General Equilibrium

The theory of general equilibrium offers a simplified guide to how real economies function: describing how production, prices, demand and consumer preference interact in multiple markets and tend towards a state of equilibrium. The first attempt to model this interaction was made by Léon Walras in the late nineteenth century, but it remained a largely theoretical exercise until the advent of the computer age, when large amounts of data could be processed to model national economies on an unprecedented scale.Written by one of the key pioneers in the field, this book offers an accessible introduction to general equilibrium theory and some of its most important developments of the past fifty years, including the sunspot model, the overlapping generations model and the model with financial assets. Written for undergraduates taking courses in economic theory and modelling who have limited mathematical proficiency, the book fills a gap between forbidding technical expositions and the less rigorous elementary ones.