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General Equilibrium Models are Not Utopian

Many are the times where use of general equilibrium methods is being met by harsh criticism. Mostly it happens when the associated model results concerning some policy reform do not provide politicians or voters with what they want or had expected. Sometimes it happens through more fundamentally-based reservations against the modeling strategy per se. Critics taking either point of departure support each other in envisaging general equilibrium models as fictional and idealized Utopian worlds. Hence, they are not to be taken seriously (and they are often claimed to be used merely to promote some free-market agenda). As I see it, the critics often overlook (deliberately or not) that general equilibrium … Continue reading

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