Equilibrium Models in Economics     Equilibrium Models in Economics Purposes and Critical Limitations xwx Lawrence A Boland, frsc   Oxford University Press is a department of the University of Oxford It furthers the University’s objective of excellence in research, scholarship, and education by publishing worldwide Oxford is a registered trade mark of Oxford University Press in the UK and certain other countries Published in the United States of America by Oxford University Press 198 Madison Avenue, New York, NY 10016, United States of America © Oxford University Press 2017 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Oxford University Press, or as expressly permitted by law, by license, or under terms agreed with the appropriate reproduction rights organization Inquiries concerning reproduction outside the scope of the above should be sent to the Rights Department, Oxford University Press, at the address above You must not circulate this work in any other form and you must impose this same condition on any acquirer Library of Congress Cataloging-in-Publication Data Names: Boland, Lawrence A., author Title: Equilibrium models in economics : purposes and critical limitations / Lawrence A Boland Description: New York : Oxford University Press, 2017 | Includes bibliographical references and indexes Identifiers: LCCN 2016026800| ISBN 9780190274320 (hardcover) | ISBN 9780190274337 (paperback) Subjects: LCSH: Equilibrium (Economics) | Econometric models Classification: LCC HB145 B65 2016 | DDC 339.5—dc23 LC record available at https://lccn.loc.gov/2016026800 1 3 5 7 9 8 6 4 2 Paperback printed by WebCom, Inc., Canada Hardback printed by Bridgeport National Bindery, Inc., United States of America   In memory of my former student and long-​time friend: the late Dr. Stanley Wong     CON T E N T S Preface   xiii Acknowledgements   xvii Prologue: Problems with modelling equilibrium attainment    P.1. A general economic equilibrium as a necessary social optimum   4 P.2. Maximization is the only behavioural assumption in neoclassical equilibrium models    P.3 On the road to Dynamic Stochastic General Equilibrium models    P.4. Outline of this book    10 PART ONE:  The purpose and problems for equilibrium models 1. Equilibrium models and explanation    13 1.1. Equilibrium and explanation: Elementary considerations    14 1.1.1 Marshall’s two ‘Principles’ of explanation    15 1.1.2 Long-​run vs short-​run equilibria and the role of time    16 1.1.3 Comparative statics analysis as thought experiment    17 1.2. Equilibrium implies recognition of disequilibrium dynamics   18 1.3. Equilibrium and necessary knowledge    20 1.4. Marshallian textbook explanations vs modern economic model building   23 2. Equilibrium attainment vs equilibrium necessities    25 2.1. Price adjustment in a formal model    26 2.2. Equilibrium attainment as an explicit process    29 2.3. Equilibrium vs imperfect competition    32 3. Does general equilibrium attainment imply universal maximization?    35 3.1. The equilibrium actually reached by an ignorant monopolist   36 3.2. An equilibrium state as a sub-​optimum    43 ( vii )   ( viii )  Contents 4. Time and knowledge matters for general equilibrium attainment    47 4.1. Knowledge and learning in economic models    48 4.2. Richardson on completing an equilibrium model    49 4.2.1 The informational requirements for a perfectly competitive equilibrium   49 4.2.2 The consequences of reaching a general equilibrium    50 4.2.3 Considering the disequilibrium before reaching the equilibrium   52 4.2.4 The availability of needed information in a competitive general equilibrium model    53 5. Equilibrium concepts and critiques: Two cultures    57 5.1. Two cultures    59 5.2. Equilibrium concepts involving time, dynamics and process   62 5.3. Equilibrium concerns of the formal model builders    63 5.3.1 Existence    64 5.3.2 Uniqueness    65 5.3.3 Stability    65 5.4. Concerns, beyond realism, of the critics of formal equilibrium models   66 5.4.1 Knowledge and information    66 5.4.2 Expectations    66 5.4.3 Uncertainty    67 5.4.4 Increasing returns to scale    67 5.4.5 Operational?    68 5.5. Exogenous vs endogenous variables in equilibrium models: Cause vs effect?    70 5.5.1 Causality among economists    70 5.5.2 Causality and economic model builders    71 5.5.3 Can economists so easily avoid causality?    74 PART TWO:  The limits of equilibrium models 6. Recognizing knowledge and learning in equilibrium models   79 6.1. Modern attempts to include knowledge and learning    80 6.2. Recognizing knowledge in equilibrium models    81 6.3. Towards including realistic learning in economic equilibrium models   84 6.3.1 Does learning matter in the model?    84 6.3.2 What role probabilities play in the model’s decision maker’s learning process?    85 6.3.3 Does the equilibrium model involve agents’ making decision errors?   86   Contents  ( ix ) 6.4. The problem of maintaining methodological individualism in equilibrium models    90 6.5. The problem of the compatibility of general equilibrium and psychologism   93 6.5.1 Multiple equilibria?    