Classical and Neoclassical Indeterminacy in One-Shot Versus Ongoing Equilibria

I analyze two connections between neoclassical and classical economics. First, I consider the indeterminacy that arises for both schools: In the neoclassical theories of overlapping generations and of factor pricing and in Sraffa's price theory. Neoclassical indeterminacy occurs only in environments where relative prices can change through time; otherwise, determinacy obtains. Although these results challenge the Sraffian position on indeterminacy, the classical principle that current economic activity is embedded in the past proves to be a powerful insight: It establishes the robustness of factor-price indeterminacy and casts doubt on the importance of overlapping-generations indeterminacy. Second, I argue that recent claims that capital-theoretic paradoxes arise in intertemporal general equilibrium modes, not just in aggregative theory, cannot be validated