Price Equilibrium for Infinite Horizon Economic Models

The paper analyzes one-sector models of general equilibrium over an infinite time horizon in which there are an infinite number of agents, these being the members of successive generations. It is argued that such models are more realistic than the customary equilibrium models with finitely many agents. Three aspects of these models are then examined including: (1) non-optimalities in the form of productive inefficiency (as noted by Samuelson and others) and consumption non-optimality due to "inflationary" equilibria, (2) the role of "credit" and its effect on the equilibrium is discussed and (3) it is shown that for simple exchange models steady state equilibria are possible with a permanent imbalance of trade in which one country constantly exports to the other, a phenomenon which cannot occur in the classical model.