The second fundamental theorem of positive economics

The paper examines what result, apart from the existence of competitive equilibrium, may be called a Fundamental Theorem of Positive Economics. It is shown first that if, for any distribution of the aggregate endowment, the matrix sum of the Jacobian of the excess demand function plus its transpose, evaluated at equilibrium, has maximal rank, then equilibrium will be locally asymptotically stable. It is next shown that redistributing resources will always make a competitive equilibrium price configuration stable provided that the rank condition referred to earlier holds at zero‐trade competitive equilibria: this is the Second Fundamental Theorem of Positive Economics.