Essays on General Equilibrium Theory

Abstract

The paper dwells on general equilibrium theory by putting into perspective various critical issues. The origin of the concept of general equilibrium theory is illuminated dating back to neoclassical period. Moreover, various models such as Walras model of pricing and modern equilibrium model is also put into consideration. Finally, the importance and application of general equilibrium has also been discussed at length. General equilibrium theory refers to a concept modeled around theoretical economics. The modern general equilibrium takes into consideration three important interpretations which should be taken into consideration. The idea of general equilibrium theory cannot be complete when there ...

Introduction

History of Economic Thought is a subject which is has a critical account of development of all emerging economic ideas, seeking for their originsand, in most cases, trying to figure out their results.The history of economic thought is concerned with thinkers and theoriesin the fields of political economy as well as general economics from the far past ranging to the immediate present (Roll 1996, p23).The broad subject of economics was considered as a distinct discipline until the 19thcentury. For instance, the ancient Greek philosopher named Aristotle, in one of his works on ethics and politics thought about the ‘art of ...

Rational expectation theory and bounded rationality were developed at the same nest and the same time. The pioneers of wee at Carnegie-Mellon University in the 1960s and they included Keynesian, Simon, Muth, as well as Lucas. The atmosphere among these adversaries was amiable. They focused on dynamic programing techniques and demonstrated the applications to managerial decisions (Sent 324). The method was applicable in factory-warehouse. Simon asserted that making assumption on costs it is possible to solve without computation a minimization problem. Herbert Simon pushed for the idea that was against economic believes. Despite the differences between the individuals, they maintained ...

Is Smith, Leon and Keynes Contributions Relevant in Today’s Market Concept?

Abstract This study involves studying, investigating, and analyzing various economic theories, how they relate to each other, and their relevance to modern market concept. The contributions of economic thinkers like Adam Smith, Leon Walras, David Ricardo, John Stuart Mill, Thomas Malthus, Jean-Baptiste Say, and John Maynard Keynes played a lot on what we have today. As the world of market and economics continues to be more complex, some of the ideas of these great economists have ceased to be operational. It all started with classical economics. The Era of “The Wealth of Nation” by Adam Smith in 1776 marks ...

Dynamic stochastic general equilibrium modeling or DSGE is one of the branches in general equilibrium theory that is of vital importance to macroeconomics. Macroeconomics deals with studying of growth and fluctuations of the extensive national aggregates, which are inclusive of such elements like employment levels, national income, price levels among other factors that are vital to a country’s standards of living. Criticisms arose because this theory was not able to predict the financial crisis that occurred in 2007-2010. The financial crisis led to various economic problems, and the adverse effects were felt the world over (Bateman 37). Robert ...