53701. Still Dead After All These Years: Interpreting the Failure of General Equilibrium Theory
- Author:
- Frank Ackerman
- Publication Date:
- 11-1999
- Content Type:
- Working Paper
- Institution:
- Global Development and Environment Institute at Tufts University
- Abstract:
- For years after the Spanish dictator actually died, the mock television newscast on “Saturday Night Live” was periodically interrupted with a “news flash” informing viewers that “General Franco is still dead!” This served both to satirize the breathlessly urgent style of television news reporting, and to suggest that after many decades of taking an absolute ruler for granted, the world needed more than one reminder that he was no longer alive and well. Much the same is true for general equilibrium theory. In the course of its long decades of rule over the discipline of economics, general equilibrium became established as the fundamental framework for theoretical discourse. Its influence continues to spread in policy applications, with the growing use of computable general equilibrium models. It has successfully colonized much of macroeconomics, with the insistence on the derivation of rigorous microfoundations for macro models and theories. General equilibrium theory is widely cited in a normative context, often in textbooks or semitechnical discussion, as providing the rigorous theoretical version of Adam Smith’s invisible hand and demonstrating the desirable properties of a competitive economy.
- Topic:
- Economics and General Equilibrium Theory
- Political Geography:
- Global Focus