Economic Evolution and Equilibrium: Bridging the Gap

theory,whichformalizesa dynamiceconomicsystemasa systemofdifierence, or differential, equations. There equilibria mean ‘equilibrium trajectories’ of the whole evolution that, in a certain sense, are optimal. A particularly un— tisfactory feature of this conceptualization of an equilibrium, however, is the factthattheintertemporaloptimizingapproachcompletelypredeterminesthe whole future of the economic system. This “closed loop” approach gives rise to the common reproach that economic theory...