Discontinuities in Microeconomic Systems

Abstract

The insight of Adam Smith (1776) that the “invisible hand” can efficiently allocate resources in many markets simultaneously¹ inspired the efforts of Léon Walras (1874) to define and establish the existence of competitive general economic equilibrium in algebraic systems of linear supply and demand equations. Although his approach of counting equations and unknowns was insufficient for establishing such existence, it was carried forward by Pareto (1909) who introduced the use of calculus and gave a clear definition of optimality that was posited to coexist with competitive general equilibrium.

“At the still point of the turning world. Neither flesh nor fleshness; Neither from nor towards; at the still point, there the dance is, But neither arrest nor movement. And do not call it fixity, Where past and future are gathered. Neither movement from nor towards, Neither ascent nor decline. Except for the point, the still point, There would be no dance, and there is only dance.” T.S. Eliot, 1943 “Burnt Norton”, The Four Quartets

“Things fall apart; the centre cannot hold” William Butler Yeats, 1921 “The Second Coming”