A Mix of Good News and Bad News

The Harvard Crimson currently reports that Economics 10B is the most popular undergraduate course, having 585 students enrolled, for the fifth consecutive spring semester.

It is good that so many students are interested in macroeconomics,.  It is not so good that the students will be oriented towards a static Walrasian framework, rather than to a Functional Macroeconomic Dynamics framework.

The appeal of Walrasian equilibrium is strong.  Walras’ “conception is exact, but it is not complete.”  The exactness makes it appear final in young minds not yet sufficiently conscious of a theory of dynamics; the incompleteness is not noticed; the inadequacy of statics is not recognized.

Leon Walras developed the conception of the markets as exchange equilibria. Concentrate all markets into a single hall. Place entrepreneurs behind a central counter.  Let all agents of supply offer their services, and the same individuals, as purchasers, state their demands.  Then the function of the entrepreneur is to find the equilibrium between these demands and potential supply. … The conception is exact, but it is not complete.  It follows from the idea of exchange, but it does not take into account the phases of the productive rhythms. [CWL 21, 51-52]

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