The Relativity Theory of General Economic Equilibrium

Leiashvily, Paata (2017): The Relativity Theory of General Economic Equilibrium. Published in: American Journal of Economics , Vol. 7(5), No. 5 (2017): pp. 216-229.

Abstract

Abstract Purpose. The purpose of this paper is to propose a new approach to the understanding of self-regulation mechanism of decentralized economic system. Design/methodology/approach. As a result of the dialectical analysis of fundamental economic categories of market economy it appears as the form of a complex, non-linear, functionally closed and causally open system of economic actions. These systems have a number of unique properties that are well studied by second-order cybernetics. This allows in the study of economic processes the unique research and development of this science to be involved in the interdisciplinary format. Findings. The self-organization of a market economy is carried out through the recursive processes. Recursive processes in the economic system, as well as in other complex nonlinear dynamical systems, generate "eigenvalues" ("fixed points"). These "eigenvalues" are the equilibrium prices to which through the recursive processes tend the actual market prices, thus providing a tendency of the system to the general equilibrium. However, due to constant influence on the system of random external factors, the general equilibrium is never achieved. Research limitations/implications. On the base of the created model the hidden relationships among the gross profit, gross saving, gross investment and gross consumption in debt, as well as the relationships among the other economic parameters are revealed. This is important for adequate understanding of economic reproduction, tendency to general equilibrium, genesis of economic cycles, etc. Practical implications. The proposed understanding of self-regulation mechanism of decentralized economic system will help to improve the applied economic models and to develop the effective economic policy. Originality/value. The original interpretation of economic self-regulation mechanism of market economy is given. The ―Symmetrical model‖ of general economic equilibrium, which shows how economic forces arise, where they are directed and how interact with each other, which provide the homeostasis of a decentralized economic system, is proposed. This model shows the attractor of a real disequilibrium economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Market economy, Dialectics, Second-order cybernetics, Economic equilibrium, Closeness, Recursive processes
• Subjects: A - General Economics and Teaching > A1 - General Economics > A12 - Relation of Economics to Other Disciplines; C - Mathematical and Quantitative Methods > C0 - General > C00 - General; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General

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