95 6.5.2 Psychologism    97 7. Limits of equilibrium methodology: An educational dialogue    99 7.1. A dialogue in an Economics 101 class    100 7.2. The stability in an equilibrium model must be endogenous   105 8. Equilibrium models vs realistic understanding    107 8.1. Equilibrium attainment and knowledge sufficiency    108 8.2. Equilibrium models and the ignorant consumer    112 8.3. The market’s equilibrium price: Learning vs knowing    115 9. Macroeconomic equilibrium model building and the stability problem   117 9.1. Rational expectations and macroeconomic equilibrium models   118 9.1.1 Rational expectations in a microeconomic context    120 9.1.2 The Rational Expectations Hypothesis in macroeconomic equilibrium models    122 9.1.3 The Rational Expectations Hypothesis and various ideas about learning in macroeconomics    123 9.2. Stochasticism and macroeconomic equilibrium models    125 9.2.1 Rational expectations vs bounded rationality    125 9.2.2 Rational expectations and Bayesian learning    126 9.2.3 Rational expectations and econometric learning    128 9.3. Instrumentalism and the use of stochasticism in equilibrium models   129 10. Equilibrium models intended to overcome limits    131 10.1. The alleged limits of general equilibrium models    133 10.1.1 Dynamics vs time    135 10.1.2 A list of other short-​comings of the Arrow-​Debreu general equilibrium   137 10.2. The current attempts to overcome the limits of general equilibrium models    140 10.2.1 DSGE models to the rescue?    141 10.2.2 Recent unrealistic efforts in formal equilibrium model building to address limitations    143 10.3. Three empirical alternatives to Walrasian general equilibrium models   144   ( 250 )  Names Index Eatwell, J., 240, 243–​44 Evans, G., 117, 122, 208, 239 Ezekiel, M., 59, 239 Finger, J.M., 68, 240 Fisher, F., 26, 65, 99, 112, 118, 173, 177–​79, 186, 192, 234, 240 Foley, D., 167 Foster, J., 152, 240 Friedman, B., 142, 240 Friedman, M., 70, 129, 130, 206, 238, 240, 246 Frisch, R., 19, 240 Gabszewicz, J.J., 46, 240 Gale, D., 137, 240 Geanakoplos, J., 132, 135, 138–​40, 141, 144–​45, 240 Gilboa, I., 205, 240 Gordon, D., 174, 183, 240 Gordon, R., 176, 186, 240 Grossman, H., 19, 237 Grossman, S., 140, 240 Hahn, F., 1, 67, 68, 137, 176, 178–​79, 186, 239–​42, 244 Hall, R., 148, 239, 241 Hammes, D., xvii Hands, D.W., 168, 239, 241 Hansen, L.P., 206, 241, 245 Hart, O., 46, 139, 241 Hart, S., 118–​19, 241 Hayek, F., 3–​4, 10, 19, 20, 39, 59, 66, 79–​80, 89, 108, 110–​12, 115–​16, 132, 134, 153, 174, 184, 210, 219, 221, 233, 241, 246 Henry, J., 60, 241 Hibon, M., 123, 243 Hicks, J., 9, 39, 62, 104, 112, 134–​38, 145, 193, 197–​99, 202–​3, 220, 241 Hirsch, A., 130, 241 Hitch, C., 148, 241 Hitchcock, A., 122, 241 Hodgson, G., 150, 156, 241 Holland, J., 167, 168–​69, 241, 244, 246 Holyoak, J., 167, 241 Honkapohja, S., 117, 122, 208, 237, 239–​41 Hoover, K.D., 73, 123, 130, 221, 241–​42 Hume, D., 22, 82, 164, 166–​69 Hynes, A., 174, 183, 240 Jarvie, I., 97, 242 Kahneman, D., 230, 242 Kaldor, N., 58–​59, 189, 242 Kasa, K., xvii Keynes, J.M., 10, 67, 70, 72, 136, 142, 165, 189–​90, 193–​99, 202–​3, 205, 209, 211–​12, 221, 234, 242, 247 King, R.G., 142, 239 Kirman, A., 61, 65–​66, 123, 126, 143, 242 Knowles, J., xvii Knudsen, T., 156, 157, 241–​42 Koopmans, T., 7, 108, 109–​10, 116, 242, 245 Kornai, J., 59 Krauth, B., xvii Kreps, D., 96, 242 Lachmann, L., 59, 79–​80, 107, 242 Lancaster, K., 186, 242 Lancaster, T., 127, 242 Lange, O., 33 Latsis, S., 203, 242 Lawson, T., 59, 60, 246 Leamer, E., 242 Leijonhufvud, A., 205, 242 Leontief, W., 69, 145 Lester, R., 148, 242 Lichtenstein, S., 230, 242 Lindahl, E., 136 Lipsey, R., 156, 238 Loasby, B., 191, 242 Long, J., 16, 28, 60, 81, 142, 242 Loughran, T., 127, 237 Lucas, R., 142, 206, 243 Machlup, F., 59–​60, 68, 69, 143, 243 Mäki, U., 246 Makridakis, S., 123, 243 Mandeville, B, 14 Mantel, R., 141, 143 Marshall, A., 14–​16, 18–​19, 23, 48–​49, 59, 61–​62, 70, 93–​94, 102, 149, 175, 191, 243 Mas-​Colell, A., 118–​19, 241 McKenzie, L.W., 131, 134, 239, 243, 246 Milgate, M., 13, 240, 243–​44   Names Index  ( 251 ) Mitra-​Kahn, B.H., 145, 243 Muth, J., 48, 105, 118, 120–​21, 142–​43, 243, 245 Nachbar, J., 127, 243 Negishi, T., 9, 178, 241, 243 Nelson, R., 147–​48, 150–​57, 163, 239, 243–​44 Neumann, J. von, 244 Newman, P., 240, 243–​44 Newton, I., 129 Nikaido, H., 65, 244 Nisbett, R., 167, 241 Nobay, A.R., 240, 245 North, D., 97, 99, 110–​11, 133–​34, 244, 246 Panico, C., 239 Parker, J., 118, 238 Pashigian, P., 105, 244 Pesaran, M.H., 133, 244 Peterson, L., xvii Petri, F., 240, 242, 244 Pindyck, R., 222, 244 Plato, 82 Plosser, C., 142, 242 Poirier, D., 127, 244 Popper, K., 82, 168, 241, 244 Prescott, E., 206, 243 Price, G.R., 157, 242 Richardson, G., 3, 10, 19–​21, 47–​56, 58, 63, 67, 84–​85, 91, 106, 113, 116–​18, 120, 132, 180, 199, 233, 244 Robinson, J., 44, 58–​60, 62–​63, 137, 180, 244, 246 Robson, A., 156, 244 Rubinfeld, D., 222, 244 Russell, B., 164, 166, 244 Rutherford, M., 134, 244 Salvadori, N., 239 Samuels, W., 13, 245 Samuelson, P., 19, 60, 64–​65, 69, 92, 96, 134, 238–​39, 245 Sargent, T., 81, 118, 125, 141, 169, 206, 241, 245 Scarf, H., 145, 237, 245 Schmeidler, D., 205, 240 Schumpeter, J., 60, 80, 90–​91, 93, 150, 215, 241, 245 Scitovsky, T., 229, 245 Sent, E.