Evenly rotating economy: A new modeling technique for an old equilibrium construct |
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Authors: | William J Luther |
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Institution: | 1. Department of Economics, Kenyon College, Ascension Hall #302, Gambier, OH, 43022, USA
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Abstract: | In the middle of the twentieth century, just five years before Arrow and Debreu proved the existence of an equilibrium for a competitive economy in the Walrasian system, Ludwig von Mises introduced the English-speaking world to his alternative equilibrium construct: the evenly rotating economy. In contrast to Arrow and Debreu, which characterizes equilibrium as a unique vector of prices and quantities, Mises depicts equilibrium as a pattern of behavior. After reviewing the Misesian conception of equilibrium and its failure to take hold in the profession, I turn to the modern literature. I contend that the evenly rotating economy is a special case of the now-prevalent class of search-theoretic exchange models. As such, I argue that this class of models is particularly well suited for applications considered by economists working in the Austrian tradition. |
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