Equilibrium in Economic Theory

Everything you may have wanted to know about equilibrium in economics.

Post Keynesianism generally dismisses the neoclassical assumption of equilibrium in economic theory, but these posts serve to clarify the concept and the debate around it. David Glasner explores the history, while Jason Smith comments on the concept for the POV of physics and explains it in terms of information equilibrium.

Uneasy Money
On Equilibrium in Economic Theory
David Glasner | Economist at the Federal Trade Commission

Information Transfer Economics
An agnostic equilibrium
Jason Smith

See also

The Undercover Historian
What is the cost of ‘tractable’ economic models?
Beatrice

David Glasner — John Cochrane, Meet Richard Lipsey and Kenneth Carlaw

So [John] Cochrane wants to take this bickering out of the realm of punditry and put the conflicting models to an objective test of how well they perform against the data. Sounds good to me, but I can’t help but wonder if Cochrane means to attribute the academic ascendancy of RBC/New Classical models to their having empirically outperformed competing models? If so, I am not aware that anyone else has made that claim, including Kartik Athreya who wrote the book on the subject. (Here’s my take on the book.) Again just wondering – I am not a macroeconometrician – but is there any study showing that RBC or DSGE models outperform old-fashioned Keynesian models in explaining macro-time-series data? 

But I am aware of, and have previously written about, a paper by Kenneth Carlaw and Richard Lipsey (“Does History Matter?: Empirical Analysis of Evolutionary versus Stationary Equilibrium Views of the Economy”) in which they show that time-series data for six OECD countries provide no evidence of the stylized facts about inflation and unemployment implied by RBC and New Keynesian theory. Here is the abstract from the Carlaw-Lipsey paper.

David Glasner also cites Brain Arthur on complexity economics, for which he acknowledges MNE.

Uneasy Money
John Cochrane, Meet Richard Lipsey and Kenneth Carlaw
David Glasner | Economist at the Federal Trade Commission

JKH also posted today at MR on John Cochrane.

John Cochrane’s “Monetary Policy with Interest on Reserves”