-​M., 81, 120, 245 Shackle, G., 21, 59, 107, 138–​39, 242, 245 Simon, H., 21, 73, 81, 125, 130, 163, 169, 229–​30, 244–​46 Slovic, P., 230, 242 Smith, A., 4, 13–​14, 22, 91, 110, 150, 174 Smith, R., 133, 244 Smithies, A., 62, 245 Solow, R., 19, 60, 64–​65, 134, 239, 245 Sonnenschein, H., 141, 143 Spencer, H., 150, 245 Sraffa, P., 19, 245 Stigler, G., 22, 47, 83, 127, 129, 229, 245 Stiglitz, J., 96, 245 Suda, J., 126, 238 Sugden, R., 166, 246 Thagard, P., 167, 241 Trevithick, J., 242, 247 Tversky, A., 230, 242 Uzawa, H., 178, 246 Veblen, T., 96, 150, 219 Vives, X., 125, 246 Voltaire, 160 Vriend, N., 206, 246 Vromen, J., 149, 152–​53, 156, 246 Wald, A., 57, 66, 95, 116, 246 Waldrop, M., 167, 246 Walras, L., 9, 65, 94–​95, 131, 134, 139, 141, 178, 234, 242, 246 Weintraub, E.R., 59–​61, 64, 128, 134, 239, 246 Wible, J., 130, 246 Williamson, O., 97, 191, 237, 246 Winter, S., 147, 150–​53, 156–​57, 231, 244, 246 Witt, U., 147, 156, 231, 246 Woodford, M., 124, 246 Worswick, D., 247 Zame, W., 118, 143–​44, 247     S U B J E C T  I N DE X Austrian economists, 80 average cost, 32, 44–​45, 68, 111, 133, 148–​49, 180, 192, 198 conjectural indifference map, 88, 213, 216–​17, 223 convexity assumption, 87, 131 demand curve, 1–​3, 8, 26, 28, 32–​34, 36–​45, 50, 59, 85, 101, 103–​5, 148, 165, 174, 180–​84, 192, 210, 216, 219–​20, 223 Giffen effect, 28, 219–​20 demand elasticity, 33, 181–​82 exogenously diverse tastes, 226 expected utility, 6, 8, 22, 30, 48, 51, 81, 83, 85, 87, 89, 100, 104, 115, 120, 125, 141, 165, 175, 177, 184, 186–​87, 193–​94, 197, 207, 209, 213–​14, 216–​17, 220, 230 indifference curve, 88–​89, 112 slope, 214 strictly convex, 87, 89, 214 map, 89 indifference map, 87–​89, 112, 214, 216–​17, 214, 216–​17, 223 insufficient knowledge of, 213 learning consumer, 209 luxury goods, 219 preference map, 83, 85, 87–​89, 113, 166, 186, 207, 213–​14 strictly convex, 87, 89, 214 preferences, 50–​51, 53, 84–​85, 89, 94, 108, 132, 139, 147, 156, 164, 209, 230 psychologically-​given, 94 sociological aspects, 157 tastes, 4, 21, 93–​94, 97–​98, 157, 215, 217, 222, 227 satisficing, 81, 149 banking, 142 behavioral sciences, 168 behavioural economics, 156, 229–​30, 233 behavioural finance, 231 behavioural microeconomics, 157 model of firm, 157 biological growth rate, 93–​94 business cycle theory, 141 causality, 17, 68, 70–​71, 73–​75, 92, 94–​95 cause vs effect, 70 collusion, 3, 59, 91, 99, 103–​4 absence of, 91 explicit, 55 implicit, 55 comparative advantage, 52 complexity, 159–​62, 229, 231–​32 computational, 230 complexity economics, 159, 161–​62, 229, 231–​32 case-​by-​case, 233 computer program model, 38, 91, 161–​63, 169 path dependency, 154–​55, 163, 229, 233–​34 sociological interactions, 161 conjectural theory, false, 85 conjecture, theoretical, 85 constraints, non-​natural, 5 consumer, theory of, 88, 194 budget line, 87, 114, 213–​14 ( 253 )   ( 254 )  Subject Index testing sub-​optimal point, 220 utility, 6, 8, 22, 30, 48, 51, 81, 83, 85, 87, 89, 100, 104, 115, 120, 125, 141, 165, 175, 177, 184, 186–​87, 193–​94, 197, 207, 209, 213–​14, 216–​17, 220, 230 marginal, 6 utility function, 48, 83, 85, 87, 89, 104, 120, 187, 209, 213–​14, 220 utility maximizing, 8, 27, 29–​30, 81, 87, 94, 102, 141 Copenhagen lecture, 210, 221 cost, 3, 22, 28, 32–​33, 41–​42, 44–​46, 68, 83, 102, 111, 127, 129, 148–​49, 180–​81, 186, 191, 200–​201 aggregate, 185 average lowest level of, 148 curves, 68, 111 marginal, 3, 27–​28, 33, 37–​38, 40–​45, 68, 83, 88, 102, 111, 149, 175, 181, 198, 218 curve, 3, 27–​28, 33, 37–​38, 40–​45, 68, 83, 88, 102, 111, 149, 175, 181, 198, 218 rising, 28 opportunity, 92, 94 real, 200, 222 U-​shaped average, 44, 111 data, 39, 71, 80, 84–​86, 116, 120, 123–​24, 126–​28, 134, 142, 144–​46, 166, 206, 208–​9, 234 incomplete, 205 observation reports, 22, 164, 222 observational, 69, 120, 166, 206, 208 refuting, 85–​86 statistical, 122 stochastic, 123, 125 decision maker, 42, 45, 48, 81, 83–​86, 89–​91, 93, 95, 108, 120, 122, 125, 132–​35, 142, 168–​69, 186, 198, 224, 232, 234 autonomous independent, 223 decision making, 39, 80, 85–​86, 91, 96, 108, 121, 198, 209, 215–​16, 223–​24, 230 algorithmic, 161 autonomous, 47, 95, 98 choosing to conform, 226 consciously maximizing profit, 148 conventional judgment, 211 deductively rational behaviour, 165 dynamic plan, 117 error awareness, 86 expected price error, 114–​15 expected quantity error, 114–​15 falsifiable methodology of, 33, 69 following the crowd, 209 human cognitive abilities, 230 ignorant consumer, 112 ignorant monopolist, 2, 36, 38–​40, 42, 47–​48, 50, 85, 88–​89, 106, 113, 180, 192, 216, 223 individual, 105, 215 investment, 4, 132 learn or form expectations, 120–​21 limited cognitive abilities, 21 maximizing, 3, 5–​9, 13, 15–​16, 21–​22, 26–​27, 29, 31, 33, 35–​38, 40–​46, 48, 51, 58, 81–​82, 87–​89, 95, 97, 102–​3, 109, 114, 119–​20, 125, 133, 139, 141, 148–​49, 161, 164–​65, 167, 175, 180, 184, 186, 192–​93, 200, 207, 214, 218–​20, 223 minimizers, 5 multi-​period, 139 non-​optimizing, 