At 12:47 AM 02/07/2001 -0500, you wrote:
>I recall a Fortune
>article once claiming the Arrow-Debreu work was somehow the great proof of
>capitalist allocation. Did they really prove their thesis of optimal
>allocation?
the claim is that the model proved the so-called "invisible hand thesis,"
i.e., that competitive markets serve consumers even though market
participants are motivated by sheer greed and nothing else. But that claim
is false. A & D aimed to prove the conditions necessary for the existence
of competitive equilibrium, which may or may not serve consumers. I see
their main contribution as showing that the assumptions behind many popular
conceptions of (apologies for) the market are unrealistic, utopian, since
the necessary assumptions don't apply. (This is not controversial, since
most or all of the profs. at UC-Berkeley when I was there had a similar
interpretation.) Unfortunately, our friends at the IMF and the US Treasury
don't see it that way and are trying to drag us kicking and screaming into
the capitalist utopia, the A & D model. (Irony intended with the word
"friends.") This can be seen in a minor way here in California, where an
artificial market was set up to organize electric power generation -- with
utopian ideology to justify it -- and it has had somewhat catastrophic
results (though not for the bottom lines of the holding companies that own
the "bankrupt" utilities). Of course, this utopian fantasy -- nowadays
called neoliberalism -- wouldn't survive if it weren't for the powerful
economic and political forces that support it.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~JDevine
