General equilibrium and the neo-Ricardian critique: On Bloise and Reichlin

Abstract

The 2009 article by Professors Bloise and Reichlin offers the opportunity to clarify the ‘neo-Ricardian’ critique, which is not fully grasped by the two authors. Bloise and Reichlin identify long-period analysis with steady states, which obscures the relevance of the supply-side problems of the conception of capital as a single factor. Also, they seem not to grasp how indefensible intertemporal general equilibrium theory is, because of the impermanence problem and of the absurdity of perfect foresight of novelties. But in fact the acceptance of neoclassical theory rests, not on general equilibrium theory, but on faith in the traditional marginalist adjustments based on capital conceived as a single factor—a conception destroyed by the neo-Ricardian critique, which therefore destroys the entire neoclassical approach. This critique points to problems which are logically prior to the instability issues to which Bloise and Reichlin reduce the critique; stability can be discussed only under ‘even-conceding’ assumptions (illustrative examples are Marshall, and Fratini).