wall street

The rational investor behavior and news triggered price change assumed by the Efficient Market Hypothesis (EMH) could not explain most of asset price variances, suggesting the need for an alternative theory. The Behavioral Finance Theory (BFT) advocates those economic judgments and decisions in markets are often irrational because of systematic and predictable psychological bias. However, due to the lack of measurable investment behaviors, proponents of the efficient market hypothesis argue that irrational behavior could not be reliably identified and predicted. Here we show that the price-takers behavior gauged by the normalized excess demand (NED) can be measured and the results explain most of the variances of SP500 daily returns over eight years of available data, the remaining variances are due to price-makers behavior, an influence abstracted out by the Walrasian general equilibrium theory. The interactions between behaviors of price-takers and price-makers drive market price fluctuations. For short-term prediction, we demonstrate that detected market makers' inventory positions often lead to intraday and daily market reversals. For long-term forecasting, feedback analyses of NED and SP500 data reveal signals of looming plunges and recovery processes in 2000, 2008, and 2020 market crises.

PENUAAN POPULASI DAN DAMPAKNYA TERHADAP PERTUMBUHAN EKONOMI MAKRO JANGKA PANJANG DI ASIA TIMUR

This study will examine the impact of the population aging phenomenon on innovation and long-term macroeconomic balance in several East Asian countries. The variables used in this study include the number of elderly population, population growth, income per capita, birth rate, death rate, institutional quality, education level, unemployment rate and gross national expenditure. The data analysis method that will be used is the Monash-China Hunan-University General Equilibrium (MC-HUGE) model which is the development of the Computable General Equilibrium (CGE) model. The MC-HUGE model is built on the Walrasian general equilibrium theory and input-output theory, including the three main elements in production activities, namely land, capital and labor.

A neoclassical growth model with endogenous birth and mortality rates

This study examines dynamic interdependence between different socio-cultural groups? birth rates, mortality rates, populations, wealth accumulation, and the allocation of time between work, leisure, and childcare. It emphasises the role of changes in human capital, technology, and preferences on birth and mortality rates and time allocations. The economic mechanism of wealth and income distribution is based on the Walrasian general equilibrium theory, and wealth accumulation is based on the Solow growth model. The paper uses a utility function proposed by Zhang (2015) to describe the behaviour of households. It also models group and gender differences in human capital, the propensity to have children, the propensity to use leisure time, and the efficiency of childcare. The paper uses differential equations to describe the dynamics of group differences in wealth, income, birth rates, mortality rates, and populations. I simulate a model to show the motion of the system and identify the existence of an equilibrium point. I also examine the effects on the dynamics of the economic system of changes in the propensity to have children and the propensity to save, and in gender differences in the propensity to use leisure, in human capital, and in emotional involvement in childcare.

Business Cycles in a Dynamic General Equilibrium Model with Monopolistic and Perfect Competition

The purpose of this study is to explain business cycles by developing a neoclassical growth model with perfect and monopolistic competition. The study generalizes the model by Zhang (2019) by making all the constant coefficients to be time dependent. The model determines income and wealth distribution on the basis of Walrasian general equilibrium theory, neoclassical growth theory, and Dixit-Stiglitz monopolistic competitive theory. The paper makes a unique contribution to the literature of economic growth with perfect and monopolistic competition by showing existence of business cycles due to exogenous shocks in the model with the economic mechanisms in the three main models of economic theory. The study shows how different shocks cause business cycles as argued by real business theory in macroeconomics.

Robert Solow’s Non-Walrasian Conception of Economics

The neoclassical synthesis has been defined as a bridge between Keynes-ian theory and Walrasian general equilibrium theory. The aim of this article is to show that founders of the neoclassical synthesis were not homogenous in their appraisal of the importance of Walrasian theory. To do so, we focus on Robert Solow’s contributions as a case study and examine the history of his lifelong criticism of what he called “axiomatics.” According to Solow, the axiomatic approach aims at founding economics on one general and complex model based on first principles or axioms. In contrast, Solow advocated the use of a diversity of simple and partial models, which have practical utility, are realistic in their crucial assumptions, consider institutions and the evolving nature of the economy, and rely on common sense microfoundations. We conclude by suggesting that Solow can be characterized as Cournotian.

Education, Income, Wealth Inequality and Business Cycles in a General Equilibrium Growth Model

The paper is concerned with the dynamic interactions between physical capital, human capital, income and wealth inequalities between different households with government subsidy to education. It generalizes the endogenous growth model of a small-open economy proposed by Zhang (2016). Zhang’s paper deals with income and wealth inequalities between heterogeneous households with government subsidy to education. The paper makes a contribution to the literature of economic growth with endogenous education by integrating Solow-Uzawa’s neoclassical growth theory, Uzawa-Lucas model, Arrow’s learning by doing, Zhang’s creative leisure, and Walrasian general equilibrium theory. The model treats endogenous capital and human capital accumulation as the main engines of economic growth. This study generalizes Zhang’s model by allowing constant coefficients to be time-dependent. We simulate the generalized model to demonstrate existence of business cycles due to various exogenous periodic shocks.

