General equilibrium

General equilibrium theory is the macroeconomic extension of partial equilibrium analysis, originating with Léon Walras and later formalized by Kenneth Arrow and Gérard Debreu. It studies the simultaneous equilibrium of all markets in an economy, treating prices as variables that coordinate aggregate supply and demand. The Arrow-Debreu model proves that under idealized assumptions, such an equilibrium exists and is Pareto efficient. But these assumptions — complete markets, convex preferences, no externalities — are systematically violated in real economies. General equilibrium is not a state that economies achieve; it is a mathematical boundary condition that defines the limits of what decentralized coordination can accomplish. The theory's power is formal, not descriptive. From a systems-theoretic perspective, general equilibrium is a fixed-point theorem disguised as economic description.