89 non-​rational, 209 optimizing, 5, 9, 14, 16, 114–​15, 119–​20, 175, 187, 202–​3, 224–​25 plan, 39, 49, 50, 53, 79, 100, 109–​10, 112–​15, 118, 138, 198, 200, 202, 227 optimal, 112–​13, 198 price takers, 26, 34, 42–​43, 109, 174, 192 price-​taking, 42, 44, 93, 102, 111, 144 primary conditions, 48, 50 primary information, 48, 51 primary knowledge, 21, 50, 53–​54 probabilities, 67, 75, 85, 124, 126 producer, 6, 32, 35, 42, 44, 52, 54, 68, 70, 93, 103, 108, 131, 181, 193, 230   Subject Index  ( 255 ) profit-​maximizing, 3, 51, 180 profit maximizing, 27, 29–​31, 39, 45, 138, 151, 175, 182 rational, 126, 132, 163, 224 satisficing, 81 secondary conditions, 48 secondary knowledge, 21, 48, 50, 53 shortage, 110, 199 singular behavioural assumption, 8–​9, 15, 29, 32, 36, 186 social convention, 212 stochastic, 130 test of conjectured sub-​optimal point, 217 trial and error, 41, 89 uncertainty, 21–​22, 36, 66–​67, 85, 132, 143, 196, 221 utility maximizing, 51, 83, 194, 197 demand, 1–​3, 5, 8–​9, 18, 21, 26–​34, 36–​45, 47, 50, 59, 62, 85, 91–​92, 94, 96, 100–​106, 109–​10, 113, 117, 131, 137, 138, 148, 151, 161, 165, 173–​77, 179–​84, 192–​93, 195, 198, 202, 210–​12, 216, 218–​20, 223, 225 utility maximizing, 8 demand curve, 1–​3, 8, 26, 28, 32–​34, 36–​45, 50, 59, 85, 101, 103–​5, 148, 165, 174, 180–​84, 192, 210, 216, 219–​20, 223 downward sloping, 68, 104, 174, 218, 220 elasticity, 33 linear, 40–​41 upward sloping, Giffen goods, 219 destabilizing, 218–​21 techniques, 221 development economics, 69 disequilibrium, 10, 18–​20, 22, 25–​26, 30, 34, 36, 42–​44, 52, 54–​56, 58, 62, 65, 92, 102, 105, 108–​9, 115–​16, 122, 126, 129, 130, 167, 176, 178, 186, 189–​93, 202–​3, 207, 210–​12, 215–​16, 218–​19, 221, 227, 234 awareness, 115 deliberate, 202 demand exceeds supply, 29 dynamics, 18 explainable, 191 explosive, 219 macroeconomics, 210 persistent, 203 explanations of, 212 model of, 211 phenomena, 19 explanations of, 221 process, 54, 122, 126, 215–​16 analysis, 215, 216 sub-​optimal, 199 unintentional, 190 disequilibrium economics, 19, 129 diversity, 123, 126, 143, 157, 163, 221, 223, 226 heterogeneity of agents, 157 Dynamic Stochastic General Equilibrium model, DSGE, 9, 10, 106, 126, 133, 141–​43, 163, 212, 230 dynamics, 47, 56, 62–​63, 66, 108, 134–​37, 141, 149, 152, 155–​56, 161, 180, 182, 210, 234 adaptive, 119 price, 10, 173, 175, 180, 192, 210, 221 econometric models, xiv, 122, 128, 146, 206, 216, 223 generator of observed data, 72 identified, xiv, 8, 15, 19, 21, 51, 61, 70, 73, 106, 108, 132–​33, 150, 152, 159, 175–​76, 187, 203 econometrician, expert, 122, 128, 142 econometrics, 71, 73, 122–​2 4, 128–​29, 183–​84, 207–​8, 210, 212, 224–​25 error terms, 72, 141–​42 estimation methods, 208 forecasting, 123, 128 methods, 123 models, 122 model builder, 123 models, 123, 206 parameter, 5, 71–​75, 83, 123, 125, 128, 144, 146, 196, 205, 208–​9 ergodic, 72, 128, 209 parametric statistics, 126 random observation errors, 184 economic policy, 129   ( 256 )  Subject Index economic system, 6, 53, 62, 153 Economics 101, x, 3, 5, 8, 14–​15, 23, 27, 93, 99, 100, 106, 109, 125, 154, 160, 175, 232 economies of scale, 67–​68 Edgeworth process, 178, 184 equilibrium, xiv–​xv, 1, 7–​8, 13–​14, 17, 19–​22, 26–​27, 44–​45, 47, 50, 55, 58, 61–​62, 64, 68–​69, 75, 83, 89, 92, 94, 99, 103, 106–​8, 111–​12, 115–​17, 119, 132, 149, 153, 161–​62, 185, 217, 224–​25 analysis, 16, 65, 140–​41, 147–​49, 160 existence, xiii, 13, 20, 26, 30, 43, 49, 51, 58–​62, 64–​65, 92, 94, 106, 110, 116, 131–​32, 134, 136–​39, 141, 144, 151, 154, 160, 190–​91, 202, 205 existence and stability, 51, 58 assumption of a state of, 8, 25 attainment, 1, 19, 21, 25, 29, 43, 106, 118, 126, 174, 223, 225–​26 disequilibrium process of, 122 explanation of, 35, 36 how long it takes, 62 price adjustment behaviour, 20 competitive, 4, 14, 30, 44, 49, 56, 68, 111, 116, 140, 143, 151, 192 complete, 36, 63 textbook’s, 28 concept, xiv, 19, 57, 60, 62, 69, 108, 215 older culture, 60, 62, 68, 75, 96, 105, 131, 133, 135, 144, 149 property of a model, 61 real-​time, 22 two cultures, 57, 59 convergence, 59, 62, 108, 118–​19, 125, 168, 177, 182–​86, 218 exogenous, 182 coordinating society, 219 formal models of, 57–​58, 105 full employment, 189, 205 indeterminate, 54 long-​run, 6, 16, 70 path dependent, 154 zero profit, 148, 185 long-​run competitive, 68 long-​run vs short-​run, 16 macroeconomic model, xiii, 9–​10, 22–​23, 59–​60, 65–​66, 74, 108, 118, 128, 143, 183, 212, 216, 223, 226, 229, 231–​32, 235 market, 1–​2, 7, 27–​29, 41–​42, 45, 47–​48, 56, 59, 66, 91, 109, 114, 132, 174, 177, 216–​17 demand equals supply in, 8, 32, 47, 100, 110, 176, 179, 225 law of supply and demand, 176 process of reaching, 34 stable, 59, 100, 184 model building, xiii, 9–​10, 20, 22–​23, 27–​29, 53–​54, 57–​60, 62–​66, 71, 73–​74, 82, 86, 89, 94, 96, 99, 108, 112, 115, 118–​19, 121–​23, 128–​30, 132–​33, 141, 143–​44, 173–​74, 176, 179, 183, 187, 190, 192, 207–​9, 212, 215–​16, 222–​24, 226, 229, 231–​32, 234–​35 methodology, 30 models of perfect competition, 25, 50 monetary, 137 multiple, 65, 95–​96, 144 neoclassical model, 8, 63, 93, 97–​98, 105, 150, 