Gravitation of market prices towards natural prices

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Abstract

Classical economists thought of prices actually prevailing in the market (market prices) as gravitating around a long-run configuration: "natural prices"(or "production prices". Natural prices are defined as those prices that guarantee in each period a uniform remuneration of capital across the various industries. The conjecture of gravitation of market prices around natural prices has been challenged in the second half of the Seventies by some analytical formulation of the Classical competitive process, which showed the possible arising of instability phenomena. More accurate re-formulations of the Classical competitive process have subsequently proved the validity of the Classical intuition. In this work we aim to emphasise the generality and the robustness of the notion of natural prices as centers of gravitation for actual prices, either in Classical frameworks, or in other contexts. In particular we will see how this notion plays a centrale rôle in some formulations of the neoclassical general equilibrium system.
Lingua originaleEnglish
Titolo della pubblicazione ospiteSraffa and Modern Economics, Volume II
EditorGary Mongiovi, Roberto Ciccone Christian Gehrke
Pagine58-75
Numero di pagine18
Stato di pubblicazionePubblicato - 2011

Keywords

  • capital mobility
  • intertemporal equilibrium
  • long-run equilibrium
  • market prices
  • natural prices
  • production prices

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