The concept of long-run equilibrium — a slippery eel

5 Oct, 2014 at 18:34 | Posted in Economics | 3 Comments

The concept of equilibrium, of course, is an indispensable tool of analysis … But to use the equilibrium concept one has to keep it in place, and its place is strictly in the preliminary stages of an analytical argument, not in the framing of hypotheses to be tested against the facts, for we know perfectly well that we shall not find facts in a state of equilibrium. Yet many writers seem to conceive the long-period as a date somewhere in the future that we shall get to some day …

210578Long-run equilibrium is a slippery eel. Marshall evidently intended to mean by the long period a horizon which is always at a certain distance in the future, and this is a useful metaphor; but he slips into discussing a position of equilibrium which is shifted by the very process of approaching it and he got himself into a thorough tangle by drawing three-dimensional positions on a plane diagram.

No one would deny that to speak of a tendency towards equilibrium that itself shifts the position towards which it is tending is a contradiction in terms. And yet it still persists. It is for this reason that we must attribute its survival to some kind of psychological appeal that transcends reason.


  1. What is a plance diagram?

    • Thanx. Fixed 🙂

  2. Nonentities: The emptiness of economic thinking
    Comment on Lars Syll’s ‘The concept of long-run equilibrium — a slippery eel’

    The discussions among physicists, for example, became enormously productive just by no longer applying concepts like perpetual motion machine or epicycle because these words signify nonentities. It took some time to find this out. The specific difficulty with nonentities is sometimes that they cannot be readily recognized or disproved. It is simple with the Easter Bunny and rather demanding with the concept of absolute space.

    Likewise, students of economics can gain a wealth of time by immediately stopping to read an article or a book as soon as the concept of equilibrium is introduced.

    Equilibrium, or by implication disequilibrium, is a nonentity. Of course, there are some other nonentities in conventional economics but equilibrium is the most wasteful.

    Identifying nonentities is one of the defining activities of science. In took the physicists about eighteen centuries to find out that epicycles are nonentities. As J. S. Mill put it: “Mankind in all ages have had a strong propensity to conclude that wherever there is a name, there must be a distinguishable separate entity corresponding to the name; …” (Mill, 2006, p. 756)

    General equilibrium is the economic counterpart of a perpetual motion machine; no real thing could possibly correspond to the name. The scientific content of all variants of equilibrium models is nil. The fact that conventional economics clings to equilibrium does not testify for equilibrium but against conventional economics.

    Ask the middle-of-the-road economist where equilibrium is to be found and he will answer: in the long run, that is, nobody will ever see it. And this means in very concrete terms: all the methodological fuss about verification/falsification is idle.

    The long run is no eel but what Popper called a stratagem to avoid the true/false question. Inconclusiveness, confusion, and sloppiness is where economics thrives. This is the cozy ecological niche of science where “… nothing is clear and everything is possible.” (Keynes, 1973, p. 292)

    By overlooking the state of economics of her time, Joan Robinson could only conclude: “Scrap the lot and start again.” (quoted in Harcourt, 2010, p. 50).

    Neither Orthodoxy nor Heterodoxy heeded her advice. The empty talk about equilibrium and the long run goes on and on and on (for an exception see 2014).

    Egmont Kakarot-Handtke

    Harcourt, G. C. (2010). The Crisis in Mainstream Economics. real-world economics
    review, (53): 47–51. URL

    Kakarot-Handtke, E. (2014). The Synthesis of Economic Law, Evolution, and
    History. SSRN Working Paper Series, 2500696: 1–22. URL http://papers.ssrn.

    Keynes, J. M. (1973). The General Theory of Employment Interest and Money.
    The Collected Writings of John Maynard Keynes Vol. VII. London, Basingstoke:
    Macmillan. (1936).

    Mill, J. S. (2006). A System of Logic Ratiocinative and Inductive. Being a Connected
    View of the Principles of Evidence and the Methods of Scientific Investigation,
    volume 8 of Collected Works of John Stuart Mill. Indianapolis, IN: Liberty Fund.

    See also:

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