Intertemporal Competitive Equilibrium, Capital and the Stability of Tatonnement Pricing Revisited
18 Pages Posted: 28 Jan 2006
This paper reconsiders a recent criticism which contends that the theory of general intertemporal equilibrium, formulated by taking the physical endowments of capital goods as given, is not protected from the problem of capital at the centre of the two Cambridges debate of the 1960s. The author confirms such a criticism following a different approach. He argues that the stability analysis of an intertemporal equilibrium via tatonnement must be consistent with a uniform rate of return on capital. He shows that the resulting non-orthodox tatonnement subverts the traditional analysis of equilibrium stability.
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