Still Dead after All These Years: Interpreting the Failure of General Equilibrium Theory
Author(s)
Ackerman, Frank
Abstract
For over decades, general equilibrium became established as the fundamental framework for theoretical discourse. Its influence continues to spread in policy applications, with the growing use of computable general equilibrium models. However, those who follow the news about microeconomic theory have known for some time that general equilibrium is not exactly alive and well anymore. The equilibrium in a general equilibrium model is not necessarily either unique or stable, and there are apparently no grounds for dismissing such ill-behaved outcomes as implausible special cases. The world must be continuously reminded that in order to formulate new directions for economic theory, we must assimilate and interpret the failure of earlier hopes for general equilibrium models first.
