Equilibrium without prices: A central issue in pareto’smanuale |
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Authors: | Antonio Gay |
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Institution: | (1) Department of Economics, University of Florence, Florence, Italy |
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Abstract: | Pareto in hisManuale asserts that the price concept is inessential for the notion of equilibrium. This view deeply contrasts with the Arrow-Debreu’s
dominant approach of Walrasian derivation. This identifies general equilibrium with a system of prices at which the decentralized
choices of economic agents match. In this paper the author justifies and gives substance to the Paretian point of view. The
differential merit of the Paretian approach is its independence of assumptions of price taking and of convexity in preferences
and in production possibility sets. These assumptions are necessary, in the walrasian framework, only to maintain the centrality
of prices, but they clash against the request of realism. (JEL:BOO, D51, D60) |
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Keywords: | Pareto improvement general equilibrium efficiency |
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