Adjustment Processes and Stability
Economic theory is pre-eminently a matter of equilibrium analysis. In particular, the centrepiece of the subject – general equilibrium theory – deals with the existence and efficiency properties of competitive equilibrium. Nor is this only an abstract matter. The principal policy insight of economics – that a competitive price system produces desirable results and that government interference will generally lead to an inefficient allocation of resources – rests on the intimate connections between competitive equilibrium and Pareto efficiency.
- Arrow, K.J., and F.H. Hahn. 1971. General competitive analysis. San Francisco/Edinburgh: Holden-Day/Oliver & Boyd.Google Scholar
- Clower, R.W. 1965. The Keynesian counterrevolution: A theoretical appraisal. In The theory of interest rates, ed. F.H. Hahn and F.P.R. Brechling. London/New York: Macmillan/St. Martin’s Press.Google Scholar
- Edgeworth, F.Y. 1881. Mathematical psychics, Reprinted. New York: Augustus M. Kelley, 1967.Google Scholar
- Schumpeter, J. 1911. The theory of economic development. 4th printing of English trans. Cambridge, MA: Harvard University Press, 1951.Google Scholar