The Moving Equilibrium Method

Economic laws are, in Marshall’s felicitous phrase, laws of tendencies: statements regarding the impact of various influences, more or less certain, more or less definite (Marshall p. 27). If these tendencies have worked themselves out fully, equilibrium is reached. Hence an equilibrium state is a state towards which things are tending. It might be, however, that an equilibrium is never reached since time is required for the causes to work out their effects: “For meanwhile the material on which they work, and perhaps even the causes themselves, may have changed; and the tendencies which are being described will not have a sufficiently long run’ in which to work themselves out fully1.” But even if this holds true and the moving equilibria are never reached, the notion of such equilibria might still be helpful to describe the tendencies at work. This is the theme of the present chapter.