When Supply and Demand do NOT Meet: Sraffa's Critique of Economic Theory Restated

The neoclassical Walrasian microeconomists assume that the agents are price takers and, concurrently, that these prices are exactly those that would ensure market clearing across all markets. In this chapter, traditional Sraffian schemes are generalized to the case in which there are non-uniform rates of profits and a population of heterogeneous neoclassical utility maximizing agents. A series of computational experiments are conducted to verify whether this generalisation alters Sraffa's conclusion concerning the indeterminacy of general economic equilibrium. The conclusion is that market clearing equilibria in the market for consumption goods do not occur for most of the economies we have considered. In other words, the so-called "law" that supply meets demand does not seem to hold for most cases.