The results of the capital theory controversies and general equilibrium theory: some reflections on concepts and history
As I understand Garegnani’s arguments, he was attempting to show that, in a situation where a tendency to equality of rates of proﬁt in all activities was at work, both the Marshallian and Walrasian frameworks (those that Krishna Bharadwaj called the supply and demand approach) could not guarantee convergence on longperiod situations where this was ensured. Or, even if it did occur, the resulting before and after comparisons of the properties of the long-period positions were such as not to be compatible with any observed ‘changes’ in, say, income distribution in actual economies. It was a question concerned, ﬁrst, with establishing existence (and uniqueness) and, second, with the possibility of the equilibrium, if it existed, exhibiting local and global stability. This last is a much harder task, one that the most thoughtful general equilíbrium theorists seem to have conceded cannot be done unless very special and artiﬁcial, arbitrary or, dare I say it, ad hoc, conditions are assumed. Heinz Kurz has written an especially lucid account of the existence and stability arguments in Kurz (1985); there, he set out the ‘critique of economic theory’ implicit in Piero Sraffa’s ‘prelude’ and, more explicitly of course, in the writings of Garegnani and other scholars.