HOME

TheInfoList



OR:

Marie-Esprit-Léon Walras (; 16 December 1834 – 5 January 1910) was a French mathematical economist and
Georgist Georgism, in modern times also called Geoism, and known historically as the single tax movement, is an economic ideology holding that people should own the value that they produce themselves, while the economic rent derived from land—includ ...
. He formulated the marginal theory of value (independently of
William Stanley Jevons William Stanley Jevons (; 1 September 1835 – 13 August 1882) was an English economist and logician. Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method i ...
and Carl Menger) and pioneered the development of
general equilibrium theory In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an ov ...
. Walras is best known for his book ''Éléments d'économie politique pure'', a work that has contributed greatly to the mathematization of economics through the concept of general equilibrium. For Walras, exchanges only take place after a Walrasian '' tâtonnement'' (French for "trial and error"), guided by the auctioneer, has made it possible to reach market equilibrium. It was the general equilibrium obtained from a single hypothesis, rarity, that led Joseph Schumpeter to consider him "the greatest of all economists". The notion of general equilibrium was very quickly adopted by major economists such as
Vilfredo Pareto Vilfredo Federico Damaso Pareto (; ; born Wilfried Fritz Pareto; 15 July 1848 – 19 August 1923) was an Italian polymath, whose areas of interest included sociology, civil engineering, economics, political science, and philosophy. He made severa ...
,
Knut Wicksell Johan Gustaf Knut Wicksell (December 20, 1851 – May 3, 1926) was a Swedish economist of the Stockholm school. He was professor at Uppsala University and Lund University. He made contributions to theories of population, value, capital and mon ...
and
Gustav Cassel Karl Gustav Cassel (20 October 1866 – 14 January 1945) was a Swedish economist and professor of economics at Stockholm University. Cassel was among the most prominent economists in the world in the interwar period. He made contributions to the ...
.
John Hicks Sir John Richard Hicks (8 April 1904 – 20 May 1989) was a British economist. He is considered one of the most important and influential economists of the twentieth century. The most familiar of his many contributions in the field of economics ...
and
Paul Samuelson Paul Anthony Samuelson (May 15, 1915 – December 13, 2009) was an American economist who was the first American to win the Nobel Memorial Prize in Economic Sciences. When awarding the prize in 1970, the Swedish Royal Academies stated that he "h ...
used the Walrasian contribution in the elaboration of the neoclassical synthesis. For their part,
Kenneth Arrow Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with ...
and
Gérard Debreu Gérard Debreu (; 4 July 1921 – 31 December 2004) was a French-born economist and mathematician. Best known as a professor of economics at the University of California, Berkeley, where he began work in 1962, he won the 1983 Nobel Memorial Prize ...
, from the perspective of a logician and a mathematician, determined the conditions necessary for equilibrium.


