Tuesday, October 26, 2010

Bad Teaching By DeLong?

Brad DeLong has kindly made his lecture notes on General Equilibrium available online. I think he explicitly only asserts that equilibria exist (under certain conditions), not that any are necessarily stable. But I do not see how any student reading his notes cannot come to that conclusion. He never explicitly states that economists have found that General Equilibrium Theory imposes basically no limit on dynamics - this is an implication of the Sonnenschein-Mantel-Debreu results. I also don't care for DeLong's treatment here of Karl Marx, who was not writing about the allocation of given resources. (I think that a formalization of Marx's notion of prices of production is more like a Von Neumann ray without requiring labor markets to clear.)

Not being a teacher, I'm willing to entertain discussion of simplifications in teaching beginners. I can see why Joan Robinson thought that General Equilibrium Theory doesn't stand up long enough to be knocked down. The complete model postulates that enough markets exist such that you can trade any commodity for any other commodity across all time periods and all states of nature. This is wildly non-descriptive of any actual capitalist economies. But I can see how the introductory teacher might not get to point where this objection makes any sense.

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