153, 203, 212, 217, 220, 226, 227, 230 personal, 49, 234 proof, 144 fixed-​point theorems, 144 rate of convergence to, 125 real event, 61 short-​run, 6, 15–​16, 70, 106, 191 vs simple balances, 100 social coordination, 223 stability, xiii, 51, 58–​59, 61, 65–​66, 99–​100, 105–​6, 116–​18, 124, 144, 177, 185–​87, 196, 205, 207, 211–​12, 217–​23, 225–​27 analysis, xiii, 99, 117–​18, 185, 187, 217, 222, 225 endogenous, 106 false, 225 guarantee, 220 problem, 58–​59, 117 stable balance, 225 stable models, 212, 215 realistic, 216 static, 62, 156   Subject Index  ( 257 ) stationary, 134, 156 sub-​optimal, 43, 89, 191 temporary, 191 underemployment, 189 uniqueness of solution, xiii, 58–​59, 61, 64–​65, 95, 125, 144 unstable, 225 equilibrium model, xiii–​xv, 1–​2, 5–​6, 8–​11, 13–​20, 22–​23, 25–​31, 36, 43, 47–​55, 57–​60, 62–​71, 73–​75, 77, 79–​86, 89–​97, 99, 100, 105, 108–​12, 114–​23, 125–​26, 128–​30, 132–​33, 138, 141, 143–​46, 149, 151, 153, 158, 161–​63, 171, 173–​74, 176, 178–​79, 183, 185–​87, 190, 192–​93, 195–​96, 198, 200, 202, 205–​9, 211–​13, 215–​17, 219–​26, 229–​35 critics of, 22, 83, 149 imperfectly competitive, 191 inherently dynamic, 63 macroeconomic stochastic, 126, 130 microeconomic, 121, 126, 140 neo-​Walrasian, 136 problems with, xv, 10, 234 stochastic, 128 equilibrium process, 8, 108, 115–​16, 129, 205 dominate response behaviour, 220 Endogenous convergence, 185 equilibration, 144 Marshallian behaviour, 102, 218, 220 price adjustment, 20, 26, 28–​29, 32, 36, 43, 47, 56, 59, 101, 105, 173–​75, 177–​78, 182–​86, 190 quantity-​adjustment behaviour, 59, 102–​3, 183, 189 Walrasian price-​adjustment behaviour, 101, 218, 220 error awareness, 88–​89 evolution, 125, 139, 148–​53, 156, 161–​63, 169, 233 Darwin’s view, 149–​53, 156, 161, 184 genes, 152, 153 genotypes, 152 mutation, 152 natural selection, 184 replication-​based selection, 157 survival of the fittest, 150, 184 survivors, 185 evolutionary biology, 151–​52 Darwinian natural selection, 149 evolutionary economics, 59, 147–​52, 154–​57, 161–​63, 230–​32 biological analogies, 150, 152 biological metaphors, 153, 157 computer-​based game-​theoretic models, 157 creative destruction, 148 environmental interaction, 157 formal models, 156 genes as decision rules, 151–​52 macroeconomic view of, 157 models, 152, 157 mutations, 152–​53 Non-​Darwinian, 153, 156, 159 theoretical model, 153 phenotypes, 152 population dynamics, 157 The Price Equation, 157 replication, 152–​53 selection, 144, 152–​53, 157 Social Darwinism, 183 evolutionary process, 150 expectations, 4, 21, 22, 40, 48, 50–​53, 66–​67, 86, 106, 113–​15, 117–​30, 132, 134, 135, 141–​43, 176, 181–​84, 185, 197, 206, 208–​12, 216, 221–​25, 231 different, 225 disappointed, 42 failed, 40–​41, 43 formation, 80, 115, 121, 132, 211, 221–​22 conjectural, 85 mixed, 222 optimal, 120 rational, 22, 48, 55, 67, 81, 85, 117–​20, 121, 125, 127, 129, 132–​33, 139–​43, 161, 166 refuted, 40 true, 128–​29 widespread errors, 221 experiment, 17, 18, 163, 230 intellectual, 73–​74   ( 258 )  Subject Index laboratory, 230 preference reversals, 230 explanation, 2, 13–​20, 22–​23, 26, 29, 30, 35, 36, 42–​45, 55–​56, 59, 62, 64–​65, 71, 75, 80, 85, 91–​96, 99, 112, 115, 117, 119, 126–​27, 132, 138, 140, 153, 157, 161, 165, 174, 178, 180, 183–​84, 186–​87, 190–​95, 197–​98, 200, 202–​3, 206–​7, 213, 215–​16, 221, 223–​25 analytical exercises, 175 behavioural assumption, 6, 8, 13, 25, 29, 31, 36, 42, 44, 63, 89, 94, 154, 174, 230, 231 bounded rationality, 81, 84, 125–​26, 129–​30, 149, 168–​69 maximization, 29 ceteris paribus assumption, 62, 131, 182 comparative statics analysis, 14, 17–​19, 73–​74, 144, 180, 198, 233 determinacy, 144 conditions, 49 determinateness, 58–​59 determine, 6, 25, 37–​39, 71–​74, 84, 86, 88, 93, 145, 191, 196, 200, 217 equilibrium, 10, 23, 60, 91, 223 logical requirements, 26 equilibrium methodolgy, 13 equilibrium model, 14, 21, 65 induction-​based, 22 Keynes-​Hicks, 203 methodological-​individualist, 202, 226 realistic, xv scientific, 14 situational logic, 168 time Marshall’s periods, 154 long period, 15–​16 long run, 15–​16, 91–​93, 107, 137, 201, 211, 221 market period, 16, 39, 48 short period, 15, 93, 211, 221 short run, 16 forecasting, 122, 128–​29, 132 game theory, 80 Nash equilibrium, 119, 140 general equilibrium, xiii, 4–​5, 7, 9–​10, 14, 18–​20, 25–​26, 35, 45–​54, 56, 58, 61–​62, 64–​65, 68, 91–​94, 97, 99, 103, 110, 111, 114, 116–​18, 130–​35, 137–​38, 140–​45, 147, 154, 157, 161, 163, 189–​90, 201, 232–​33 allocation of production, 52 Arrow-​Debreu model, 9, 122, 132, 134–​41, 144–​45 bankruptcy, 138 McKenzie, 134 financial securities, 138 firm shares, 138 formal model of, 9, 58, 132 model, xiii, 5, 20, 25–​26, 48–​49, 53–​54, 61, 65, 68, 111, 116, 118, 131–​35, 137, 140–​45, 147, 154, 161, 163, 232–​33 convexity assumption, 131 in time, 136 perfect competition, 20 time, 134 Walrasian, xiii, 9, 10, 46, 62, 64, 66, 94–​95, 131–​32, 134–​35, 140, 145, 155, 157, 159–​61, 175, 234 a model of attainment, 47 money-​based numeraire, 138 social optimum, 4–​5, 46 universal maximization, 21, 35, 42, 192 givens, 7, 70, 92–​97, 198, 215–​16, 223 