Lecture Material: 

All the lecture material is available in OLAT. This course is password protected. The password will be given in the first lecture.

• Syllabus

Aims of the lecture

The module covers the history and actual developments of General Equilibrium Theory (GET). It traces the development of GET from Walras' “Éléments d'Économie Politique” to more recent approaches. The relation of GET and capital theory, as well as Keynesianism will be of special interest.

Lecture and Exercises provide a profound knowledge in economic theory which is the basis of modern research in Micro- and Macroeconomics. The theoretical foundations presented will enhance and encourage students to develop their own scientific research activities.

Lecture description

General Equilibrium Theory (GET) is still the basis of modern economic theory. The intertemporal GET according to Arrow and Debreu will in this lecture be treated as a reference model, together with an extensive discussion of proofs of existence and of stability properties. The analysis of the equilibrium concept is to be deepened by a reconstruction of its historical evolution, passing from classical economics via the first neo-classical revolution to Walras and to the second neo-classical revolution (which is controversial among historians of economic thought) and to intertemporal theory (Hicks, Lindahl, Hayek). Within this framework, Sraffa and capital theory also are to be treated. This will involve an introduction to the theory of non-negative matrices as a mathematical foundation, the analysis of long-period prices, the application to the aggregation of capital, the critique of the aggregate production function and a report on my present research on the extent to which the production function may be rescued, using a statistical approach and random matrices. If time permits, it will be shown further how GET was changed under neo-keynesian influence (Malinvaud, Drèze) to include the problem of effective demand. Another path of development leads via the results of the turnpike theorems back to the theory of natural prices. The contrast between the failures (stability) and the successes (existence theorems) of GET from a theoretical and an applied point of view (Keynesians and Monetarists) may stimulate own research.