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``Further Remarks on Walras' Law and Nonoptimal Equilibria''

Author

Listed:
  • Mark Pingle

    (Department of Economics, U of Nevada, Reno, Nevada, Reno, NV 89557)

  • Leigh Tesfatsion

    (Dept. of Economics, Iowa State U, Ames, Iowa 50011-1070)

Abstract

The objective of this note is to show that the positively valued excess supplies which Aiyagari (JME, 1992) connects with Pareto inefficiency for overlapping generations economies represent an economic opportunity that can potentially be exploited by government or by a private financial intermediary through the issuance of unsecured debt. We demonstrate that, when unsecured debt is issued, Walras' Law does not fail in the sense described by Aiyagari. However, the mere issuance of unsecured debt does not ensure Pareto efficiency. We show that Pareto efficiency is achieved if and only if the opportunity to issue unsecured debt is optimally exploited, for example, by an earnings-driven private financial intermediary.

Suggested Citation

  • Mark Pingle & Leigh Tesfatsion, 1993. "``Further Remarks on Walras' Law and Nonoptimal Equilibria''," GE, Growth, Math methods 9312001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpge:9312001
    Note: 10 pages, includes 1 figure, all in LaTeX
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    References listed on IDEAS

    as
    1. Rao Aiyagari, S., 1992. "Walras' Law and nonoptimal equilibria in overlapping generations models," Journal of Mathematical Economics, Elsevier, vol. 21(4), pages 343-361.
    2. Gale, David, 1973. "Pure exchange equilibrium of dynamic economic models," Journal of Economic Theory, Elsevier, vol. 6(1), pages 12-36, February.
    3. Balasko, Yves & Shell, Karl, 1980. "The overlapping-generations model, I: The case of pure exchange without money," Journal of Economic Theory, Elsevier, vol. 23(3), pages 281-306, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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