Prices and Production: Elements of a System-Theoretic Perspective

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This work presents a system-theoretic foundation of the theory of price formation and production. System theory is shown to constitute a common framework to a variety of seemingly different approaches to that field. The author is able to demonstrate that traditional Walrasian theory is intertemporally inconsistent while the systems of intertemporal equilibrium, both neo-classical and neo-Ricardian, are shown to merely emphasize different aspects of the same underlying structure, irrespective of their rivaling claims to generality. The method employed by the author also proves useful in a variety of applications, for examplel, input-output theory, the incorporation of durable capital and the analysis of Marxist theory. Problems of empirical analysis and of control are also briefly discussed. Adjustment processes are provided for both cross-section data and time-series observations of varying period length. As to control, it is shown that contrary to conventional view, control over the economy by the price mechanism becomes rather uncertain and incomplete when analysed from a thoroughly dynamic point of view.