The Federal Reserve Bank of Minneapolis presents the full text of the November 2000 staff report entitled "On the Equilibrium Concept for Overlapping Generations Organizations," written by Edward C. Prescott and Jose-Victor Rios-Rull. The text is available in PDF format. This paper proposes an alternative equilibrium concept, organizational equilibrium that does as well as the initial generation did in the same situation.

Necessary conditions for equilibrium are that beliefs about the behavior of other agents are rational and individuals maximize. We argue that in stationary OLG environments this implies that any future generation in the same situation as the initial generation must do as well as the initial generation did in that situation. We conclude that the existing equilibrium concepts in the literature do not satisfy this condition. We then propose an alternative equilibrium concept, organizational equilibrium that satisfies this condition. We show that equilibrium exists, it is unique, and it improves over autarky without achieving optimality. Moreover, the equilibrium can be readily found by solving a maximization program.

This book presents an original exposition of general equilibrium theory for advanced undergraduate and graduate-level students of economics. It contains detailed discussions of economic efficiency, competitive equilibrium, the first and second welfare theorems, the Kuhn-Tucker approach to general equilibrium, the Arrow-Debreu model, and rational expectations equilibrium and the permanent income hypothesis. Truman Bewley also treats optimal growth and overlapping generations models as special cases of the general equilibrium model. He uses the model and the first and second welfare theorems to explain the main ideas of insurance, capital theory, growth theory, and social security. It enables him to present a unified approach to portions of macro- as well as microeconomic theory. The book contains problems sets for most chapters.

This book focuses on the interaction between practising economists and previous generations of economists. Because economic problems, such as crashes, tend to recur and are only partially understood, it may be profitable read the work of previous generations in a collaborative spirit. Sometimes this can offer a different perspective on current preoccupations and cause us to reconsider the scope of our much criticised subject. The book gathers together earlier work by the author which appeared in various academic books and journals with the addition of six new chapters. The collection makes for a lively, informative and thought-provoking collection. It will interest anyone with an interest in the history of economics and of economic thought.