Subjectivism and Economic Analysis: Essays in memory of Ludwig ...

MAURIZIO CASERTAlong-term model. The difference between a partially and a fullyspecified model is one between a model whose functions, throughignorance of the agent or the analyst, cannot all be precisely specified,and a model where nothing impedes such specifications. 3 Thus ashort-term model can be fully specified if what is treated as given isnot liable to generate at some point in time an unpredictable dynamics,either because fixity of that variable is a realistic assumption orbecause the analyst is not prepared to take into account the possibilityof change. That assumption, therefore, is not concealing the inabilityof the theorist to properly specify that function.If this argument is accepted, equilibrium will cease to conveynecessarily the idea of finality, that is, the idea of a state of affairsthat can be changed only by external occurrences. More generally, itmight become associated with endogenous as well as withexogenous change. The notion of provisional equilibrium,introduced in Chick and Caserta (1994) mentioned above, wasdesigned precisely to represent a state of rest that has within itselfthe seeds of its own destruction. Thus, equilibrium becomesconsistent with innovation, learning and evolution.The purpose of this chapter is to pursue further the notion ofprovisional equilibrium. In particular, what kind of theoreticalpurpose is served by this notion will be discussed. Then attentionwill be devoted to the idea that equilibrium is consistent withlearning. To do so, Hahn’s notion of equilibrium is taken as thestarting point. 4 Finally, an example, taken from the theory ofeconomic growth, of what implications the notion of provisionalequilibrium could have for actual theorising will be suggested. It willbe argued that the need to ensure continuity to the economicdiscourse can be served by an approach to growth based on amultiplicity of growth regimes, each of which is associated with adifferent set of exogenous and endogenous variables. Such anapproach can cope with novelty in a non-traditional way: instead ofhaving shifts in the parameters of the functions (which obviouslycan still take place), it handles novelty by means of shifts from oneregime to another. This implies that there is a higher level in theanalysis, a general framework, which is what is required for thenotion of provisional equilibrium to make any sense.The nature of changeAny account of change in theorising is bound to be unsatisfactory. Ifchange is viewed as the emergence of novelty, one can only trace its106