“My comment was aimed at the notion that a general equilibrium can be characterized as the tangency of a PPC with an indifference curve.”

I was thinking of general equilibrium as a community PPC being tangent to a community indifference curve (CIC). I’ve never seen textbooks describe it this way, so if my description below isn’t clear I can email you a drawing.

A CIC (which I first saw in Alchian’s 201A class) is drawn by turning B’s indifference curve upside down, placing it tangent to A’s indifference curve at an arbitrary point, holding an imaginary pencil at B’s origin, and sliding B’s indifference curve up and down A’s indifference curve, keeping them tangent. Your pencil will trace out the CIC.

To show general equilibrium, start with a CPPC (described in my old comment). Inscribe an Edgeworth box inside that CPPC. When we are in general equilibrium, the indifference curves of A and B will be tangent to each other, and the PPC’s of A and B will also be tangent to each other. Furthermore, the slopes of the PPC’s will equal the slopes of the indifference curves (at the point of tangency), and also equal to the slope of the CPPC.

Finally, focus in on the tangengy of the two indifference curves. Place an imaginary pencil at B’s origin, and imagine sliding B’s indifference curve up and down along A’s indifference curve, keeping them tangent. You imaginary pencil will trace out the CIC, and the CIC will be tangent to the CPPC, thus picturing general equilibrium without requiring everyone’s indifference curves to be the same.

]]>So “real cost” is not the same as saying “all other prices are set at equilibrium levels?

]]>From the perspective of partial equilibrium, the assumption that all other prices are set at equilibrium levels then negates all questions of logical invalidity of the analysis.

Partial equilibrium is OK because of the assumption about prices.

Walrasian equilibrium is OK because of the tatonnement process.

So what is Wicksteed’s argument all about? (I can see the dunce’s corner beckoning.)

]]>“Thus, the notion that cost can serve as an independent determinant of equilibrium price is an exercise in question begging, because cost is no less an equilibrium concept than price.”

Is this not saying that cost is indeterminate?

]]>I would say it’s an assumption strongly made.

“The whole of standard microeconomics,…… presumes the existence of equilibrium in all markets other than the one being subjected to micro-analysis. Without the background assumption of equilibrium, it would be impossible to derive what Paul Samuelson (incorrectly) called “meaningful theorems,”

Is this not saying what I am saying? Is not Wicksteed saying that without this assumption, partial equilibrium analysis is not possible? If not, then I have seriously misunderstood your post and Wicksteed and I will quietly retreat to the dunce’s corner.

]]>