CHAPTER 18: On the Value of Small-scale GE Models
Originally published in International Journal of Economic Theory, 11, (2005), pp. 155–168.
The field of international economics has made frequent use of general equilibrium models in order to investigate the nature of those possible comparative static equilibrium solutions that seem somewhat paradoxica1. Frequently the analysis is done for settings in which the number of commodities, countries, and/or factors of production is assumed to be rather small. For example, the Classic Ricardian model making use of the concept of comparative advantage based on comparisons of efficient ratios of country productivities has solutions that hold for any number of countries or commodities. A number of different issues, such as stability conditions and the transfer problem, are discussed in which surprising equilibrium outcomes possible in a general situation can be understood more easily in a small-scale setting.
