What the fuck is disequilibrium theory and does it matter?

I've read a load of articles on it and still don't have even the first clue what it is. Could you explain in language a human could understand?

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First time I actually hear the term.

I guess you mean "Monetary Disequelibrium theory": Monetary-disequilibrium theory - Wikipedia, the free encyclopedia

Monetary-disequilibrium theory presents an alternative to the real business cycle model and the quantity theory of money considered as only a long-run theory of the price level. While it is widely agreed in economics that monetary policy can influence real activity in the economy, real-business-cycle theory ignores these effects. Monetary-disequilibrium theory addresses the effects of monetary policy on real sectors of the economy, that is, on the quantity and composition of output.

Monetary-disequilibrium theory states that output, not (or not only) prices and wages, fluctuate with a change in the money supply. To that degree, prices are represented as "sticky." It is this “monetary disequilibrium,” that, the theory contends, affects the economy in real terms. Thus, changes in the money supply will result first in a change of output in the same direction, as distinct from merely a change in prices. Consequently, an increase in the money supply will induce workers and businesses to supply more, without being fooled into doing so. In a situation where the money supply contracts, businesses will respond by laying off workers. In this way, the theory accounts for involuntary unemployment.

.... Which looks to me like a restatement of a Keynesian idea: Money supply affects the real economy with loose monetary being stimulating and a restrictive one having the reverse effect.

Except that this bit is not clear to me: "To that degree, prices are represented as "sticky." It is this “monetary disequilibrium,” that, the theory contends, affects the economy in real terms". Hmmmm... That's not exactly an explanation of how the process works. Keynes, whether you like him or not, explain how loose monetary policies, by favouring credit and investments, favour economic activity. Here, prices are described as "sticky" (ok) and thus, more money mean more activity. Huh? How?

There seems to be also a Macroeconomic Disequilibrium Theory. JSTOR: An Error Occurred Setting Your User Cookie

... it seems the term is used a bit freely as soon as they decide to step out of a neo-classical/Walrasian Theory of General Equilibrium or Arrow-Debreu model...

... which happens quite often: The whole Marxist, Keynesian and neo-keynesian school plus anyone disagreeing with the neo-classics/monetarists is going to insist that the economy can get into states of disequilibrium...

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That second one is what I meant. Does it just mean that sometimes shit doesn't work properly?

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Basically.

If you remember, Walras and the neo-classics in general states that, if some conditions are satisfied (all are price-takers etc), supply and demand reach clearing prices.

Anything that disagree with that (and, despite the main-mise of the neo-classics and monetarists on modern economic thinking, they'd be legions!) can be termed "disequilibrium theory"....

Sometimes, shit doesn't work and prices don't clear: Unemployment being everyone's pet dispute...

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Cheers. I ran accross it in some left economic theory book and didn't get it.

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Okay, another question, the book I'm reading right now says: "La décision d'investissement joue également un effet d'accélération. Pour parvenir à une augmentation d'un montant donné de la production il est nécessaire de consentir un effort d'investissement supérieur à ce montant: ce pénomène, appelé "effet d'accélération" s'explique par le fait que les biens d'équipement participent au processus de production au-delà de la seule période où ils sont acquis."

Which seems to have nothing at all to do with any other definitions of the accelerator effect that I've ever read. What's going on?

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This is a very weird sentence. I assume we're talking within a keynesian/neo-keynesian environment. They are the ones most concerned with "accelerators", afaik.

La décision d'investissement joue également un effet d'accélération: Seems logical enough. Productive investment are both valuable for the spending they represent right now and the extra production they'll generate.

Pour parvenir à une augmentation d'un montantc donné de la production il est nécessaire de consentir un effort d'investissement supérieur à ce montant: Heuh? Which 'montant'? And why 'superior'? If I want to increase production by X, I better not have to invest amounts superior to X - Otherwise, it sucks.

ce pénomène, appelé "effet d'accélération" s'explique par le fait que les biens d'équipement participent au processus de production au-delà de la seule période où ils sont acquis: Hmmmm. Wait a sec. Is this a reference to a multi-period vision of things? Investment X may generate only 0.1X the first period but, as they'll be more than 10 periods in the future, there is an overall increase in production?

I think that's what it means - Investments will lead to increased production but you need to consider a multi-period environment.

In any case, you're right that this has nothing to do with classical definitions of multiplier effects.

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Thanks! Yes, it seemed like a recipe for deceleration, if anything. I think I'll stick to what I know. ROE etc.

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