The Virtues and Vices of Equilibrium and the Future of Financial Economics

  title={The Virtues and Vices of Equilibrium and the Future of Financial Economics},
  author={J. Doyne Farmer and John Geanakoplos},
  journal={Yale Economics Department Research Papers},
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this is so, extolling the virtues of equilibrium theory; then we present a critique and describe why this approach is inherently limited, and why economics needs to move in new directions if it is to continue to make progress. We stress that this shouldn't be a… 
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Frontiers of finance: evolution and efficient markets.
  • J. Farmer, A. Lo
  • Economics
    Proceedings of the National Academy of Sciences of the United States of America
  • 1999
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A. Wald has presented a model of production and a model of exchange and proofs of the existence of an equilibrium for each of them. Here proofs of the existence of an equilibrium are given for an