In the early neoclassical era, the smooth adjustment of agents’ marginal utilities dampened the response of market prices to supply disturbances. But when agents do not make smooth trade-offs, they will tend consume goods in specific combinations, as in the model of safety bias. A negative shock to supplies can then send prices soaring, a common feature of energy markets for example. Postwar general equilibrium theory permits agents to be safety-biased but has dismissed these volatility scenarios on the grounds that they occur only at vanishingly unlikely output levels. The no-volatility conclusion fails to hold however once the production of goods is taken into account: the seemingly unlikely output levels arise systematically. Production on the other hand spells out countervailing forces that curb the most extreme cases of price volatility. Volatility is closely related to the indeterminacy of equilibria and the chapter critiques the claims of general equilibrium theorists that these phenomena are unlikely.

Chapter 4 situates Solow’s model in the heterogenous landscape of mathematical economics in the early 1950s. Robert Solow got acquainted with different strands of structuralist and mathematical reasoning before he devised the model more or less incidentally in the context of teaching engineering students at MIT. Here, I describe Solow’s model as a miniature not of the world but of other models. Its smaller scale and reduced mathematical form fit older mathematical economics while, at the same time, it related to the more sophisticated systems of proof and proposition characteristic of general equilibrium theory. While rigor and axiomatization also played a role in the construction of the miniature, the related style of modeling did not revolve around the austere beauty of proposition and proof. Rather, it centered on creating simple and manageable artifacts that upheld the promise of being useful tools for economic governance. The efficient shape of Solow’s model made it a particularly talkative artifact. Not least, it provided a starting point for a number of stories, including what economists themselves called “fables” or “parables” about growth.