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The Relativity Theory of General Economic Equilibrium

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  • Paata Leiashvily

Abstract

Purpose. The purpose of this paper is to propose a new approach to the understanding of self-regulation mechanism of decentralized economic system. Design/methodology/approach. As a result of the dialectical analysis of fundamental economic categories of market economy it appears as the form of a complex, non-linear, functionally closed and causally open system of economic actions. These systems have a number of unique properties that are well studied by second-order cybernetics. This allows in the study of economic processes the unique research and development of this science to be involved in the interdisciplinary format. Findings. The self-organization of a market economy is carried out through the recursive processes. Recursive processes in the economic system, as well as in other complex nonlinear dynamical systems, generate "eigenvalues" ("fixed points"). These "eigenvalues" are the equilibrium prices to which through the recursive processes tend the actual market prices, thus providing a tendency of the system to the general equilibrium. However, due to constant influence on the system of random external factors, the general equilibrium is never achieved. Research limitations/implications. On the base of the created model the hidden relationships among the gross profit, gross saving, gross investment and gross consumption in debt, as well as the relationships among the other economic parameters are revealed. This is important for adequate understanding of economic reproduction, tendency to general equilibrium, genesis of economic cycles, etc. Practical implications. The proposed understanding of self-regulation mechanism of decentralized economic system will help to improve the applied economic models and to develop the effective economic policy. Originality/value. The original interpretation of economic self-regulation mechanism of market economy is given. The âSymmetrical modelâ of general economic equilibrium, which shows how economic forces arise, where they are directed and how interact with each other, which provide the homeostasis of a decentralized economic system, is proposed. This model shows the attractor of a real disequilibrium economy. Keywords Market economy, Dialectics, Second-order cybernetics, Economic equilibrium, Closeness, Recursive processes

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  • Paata Leiashvily, 2018. "The Relativity Theory of General Economic Equilibrium," 2018 Papers ple904, Job Market Papers.
    • Handle: RePEc:jmp:jm2018:ple904
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2015. "Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(4), pages 5-17, June.
    2. Adair Turner, 2015. "Between Debt and the Devil: Money, Credit, and Fixing Global Finance," Economics Books, Princeton University Press, edition 1, number 10546.
    3. Lee Smolin, 2009. "Time and symmetry in models of economic markets," Papers 0902.4274, arXiv.org.
    4. Richard A. Werner, 2005. "New Paradigm in Macroeconomics," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-50607-7, October.
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    1. Leiashvily, Paata, 2022. "The Economy as a Complex System of Economic Actions: In Search of a New Paradigm," MPRA Paper 116226, University Library of Munich, Germany.
    2. Leiashvily, Paata, 2018. "Рождение Макроэкономического Порядка Из Микроэкономического Хаоса [The birth of a macroeconomic order from microeconomic chaos]," MPRA Paper 100431, University Library of Munich, Germany, revised 16 May 2019.
    3. Leiashvily, Paata, 2024. "Симметричная Модельэкономического Равновесия: Круговая Организация Экономических Рроцессов [Symmetric Model of Economic Equilibrium: Circular Organization of Economic Processes]," MPRA Paper 119783, University Library of Munich, Germany.
    4. Leiashvily, Paata, 2020. "Macroeconomic Order from Microeconomic Chaos," MPRA Paper 102436, University Library of Munich, Germany.
    5. Leiashvily, Paata, 2022. "The Economy as a Nonlinear Complex System: In Search of a New Paradigm," MPRA Paper 113601, University Library of Munich, Germany.
    6. Леиашвили, Паата, 2022. "Экономика Как Сложная Система: В Поисках Новой Парадигмы [The Economy as a Nonlinear Complex System: In Search of a New Paradigm]," MPRA Paper 114140, University Library of Munich, Germany.
    7. Leiashvily, Paata, 2023. "Symmetric Model of Economic Equilibrium: Circular Organization of Economic Processes," MPRA Paper 119594, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General

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