equilibrium

[Paul Davidson <PB108928%UTKVM1.BITNET@xxxxxxxxxxxxxxxxx>]

FROM:  Paul Davidson
"      Economics Department
"      523 Stokely Management Center  (615) 974-4221
The use of static equilibrium in economics is our attempt to emulate the contro
lled experiment of the natural sciences, i.e., it is a ceteris paribus concept.
 What we are attempting to do is not to explain how an economy moves from one e
quilibrium to another when an exogenous variable changes. What we are doing  is
investigating how, in a controlled experimental environment with two identical
populations -- the control group and the experimental group -- a change in
an exogenous variable given only to the experimental group, alters the
characteristics of the experimental group vis-a-vis the control group where
all exogenous variables are unchanged. Thus for example, the multiplier
does not explain how muchthe US economy's GDP will change between 1994 and 1995
if the government increases expenditures on infrastructure by $x dollars. What
the multiplier does "explain" is how much higher the (experimental) Us's GDP
would have been in 1994, if the experimetnal US had spent $x additional on
infrastructure compared to the observed "control" US economy. (This is
explained further in my book POST KEYNESIAN MACROECONOMIC THEORY, pp.40ff.)
Now I admit that many economists treat the multiplier as a process through hist
orical time -- but logically it is not. Similarly so called "dynamic" models
where variables are dated -- are not models about historical time. They are
conceptually the same as the "hard science" controlled experiments investigat-
ing differences in paths between controlled and experimental groups when one
exogenous variable is changed for the experimental group.
   If we economists would spend more time studying "design of experiments"
literature, we would not fall into such useless semantic squabbles about
static vs. dynamioc equilibrium concepts.

Have a good day!____Paul Davidson
))))_ fax # (615) 974-1686