Open AccessThe Dynamics of General Equilibrium *
Author(s) -
Gintis Herbert
Publication year - 2007
Publication title -
the economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.683
H-Index - 160
eISSN - 1468-0297
pISSN - 0013-0133
DOI - 10.1111/j.1468-0297.2007.02083.x
Subject(s) - dynamics (music) , general equilibrium theory , sociology , economics , macroeconomics , pedagogy
The Walrasian general equilibrium model is the centrepiece of modern economic theory, but progress in understanding its dynamical properties has been meagre. This article shows that the instability of Walras’ tâtonnement process is due to the public nature of prices, which leads to excessive correlation in the behaviour of economic agents. When prices are private information, a dynamic with a globally stable stationary state obtains in economies that are unstable in the tâtonnment process. We provide an agent‐based model of a multi‐sector Walrasian economy with production and exchange, in which prices are private information. This economy is dynamically well behaved.