On the usefulness of GE models, Jim Devine comments:
> Farbeit for me to defend Sraffian models of the edon (yuk) economy,
> since they are very utopian. But at least they don't assume full
> employment (and a total absense of quantity constraints) they the
> way Walrasian models do.
>
> But give me a vision of the economy as a dynamic disq disequilibrium
> process any day! both Walrasian and Sraffian models fail that test.
>
...and I agree in principal with pretty much everything he says.
Some comments on the way to a conclusion:
1) Sraffian models might as well presume full employment, since they
have no machinery for differentiating from un-full employment. [Thus
my point that they are in effect "GE with a lot of stuff left out"...]
2) Since one can have GE models with incomplete markets, one can
have GE models with involuntary unemployment. However, not all
purposes to which GE models might be put require that unemployment be
built in. Occam's razor, and all that.
3) The unemployment Marx speaks of in his analysis of the "general
law of capitalist accumulation" doesn't seem to be Keynesian or
market-failure unemployment; rather the industrial reserve army in
his story emerges from variations in aggregate labor demand along a
supply curve which may be horizontal over some region. If this is
the case one need not even build incompleteness into Walrasian GE to
get unemployment in Marx's sense.
4) I'm all for a "dynamic disequilibrium" model as a general thing,
but it sounds pretty unwieldy. While it might be appropriate for
some uses, there are lots of others for which one needn't cart around
the extra baggage.
Thus I'm back to my (rather modest) original position--GE models
provide a "base case" framework for considering certain questions of
economy-wide micro-interactions. Questions of exploitation and the
class distribution of income, firm ownership structure, consequences
of changes in trade policy, etc., etc, all relevant issues, can be
usefully addressed in such a framework. Gil
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