ABSTRACT
Joan Robinson posed the opposition, “history v. equilibrium”. Our investigations have shown the importance of history in economics: the economy-in particular, the system of market adjustment-does not function the same way in different periods. In our earlier period we find evidence of a price mechanism that is moderately stabilizing, so long as the fluctuations are not too extreme. But in the second period there is little or no evidence of this price mechanism. Instead we find a quantity adjustment process which is highly volatile, and possibly unstable. Equilibrium, then, may be a useful hypothesis in the earlier period; it is less likely to be useful in the second. Moreover, the institutions are different: the way labor is remunerated is different, and the incentives governing employment are also different. As a result the labor market adjusts differently. Further, the firms, the institutions making decisions, are constituted differently. Family firms and modern corporations have different social foundations, and behave differently in the market. Family firms tend to find their optimal size and remain there; corporations retain earnings and reinvest them to grow with the growth of their markets. Family firms are slow to introduce new technologies; corporations support R & D, and re-tool and upgrade their product lines regularly. Government plays a different role in the two periods; oversimplifying, it is the nightwatchman in the first, the manager of the Welfare State in the second. And the implications of the differences for many debates within contemporary economics are substantial.
