Sunday, June 25, 2017

James Buchanan on general equilibrium

James Buchanan, quoted by Peter J. Boettke in Don’t Be “a jibbering idiot”: Economic Principles and the Properly Trained Economist:
A solution to a general-equilibrium set of equations is not predetermined by exogenously-determined rules. A general solution, if there is one, emerges as a result of a whole network of evolving exchanges, bargains, trades, side payments, agreements, contracts which, finally at some point, ceases to renew itself. At each stage in this evolution towards solution, there are gains to be made, there are exchanges possible, and this being true, the direction of movement is modified”.

Sounds like an asymptotic approach to perfection. The "gains" get smaller and smaller as progress is made, until finally the gains add nothing at all. At that point economic nirvana is reached, general equilibrium, and the economy "ceases to renew itself."

In other words, change comes to an end. Yeah, I don't buy that at all. Seems to me the most significant words in the Buchanan quote are "if there is one".

1 comment:

The Arthurian said...

There is the possibility that "change comes to an end" in the Dark Age.