General Equilibrium with Regenerative Capital: Extending DSGE Models for Institutional Value Creation

Arrow--Debreu equilibrium rests on preconditions that fragility-dominated domains do not satisfy: budget constraints become dynamic fragility constraints, prices cannot coordinate behaviour when capital cycles collapse, and the welfare theorems lose their footing. This paper asks what an equilibrium concept looks like when capital is allocated rather than traded — when it is governed by cadence rules and alignment conditions instead of by a price vector. We define a regenerative equilibrium as a fixed point in which allocation rules, cadence rules and capability dynamics are mutually consistent, prove existence by a fixed-point argument, and establish two welfare results: any regenerative equilibrium is Pareto-efficient within the alignment-feasible set, and any alignment-feasible efficient allocation is decentralisable by a cycle constitution. A third result states the conditions under which regenerative equilibria are welfare-superior to extractive ones in fragility-dominated domains. The paper is explicit about the scope of the agent set over which these results quantify, which determines what they can and cannot be taken to show.