S-Space College of Social Sciences (사회과학대학) Institute of Economics Research (경제연구소) Seoul Journal of Economics Seoul Journal of Economics vol.02(1) (Spring 1989)
Micro Adjustment Behavior and Macro Stability
- Dume´nil, Ge´rard; Le´vy, Dominique
- Issue Date
- Seoul Journal of Economics, Vol.2 No.1, pp. 3-38
- In this paper we construct a framework for the analysis of the stability of capitalist economies. To this end, the behavior of economic agents (allocation of capital, loans, investment, production, customer credit, prices) is described in terms of adjustment. Agents make decision within disequilibrium and react to the observation of disequilibrium (what we call disequilibrium microeconomics). The conception of equilibrium is that of a long-term equilibrium with prices of production (normal equilibrium). We distinguish the stability of the system with respect to the relative values of the variables among industries (proportions) and the stability of the general level of activity (dimension). Capitalism appears very stable with respect to proportions and unstable with respect to dimension. The demonstration of a necessary and sufficient condition for stability is realized in a short-term approximation of the model. The introduction of non-linearities in the models of behavior allows for the existence and stability of two other equilibria (in addition to normal equilibrium): overheating and stagnation. An interpretation of the business cycle is given on this basis.