Introduction

This volume honors Herbert Scarf and his contributions to economics. It deals with new developments in applied general equilibrium (AGE) modeling, a field in which Scarf's contributions have played a decisive role. All but two of the chapters in the volume were presented at a conference held at Yale University in April 2002. The chapter by Herbert Scarf and Charles Wilson was written afterward; it demonstrates the uniqueness of equilibrium in an important class of international trade models. The chapter by Lars Ljungqvist and Thomas Sargent is an outgrowth of Sargent's discussion at the conference of the paper presented there by Edward Prescott. The chapters presented here build on a well-known earlier volume in applied general equilibrium, edited by Herbert Scarf and John Shoven in 1984 (Scarf and Shoven 1984), which in turn grew out of Scarf's pioneering contributions in general equilibrium computation in the 1960s and early 1970s (Scarf 1967a, Scarf and Hansen 1973). Kenneth Arrow's chapter in this volume points out that the ability to deploy AGE models is the product of research advances, going back at least 130 years, in which progress in economic theory and vastly improved availability of economic data have played crucial roles. According to Arrow, equally crucial inputs were improvements in computing power and the development of algorithms for computing equilibrium, in which Scarf's (1967b) algorithm based on simplicial subdivisions was the crucial step. Since the 1980s, applications of AGE have broadened.