The concept of equilibrium in economics

Abstract

Equilibrium models play a central role in modern (micro)economic analysis. They form the basis of almost all our understanding in economics and are increasingly being used in other fields of social science. Yet there are numerous limitations to the equilibrium approach. To name a few: the treatment of time, i.e., the problem of distinguishing between ?time in models? and ?models in time?; learning process, i.e., the problem of knowledge necessary to attain the equilibrium; equilibrium dynamics, i.e. considering the equilibrium attainment process and not just the equilibrium state. Many critics already drew attention to the reach and limitations of the ?engineering approach? in economic science. It seems that the ?voice of reason? has never been loud enough. This paper presents a review of the above-mentioned problems.