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Price Rigidity and Market-Clearing: A Conceptual Clarification

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  • De Vroey, Michel

Abstract

This article tests the view (derived from Hicks and Patinkin) that non-market clearance may be caused by slow adjustment ("process rigidity"). There are models where market-rationing is present and derives from some form of rigidity, but this rigidity cannot be considered as process rigidity. It is similarly possible to accommodate the idea of process rigidity within the Marshallian research programme. What is missing is that market-rationing might be its corollary. The reason such a causal link is often believed to exist lies in a generic use of the concept of rigidity, used to designate alternative and incompatible phenomena: "exogenous end-state rigidity" and "equilibrium end-state rigidity", as well as process rigidity. It is true that these first two forms of rigidity create market rationing. The belief that slow adjustment also generates market rationing results from the unwarranted extension to process rigidity of conclusions which are only valid for the first two. Copyright 2001 by Oxford University Press.

Suggested Citation

  • De Vroey, Michel, 2001. "Price Rigidity and Market-Clearing: A Conceptual Clarification," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 25(5), pages 639-655, September.
    • Handle: RePEc:oup:cambje:v:25:y:2001:i:5:p:639-55
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    Cited by:

    1. Stavros A. Drakopoulos & Anastassios D. Karayiannis, 2005. "A Review of Kuhnian and Lakatosian «Explanations» in Economics," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 13(2), pages 51-73.
    2. Michel De Vroey, 2006. "The temporary equilibrium method: Hicks against Hicks," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 13(2), pages 259-278.
    3. Michel De Vroey, 2000. "La structure logique de la Théorie générale de Keynes. Une critique de Benetti," Cahiers d'Économie Politique, Programme National Persée, vol. 36(1), pages 127-141.
    4. Michel De Vroey, 2004. "Théorie du déséquilibre et chômage involontaire. Un examen critique," Revue économique, Presses de Sciences-Po, vol. 55(4), pages 647-668.
    5. Michel, DE VROEY, 2004. "On the Right Side for the Wrong Reason : Friedman on the Marshall-Walras divide," LIDAM Discussion Papers IRES 2004015, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Michel De Vroey, 2002. "The history of economic thought: the French way," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(4), pages 672-687.

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