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Models as Economies


  • Townsend, Robert M


The distinction between actual economies and stylized general equilibrium models is no t sharp. General equilibrium models with such key elements as uncerta inty, spatial separation, private information, limited communication, and limited commitment provide a catalogue that one can use to inter pret actual economies. Further, a general equilibrium model can provi de a framework one can use to trace out the logic of some premise for joint, economy-wide phenomena, a web to tie together seemingly unrel ated observations. Also, in tolerating wide variations in environment s, general equilibrium models provide laboratories one can use to con duct relatively inexpensive policy experiments. Copyright 1987 by Royal Economic Society.

Suggested Citation

  • Townsend, Robert M, 1987. "Models as Economies," Economic Journal, Royal Economic Society, vol. 98(390), pages 1-24, Supplemen.
  • Handle: RePEc:ecj:econjl:v:98:y:1987:i:390:p:1-24

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    References listed on IDEAS

    1. Picard, Pierre, 1987. "On the design of incentive schemes under moral hazard and adverse selection," Journal of Public Economics, Elsevier, vol. 33(3), pages 305-331, August.
    2. Baron, David P. & Besanko, David, 1984. "Regulation and information in a continuing relationship," Information Economics and Policy, Elsevier, vol. 1(3), pages 267-302.
    3. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
    4. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-1451, November.
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    Cited by:

    1. Banerjee, Abhijit V & Newman, Andrew F, 1993. "Occupational Choice and the Process of Development," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 274-298, April.
    2. Joseph G. Haubrich, 1995. "Imperfect state verification and financial contracting," Working Paper 9506, Federal Reserve Bank of Cleveland.

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