Econometrica: Jul, 1990, Volume 58, Issue 4

An Algorithmic Theory of the Choice of Techniques

https://doi.org/0012-9682(199007)58:4<839:AATOTC>2.0.CO;2-G
p. 839-859

Christian Bidard

We build a theory of the choice of techniques in joint production, at a given profit rate, considering a market algorithm. Partial results are extended by means of an abstract notion of technology, where techniques meet demand and satisfy local properties. Global results on the existence, uniqueness, and convergence towards an equilibrium technique are obtained. We thus characterize cases where a square technique is reached, which provides an answer to an old debate, initiated by Jevons, between classical and neo-classical economists. But the framework allows for a more general interpretation in terms of two-level planning procedures.