Three important points which I forgot to mention in my small piece about equilibrium (only implying them) are the following.
1. I said, "in time, the market must balance out, and if it does not, the only cause can be external factors, which could be social, political, physical, cultural, psychological, animal spirits and so on.". This has an important implication, because it means that there is a sense in which obstacles and obstructions to the market have to be cleared away for equilibrium to be achieved, an idea which is quite old in bourgeois economic thought, and theories about it, date back at least to the formation of national markets in Europe in the 17th and 18th century (although the problem in merchant trade is of course much older). The same idea is apparent in the neo-liberal concept of deregulation aiming to promote market efficiency. The relevant point is twofold: on the one hand, the establishment of economic equilibrium may necessitate the removal or neutralisation of factors external to the market, and on the other hand, there can never be anything systematic about these factors obstructing the efficient operation of markets, and they could vary from one moment to the next. That is to say, the only systematicity there is, is the price mechanism itself, which provides the "logic of markets" specifiable in terms of supply and demand factors. As regards the former, this relates closely to a previous discussion we had about primitive accumulation and Rosa Luxemburg's theorems about the expansion of the market. As regards the latter, if all disequilibria result from external factors, and if there is never anything systematic about these external factors, then any market failure can never be system-immanent, i.e. it can never be a result of the operation of markets themselves. But this is just a tautology, since, as I mentioned, the price mechanism or the market-mechanism is precisely treated as the modus by which balance between supply and demand is achieved in the first place. You cannot very well say that the very thing that creates balance is the cause of imbalance, unless you are Karl Marx, and start to conceptualise dialectical contradictions. 2. The concepts of "supply" and "demand" are also never unproblematic in themselves, as businesspeople know very well. In the case of supply, we are dealing with such things as the decision to supply, manifest supply, potential supply, and capacity to supply and so on. A supply could be theoretical, or it could be real. This has to do with the fact that economic actors can choose to enter or withdraw from the market for the purpose of supply, independently of what the demand is, although, according to the theory, if there is demand there, it will be supplied, and if there is a supply, it will find its own demand, (opinions differ on just exactly how that works and a lot of discussion is devoted to this). An example here is the phenomenon of excess capacity, where there is a discrepancy between what could theoretically or technically be supplied, and what is actually supplied. So when we are talking about supply, we are not simply talking about actual provision of net output conditional on payment by a buyer, we are talking about much more, for example potential supply or theoretical supply. Thus, supply need not be anything tangible, it could be just an idea. The same applies to demand. In the first instance, of course, we are talking about monetarily effective demand, effective buying power. But as the concept of "potential markets" already indicates, we can never be fully sure about what the real market is until we have sold our stuff and received payment, and therefore "demand" need not be cash buyers seeking purchase, but could also be potential demand or theoretical demand. These points are obvious to any professional economist, but they have an important implication for the concept of equilibrium, relating to the first sentence of my script: I said, "the discussion about equilibrium is totally meaningless unless you can specify what exactly is being equilibrated." (Ian replied ""duh"). Namely, in a closer specification of what balance between supply and demand would constitute, we have to deal not just with what is actually supplied and what actual demand happens to be, but also with potential demand and theoretical demand. And this is really what makes the search for an adequate specification of equilibrium conditions so difficult in neoclassical economics. There is a sense in which we have to assume what we try to explain, we adopt a definition of equilibrium based on some assumptions, but there is an epistemic problem in substantiating the validity of this equilibrium definition. The concept of "market uncertainty" suggests that we may not know what the supply is and what the demand is, and this being the case, we cannot specify what would constitute a balance between supply and demand. This means that equilibrium theorems are often intrinsically hypothetical in the sense of us being unable to test or falsify them. Hence, the neoclassical concept of equilibrium is ultimately a metaphysical hypothesis. 3. In the neo-classical discussion about supply and demand, it is already assumed that goods and services do exchange and will exchange in general. We have the market, and we have the price mechanism, and for the rest exchange just happens. This has a very important implication, because it means that in neoclassical theory the exchange process itself is not problematised, theorised and analysed thoroughly as a social process, or even as an interaction between economic agents, it is assumed that this interaction will normally occur, and that if it does not occur, that this is the product of rational choices of economic agents withdrawing from the market. Basically, we are dealing with abstract quantitities of supply and demand, and with price relationships between goods and services analysed from the point of view of costs and expenditures, sales and purchases. This has another very important effect on the equilibrium discussion, because it means that disequilibrium resulting from market failure can never inhere in the exchange process itself, in the exchange process as such. It can inhere only in the specific way that the exchange process process happens to operate, the magnitudes of it. Thus, the concept of the "price mechanism" substitutes for any serious neoclassical discussion of the concept of economic exchange as such. This discussion may be of historical or anthropological interest, but it is not considered part of economic theory proper. This is a procedure diametrically opposed to that of Karl Marx, who very carefully analyses economic exchange at the simplest level, and then builds the architecture of Das Kapital on an examination of all the different basic categories of exchange that occur, considered as social processes, based on the idea that marketable goods and services are products of human labour, and that the price relationship between goods and services sold and bought therefore reflects a social relationship between economic agents as producers and consumers, mediated through objectified value relations. Thereby, neoclassical economics is not a social science but a technical science, concerned with the relationships applying to prices, priced goods and services, and price variables. Jurriaan
