Re:The Sonnenschein-Mantel-Debreu Results After Thirty Years
by hackeraccount on Tuesday January 21, 2025 @10:26AM
(#42781127)
For other reasons I'm reading Adam Smith's Wealth of Nations and this seems like nothing that Smith would object to. He'd say there's a natural price that that the market price gravitates around - very much like that second graphic.
Re:The Sonnenschein-Mantel-Debreu Results After Thirty Years
by bckr on Tuesday January 21, 2025 @11:11AM
(#42781735)
The point is there are multiple "natural prices" that the market price may gravitate around. If Adam Smith thinks there's only one "natural price", then he's wrong, and you probably want to read with that idea in mind.
The very abbreviated TL;DR of this post is:
1. We are taught that markets look like this: https://upload.wikimedia.org/wikipedia/commons/8/8c/Supply-d...
2. By applying rigorous math ("general equilibrium theory"), it turns out that there is no reason that markets can't look like this instead: https://upload.wikimedia.org/wikipedia/commons/a/ab/SMD_Dema...
3. OP's article summarizes how economists have reacted to this problem.