Information, Dynamics and Equilibrium

This lecture, delivered in Edinburgh in 1987, proposes that a useful concept of equilibri um requires a theory of the behavior of economic agents out of equili brium. Particular attention is paid to the learning of agents. Bayesi an learning is assumed and several examples are studied. They reveal that, in general, equilibrium will be history dependent. It is sugges ted that recent recognition of the pervasiveness of multiple equilibr ia of the Walrasian kind makes such history dependence more acceptabl e since the learning process on which it is based will single out one among many equilibria if there is convergence. Copyright 1987 by Scottish Economic Society.