General equilibrium

The economic theory of general equilibrium describes the behavior of demand , supply and prices in several interconnected markets. In the narrow sense, general equilibrium is understood as the simultaneous equilibrium state of all markets of a given economy. Thus, the theory of general equilibrium is opposed to the theory of partial equilibrium , in which markets are considered in isolation from each other.

In the theory of general equilibrium, two major questions are studied. First, she studies economics using the equilibrium price model. Secondly, it determines the circumstances in which a general equilibrium is established in the narrow sense. The theory originated in the 70s of the XIX century, one of its cornerstones was the work "Elements of pure political economy" by the French economist Leon Walras ^[1] .

The modern concept of general equilibrium developed in the 1950s based on the work of Kenneth Arrow , Gerard Debreu and Lionel Mackenzie ^{[2] [3]} . In the work “Theory of Value” (1959), Debreu introduced an axiomatic model of general equilibrium, setting it out in the style of Nicolas Bourbaki . This approach made it possible to determine the main objects (goods, prices) without specifying a specific economic interpretation. The model allowed for various interpretations of these objects, of which three are of the greatest theoretical value.

According to the first of the interpretations, goods differing in place of delivery are treated as different. For example, apples sold in London and Paris are two different products; they are traded in two different markets. Then the model can be used for spatial modeling of international trade . According to the second interpretation, goods are considered different if delivery times do not match. Suppose, at the initial time, all markets are in equilibrium. Agents buy and sell contracts for the delivery of a certain product at a specific time. Then the model comes down to a description of the whole (by type of goods and by date) set of forward markets . Finally, in the third interpretation, goods are considered different if there is a mismatch of a certain state of nature . In such a situation, a contract for the supply of goods may include a description of the conditions under which delivery will occur ^[4] . Interpretations can be combined. The product is determined by the time and place of delivery, delivery conditions and, in fact, its consumer properties.