A Simple Growth Model Based on Neoclassical Growth, Monopolistic Competition, and Walrasian General Equilibrium Theories

The purpose of this study is to examine economic growth and income and wealth distribution on the basis of Walrasian general equilibrium theory, neoclassical growth theory, and Dixit-Stiglitz monopolistic competitive theory. It makes a unique contribution to the literature of economic growth with perfect competition and monopolistic competition by integrating the basic economic mechanisms in the Walrasian general equilibrium model, the Solow one-sector growth model, and the Dixit-Stiglitz model. The final goods sector in our approach is based on Solow’s one-sector growth model. The issues of distribution are referred to the Arrow-Debreu theory. The market mechanism of perfect competitive markets is based on traditional neoclassical growth theory. We described imperfect competition on the approach basically developed by Dixit and Stiglitz. The paper unifies these approaches by applying the utility function and the concept of disposable income proposed by Zhang. We also deviate from the DixitStiglitz by assuming that non-zero profits are distributed to households. We build and then simulate the model for a three-group economy. We examine the effects of changes in some parameters on transitory processes and long-term equilibrium structure.

The role of financial policy

I review the contribution and influence of Milton Friedman's 1968 presidential address to the American Economic Association. I argue that Friedman's influence on the practice of central banking was profound and that his arguments in favour of monetary rules were responsible for 30 years of low and stable inflation in the period from 1979 through 2009. I present a critique of Friedman's position that market economies are self-stabilizing and I describe an alternative reconciliation of Keynesian economics with Walrasian general equilibrium theory from that which is widely accepted today by most neoclassical economists. My interpretation implies that government should intervene actively in financial markets to stabilize economic activity.

A Growth Theory Based on Walrasian General Equilibrium, Solow-Uzawa Growth, and Heckscher-Ohlin Trade Theories

The purpose of this study is to analyse the role of preferences and technological differences between countries in determining dynamics of capital accumulation, wealth and income distribution within countries and between countries, and patterns of trade in a dynamic general equilibrium framework. The model is built by integrating Walrasian general equilibrium, neoclassical growth, and H O international trade theories. The model is built for any number of countries and each country is composed of three production sectors and heterogeneous households. The national growth mechanism is the same as that in neoclassical growth theory. Labour and capital distributions among sectors and among countries are determined under perfect competition and free trade. The model synthesizes the well-known H O and the Oniki-Uzawa trade models, Solow-Uzawa neoclassical growth theory, and Walrasian general equilibrium theory with Zhang's utility function. We simulated the model with three national economies and with two groups of households for each country. We identified the existence of equilibrium points and plot motion of the dynamic system. We also conducted a comparative dynamic analysis.

Inequality and Education Subsidies in General Equilibrium Growth Model for a Small Open Economy

The paper is concerned with dynamic interactions between physical capital, human capital, income and wealth inequalities between different households with government subsidy to education. The model is developed on the basis of Solow-Uzawa?s neoclassical growth theory, Uzawa-Lucas model, Arrow?s learning by doing, Zhang?s creative leisure, and Walrasian general equilibrium theory. The capital accumulation and economic structure are based on the neoclassical growth theory. The human capital accumulation is due to Uzawa?s education, Arrow?s learning by doing, and Zhang?s creative leisure. The model explains income and wealth inequality between groups with government education subsidy policy in a small-open economy. The model reveals a complicated nonlinear dynamic interdependence between wealth accumulation, human capital accumulation, economic structural change, division of labor, and time distribution under perfect competition and government education subsidy policy. We simulate the economy composed of three groups of households. We carry out comparative dynamic analysis and demonstrated how a change in a parameter affects the path of economic growth.

Business cycles in a general equilibrium dynamic model with land value and rent

This study shows economic oscillations due to periodic changes in some parameters in the economic model proposed by Zhang (2014). This paper generalizes Zhang?s model by allowing all the time-independent parameters to be time dependent. The model deals with the relationship between growth and inequality in a two-sector growth modelling framework with different time-dependent exogenous shocks. The model is based on the Walrasian general equilibrium theory and the Solow-Uzawa neoclassical growth theory. The study applies the utility function proposed by Zhang to describe the behaviour of households. We simulate the model to demonstrate the existence of equilibrium points, the motion of the dynamic system, and oscillations due to different exogenous shocks.

