Evenly Rotating Economy: A New Modeling Technique for an Old Equilibrium Construct

25 Pages Posted: 26 Jul 2013 Last revised: 17 Sep 2013

William J. Luther

Kenyon College

Date Written: July 24, 2013

Abstract

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

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

William J. Luther (Contact Author)

Kenyon College ( email )

Gambier, OH 43022
United States

HOME PAGE: http://www.wluther.com

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