Asymmetries between the price system and the system of physical quantities

In the two equation systems considered in the previous chapter, the solutions for physical quantities and the solutions for prices have emerged in a formally symmetrical manner. They determine the time paths of relative quantities and the time paths of relative prices, respectively. This means that, in each equation system, the time path of one of the unknowns must be determined exogenously.

However, in point of substance (as against the formal appearance), the two equation systems evince more than an asymmetry. In the physical quantity system (IV.5.2), the exogenously determined unknown is, quite obviously, N(t), i.e., population. The (exogenous) time path of N(t) determines, through (IV.10.1), the total quantity of available labour Qn(t), which in turn determines the evolution of the scale of operation of the entire economic system. On the other hand, it is not so evident which of the unknowns is exogenously determined in the price system (IV.5.3). Actually, in this equation system, there is no unknown that may obviously be said to be determined from the outside. The choice of the unknown to be exogenously determined, which means in this case the choice of the numéraire of the price system in its evolution over time, is arbitrary.

In a dynamic context with structural change, this gives way to a whole series of intricate relations, to which we shall devote the present chapter.