Metaeconomics Sprouts Wings

Abstract

Francis Ysidro Edgeworth (1845–1926) was central casting’s perfect English professor. He was a bachelor, conversed with exaggerated politeness, never strayed far from Oxford University, and left a legacy of durable papers and dense monographs. In one study, Mathematical Psychics, he formalized the now classical problem of barter between two persons with different endowments of ale and bread. This problem is today always explicated with the Edgeworth Box diagram. Edgeworth set out the mutual gains from barter in the now familiar way. In general there remains a range of possible gains and students are left crying out for a simple rule or ‘story’ to pin down the final point. There are different ways of ‘closing’ the model and Edgeworth had his own. He argued that as one added people to the trading group the range of potential gains would shrink. Everyone bartering would still gain, but the range of where bartering ended up would get less. With many many traders in the barter situation, the range would shrink to a point, Edgeworth argued. Numerous traders sounds like a competitive situation. With only two traders, it sounds like an arm wrestle. So Edgeworth presented a clear idea of how a more competitive situation might be modelled. For seventy five years his idea about more traders and a shrinking range of indetenninacy lay ignored despite the fact that his book was refened to by almost all economists year in and year out. His argument was independently re-invented and his range of indeterminacy has been labelled … no, not the Edgeworth range but the core of an economy.