Equilibrium and Stability in Classical Theory

Kaldor begins his paper of 1972 with a resounding blast against what he calls ‘equilibrium economies’. The opening paragraph is worth quoting in full for its candid irreverence:

The purpose of my lecture today is to explain why, in my view, the prevailing theory of value — what I called, in a shorthand way, ‘equilibrium economics’ — is barren and irrelevant as an apparatus of thought to deal with the manner of operation of economic forces, or as an instrument for non-trivial predictions concerning the effects of economic changes, whether induced by political action or by other causes. I should go further and say that the powerful attraction of the habits of thought engendered by ‘equilibrium economics’ has become a major obstacle to the development of economics as a

science —

meaning by the term “science” a body of theorems based on assumptions that are

empirically

derived (from observations) and which embody hypotheses that are capable of verification both in regard to the assumptions and the predictions. (Kaldor, 1972, p. 1237)