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Professor Kenneth J. Arrow is one of the most distinguished economic theorists. He has played a major role in shaping the subject and is honoured by the publication of three volumes of essays on economic theory. Each volume deals with a different area of economic theory. The books include contributions by some of the best economic theorists from the United Stated, Japan, Israel and Europe. This second volume is entitled Equilibrium Analysis and is divided into sections on general equilibrium and on the microfoundations of macroeconomics

Preface -- Acknowledgements -- Contents -- List of Figures -- 1 Introduction -- 1.1 Introduction -- 1.2 The Econ 101 Presentation -- 1.3 It Can Be Restored, but at Some (Maybe Huge?) Cost -- 1.4 Apparent Determinateness -- 1.5 Partial Equilibrium as an Institutional Artifact -- 2 General Equilibrium Theory -- 2.1 Preference and Utility Function -- 2.2 Demand and Compensated Demand -- 2.2.1 Demand Function and Indirect Utility Function -- 2.2.2 Compensated Demand Function, Expenditure Function, and Income Compensation Function -- 2.3 Comparative Statics -- 2.4 General Equilibrium in Exchange Economies -- 2.4.1 Setting and Definitions -- 2.4.2 Efficiency -- 2.4.3 Differential Characterization -- 2.5 The Compensation Principle -- 2.6 Social Welfare Function -- 2.6.1 Arrovian Social Welfare Function -- 2.6.2 Bergson-Samuelson Social Welfare Function -- 2.6.3 Negishi Approach -- 2.7 General Equilibrium Under Uncertainty -- 2.7.1 The Environment -- 2.7.2 Arrow-Debreu Market -- 2.7.3 Sequential Trade -- 2.7.4 Market Incompleteness and Efficiency -- Notes -- References -- 3 Income Evaluation of Welfare Change: Equivalent Variation, Compensating Variation, and Consumer Surplus -- 3.1 Definitions -- 3.1.1 Single-Good Price Change -- 3.2 Recovery of Welfare Measure from Marshallian Demand -- 3.3 Individual Welfare Judgment: Comparison Between Status Quo and an Alternative -- 3.4 Individual Welfare Judgment: Comparison Between Alternatives -- 3.4.1 Equivalent Variation -- 3.4.2 Compensating Variation -- 3.5 Individual Welfare Judgment Based on Consumer Surplus -- 3.5.1 Path-Independence and Welfare -- 3.5.2 General Case -- 3.5.3 When Income Stays Constant -- 3.5.4 When Prices of a Subset of Good and Income Vary -- 3.6 Consistency of Social Welfare Judgment -- 3.6.1 Equivalent Variation -- 3.6.2 Compensating Variation -- 3.6.3 Consumer Surplus -- Notes

Each year, new economics Ph.D. students learn the proof of the existence of a competitive equilibrium as if it were a rite of passage. From the utility-maximizing behavior of consumers and the profit-maximizing behavior of firms, neophyte economists soon can demonstrate that under certain conditions there exists a competitive market-clearing general equilibrium price vector. While there are a number of proofs that establish the existence of such an equilibrium, the validity of these proofs is indubitable. Indeed, economists with even scant knowledge of the history of economics can identify Kenneth J. Arrow and Gerard Debreu's Econometrica paper as having provided the proof that settled the issue.