An Intertemporal General Equilibrium Model with Continuous Changes in Endowments and Technology

In this article, we consider an intertemporal economy with privately owned production in which both technology and initial endowments change continuously over time. Firms maximize profits throughout the period under consideration, taking into account technological changes, while consumers, who are the owners or shareholders of these firms, maximize their utility over the same period, acknowledging that the value of their assets, their initial endowments, and the income they receive from their participation in firms all evolve continuously over time. As a result, we obtain an intertemporal set of Walrasian equilibria consisting of a price system and production and consumption plans which, although optimal in the long run, may give rise to temporary imbalances at different points in time, since the values these variables take at each moment may differ from those corresponding to the static Walrasian equilibria evaluated at that time. We also show that even when economic agents behave rationally and changes in technology and initial endowments follow a continuous transformation process, intertemporal prices as well as intertemporal equilibrium consumption and production plans may not evolve continuously. This discontinuity can give rise to economic crises which therefore emerge as inherent features of the intertemporal general equilibrium model