The theory and the facts of how markets clear: Is industrial organization valuable for understanding macroeconomics?
In: Handbook of Industrial Organization
Abstract6. SummaryThis chapter has presented a survey of what industrial economists know about how markets clear. The evidence on price behavior is sufficiently inconsistent with the simple theories of market clearing that industrial economists should be led to explore other paradigms. The most useful extensions of the theory will be those that recognize that marketing is a costly activity, that an impersonal price mechanism is not the only device used to allocate goods, and that price methods in conjunction with non-price methods are typically used to allocate goods.Exactly what macroeconomists can learn from all this is less clear to me. Since both macroeconomists and industrial economists are interested in the same question of how markets clear, I have no doubt that there is the potential for the two groups to influence each other's research. Whether that potential is realized depends in part on how some of the new areas of research in industrial organization develop.
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Other versions of this item:
- Dennis W. Carlton, 1986. "The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics?," University of Chicago - George G. Stigler Center for Study of Economy and State 44, Chicago - Center for Study of Economy and State.
- Dennis W. Carlton, 1987. "The Theory and the Facts of How Markets Clear: Is Industrial Organization Valuable for Understanding Macroeconomics?," NBER Working Papers 2178, National Bureau of Economic Research, Inc.
- L0 - Industrial Organization - - General
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