Kornai’s DRSE Theory Versus General Equilibrium Theory

Móczár, József (2015) Kornai’s DRSE Theory Versus General Equilibrium Theory. Pénzügyi Szemle / Public Finance Quarterly - Journal of Public Finance, 60 (2). pp. 194-211.

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János Kornai’s DRSE theory (Kornai, 2014) follows the ex post model philosophy which radically rejects the ex ante set of conditions laid down by the dominant neoclassical school and the stringent limits of equilibrium, and defines its own premises for the functioning of capitalist economy. In other words, the DRSE theory represents an extremely novel trend among the various schools of economics. The theory is still only a verbal model with the following supporting pillars as the immanent features of the capitalist system: dynamism, rivalry and the surplus economy. (The English name of the theory uses the initial letters of the terms Dynamism, Rivalry, Surplus Economy). The dominance of the surplus economy, that is, oversupply is replaced by monopolistic competition, uncertainty over the volume of demand, Schumpeterian innovation, dynamism, technological progress, creative destruction and increasing return to scale with rivalry between producers and service providers for markets. This paper aims to examine whether the DRSE theory can be formulated as a formal mathematical model. We have chosen a special route to do this: first we explore the unreal ex ante assumptions of general equilibrium theory (Walras, 1874; Neumann, 1945), and then we establish some of the possible connections between the premises of DRSE, which include the crucial condition that just like in biological evolution, there is no fixed steady state in the evolutionary processes of market economy, not even as a point of reference. General equilibrium theory and DRSE theory are compared in the focus of Schumpeterian evolutionary economics.

Item Type:Article
Uncontrolled Keywords:surplus economy, general equilibrium theory, Walras’ Law, Say’s law, search-match models, ex post and ex ante model philosophies, Schumpeter’s evolutionary economics
JEL classification:B20 - History of Economic Thought since 1925: General
C62 - Existence and Stability Conditions of Equilibrium
D51 - Exchange and Production Economies
D52 - Incomplete Markets
Divisions:Faculty of Economics > Department of Mathematical Economics and Economic Analyses
ID Code:2053
Deposited By: Ádám Hoffmann
Deposited On:11 Sep 2015 07:36
Last Modified:11 Sep 2015 07:36

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