Departmental Bulletin Paper A Comprehensive Guide for the Proof of the Turnpike Theorem in General Equilibrium Theory

KANEKO, Fumihiro

32 ( 1 )  , pp.1 - 59 , 2017-06-28 , 千葉大学経済学会
[SUMMARY] A comprehensive guide for understanding the proof of the turnpike theorem in general equilibrium theory is presented. The original proof is rather disorganized and partly unintuitive, and has an error. This guide reorganizes it to emphasize that the turnpike theorem is a theorem on dynamics of economic surplus in the spirit of promoting a formation of a good habit over a fully rational optimization for each economic agent. The reason why the common time-discount rate must be taken close to 1 is clarified as that a Lyapunov stability argument for the case that the common time-discount rate is 1 is applied to the dynamics of loss in the total market surplus. The guide also contains a reproof of the part derived from an error in the original proof. No technical detail is left unexplained except for issues related to the existence of an equilibrium, so that the guide is nearly complete.

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