ABSTRACT
In traditional general equilibrium theory an economy is described by the preferences and endowments of agents and by the available technological knowhow. But we need also to know something about agents’ expectations and beliefs, leave alone their information and the institutions in which they operate... As game theorists have found, even rather orthodox, hyper-rational and ‘hyper-informed’ agents can give rise to many equilibria. There are, in spite of numerous attempts, no decisive ways of choosing between them so that even this approach does not escape the ‘anything can happen’. This alerts one to the obvious fact that the process of learning and adjusting – indeed history – will need to be brought into the story. But processes themselves will need to be invoked in the account of equilibrium. For instance, if a process never reveals a certain kind of information, then the equilibrium associated with it cannot have actions and states depending on such information.
