Circular competitive equilibrium (Austrian Science Fund (FWF): PAT5388924)

Wider research contextWe propose to introduce the idea of circularity into a standard microeconomic general equilibrium setup by defining resources used, as well as “residual” goods/bads created, through the interrelated acts of consumption and production. A consumption act converts a combined set of resources (including consumption goods) into individual consumption utility, but additionally affects the economy’s state of resources by creating by-products and waste. Production acts are similarly defined as creating profits from the use of input factors and impacting the economy’s state of resources. Appropriately maximized consumption and production acts, together with a price system defined by resource market clearing, defines a circular competitive equilibrium.2. Research questionsOn the basis of the idea of circular competitive equilibrium, we propose to study the following set of questions: If the economy’s resource use is to satisfy basic ideas of (imperfect) circularity, under which conditions on consumption and production acts can we expect a decentralized circular competitive equilibrium to exit in such an economy? Which properties of competitive equilibrium extend to this augmented environment? What is a suitable definition of constrained efficiency if perfect circularity cannot be achieved?

• University of York

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