Chapter

Stability Analysis of the Walras–Leontief System

Michio Morishima

in Equilibrium, Stability and Growth

Published in print March 1963 | ISBN: 9780198281450
Published online November 2003 | e-ISBN: 9780191596650 | DOI: http://dx.doi.org/10.1093/0198281455.003.0002
 Stability Analysis of the Walras–Leontief System

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This chapter is concerned with the stability of the mixed Walras–Leontief general‐equilibrium system, to which a conventional analysis of stability of equilibrium is applied. The use of this method may be justified by the Walrasian device of tâtonnement, or by making the assumptions that consumption goods and raw materials are perishable and not used more than once, and that capital goods are not subject to purchase and sale, only their services being traded on the market. No redistribution of durable goods occurs among individuals throughout the whole process of trading and pricing. However, a note to Ch. 2 shows that a pure exchange equilibrium is stable under some fairly reasonable assumptions, even if transactions of durable goods and, therefore, redistributions of the stocks of goods take place in the midst of pricing. The chapter also explores the laws of comparative statics that can be established for the Walras–Leontief system.

Keywords: capital goods; consumption goods; durable goods; equilibrium; exchange equilibrium; pricing; redistribution; stability; static properties; tâtonnement; trading; Walras–Leontief system

Chapter.  16818 words. 

Subjects: Economic Development and Growth

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