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Welcome to the world of general disequilibrium and more

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Welcome to the world of general disequilibrium

By Brian Reading

Official forecasters use econometric models which assume all markets return simultaneously to general equilibrium in the medium term. Cost-push inflationary surges are transitory and subdued by equally transitory higher unemployment. History and theory demonstrate that disequilibrium rotates between product, labour, financial and traded goods markets. Some are always out of kilter at any one time. Forecasters must explain what is happening in terms of general disequilibrium. Here is an attempt to do so. The key message is income and wealth distribution matter.

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