¹ Keirstead, B. S., “Technical Advance and Economic Equilibria” (Canadian Journal of Economics and Political Science, vol. IX, 02, 1943, pp. 55–68).CrossRefGoogle Scholar

² Under perfect competition equilibrium of all firms requires as a condition equilibrium of the industry.

³ In the case of “multiple equilibrium,” either under perfect or non-perfect competitive conditions, there may be more than one “determinate” point of equilibrium between the cost and revenue curves. But of these only one is apt to be stable. Compare Robinson, Joan, The Economics of Imperfect Competition (London, 1933), pp. 57–9Google Scholar, and Marshall, A., Principles of Economics (ed. 2, London, 1891), pp. 491–2.Google Scholar Marshall suggests that more than one position may be stable, though others will be unstable. Somewhat similarly for Walras, a series of determinate general equilibria might exist, not all of which, however, need be stable. We shall not treat this case in the course of this discussion.

⁴ Thus under duopoly, or under monopolistic competition with decreasing costs, where prices and quantities are indeterminate, the market is said to be unstable. In Mr. Harrod's language, if two firms are in imperfect competition and one of them operates under decreasing costs, restrictions of output on the part of the firm with increasing costs will require even greater restrictions on the part of the other, and they may thus “chase each other indefinitely” ( Harrod, R. F., “The Equilibrium of Duopoly,” Economic Journal, vol. XLIV, 06, 1934, pp. 335–7).CrossRefGoogle Scholar Similarly two decreasing cost firms may chase each other into bankruptcy with a series of increases of output.

⁵ Robbins, L., “On a Certain Ambiguity in the Conception of Stationary Equilibrium” (Economic Journal, vol. XL, 06, 1930, pp. 194–214).CrossRefGoogle Scholar

⁶ Pigou, A. C., Employment and Equilibrium (London, 1941), chap. IV.Google Scholar

⁷ Robinson, The Economics of Imperfect Competition.

⁸ Chamberlin, E. H., The Theory of Monopolistic Competition (Cambridge, Mass., 1933).Google Scholar

⁹ Schumpeter, J. A., Business Cycles (2 vols., New York, 1939), vol. I, pp. 41–2.Google Scholar

¹⁰ “What we want to learn before anything else is whether or not the relations known to subsist between the elements of the system are, together with the data, sufficient to determine these elements, prices and quantities, uniquely. … The values of prices and quantities which are the only ones, the data being what they are in each case, to satisfy these relations, we call equilibrium values. The state of the system which obtains if all prices and quantities take their equilibrium values we call the state of equilibrium” ( Schumpeter, , Business Cycles, vol. I, p. 41).Google Scholar

¹¹ Thus Edgeworth says, “economic equilibrium may be regarded as determined [italics mine] by the condition that the advantage of all parties concerned, the integrated utility of the whole economic system, should be a maximum” ( Edgeworth, F. Y., Papers Relating to Political Economy, 3 vols., London, 1925, vol. II, p. 295).Google Scholar Edgeworth clearly believes that the determinate position maximizes advantages so that no party concerned would have an incentive to modify his behaviour, on the given data, and that it would be, therefore, stable.

¹² Compare Professor Schumpeter's footnote on the distinction between a stability brought on by frictions and that which satisfies the “economic rationale” ( Schumpeter, , Business Cycles, vol. I, p. 42 n.Google Scholar).

¹³ Kaldor, Nicholas, “The Equilibrium of the Firm” (Economic Journal, vol. XLIV, 03, 1934, p. 60).CrossRefGoogle Scholar

¹⁴ When competition is not perfect the elements of indeterminacy are more pronounced and cannot be disposed of by the Marshallian argument we are about to summarize in the text. Compare Higgins, B. H., “Elements of Indeterminacy in the Theory of Non-Perfect Competition” (American Economic Review, vol. XXIX, 09, 1939, pp. 468–79).Google Scholar

¹⁵ “The price [of 36s.] has thus a claim to be called a true equilibrium price: because if it were fixed on at the beginning, and adhered to throughout, it would exactly equate demand and supply; and because every dealer who has a perfect knowledge of the circumstances of the market expects that price to be established” ( Marshall, , Principles of Economics, ed. 2, p. 392, italics mine).Google Scholar

¹⁶ Robbins, “The Conception of Stationary Equilibrium.”

¹⁷ “… the various outputs for which marginal cost and marginal revenue points are shown by the marginal curves must all be considered potential outputs at the selected moment of time. Actually the firm does not increase its output through those various points, and is not considered as doing so. They are potential in the moment” ( Keir-stead, , “Technical Advance and Economic Equilibria”, p. 57).Google Scholar This use of “potential” in the logical sense of imminent must be distinguished from the sense of the word as used by J. B. Clark, for example, when he speaks of “potential” competition which producers of substitutable commodities offer a monopoly, a usage which suggests the recognition of a probability.

¹⁸ Professor Pigou expresses the same distinction in somewhat different language: “There are still two senses of equilibrium between demand and supply that need to be distinguished … the first is equality between the quantity, which, at the ruling price, demanders would like to buy and the quantity which, at that price, suppliers would like to sell; the second is the equality between the quantity which, at the ruling price, demanders would like to buy, and the quantity which would make price equal to the marginal cost of production. Under perfect competition these two senses of equilibrium come to the same thing” ( Pigou, , Employment and Equilibrium, p. 30).Google Scholar I find Professor Pigou's language here a little troublesome, but he is clearly referring to the intersections of the price curve with the average and marginal cost curves. The point is the same under perfect competition for all firms only if rent is included, and it is then the least-cost point.

¹⁹ We exclude the case of duopoly and such other cases of oligopoly as are indeterminate. These only go to increase the element of indeterminacy and the imperfection of equilibrium in the system as a whole, which we intend to show arises from non-perfect markets.

²⁰ This should be distinguished from “imperfect equilibrium” as denned by Professor Schumpeter, for whom imperfect equilibrium is the condition which “without satisfying ligamina exactly, is as near to perfect equilibrium as it will go, and [which] will not move from that position unless some event impinges upon it” ( Schumpeter, , Business Cycles, vol. I, p. 44).Google Scholar

²¹ “It may be doubted if such a conception of dynamic equilibrium is of great importance in interpreting economic change, for there is no ‘natural’ tendency for society to conform to it” ( Boulding, K. E., Economic Analysis, New York, 1941, p. 769).Google Scholar

²² Thus Marshall in one place states the law of diminishing returns: “The application of increased capital and labour to land will add a less than proportionate amount to the produce raised” ( Marshall, , Principles of Economics, ed. 8, London, 1920, p. 153).Google Scholar

²³ As defined in Pigou, , Employment and Equilibrium, pp. 32–3.Google Scholar

²⁴ As defined in Schumpeter, , Business Cycles, vol. I, pp. 35–42.Google Scholar

²⁵ Pigou, , Employment and Equilibrium, pp. 32–3.Google Scholar

²⁶ Schumpeter, , Business Cycles, vol. I, p. 35.Google Scholar

²⁷ Schultz, H. L., The Theory and Measurement of Demand (Chicago, 1938).Google Scholar See, especially, chap. XVI.