Almost a century and a half after Léon Walras founded neoclassical general equilibrium theory, economists still have not been able to show that markets move economies toequilibria. What we do know is that — under very restrictive assumptions — unique Pareto-efficient equilibria do exist.
But what good does that do? As long as we cannot show, except under exceedingly unrealistic assumptions, that there are convincing reasons to suppose there are forces which lead economies to equilibria – the value of general equilibrium theory is nil.Modern economics — emperor without clothes
Lars P. Syll | Professor, Malmo University
See also Dumb and dumber in modern macroeconomics and Microfounded angelic agents
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