Validating the Invalid Dichotomy

15 Pages Posted: 18 May 2009 Last revised: 15 Jul 2018

See all articles by Hak Choi

Hak Choi

Chienkuo Technology University - Department of International Business; Chung-Hua Institution for Economic Research

Date Written: May 12, 2009

Abstract

This paper tackles the Invalid Dichotomy, which means that the Walrasian system is incompatible with money. This paper shows that earlier attempts to solve the Invalid problem have gone in the wrong direction: naming numéraire finds no market, eliminating some markets or equations destroys the whole Walrasian system, while adding extra variables spoils the good wine. This paper uses David Ricardo’s profit from trade to create money, to solve for the absolute and market prices. This paper concludes that disequilibrium is the driving force of the economy.

Keywords: Walras' law, Gains from trade, Invalid Dichotomy

JEL Classification: D21, D51, E51

Suggested Citation

Choi, Hak, Validating the Invalid Dichotomy (May 12, 2009). Available at SSRN: https://ssrn.com/abstract=1403684 or http://dx.doi.org/10.2139/ssrn.1403684

Hak Choi (Contact Author)

Chienkuo Technology University - Department of International Business ( email )

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Changhua City, 500
Taiwan
+886 91 901-4618 (Phone)

HOME PAGE: http://euntold.wordpress.com

Chung-Hua Institution for Economic Research ( email )

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Taipei
Taiwan

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