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Equilibrium Models in EconomicsPurposes and Critical Limitations$
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Lawrence A. Boland

Print publication date: 2017

Print ISBN-13: 9780190274320

Published to Oxford Scholarship Online: May 2017

DOI: 10.1093/acprof:oso/9780190274320.001.0001

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Equilibrium concepts and critiques

Equilibrium concepts and critiques

Two cultures

Chapter:
(p.57) Chapter 5 Equilibrium concepts and critiques
Source:
Equilibrium Models in Economics
Author(s):

Lawrence A. Boland

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780190274320.003.0006

This chapter explores the equilibrium concept by examining the views of two cultures: those who began talking about equilibrium models in the decades before World War II and those formal model builders promoting mathematics after that war. For the older culture, the concept of an equilibrium refers to the real properties of an actual economy in a state of equilibrium. For the newer culture, an equilibrium refers only to a property of a formal mathematical model. The main discussion of the chapter is about the various critiques provided by both sides of the cultural divide. The chapter also discusses the extent to which the distinction between a model’s exogenous vs. endogenous variables involves causality. The older culture would view causality as a necessary part of understanding an equilibrium but the newer culture would view it only as an interpretation of the mathematics of the model.

Keywords:   equilibrium existence, equilibrium uniqueness, equilibrium stability, exogenous variables, endogenous variables, causality in economic models

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