Brief comments from Joseph Halevi

Hashimori Iwato assumes that there is such a thing as a well defined body of
economic theory used by every economist, more or less like a construction
engineer will have to pool from the same body of technical knowledge whether
she/he works in Tunisia or Chile.

This is most definitely not the case! Indeed whenever the artificial apparatus
of the doctrine Hashimori refers to is subjected to strict analytical scrutiny
it appears to be rather hollow. I can mention only two things that strike at the
very heart of the Walras-Edgeworth-Wicksell system of thought.

(1) The notion of a monotonic inverse relationship between the rate of interest
and capital intensity has no theoretical basis (see the QJE Symposium in 1966).

(2) The idea that excess demand functions and prices are inversely related, has
no general validity as shown long ago by Sonnenschein, Mantel and Debreu.

The first result strikes at the very idea that the prices of factors, and thus
the distribution of income among those factors, reflect the forces of supply and
demand. The second result destroys traditional pure exchange models. So much so
that mathematical economists who want to save that kind of theorizing at all
costs, have begun to formulate group or collective downward sloping demand
functions (Kirman, etc). Within each group individuals are all identical. Yet
these are just exercises.The fact is that the theory of general equilibrium
based on the relationship between supply and demand may not at all be a theory
but just a metaphysical construction.

Kindest regards

Joseph Halevi
Universite' de Grenoble (France) and the University of Sydney (Australia)

[Moderator's Note: This debate is of course important, but members are
encouraged to avoid straying too far from issues related to Japan.]