Introduction

In this chapter, I return to the Hahn Process models discussed in Chapter 2 and treat them more precisely than was done there. This enables the introduction of the notation used later in the book. More important, it facilitates understanding of some issues which arise again in the context of more complex and satisfactory models. For the most part, these issues were discussed in the previous chapter and nontechnical readers may proceed directly to Chapter 4 with little loss of continuity.

Two models are discussed in the present chapter. First, I treat the case of pure exchange without the introduction of money. As explained in the previous chapter, this model embodies the basic feature of the Hahn Process. It is very easy to see what is going on in a context that lacks the increasingly complex apparatus of later versions.

The second model treated below adds the complications of firms and of money. However, actual production and consumption out of equilibrium are not permitted. The analysis of this model permits an understanding of the role of firms and introduces a number of the problems which later appear. Production and consumption out of equilibrium will not be separately treated. As explained in the preceding chapter, they are easiest to introduce in the context of a relatively rich disequilibrium model where agents understand what is happening and care about the timing of their actions. Hence, disequilibrium production and consumption are introduced only in the full model of Part II.