exogenous, 8, 27, 70, 93–​96 psychological, 214 holistic, 92–​93, 97 natural, 5, 97, 186, 203, 215 non psychological, xiv, 3–​4, 6–​8, 14–​17, 21–​22, 26–​33, 42–​46, 51, 54–​55, 69, 70, 72, 85, 88–​91, 93–​98, 102–​5, 109, 111, 114–​15, 119–​21, 128, 130, 139, 142, 147, 151, 153–​54, 156, 160, 167, 173, 175–​76, 178–​81, 183–​85, 187, 189, 191, 194–​96, 200, 202, 212–​13, 217, 222–​24, 226 Great Recession, 140, 142, 232   Subject Index  ( 259 ) Hahn process, 178–​79, 186 history of economic thought, xiii, 8–​9, 15, 120 ideology, 70 conservative, 110–​11 debate, 70 free-​enterprise capitalism, 116 just value, 92 labor value, 92 Marxian, 111, 190 natural value, 92 neo-​liberal, 110 social-​democratic, 110 socialism, 110 socialist planning, 110 social-​liberal, 110–​11 imperfect competition, 2, 19, 34, 36–​37, 43–​46, 48, 50, 54, 68, 174, 180, 182 duopoly, 38 monopolist, 2–​3, 32–​34, 36–​44, 46, 50, 89, 180, 182, 207, 216 knowledgeable, 37 linearity assumption of, 40, 72 oligopoly, 38, 54 price-​setting, 180 profit maximizing, 33 theory, 26, 32 individual, 2, 4–​9, 13–​15, 18, 20–​21, 26, 30–​31, 44, 48–​50, 54, 72, 79, 81, 84, 90–​98, 102–​5, 108–​16, 118–​23, 125, 127, 129–​30, 132, 138, 147–​48, 151, 154, 156–​57, 160, 165–​66, 173–​75, 179, 183, 186–​87, 193–​96, 199–​200, 203, 211–​17, 221–​26, 230–​31 autonomous, 5, 7, 47, 49–​50, 91–​92, 95–​96, 98, 101, 103, 108, 110, 185, 203, 215–​16, 218, 220, 225–​27 maximizing behaviour, 139, 186 sovereignty, 91 test of conjecture by, 216 individualism, 90, 92–​93, 97–​99, 186–​87, 209, 215, 224 false, 225 generalized methodological, 223 institutional, 215 methodological, 80, 90–​92, 94, 96–​99, 103–​5, 117, 119–​20, 123, 126, 130–​31, 143, 173, 178, 185–​87, 190–​91, 202–​3, 207, 209–​12, 215, 224–​25 vs holist view, 92 microfoundations, 123 monozygotic twins, 226 vs strict holist view, 92 psychologistic version, 94, 98, 187, 215, 224 induction, 22, 82, 124, 146, 164–​69, 183–​84, 205–​7, 209–​12, 216, 223, 224 inductive axiom, 205–​6 inductive process, 167 justification, 168 pattern recognition, 166, 169 problem of, 166–​67 prove the negative, 206 information, 83, 115, 140 asymmetric, 140 available, 2, 53, 55, 67, 206, 211, 224 disequilibrium, 42–​43 economics of, 22, 83 full, 49–​50 imperfection, 142 incomplete, 48, 80 information sets, 121, 222 insufficient, 224 limited, 36 necessary, 47, 49, 53 observational data, 222 primary, 53 quality of, 207 required, 49, 50, 55–​56, 140 secondary, 48, 53–​55 restraints, 50, 55 stochastic, 125 input-​output models, 69, 145 institutionalism, 96–​97 new institutional economics, 97 old institutional economics, 134 institutions, 18, 92, 96–​97, 134, 148, 160–​61, 215, 226 constraining, 215 theory of, 226   ( 260 )  Subject Index interest rate, 4, 94, 97, 142, 194, 197, 221 inventory, 32, 40, 199 keyboard, 154–​55 Dvorak, 154–​55 QWERTY, 154–​55 knowledge, 2–​3, 10, 19–​22, 33, 37, 38, 43, 47–​49, 53–​55, 67, 79–​86, 88, 90, 98, 106–​10, 113, 115–​16, 124, 128–​30, 132, 136, 141, 147, 152, 161, 164, 167–​69, 184–​85, 192, 200, 205, 207–​9, 213, 216–​17, 222–​23, 233 acquisition, 21 beliefs, 49–​53, 55, 66, 82, 124–​25, 156, 165, 168 bucket theory of, 83 complete induction-​based, 214 conjectural, 2–​3, 10, 19–​20, 33, 37–​39, 43, 47–​49, 53–​55, 67, 75, 79–​86, 88, 90, 106–​10, 113, 115–​16, 124, 128–​30, 132, 136, 139, 141, 147, 152, 161, 164, 167–​69, 180, 184–​85, 192, 200, 205, 207–​10, 213, 216–​17, 222–​23, 233 autonomous, 216 and information, 66 vs learning, 82 necessary for equilibrium, 20 perfect, 21–​22, 48, 81, 83, 139, 141, 154, 174, 193–​94 problem of, 79 process of acquiring necessary, 108 quality-​based view of, 84, 207 quantity-​based view of, 82–​83, 207 requirements, 3, 19–​21, 47, 85, 107, 116, 192 sociology of, 222 Socratic view of, 82, 84, 86 sufficient, 21 theory of, 21, 82–​83, 86, 89, 107, 109, 207, 212 true, 128–​29, 206 uncertainty, 21–​22, 36, 66–​67, 85, 132, 143, 196, 221 learning, xiii, xv, 2, 10, 22–​23, 43, 48, 79–​86, 89, 93–​94, 106, 108, 116, 118, 121–​25, 127–​30, 153–​55, 161–​63, 166, 168–​69, 174, 180–​85, 205–​12, 214, 216–​17, 222–​26, 229, 233–​34 active, 217 adaptive, 81, 84, 124 autonomous, 185 Bayesian, 80, 84, 124–​27, 128–​29, 216 collective processes, 148 conjectured theory of, 223 disequilibrium process and, 20 econometric, 124, 128–​29, 183, 207–​8, 224–​25, 234 as error correction, 84 forced, 182 heterogeneous techniques, 226 increasing returns and, 233 induction-​based theory of, 82 induction-​like, 124, 205, 209–​12, 223–​24 inductive, 22, 82, 124, 127–​28, 164, 182–​84, 205–​9, 216, 221–​22, 234 inductive approaches, 22, 82, 124, 127–​28, 164, 182–​84, 205–​9, 216, 221–​22, 234 vs knowing, 115 models of, 205 modified inductive, 127 rational process, 207 realistic, 84, 233, 235 technique, 212 theory of, 21, 81, 127, 209, 207 false, 119, 225 by trial and error, 182 liquidity, flexibility, 142, 193, 195, 197–​203 deliberate, 203 financial, 197 Keynes-​Hicks viewpoint, 199, 202–​3 logic, 22, 56, 61, 67, 69, 82, 105, 107, 164, 167–​68, 183 inductive, 22, 67, 82, 124, 146, 164–​69, 183–​84, 205–​7, 209–​12, 216, 223–​24 non-​universal