SOCIAL STATUS AND INEQUALITY IN AN INTEGRATED WALRASIAN-GENERAL EQUILIBRIUM AND NEOCLASSICAL-GROWTH THEORY

This study deals with interactions between social status, economic growth and income and wealth distribution in an economic growth model of heterogeneous households with economic structure. The model emphasizes the role of social status on economic structural change and wealth and income distribution. It is influenced by the ideas related to economic growth and social status in the literature of economic growth and an integrated Walrasian general equilibrium theory and neoclassical growth theory. The economic system consists of one capital goods sector, one consumer goods sector, and any number (of types) of households. The motion is described by a set of differential equations. For illustration, we simulate the motion of the economic system with three groups of households. We identify the existence of a unique stable equilibrium point. We also carry out comparative dynamic analysis. The comparative analyses provide some insights into the complexity of economic growth with social status.

Keynesians De-Homogenized: Solow's Non-Walrasian Conception of Economics

The neoclassical synthesis has been defined as a bridge between Keynesian theory and Walrasian general equilibrium theory. The aim of this article is to show that founders of the neoclassical synthesis were not homogenous in their appraisal of the importance of Walrasian theory. To do so, we focus on Robert Solow’s contributions as a case study and examine the history of his lifelong criticism of what he called “axiomatics.” According to Solow, the axiomatic approach aims at founding economics on one general and complex model based on first principles or axioms. In contrast, Solow advocated the use of a diversity of simple and partial models, which have practical utility, are realistic in their crucial assumptions, consider institutions and the evolving nature of the economy, and rely on common sense microfoundations. We conclude by suggesting that Solow can be characterized as Cournotian.

Conundrums of the representative agent

This paper examines the increased use of the utility-maximizing representative agent in both contemporary macroeconomics (DSGE in particular) and microeconomics (revealed preference theory in particular). It is argued that the economists who developed Walrasian general equilibrium theory and revealed preference theory during the middle of the twentieth century were aware that the use of a single representative agent would simplify their analysis, but sill resisted employing it. The paper discusses a number of developments – both within economic theory and more broadly – that accommodated the rise of the representative agent in more recent economic theory.

Economic Growth and Structural Change ? A Synthesis of the Walrasian General Equilibrium, Ricardian Distribution and Neoclassical Growth Theories

This study proposes an economic growth model of structural change with heterogeneous households. It endogenously determine wealth accumulation and land value. Our model is based on three core theories in economics - Walrasian general equilibrium theory, Ricardian theory of distribution, and neoclassical growth theory. The paper is focused on effects of changes in determinants of the economic dynamics on income and wealth distribution and economic growth. We build an analytical framework for a disaggregate and microfounded general economic growth theory with endogenous wealth accumulation. We simulate the model. We find a unique equilibrium point and confirm stability. We plot the motion of the economy with three groups of households. We also conduct comparative dynamic analyses to get some insights into the complexity of economic growth and wealth and income distribution. For instance, we show that as the group with highest human capital increases its propensity to save, in transitory process the group’s and the other two groups’ wealth levels are enlarged, the national output experiences negative growth; while in the long term the group’s and the other two groups’ wealth levels continue to be enlarged, the national output experiences positive growth. We also demonstrate that if the population of the group whose human capital is lowest (highest) is increased, the wage rates and the wealth levels and consumption levels of consumer good of all the groups are reduced (enhanced).

Relaxed large economies with infinite-dimensional commodity spaces: The existence of Walrasian equilibria

Whereas “convexification by aggregation” is a well-understood procedure in mathematical economics, “convexification by randomization” has largely been limited to theories of statistical decision-making, optimal control and non-cooperative games. In this paper, in the context of classical Walrasian general equilibrium theory, we offer a comprehensive treatment of relaxed economies and their relaxed Walrasian equilibria: our results pertain to a setting with a finite or a continuum of agents, and a continuum of commodities modeled either as an ordered separable Banach space or as an L∞-space. As a substantive consequence, we demonstrate that the convexity hypothesis can be removed from the original large economy under the saturation hypothesis, and that existing results in the antecedent literature can be effortlessly recovered.

On a forest as a commodity and on commodification in the discipline of forestry

This essay revolves around two dates separated by a decade: a retrospective look based on Samuelson (1976), and a prospective one that relies on Mitra-Wan (1985–1986). It concerns a tension between two communities: to understand the basis of this dissonance, and to open lines of communication that seek to dispel it. More specifically, it relies on two frameworks (Walrasian general equilibrium theory, as in Arrow-Debreu-McKenzie-Uzawa-Gale-Nikaido-Kuhn and others, and the Ramseyian theory of optimal growth, as in Samuelson-Solow-Cass-Koopmans-Uzawa-Srinivasan and others), formalized and continually refined in the last half of the 20th century to deal with interaction and with time, both essential considerations in any kind of economics of forestry. It also gives prominence to the Muir- Pinchot controversy at the very beginning of the 20th century, and thereby underscores its relevance to current ongoing tensions and anxieties regarding issues of sustainability and global-warming. From a purely analytical point of view, it alludes in passing to the potential relevance to forestry economics of mean field theories in physics, and of subgame-perfect equilibria in the theory of non-cooperative games.