Book contents
- Frontmatter
- Contents
- List of illustrations
- Introduction to the second edition
- Preface to the second edition
- Preface to the first edition
- Table of notation
- Table of assumptions
- A General equilibrium theory: Getting acquainted
- B Mathematics
- C An economy with bounded production technology and supply and demand functions
- D An economy with unbounded production technology and supply and demand functions
- E Welfare economics and the scope of markets
- 19 Pareto efficiency and competitive equilibrium
- 20 Time and uncertainty: Futures markets
- F Bargaining and equilibrium: The core
- G An economy with supply and demand correspondences
- H Standing on the shoulders of giants
- Bibliography
- Index
20 - Time and uncertainty: Futures markets
from E - Welfare economics and the scope of markets
Published online by Cambridge University Press: 05 June 2012
- Frontmatter
- Contents
- List of illustrations
- Introduction to the second edition
- Preface to the second edition
- Preface to the first edition
- Table of notation
- Table of assumptions
- A General equilibrium theory: Getting acquainted
- B Mathematics
- C An economy with bounded production technology and supply and demand functions
- D An economy with unbounded production technology and supply and demand functions
- E Welfare economics and the scope of markets
- 19 Pareto efficiency and competitive equilibrium
- 20 Time and uncertainty: Futures markets
- F Bargaining and equilibrium: The core
- G An economy with supply and demand correspondences
- H Standing on the shoulders of giants
- Bibliography
- Index
Summary
Introduction
We have already demonstrated the existence and efficiency of general equilibrium in an economy of N goods with active markets for trading them. But what are these N goods? The answer is that they could be anything. This generality reflects the distinctive power of mathematical modeling. The model and its interpretation are separate. We have a mathematical model that provides a general family of results based on mathematical relations among the variables. How we label the variables and interpret the results is now up to us. The model could apply to trading mineral samples at annual meetings of an amateur gemologists society. It can apply to the trading and production of a small closed economy. It can apply to trading and production of an entire world economy. In each case, of course, it applies only if the assumptions of the model are fulfilled. What we know in each instance is that if the assumptions of the model are fulfilled then the conclusions follow: There will be market clearing prices that lead to a Pareto-efficient allocation. This is true whether the prices and allocations are for rock samples, the goods available in a small economy, or those available throughout the world. We have left until now a more complete discussion of the range of goods to be allocated by the market mechanism.
- Type
- Chapter
- Information
- General Equilibrium TheoryAn Introduction, pp. 225 - 248Publisher: Cambridge University PressPrint publication year: 2011