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asked ago in General Economics Questions by (230 points)
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Three years ago I started a thread that criticized the way in which we teach the supply and demand model. The emphasis was on <<model>> because my concern was with how S&D is taught, especially to majors (and, perhaps, graduate students). The standard verbal/graphical exposition is implicitly or explicitly based on a three equation mathematical model. But the third equation is an <<equilibrium condition>> that means that the market is <<assumed>> to always be in equilibrium. Because there are no equations that show how maximizing agents will react to a disequilibrium price - something that cannot exist in the model - the standard narrative's account of how the market adjusts to disequilibrium is not consistent with the model that is claimed to underpin the analysis. (The claim that firms and consumers can adjust prices violates the <<assumption>> of perfect competition.) Economists seem to be reluctant to admit that their verbal and geometric <<analysis>> is at odds with their mathematical model, which is not to deny the correctness of their intuition of how markets seem to behave.  Disequilibrium dynamics is a notoriously difficult and seemingly intractable problem - see Fisher's "Disequilibrium Foundations of Equilibrium Economics" (1984). The math that economists use to come to grips with the problem is very primitive by the standards of professional mathematicians, let alone Fields medalists,  and it may be that we need help from mathematicians in coming to grips with this problem. (Just as physicists have maintained a fruitful dialog with mathematicians for the last four hundred years.) In 2018 the Fields medal was awarded to two mathematicians who have made contributions to economics (see https://afinetheorem.wordpress.com/2018/08/01/the-2018-fields-medal-and-its-surprising-connection-to-economics/).

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