statements, 165   Subject Index  ( 261 ) rational argument, 119–​20, 164–​65, 169 tautology, 69 validity of an argument, 119–​20, 164 macroeconomics, 9, 10, 18, 115, 117, 120, 123, 130, 133, 143, 145, 190, 194–​96, 209, 220–​21 business investment, 195 distribution, 221 stochastic, 200 financial sector, 133 government investment, 71, 73–​74, 195 investment multiplier, 73, 196 involuntary unemployment, 191 Keynesian, 195–​96 liquidity, 142, 193–​95, 197–​203 is flexibility, 199 non-​financial, 201–​2 liquidity preference, 142 marginal propensity to consume, 72, 194, 203 persistent unemployment, 189–​91 psychological law, 193–​97, 221 saving is not-​consuming, 195, 197 stagflation, 190 transactions demand for money, 138 wage rigidities, 189 Keynesian equilibrium model, 195–​96 Keynesian model, 142, 190, 194 monetary theory, 137 money supply, 142, 197 national income, GDP, 18, 71, 74, 142, 195, 196 old Keynesian models, 189 savings, 142, 194–​95, 197 stagflation, 190 macrofoundations, 221, 223, 226 market, 1–​5, 7–​10, 16, 19–​21, 25–​48, 54, 56, 58–​59, 64, 66, 79–​80, 83, 88–​91, 93–​95, 99, 101–​5, 109–​15, 117, 120, 123, 132, 134, 136, 138–​39, 145, 151, 156, 160, 163, 174–​85, 189, 191–​93, 198–​99, 201, 205, 210, 215–​21, 225, 234 barrier to entry, 191 buyers, 2, 30, 50, 178–​79 competitive, xv, 3, 14, 38, 42, 46, 104, 109–​11, 152, 184, 201, 219 and social coordination, 219 consumer, 6, 9, 15, 46, 83, 85–​89, 91, 93, 103, 108–​9, 113–​16, 120, 125, 131, 142, 156, 164–​65, 192, 194–​95, 207, 209–​10, 213–​14, 216–​17, 219–​20, 223, 230 demand and supply curves, 2, 26, 59, 101, 184, 219–​20 demand curve, 1–​3, 8, 26, 28, 32–​34, 36–​45, 50, 59, 85, 101, 103–​5, 148, 165, 174, 180–​84, 192, 210, 216, 219–​20, 223 equilibrium models of, 1 excess demand, 8, 29–​32, 100–​102, 106, 139, 193 excess supply, 28–​32, 54, 100–​102, 193, 199, 202 feedback, 156 imperfectly competitive, 44–​46, 191–​92 monopoly, 32, 35, 38, 44, 47, 180, 187 monopsonist, 32 incomplete, 80, 139, 144 investment, 48, 134 investment goods, 48 labour, 113, 193, 199 model of, 47 non-​clearing, 10, 189, 191–​92 perfect competitor, 44, 54, 148 possible, 102, 218 price competition, 100–​101, 103 prices, 59, 64, 91, 93, 111–​12 demand price, 102, 106 given, 26, 30–​32, 42, 44, 54, 88, 109, 200 supply price, 102 sellers, 2, 30–​31, 50, 92, 101, 173, 178–​79, 219 structure, 38, 191, 215 supply curve, 1, 8, 26–​28, 36, 38, 59, 101, 103–​5, 148, 154, 184, 202, 218–​20 supply quantity, 3, 8, 33, 37, 39–​41, 88, 102, 181, 218   ( 262 )  Subject Index total demand, 6, 30–​31, 195 total supply, 30–​31, 195 Marshall’s Principles Principle of Continuity, 15 Principle of Substitution, 15 Marxian economics class interest, 92 mathematics, 17, 60–​65, 68–​69, 71, 74–​75, 103, 143, 161, 181 mathematics department culture, 61, 63–​64 and elegance, 65, 129 measurability, 6 metaphysics, 73 methodology, xv, 22, 99, 129, 162, 168, 173–​74, 190, 197, 206, 216 instrumentalist, 130, 146, 207 operational, 68–​69, 143–​44, 146 testability operationally meaningful, 33, 69 testing Duhem-​Quine problem, 158 non-​white swan, 166, 208 microfoundations, 123, 126, 133, 141, 143, 212, 221 model alternative general equilibrium, 69 applied general, AGE, 145 computable general, CGE, 69, 144–​45 empirical, 72, 124, 145, 146 formal economic, 64 high-​tech mathematical, xiii, 61 macroeconomic, 81, 117, 121–​23, 126, 128, 131, 190, 197, 206, 209, 212, 225 representative agent, 123, 126, 133, 143, 149, 163, 221 rational expectations, 22 Real Business Cycle, RBC, 142 simultaneous equations, 9, 13, 95, 130, 160–​61 statical, 38 theoretical, 64, 72, 126, 134, 144, 230 theoretical equilibrium, 124, 131 money, 4, 10, 61, 70, 133, 137–​39, 142, 185, 193, 195, 197, 199 contracts, 133, 137, 139 demand liquidity, 142, 193, 195, 197–​203 liquidity trap, 142 role for, 138–​39 neoclassical economics Austrian critics of, 107 critics of, 20 microanalysis, 205 new institutional economics, 97 new Keynesian, 142 model, 142–​43 non-​equilibrium, 159, 232 behaviour, 35, 234 models, 162 price dynamics, 62 process, 29 objective functions, 220 conjectured, 220 optimization, 9, 104, 115, 130, 154, 175, 197, 199, 202–​3, 216 autonomous, 5 dynamic, 117 intertemporal, 133 Pareto efficiency, 104 benefits, 104 Pareto optimum, 103, 108, 110 path dependency, 154–​55, 163, 229, 233 random events, 154, 161, 163 unpredictable, 233 path dependent, path dependency, 153, 163, 233 perfect mobility, 50 policy, xv, 4, 60, 74, 106, 117, 129–​30, 144, 197, 231, 234 government assessments, xv, 143 makers, xv monetary, 142 politicians, 106 post Keynesians, 205 price, 1–​2, 8–​10, 16, 19–​20, 26–​40, 42–​44, 46–​48, 54, 56, 59, 65, 83, 87, 89–​94, 100–​103, 105, 108–​16, 125, 142, 144, 148–​49, 173–​87, 189–​92, 198, 200–​201, 205, 209–​11, 218–​19, 221–​22, 232 adjustment, 20, 26, 28–​29, 32, 36, 43, 47, 56, 59, 101, 105, 173–​75, 177–​78, 182–​86, 190   Subject Index  ( 263 ) theory of, 25, 33 determination, 28, 32, 35, 38, 115 equilibrium, 1–​3, 9, 25–​27, 30–​32, 36, 41–​42, 48, 52, 55, 58, 62, 65–​67, 92, 95–​96, 100–​101, 103, 108–​10, 112–​13, 115–​16, 145, 163, 