The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Long Run and Short Run

  • Carlo Panico
  • Fabio Petri
Reference work entry


The notion of long-run and short-run equilibrium was introduced by Marshall in 1890 and reflected the ‘long-period method’ of analysis in use among classical political economists since the 18th century. In the early 1930s, dissatisfaction with some of the neoclassical conclusions led to a shift to different methods of analysis and to the introduction of new equilibrium notions. These changes, together with the tendency to use old terminology for new equilibrium concepts, have deprived the terms ‘short-period’ and ‘long-period’ of a uniform meaning and have been a source of confusion and misunderstandings in recent debates on theoretical and applied work.


Average interest rate Capital endowment Circulating capital Diminishing marginal returns Effective demand Fixed capital General equilibrium Intertemporal equilibria Keynes, J. M. Long-period method Long-run and short-run Market price Marshall, A. Marx, K. H. Natural price Natural rate and market rate of interest Partial equilibrium Secular equilibrium Short-run and long-run equilibrium Stationary equilibria Stationary state Supply and demand Temporary equilibrium Underemployment equilibrium Value and distribution, neoclassical theory of 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Carlo Panico
    • 1
  • Fabio Petri
    • 1
  1. 1.