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Steady States and Determinacy of Equilibria in Economies With Infinitely Lived Agents

In: Joan Robinson and Modern Economic Theory

Author

Listed:
  • Timothy J. Kehoe
  • David K. Levine
  • Paul M. Romer

Abstract

Joan Robinson frequently argued that neoclassical general equilibrium theory could not determine the rate of interest in intertemporal models (see, for example, Robinson, 1973). There were two aspects to this critique: First, neoclassical marginal productivity theory depended on the notion of an aggregate capital stock. Because of aggregation problems, notably reswitching, this concept could not be defined without resorting to circular reasoning except in the most unrealistic of models. Second, for any rate of interest there is a different short-period equilibrium in a neoclassical model. There are not enough equilibrium conditions to determine what this rate of interest is.

Suggested Citation

  • Timothy J. Kehoe & David K. Levine & Paul M. Romer, 1989. "Steady States and Determinacy of Equilibria in Economies With Infinitely Lived Agents," Palgrave Macmillan Books, in: George R. Feiwel (ed.), Joan Robinson and Modern Economic Theory, chapter 18, pages 521-544, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-08633-7_18
    DOI: 10.1007/978-1-349-08633-7_18
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    Cited by:

    1. Ortigueira, Salvador & Santos, Manuel S., 2002. "Equilibrium Dynamics in a Two-Sector Model with Taxes," Journal of Economic Theory, Elsevier, vol. 105(1), pages 99-119, July.
    2. Balasko, Yves, 1997. "Equilibrium analysis of the infinite horizon model with smooth discounted utility functions," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 783-829, May.
    3. Robert A. Becker, 2012. "Optimal growth with heterogeneous agents and the twisted turnpike: An example," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(1), pages 27-47, March.
    4. Robert A. Becker, 2012. "Optimal growth with heterogeneous agents and the twisted turnpike: An example," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(1), pages 27-47, March.
    5. Balasko, Yves, 1997. "Pareto optima, welfare weights, and smooth equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 21(2-3), pages 473-503.

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