CFDP 1272

How to Compute Equilibrium Prices in 1891


Publication Date: August 2000

Pages: 21


Irving Fisher’s Ph.D. thesis, submitted to Yale University in 1891, contains a fully articulated general equilibrium model presented with the broad scope and formal mathematical clarity associated with Walras and his successors. In addition, Fisher presents a remarkable hydraulic apparatus for calculating equilibrium prices and the resulting distribution of society’s endowments among the agents in the economy. In this paper we provide an analytical description of Fisher’s apparatus, and report the results of simulating the mechanical/hydraulic “machine,” illustrating the ability of the apparatus to “compute” equilibrium prices and also to find multiple equilibria.

Keywords: Fisher, general equilibrium, hydraulic apparatus, equilibrium prices, computable general equilibrium, algorithms

JEL Classification Codes: D58, C63, C68, B13, B31