Journal Article

Sraffian Indeterminacy in General Equilibrium

Michael Mandler

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 66, issue 3, pages 693-711
Published in print July 1999 | ISSN: 0034-6527
Published online July 1999 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00104
Sraffian Indeterminacy in General Equilibrium

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The indeterminacy claim for competitive price systems made by Sraffa (1960) is examined by placing Sraffa's work in an intertemporal general equilibrium model. We show that indeterminacy occurs at a natural type of equilibrium. Moreover, the presence of linear activities instead of a differentiate technology is crucial and the indeterminacy is constructed, as in Sraffa, by fixing some or all of the economy's aggregate quantities. On the other hand, an extra condition, that some factors have inelastic excess demand is necessary, and, unlike Sraffa's model, relative prices must be allowed to vary through time. Sraffian indeterminacy and the generic finiteness of the number of equilibria are reconciled by showing that indeterminacy occurs at a measure-zero set of endowments. We use an overlapping-generations model to show that these endowments nevertheless arise systematically and that indeterminacy does not occur when relative prices are constant through time.

Journal Article.  0 words. 

Subjects: Economics

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