Abstract
In Chapter 2 we have argued that a conventional approach to capital theory imposes at least two conditions on a market system: intertemporal completeness on the one hand, and intra-temporal completeness on the other hand (see Section 2.3). The first assumption requires a complete set of perfectly organized forward markets for all goods and periods, whereas the second one implies that in each period well-organized (spot-) markets exist for any good.
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References
In fact, the assumption that the market system is complete and well-organized is a premise upon which competitive general equilibrium analysis is usually based (for example, see ARROW and HAHN 1971).
Of course, the idea, that single production steps are inseparably interlocked and that adjustment processes consume time, can be found in the work of KOYCK (1954). His ideas might be viewed as the starting point of the so-called adjustment cost approach (see NICKEL 1978). For a short discussion of the adjustment cost approach and its interrelation to the neo Austrian framework see STEPHAN (1989).
For an alternative formulation with agents behaving myopically, see STEPHAN (1993).
E denotes the NxN identity matrix.
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© 1995 Springer-Verlag Berlin Heidelberg
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Stephan, G. (1995). Incomplete Markets: a Neo-Austrian Theory of Computable General Equilibrium Models. In: Introduction into Capital Theory. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-03081-3_10
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DOI: https://doi.org/10.1007/978-3-662-03081-3_10
Publisher Name: Springer, Berlin, Heidelberg
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