Static and Dynamic Linear General Equilibrium Models

It is a melancholy reflection that, after about a century and a half of intensive effort by a distinguished line of investigators, it is still doubtful whether we can state any quantitative, empirical law in economics. A large part of the reason for this must lie in the nature of the problem, i.e. a very complex structure plus a state of continued violent change. These conditions make it an all-or-none affair — we solve the economic problem or none at all — and thus substantially vitiate the brilliant or ingenious assaults on its various parts. If the economy were stationary, or nearly so, we might fruitfully isolate particular sectors or types of problems. Or if the parts were not so intimately related, we might make simple dynamical analyses of their behaviour. It is the fact that both conditions are present that makes each analysis so intractable and yet so unavoidable.