Introduction

I come now to an examination of the dynamics of the system, the way the variables move out of equilibrium. The main assumptions used to secure stability are those of No Favorable Surprise as discussed in Chapter 4. These are the assumptions that ensure that new opportunities neither arise nor are perceived to do so. However, there are other properties of the motion of the system which it seems reasonable to assume. Since the proof of stability is not the only end of dynamic analysis and since the class of adjustment processes which are consistent with No Favorable Surprise needs to be studied, I discuss such properties as well in the hopes that such discussion will prove useful for further work.

To put it another way, given No Favorable Surprise, the class of models for which the stability result holds is quite general. On the other hand, that very generality means that we do not gain a great deal of information from that result about the workings of the model. To the extent that additional assumptions seem reasonably calculated to restrict the behavior of the model in directions that real economies may be supposed to take, it is useful to discuss such assumptions even though this book will not itself go beyond the proof of stability under No Favorable Surprise.

There is another reason for proceeding in this way. Were I to stop with a discussion of No Favorable Surprise, there would remain some question as to whether models with sensible dynamic assumptions could in fact be fitted into the framework used. By discussing such questions as individual price adjustment, orderly markets, and the problems of non-delivery within the context of the model I show that this is not an issue.