Stability of a competitive economy: A reconsideration

Negishi (1962) suggested that price adjustment was a means of attaining a particular optimum rather than an equilibrium; this provides the starting point for the present paper. Using a gradient process to arrive at an optimum, the paper shows that with proper distribution of endowments, this process may be considered to be an actual price adjustment process. The role of a proper distribution is investigated further and related to the existing published literature. It is also shown that if the distribution of endowments satisfies certain regularity features then the equilibrium will be globally stable under the classical price adjustment rule where price adjustment is proportional to excess demand.