Re: Why study general equilibrium models of perfect competition?
- From: conover@xxxxxxxxxxxxxxx
- Date: Tue, 23 Aug 2005 23:15:21 +0000 (UTC)
ruetheday@xxxxxxxxxx writes:
> Given that the core of modern microeconomics consists primarily of GE
> models of perfect competition, and that these models do not even
> vaguely resemble any markets that exist in reality, what is the
> objective for studying them? The typical answer is that they represent
> some sort of flawless (if unobtainable) ideal and that by studying the
> attributes of the model and the effect of real world deviations from
> this ideal, we can understand what effect further deviations will have.
> Is this a valid approach though? Or would it be more useful to focus
> from the start on models that more accurately reflect reality (e.g.,
> dynamic vs static equilibrium models and models of monopolistic
> competition and oligopoly vs models of perfect competition)? Are GE PC
> models really the starting point against which to judge all other
> models or are they just another model no more relevant than any other?
Re: the so called Arrow-Debreu stuff of Debreu-Sonnenschein-Mantel,
(DSM,) fame, which used game-theoretic models to spell the demise of
the concept of general-equilibrium. It was an intellectual catastrophe
for mid 20'th century economics.
Why is GE still being taught?
Why give up a theory just because its wrong?
John
--
John Conover, conover@xxxxxxxxxxxxxxx, http://www.johncon.com/
.
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