Economic theory is devoted to the study of equilibrium positions. The concept of equilibrium is very useful. It allows us to focus on the final outcome rather than the process that leads up to it. But the concept is also very deceptive. It has the aura of something empirical: since the adjustment process is supposed to lead to an equilibrium, an equilibrium position seems somehow implicit in our observations. That is not true. Equilibrium itself has rarely been observed in real life — market prices have a notorious habit of fluctuating.
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The Alchemy of Finance: Reading the Mind of the Market (1987)George Soros
I remember Robbins asking me if I could turn the Hayek model into mathematics … it began to dawn on me that … the model must be better specified. It was claimed that, if there were no monetary disturbance, the system would remain in 'equilibrium'. What could such an equilibrium mean? This, as it turned out, was a very deep question; I could do no more, in 1932, than make a start at answering it. I began by looking at what had been said by … Pareto and Wicksell. Their equilibrium was a static equilibrium, in which neither prices nor outputs were changing … That, clearly, would not do for Hayek. His 'equilibrium' must be progressive equilibrium, in which real wages, in particular, would be rising, so relative prices could not remain unchange … The next step in my thinking, was … equilibrium with perfect foresight. Investment of capital, to yield its fruit in the future, must be based on expectations, of opportunities in the future. When I put this to Hayek, he told me that this was indeed the direction in which he had been thinking. Hayek gave me a copy of a paper on 'intertemporal equilibrium', which he had written some years before his arrival in London; the conditions for a perfect foresight equilibrium were there set out in a very sophisticated manner.
Friedrich Hayek
There is reason for this shift of emphasis from any actual price to a hypothetical 'equilibrium' price. It is usually more interesting to know where a train is going than to know exactly where it is at any moment. The 'equilibrium' position of any price, wage, firm, industry, or system is the position toward which it is tending. The importance of equilibrium analysis, then, is that it enables us to discuss the directions of change. If a train is in New- York and its 'equilibrium' position is in Chicago, we are reasonably confident that the general direction of its motion will be westward, even if it unaccountably decides to travel north for the first hundred and fifty miles.
Kenneth Boulding
In this crucial sense, the theory of punctuated equilibrium adopts a very conservative position. The theory asserts no novel claim about modes or mechanisms of speciation; punctuated equilibrium merely takes a standard microevolutionary model and elucidates its expected expression when properly scaled into geological time.
Stephen Jay Gould
The general theory of economic equilibrium was strengthened and made effective as an organon of thought by two powerful subsidiary conceptions — the Margin and Substitution. The notion of the Margin was extended beyond Utility to describe the equilibrium point in given conditions of any economic factor which can be regarded as capable of small variations about a given value,or in its functional relation to a given value.
John Maynard Keynes
[Hayek's] equilibrium theory offered a wealth of suggestions that were to be taken up in the literature of the 1940s and 1950s. The idea of intertemporal equilibrium, which was to be precisely defined in axiomatic terms by Arrow and Debreu, took shape in his writings of the 1920s and 1930s.
Friedrich Hayek
Soros, George
Sosa, Mercedes
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