I Am the Walras
18 December 2006 at 11:21 pm Peter G. Klein 1 comment
| Peter Klein |
Was Léon Walras a Walrasian? “Walrasian” usually describes general-equilibrium models with instantaneous market clearing (guided by the famous “Walrasian auctioneer”). However, according to Donald Walker, Walras’s main interest was not the systems-of-equations approach for which he is best known, but what Walker calls Walras’s “mature comprehensive model.” This model features disequilibrium, process, path dependence, and is based on observation and experiment, rather than deduction. Maybe it’s time to give Walras a fresh look. (HT: Roger Backhouse)
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Paolo MARITI | 23 December 2006 at 1:19 pm
The aim of Walras in “Éléments d’économie politique pure, ou théorie de la richesse sociale” (Elements of Pure Economics, or the theory of social wealth), 1874. (1899, 4th ed.; 1926, rev ed.) is in his own words to show “..how current prices of products and of services are mathematically determined in a state of equilibrium”.
To develop his most celebrated mathematical model of general equilibrium he explicitly makes a lot of highly simplifying assumptions on a firm’s choice, behavior, market practices and even accounting rules. They are enumerated and discussed at length in “lesson 19”(1926). Referring to such assumptions he warns that ”We have made things as simple as possible. In practice, however, there are certain complications of NORMAL AND NOT EXCEPTIONAL character….” (capital letters added)
In most contemporary treatments they are all uncritically and implicitly retained even when partial equilibrium analysis is at issue, the firm is the unit of analysis and firm-to-firm relationships and their change over time are focused. The received theory of the firm can be reinterpreted by showing that it is a special case plausible under the very restrictive set of assumptions most clearly spelled out long ago by Léon Walras.
I do agree that it now time to give Walras a fresh look . This can be done in a NIE perspective and be willing to co-operate.