Technical Information, Returns to Scale, and the Existence of Competitive Equilibrium.
STANFORD UNIV CA INST FOR MATHEMATICAL STUDIES IN THE SOCIAL SCIENCES
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It is obvious that production requires information in standard general competitive equilibrium theory, this information is embodied in the production possibility set. This kind of information may be called, technical information it may be thought of as a recipe. The standard treatment is correct so long as information can be taken as given and not subject to alteration by deliberate choice. But in fact the acquisition of new technical information has proceeded on an increasingly rapid scale in the last century or more, and the volume of resources devoted to it has become very large. This fact has been much studied under the heading of the economics of research and development. In this paper, I want to concentrate on one particular aspect, the relation between research and development and the viability of competitive equilibrium. The relation between competitive equilibrium and the possibility of technical information is more complex than I anticipated. Clearly, competitive equilibrium is not impossible, though its existence prescribes close relation between scale of output and amount of information purchased. On the other hand, there seem no simple conditions which would characterize the existence of equilibrium.
- Economics and Cost Analysis
- Numerical Mathematics