Did The Market-Clearing Postulate Pre-Exist New Classical Economics? The Case Of Marshallian Theory
AbstractHave new classicists invented market clearing or have they just rehabilitated it? This is the question addressed in the present paper. It is generally agreed that market clearing underpins Walrasian theory, so my exploration is limited to the question of whether this is also true for Marshallian theory. I will claim that this is broadly the case: once Marshallian theory is properly reconstructed, it exhibits market clearing as a constantly present result. Still, an important difference between market clearing à la Walras and market clearing à la Marshall exists: in the former market clearing is equilibrium, while in the latter market clearing can coexist with disequilibrium. Next, I investigate whether my conclusion extends to the labour market. Again the conclusion reached is affirmative both for Marshall's theory and for present-day Marshallian models. As to the latter, I take Friedman's Phillips curve model as a case study. I show that this is a market-clearing model in which, strictly speaking, there is no place for the concept of unemployment-quite an ironical result for the paper that introduced the notion of the natural rate of unemployment! Copyright � 2007 The Author; Journal compilation � 2007 Blackwell Publishing Ltd and The University of Manchester.
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Bibliographic InfoArticle provided by University of Manchester in its journal Manchester School.
Volume (Year): 75 (2007)
Issue (Month): 3 (06)
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Other versions of this item:
- Michel, DE VROEY, 2005. "Did the market-clearing postulate pre-exist new classical economics ? The case of Marshallian theory," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2005011, Université catholique de Louvain, Département des Sciences Economiques.
- B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
- B40 - Schools of Economic Thought and Methodology - - Economic Methodology - - - General
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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- Michel De Vroey, 2001. "Friedman and Lucas on the Phillips Curve: From a Disequilibrium to an Equilibrium Approach," Eastern Economic Journal, Eastern Economic Association, vol. 27(2), pages 127-148, Spring.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Michel DE VROEY, 2010. "Microfoundations: a decisive dividing line between Keynesian and new classical macroeconomics?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010030, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Michel De Vroey, 2005. "Marshall versus Walras on Equilibrium and Time," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2005047, Université catholique de Louvain, Département des Sciences Economiques.
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