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The Stability of the Competitive System which contains Gross Complementary Goods

R. Sato
Review of Economic Studies 1972 39(4), 495-499
Journal Article The Stability of the Competitive System which contains Gross Complementary Goods Get access Ryuzo Sato Ryuzo Sato Brown University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 39, Issue 4, September 1972, Pages 495–499, https://doi.org/10.2307/2296518 Published: 01 September 1972

A Note on Scarcity of Specific Resources as a Limit to Output: A Correction

R. Sato
Review of Economic Studies 1967 34(4), 421 open access
He then interprets Walras' Law as asserting that we drop one of the two excess demand equations, and thus the remaining system contains a liquidity preference equation and a loanable funds equation.We cannot eliminate one of the markets if it is a stock-flow good.But this conclusion is quite wrong.Lloyd misinterprets Walras' Law.Let Xi = excess flow demand for the ith good and xi = the investment demand for the ith good.In this ,.context Walras' Law merely states that L p,(x,+xi) = 0 ([2], p. 29).Accordingly, if , = 1 all markets but one are in market equilibrium, so is the nth market.Similarly, if all markets but one are jn full stock equilibrium, the nth market is in either market or full stock equilibrium.Thus if n -1 markets (including money) are in any kind of equilibrium, the bond market is at least in market equilibrium.We have thus established the static equivalence of liquidity preferences and loanable funds for mixed stock-flow economics.The dynamic equivalence of these two theories has not been establishe<!,;and, indeed, under general dynamic assumptions it is impossible to do so [5,6].,-