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Social and Behavioral Sciences Commons™
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Full-Text Articles in Social and Behavioral Sciences
How To Compute Equilibrium Prices In 1891, William C. Brainard, Herbert E. Scarf
How To Compute Equilibrium Prices In 1891, William C. Brainard, Herbert E. Scarf
Cowles Foundation Discussion Papers
Irving Fisher’s Ph.D. thesis, submitted to Yale University in 1891, contains a fully articulated general equilibrium model presented with the broad scope and formal mathematical clarity associated with Walras and his successors. In addition, Fisher presents a remarkable hydraulic apparatus for calculating equilibrium prices and the resulting distribution of society’s endowments among the agents in the economy. In this paper we provide an analytical description of Fisher’s apparatus, and report the results of simulating the mechanical/hydraulic “machine,” illustrating the ability of the apparatus to “compute” equilibrium prices and also to find multiple equilibria.
Mathematical Programming And Economic Theory, Herbert E. Scarf
Mathematical Programming And Economic Theory, Herbert E. Scarf
Cowles Foundation Discussion Papers
The paper discusses the analogy between economic institutions and algorithms for the solution of mathematical programming problems. The simplex method for solving linear programs can be interpreted as a search for market prices that equilibrate the demand for factors of production with their supply. An interpretation in terms of the internal organization of the large firm is offered for Lenstra’s integer programming algorithm.