Capital and Walrasian Equilibrium

Abstract

One of the issues that Ivor F. Pearce during his unusually productive and distinguished career has helped to illuminate, is the integration of capital into what may be called the Walrasian vision of our microeconomic world. A simple, yet common, version of this Walrasian perspective is that of a collection of consumers and firms, each making buying and selling decisions relevant for single isolated instants sequentially as continuous time passes.² (An instant is characterised as an arbitrarily small interval of time.) These decisions interact simultaneously through perfectly competitive markets. Markets, in turn, are guided (perhaps by ‘auctioneers’) according to certain rules of adjustment. Dynamic behaviour across time is generated as consumers and firms react to the changing market prices dictated by the adjustment rules.

The author would like to thank Ivor F. Pearce and Douglas Vickers for many helpful comments and suggestions.