174–​77, 180, 183–​84, 200, 233–​34 informativeness of, 66 stable, 211 market-​clearing, 3, 8, 38, 40–​41, 145, 175, 218–​19 neoclassical theory of, 8 non-​Walrasian, 190 relative, 233 setter, 19, 180 social institutions, 91–​92 unexplained fixed, 190 price determination adjustment behaviour, 177 auctioneer, 26, 177–​79, 189, 219 barter economy, 137 behavioural adjustment-​process, 63 bidding up, 32 cobweb theorem, 105 demand-​price, 102, 106 disequilibrium adjustment, 36 endogenous adjustment dynamics, 180 excess demand, 8, 29–​32, 100–​102, 106, 139, 193 excess supply, 28–​32, 54, 100–​102, 193, 199, 202 formal equilibrium model of, 29–​30 hog cycle, 59, 105 imperfectly competitive, 46, 183 firm, 43–​44, 68, 174, 181, 192 market-​clearance equation, 178, 184–​85 marketee, 38 necessary adjustment, 19, 66 non-​barter transactions, 139 scientist-​type auctioneer, 177 speed of adjustment, 36, 176–​77, 179, 186, 190, 199 supply-​price, 102 tâtonnement, 178 warden-​type auctioneer, 177 price system, 108, 110–​11, 115–​16, 201 equilibrium, 108–​10 probability, 67, 75, 80, 83, 85–​86, 124–​27, 141, 231 singular events, 67 subjective, 67, 127–​28 production, 3, 5, 15, 26–​27, 48–​50, 52, 67, 71, 90, 94, 108, 111, 132–​ 33, 136, 138–​39, 142, 152, 162, 166, 198–​201, 205, 220, 234 excess capacity, 192, 199, 201, 203 production function, 27, 48, 94, 111, 133, 166, 200, 201, 220 and capital, 4–​6, 15–​16, 27, 71, 93–​94, 111, 139, 193, 199, 202 linear and homogenous, 111, 133 locally, 111 Marshallian view of, 154 three stages, 154 productive capital, 70, 93, 142, 195 productivity, 117, 154 marginal, 6 prospects, 211–​12 psychologism, 93, 97, 187, 203, 212, 215, 220, 224 psychology, 92, 97, 166–​69, 187, 211, 214–​15, 224–​25, 229–​30 Rational Expectations Hypothesis, 118, 122–​23, 129, 142, 183–​84, 206–​8, 211, 224–​25 rationality, 81, 119, 120, 124, 130, 149, 164, 168, 230 deductive, 165, 168–​69 inductive, 96, 127, 163–​67, 169, 205–​7, 224 Real Business Cycle, RBC, 142–​43, 161 real world, xiv, 19, 43, 57, 60, 66, 105, 131, 133, 161, 163, 198 realism, 61 empirical, 60 research and development, R&D, 152 resources, 14, 25, 30, 45, 51, 79, 90, 93–​94, 116, 139, 147, 184–​85, 192, 201 distribution of, 51 returns to scale, 67, 68 constant, 111, 133, 189 increasing, 45, 68, 133, 143, 154–​55, 162, 229, 233 dynamics of, 155   ( 264 )  Subject Index revenue, 3, 32–​33, 37, 40–​45, 181, 200 aggregate, 185 average, 33, 37, 42, 44, 45, 68, 181 curve, 33, 39, 44, 45 marginal, 3, 33, 37, 40–​46, 88, 181 curve, 37, 39–​43 risk, 4, 67, 85, 197 roulette wheels, 67 Santa Fe Institute, 150, 159–​60, 162–​67, 169, 179, 182, 215, 225, 229, 231–​32, 234 stock market model, 162 Scarf algorithm, 145 social coordination vs anarchy, 226 sociology, 156, 222, 226, 229 introductory, 161 Sonnenschein-​Debreu-​Mantel theorems, 141, 143 stationarity, 156 non-​stationarity, 156 stochastic, 86, 119–​20, 123–​26, 128, 130, 133, 141, 143, 200, 208, 225 nature, 124, 208 variation, 120, 124, 225 stochasticism, 129–​30, 141 non-​stochastic questions, 86 supplier, 2–​3, 8, 26, 30–​33, 37, 43, 102, 175 perfect competition price-​taking, 111 technology, 15, 16, 30, 94, 97, 147, 151, 154–​56, 162–​63 efficient automobiles, 198 hydrogen powered autos, 198 large fuel-​inefficient automobiles, 198 new, xiii, xv, 1, 9, 19, 44, 52, 54, 62, 80–​81, 91, 96, 127–​28, 142–​43, 151, 155, 160, 162–​63, 166, 168, 191, 198–​99, 209, 211, 226, 229 textbook, xiii, xv, 1–​3, 5–​10, 15, 19, 23, 26–​28, 30, 32–​34, 36–​38, 40–​44, 50, 54–​55, 60, 62, 63, 71, 87–​93, 97–​99, 100, 102, 105, 109, 111–​15, 125, 132, 147, 154, 160, 174–​75, 180, 183–​85, 191–​92, 194–​96, 198, 200, 213–​14, 217–​18, 220, 225 time, xv, 2, 4, 6, 9, 13, 15–​16, 18–​19, 22, 26, 28–​31, 39, 46–​48, 55, 58, 61–​65, 70–​72, 79, 85, 91–​92, 96–​97, 99, 104, 107, 109, 111–​12, 117, 122, 126, 128–​29, 131–​32, 134–​39, 144, 148–​49, 151, 153, 155–​56, 160–​61, 164–​66, 176, 179–​80, 182, 186, 189, 191–​92, 198–​99, 202, 208–​10, 214, 216–​17, 222 and knowledge, 47 Marshallian long-​period equilibrium, 60 Marshallian long-​run equilibrium, 45, 198 Marshallian partial equilibrium analysis, 19 vs space-​location index, 134, 136 typewriter, 154–​55 Selectric, 155 uncertainty, 21–​22, 36, 66–​67, 85, 132, 143, 196, 221 optimum degree of, 22 vs risk, 67 variables endogenous, 6–​8, 14, 17–​18, 65, 70, 72–​75, 93–​96, 145, 155, 208, 233 long-​run social, 93 exogenous, 6–​7, 14, 16–​18, 65, 70–​75, 93, 95–​96, 145, 155, 186, 191, 198, 203, 208, 215 Nature-​given, 96 Veblen effect, 219 vector space, 74–​75 ... of equilibrium models 6. Recognizing knowledge and learning in equilibrium models   79 6.1. Modern attempts to include knowledge and learning    80 6.2. Recognizing knowledge in equilibrium models   ...  Equilibrium Models in Economics     Equilibrium Models in Economics Purposes and Critical Limitations xwx Lawrence A Boland, frsc   Oxford University Press... methodological individualism   202 15. Building models of learning and the equilibrium process    205 15.1. Learning vs knowledge in equilibrium models    208 15.2. Learning and methodological individualism