Generally Not Equilibrium

Papers on general equilibrium (GE), e.g., those by Arrow & Debreu (A&D), look formidable. After you have read them, you felt lost. They talked and talked, but you did not know what they were talking about, for there was nothing concrete. After they have defined many axioms, they jumped to the conclusion that there you find general equilibrium. But, basically, they did not even give a definition of what general equilibrium is. When the supply curve of a good intersects its demand curve, there is equilibrium. By intuition, the extension of such equilibrium to all goods means general equilibrium. That is the so-called Walras’ law, but such intuition is a naive logic. When some economists with conscience thought deeper, they found contradiction.The contradiction is called the Invalid Dichotomy, which, up till now, has not yet been rectified. To both rectify the contradiction and solve GE, one must first derive some demand and supply functions. The first two chapters of this volume show, however, that economists have not even gone that far yet. This book starts with solving this simple problem, to derive two offer curves, to obtain the relative price for two products. Then it uses simultaneous mathematics to solve for their absolute price. Such solution needs one extra thing: money, but that also destroys the equilibrium in the product markets. Indeed, macro equilibrium does not exist, because there is no aggregate demand or supply; market equilibrium does not exist either, because there is no market demand or supply; even personal equilibrium does not exist, because one’s demand and supply cover two different products.

Equilibrium is not a correct concept. Had it existed, there would not be any economic activity. On the contrary, this world is so energetic because of disequilibrium.