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On treatment of interests, profits and equilibrium non-existence in general equilibrium models

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  • Icefield, William

Abstract

It is sometimes argued that one cannot criticize general equilibrium models on grounds of equilibrium non-existence. I argue that once problematic treatments of interests and profits in general equilibrium models are corrected, equilibrium non-existence issues arise again. Uniform rate of interest and zero economic profit of firms must hold after corrections, which allow equilibrium existence for only restricted circumstances. This demonstrates ongoing relevance of the Cambridge capital controversies.

Suggested Citation

  • Icefield, William, 2020. "On treatment of interests, profits and equilibrium non-existence in general equilibrium models," MPRA Paper 99625, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:99625
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    References listed on IDEAS

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    More about this item

    Keywords

    Cambridge capital controversies; general equilibrium; uniform rate of interest; zero economic profit; equilibrium existence;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical

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