25 Pages Posted: 26 Jul 2013 Last revised: 17 Sep 2013
Date Written: July 24, 2013
In the middle of the twentieth century, just five years before Arrow and Debreu proved the existence of an equilibrium for a competitive economy in the Walrasian system, Ludwig von Mises introduced the English-speaking world to his alternative equilibrium construct: the evenly rotating economy. In contrast to Arrow and Debreu, which characterizes equilibrium as a unique vector of prices and quantities, Mises depicts equilibrium as a pattern of behavior. After reviewing the Misesian conception of equilibrium and its failure to take hold in the profession, I turn to the modern literature. I contend that the evenly rotating economy is a special case of the now-prevalent class of search-theoretic exchange models. As such, I argue that this class of models is particularly well suited for applications considered by economists working in the Austrian tradition.
Keywords: Austrian economics, evenly rotating economy, general equilibrium, matching, Mises, search, Walrasian
JEL Classification: B53
Suggested Citation: Suggested Citation
Luther, William J., Evenly Rotating Economy: A New Modeling Technique for an Old Equilibrium Construct (July 24, 2013). Available at SSRN: https://ssrn.com/abstract=2297900 or http://dx.doi.org/10.2139/ssrn.2297900