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On treatment of interests, profits and equilibrium non-existence in general equilibrium models

Icefield, William (2020): On treatment of interests, profits and equilibrium non-existence in general equilibrium models.

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Abstract

It is sometimes argued that one cannot criticize general equilibrium models on grounds of equilibrium non-existence. I argue that once problematic treatments of interests and profits in general equilibrium models are corrected, equilibrium non-existence issues arise again. Uniform rate of interest and zero economic profit of firms must hold after corrections, which allow equilibrium existence for only restricted circumstances. This demonstrates ongoing relevance of the Cambridge capital controversies.

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