Paradoxes of Perfect Foresight in General Equilibrium Theory

Abstract

Intertemporal General Equilibrium Theory cannot be used to settle the Capital Controversy. The device of using dated commodities to avoid dynamic analysis excludes, artificially, strategic behaviour. The auctioneer plays an unsuspectedly stronger role in the dynamic economy than in the static economy, if capital goods are present.General Equilibrium; perfect foresight; foresight; Capital Controversy; Cambridge Controversy