By Jacques Drèze
Major students research a variety of particular departures from common equilibrium concept that have major implications for the macroeconomic research of either constructed and constructing economies. Jacques Dr?ze considers uncertainty and incomplete markets and Nobel Laureate Robert Solow relates progress idea to the macroeconomic framework. different concerns tested are the results for macro-policy of recent study, together with Joseph Stiglitz's caution at the lost zeal for monetary marketplace liberalization which in part engendered the East Asian and Russian crises.
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Additional resources for Advances in Macroeconomic Theory (International Economic Association Conference Volume No. 133)
As a firm hires more workers, the demand for output increases somewhere, leading to more hirings, and conversely. A multiplier operates. My second theorem asserts existence of a continuum of supply-constrained equilibria, sometimes Pareto ranked, hence of coordination failures. These equilibria are associated with alternative levels of supply constraints inherited from the past or expected to prevail in the future. The selection of a specific equilibrium depends in particular upon the unobserved state of information of the agents.
Drèze: Macroeconomics of Uncertainty 41 Individual agents rationally anticipate such a sequence, so their expectations concern quantity constraints on par with prices. The expectations are idiosyncratic, if only because the constraints are idiosyncratic. In the idealized model, existence and stability followed from Walrasian theory. I extend these results to price rigidities and idiosyncratic expectations of quantity constraints in three theorems. Now, incomplete markets introduce conceptual and technical complications, like defining decision criteria for business firms or using degree theory to prove existence.
That is not far-fetched; after all, there is precedent for regarding any or all of them as economic variables: saving behaviour, capital intensity, technical progress, even population growth. That is only half the battle, however. In order to make a theory of growth rather than a theory of disaster, there had better be good economic reason for believing that the variable parameter is likely to adjust in the right direction to satisfy the Harrod-Domar condition. 2 The neoclassical response and prices As everyone knows, the earliest neoclassical growth model chose capital intensity as the primary adjustable parameter.
Advances in Macroeconomic Theory (International Economic Association Conference Volume No. 133) by Jacques Drèze