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Devoted to establishing the existence of competitive equilibrium paths of various orders, and looks in particular at the Hicks–Malinvaud equilibrium growth path. The different sections cover temporary equilibrium and its conditions (the Lindahl–Hicks sequence of temporary equilibria), the responses of entrepreneurs and the custodian in a pseudo‐economy, the proof of existence of a temporary equilibrium, the non‐singularity and non‐triviality of the equilibrium, savings equals investment in the ‘ex ante’ and the ‘ex post’ sense, equilibrium of order T and its existence and non‐triviality, perfect foresight of the future and eternal equilibrium.

This chapter considers the dynamic method developed by Erik Lindahl in 1929–30. It was worked out at just the same time as Keynes's Treatise; but it was (at least initially) quite independent of the Treatise, nor did Keynes know anything appreciable about it until after he had written the General Theory.

Devoted to establishing the optimality of competitive equilibrium paths of various orders. So far three kinds of equilibrium growth paths have been discussed in the book: the Cassel–von Neumann path of balanced growth, the Lindahl–Hicks sequence of temporary equilibria, and the Hicks–Malinvaud perfect equilibrium over time. These are now examined for efficiency and optimality. Each of them is compared with any other in succession. The different sections of the chapter discuss definitions of efficiency and Pareto optimality, short‐run efficiency of temporary equilibrium and long‐run efficiency of full equilibrium, Pareto optimality of the Lindahl–Hicks and the Hicks–Malinvaud path, Farkas’ theorem of linear inequalities, the fact that shadow prices associated with a Pareto optimum obey the rules of competitive pricing, the conditions that should be satisfied in order for a given point of Pareto optimum to be a competitive equilibrium, and the Golden Rule of Accumulation.

This chapter discusses the Fixprice method. It compares the method to the Temporary Equilibrium method. It considers the inherent tendency of the Fixprice method to ‘go macro’. It addresses questions such as: What is the Fixprice theory of the working of a single market? In what ways does it differ from a Flexprice theory?

The neoclassical model so far examined in the book assumes, among other things: (a) that firms can be classified into two or several industries, each producing a single output; (b) that capital goods do not suffer wear and tear, or they depreciate by evaporation; (c) that the stock of capital goods can be transferred freely from one firm to another; and (d) that the neoclassical price mechanism works so as to establish automatically the full employment of capital stocks and the labour force; however, all these assumptions are unrealistic and crucially affect the model's capacity to analyse the capital structure of the economy. According to the neoclassical evaporation treatment of depreciation, capital goods that were produced several years ago and have been subject to wear and tear are considered to be physically equivalent to some smaller amounts of new capital goods of the same kind; this is a useful assumption, but an oversimplification of the age structure of the available endowments, and does not deal well with the mortality of the capital goods. In contrast, von Neumann suggested that used capital goods appearing simultaneously with products at the end of the production period could be treated as by‐products of the manufacturing process; this treatment of capital goods requires the discarding of assumptions (a) and (c). Another task assigned to the theory of capital is to find out when a capital good ceases to be used and is replaced by a new one; in growth theory, this problem is especially important, and the von Neumann device of regarding capital goods at different ages as different goods allows the endogenous determination of their economic lifetime simultaneously with other economic unknowns (in fact, capital goods die economically and become free goods when they become unprofitable). The different sections of the chapter look at technological aspects of the von Neumann revolution, his specification and symbolization of production processes, two interpretations of the original von Neumann model (genuine and bastard), the introduction of consumer choice, equilibrium within a period, the working of the system over time (the temporary equilibrium approach versus balanced growth approach), a ‘Pasinetti’ or ‘anti‐Pasinetti’ solution, and the generalized Leontief model (revisited).

Considers the neo‐Walrasian approach to general economic equilibrium. The conquest of the existence theorem is compared with the defeat on the grounds of uniqueness and stability. Examines the developments in the new welfare economics in the light of Arrow's impossibility theorem and Sen's critique of utilitarianism. Concludes with the controversy on marginalism in the theory of firm.