BUDGET CONSTRAINT OF A FIRM AND ECONOMIC-THEORY

Firms in reality are subject to budget constraints which general equil ibrium theorists have paid little attention. Using Morishima (1950, 19 92) model, this paper deals with firms that are subject to budgets per taining to sales and investment decisions, and proves the existence of a general equilibrium. We show that an economy with firms subject to budgets does not necessarily satisfy the efficiency proposition, and c larify how the total profit maximum condition in the Arrow-Debreu (195 4) type economy ensures an ''efficiency'' in a limited dynamic sense.