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A Note On The Concept Of Approximate Equilibrium In Economic Theory

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  • DUNCAN K. FOLEY

    (Department of Economics, New School for Social Research, 6 East 16th Street, New York, NY 10003, USA;
    Santa Fe Institute, USA)

Abstract

The problem of the computability of Walrasian competitive equilibrium is considered from the point of view of concepts of approximate equilibrium. Neither the market-clearing nor Negishi approaches to the proof of existence of Walrasian competitive equilibrium give rise to adequately robust notions of approximate equilibrium. This explains the non-computability of Walrasian competitive equilibrium. The problem lies in the economic conception of markets, in particular the inconsistent treatment of information underlying the Walrasian definition. When trade takes place at disequilibrium prices decentralized market exchange redistributes income and economic welfare, and its equilibrium is path-dependent. The set of such equilibrium outcomes, however, in contrast to the Walrasian competitive equilibrium, is constructive and computable.

Suggested Citation

  • Duncan K. Foley, 2012. "A Note On The Concept Of Approximate Equilibrium In Economic Theory," New Mathematics and Natural Computation (NMNC), World Scientific Publishing Co. Pte. Ltd., vol. 8(01), pages 95-100.
    • Handle: RePEc:wsi:nmncxx:v:08:y:2012:i:01:n:s1793005712400054
    DOI: 10.1142/S1793005712400054
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    References listed on IDEAS

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    1. K. Vela Velupillai, 2004. "Constructivity, Computability and Computers in Economic Theory: Some Cautionary Notes," Metroeconomica, Wiley Blackwell, vol. 55(2‐3), pages 121-140, May.
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