In a fairly popular paper published a couple of years ago ("On the future of macroeconomic models"), Blanchard (2018) makes the following statement, among other "widely believed propositions":

(i) Macroeconomics is about general equilibrium.

Unfortunately, no note or reference is given for this statement.

Is this statement true? How can it be formally proven? What is the intuition behind it?


1 Answer 1


Not sure what you mean by formally proven in this case, but it’s just true by definition.

Macroeconomics is by definition branch of economics that studies the behavior of economy as a whole as opposed to individual markets or actors separately which is studied by Microeconomics.

General equilibrium is by definition an equilibrium of whole economy or several markets.

Hence it just follows from definition of both general equilibrium and macroeconomics. Most of the economics is devoted to study of equilibria for better or worse so if you study macroeconomics you almost always study general equilibrium in one way or another. It’s equivalent to say that microbiology is about small organisms. It’s true just by definition.

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    $\begingroup$ The fact that macroeconomics studies the economy as a whole doesn't directly imply that a target equilibrium state exists - actually, it seems quite counterintuive that such an equilibrium state exists in an actual economy. Isn't it a huge implication to put in a model that's supposed to describe in great detail our economy? $\endgroup$ Commented Jan 24, 2020 at 21:07
  • $\begingroup$ @micpalmia in economics the concept of equilibrium exists. Your question was about proving the statement “Macroeconomics is about general equilibrium.” This is completely different question from asking whether real world economy can ever be in equilibrium. Most macroeconomists study in their models general equilibrium so the statement is trivially true. Also a formal proof is a proof based on axioms and deductive reasoning. Formally you can easily prove general equilibrium exists in let’s say IS-LM model. If you want to know if a thing exists outside models you want empirical proof $\endgroup$
    – 1muflon1
    Commented Jan 24, 2020 at 21:17
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    $\begingroup$ @micpalmia: I think you're confusing the issue of the general equilibrium being a topic of great interest with an assertion that it exists and/or it is unique; see en.wikipedia.org/wiki/General_equilibrium_theory#Determinacy (Likewise for its stability; see next section on that page.) $\endgroup$ Commented Jan 24, 2020 at 21:18
  • $\begingroup$ I just know RE and some econometrics so really some macro But I've recently been looking at another field called econo-physics. This field seems to look at things sort of from an non-equilibrium viewpoint. At a glance, it looks quite useful to have a math from physics background. I just started but it's been interesting to read it's philosophy and how different it is from RE and macro. Key and prolific players in econo-physics are doyne farmer and j.p. bouchaud. The only point here is that there are fields whose goals are the same as economics but whose methodologies are different. $\endgroup$
    – mark leeds
    Commented Jan 25, 2020 at 5:47

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