Biography

Walras was the son of a French school administrator
Auguste Walras Auguste Walras (; 1801–1866) was a French school administrator and economist. He was the father of Léon Walras, who was deeply influenced by his father's view on economics. Auguste Walras convinced his son to give up his original literary asp ...
. His father was not a professional economist, yet his economic thinking had a profound effect on his son. He found the value of goods by setting their scarcity relative to human wants. Walras enrolled in the École des Mines de Paris, but grew tired of engineering. He worked as a bank manager, journalist, romantic novelist and railway clerk before turning to economics.'' Economyths'' (2010) by David Orrell, p. 54 Walras received an appointment as the professor of political economy at the University of Lausanne. Walras also inherited his father's interest in
social reform Reformism is a type of social movement that aims to bring a social or also a political system closer to the community's ideal. A reform movement is distinguished from more radical social movements such as revolutionary movements which reject t ...
. Much like the Fabians, Walras called for the
nationalization Nationalization (nationalisation in British English) is the process of transforming privately owned assets into public assets by bringing them under the public ownership of a national government or state. Nationalization contrasts with p ...
of land, believing that land's productivity would always increase and that rents from that land would be sufficient to support the nation without taxes. He also asserted that all other taxes (i.e. on goods, labor, capital) eventually realize effects exactly identical to a
consumption tax A consumption tax is a tax levied on consumption spending on goods and services. The tax base of such a tax is the money spent on Consumption (economics), consumption. Consumption taxes are usually indirect, such as a sales tax or a value-added ta ...
, so they can hurt the economy (unlike a land tax). Another of Walras's influences was Augustin Cournot, a former schoolmate of his father. Through Cournot, Walras came under the influence of
rationalism In philosophy, rationalism is the Epistemology, epistemological view that "regards reason as the chief source and test of knowledge" or "the position that reason has precedence over other ways of acquiring knowledge", often in contrast to ot ...
and was introduced to the use of mathematics in economics. He later motivated his use of mathematics with the analogy that the pure theory of economics is “a physico-mathematical science like mechanics” and argued that the way economics proceeds is rigorously identical to the one of
rational Rationality is the quality of being guided by or based on reason. In this regard, a person acts rationally if they have a good reason for what they do, or a belief is rational if it is based on strong evidence. This quality can apply to an ...
and
celestial mechanics Celestial mechanics is the branch of astronomy that deals with the motions of objects in outer space. Historically, celestial mechanics applies principles of physics (classical mechanics) to astronomical objects, such as stars and planets, to ...
. As Professor of
Political Economy Political or comparative economy is a branch of political science and economics studying economic systems (e.g. Marketplace, markets and national economies) and their governance by political systems (e.g. law, institutions, and government). Wi ...
at the
University of Lausanne The University of Lausanne (UNIL; ) in Lausanne, Switzerland, was founded in 1537 as a school of Protestant theology, before being made a university in 1890. The university is the second-oldest in Switzerland, and one of the oldest universities ...
, Walras is credited with founding the
Lausanne school The Lausanne School of economics, sometimes referred to as the Mathematical School, refers to the neoclassical economics school of thought surrounding Léon Walras and Vilfredo Pareto. It is named after the University of Lausanne, at which both W ...
of economics, along with his successor
Vilfredo Pareto Vilfredo Federico Damaso Pareto (; ; born Wilfried Fritz Pareto; 15 July 1848 – 19 August 1923) was an Italian polymath, whose areas of interest included sociology, civil engineering, economics, political science, and philosophy. He made severa ...
. Because most of Walras's publications were only available in French, many economists were unfamiliar with his work. This changed in 1954 with the publication of William Jaffé's English translation of Walras's ''Éléments d'économie politique pure''. Walras's work was also too mathematically complex for many contemporary readers of his time. On the other hand, it has a great insight into the market process under idealized conditions so it has been far more read in the modern era. Although Walras came to be regarded as one of the three leaders of the
marginalist Marginalism is a theory of economics that attempts to explain the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason why the price of diamonds is higher than that of wa ...
revolution, he was not familiar with the two other leading figures of marginalism,
William Stanley Jevons William Stanley Jevons (; 1 September 1835 – 13 August 1882) was an English economist and logician. Irving Fisher described Jevons's book ''A General Mathematical Theory of Political Economy'' (1862) as the start of the mathematical method i ...
and Carl Menger, and developed his theories independently. ''Elements'' has Walras disagreeing with Jevons on the applicability, while the findings adopted by Carl Menger, he says, are completely in alignment with the ideas present in the book (even though expressed non-mathematically).


Main ideas


Walras's law

Walras's law implies that the sum of the values of excess demands across all markets must equal zero, whether or not the economy is in a general equilibrium. This implies that if positive excess demand exists in one market, negative excess demand must exist in some other market. Thus, if all markets but one are in equilibrium, then that last market must also be in equilibrium.


General equilibrium theory

In 1874 and 1877 Walras published the work that led him to be considered the father of the
general equilibrium theory In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an ov ...
, ''Éléments d'économie politique pure'' next section for bibliographical details">Léon_Walras#Major_works.html" ;"title="ee Léon Walras#Major works">next section for bibliographical details His main goal was to solve a problem presented by A. A. Cournot: Does a general equilibrium exist? Though it had been demonstrated that prices would equate supply and demand to Market clearing, clear individual markets ("partial equilibrium"), it was unclear that an equilibrium existed for all markets simultaneously ("general equilibrium"). While teaching at the Lausanne Academy, Walras began constructing a mathematical model that assumes a "regime of perfectly free competition", in which productive factors, products, and prices automatically adjust in equilibrium. Walras began with the theory of exchange in 1873 and proceeded to map out his theories of production, capitalization and money in his first edition. His theory of exchange began with an expansion of Cournot's demand curve to include more than two commodities, also realizing the value of the quantity sold must equal the quantity purchased thus the ratio of prices must be equal to the inverse ratio of quantities. Walras then drew a supply curve from the demand curve and set equilibrium prices at the intersection. His model could now determine prices of commodities but only the relative price. In order to deduce the absolute price, Walras could choose one price to serve as the '' numeraire'', such that all other prices are measured in units of this commodity. Using the numeraire, he determined that
marginal utility Marginal utility, in mainstream economics, describes the change in ''utility'' (pleasure or satisfaction resulting from the consumption) of one unit of a good or service. Marginal utility can be positive, negative, or zero. Negative marginal utilit ...
'rareté''divided by the price must be equal for all commodities. Then he argued that, because each individual consumer consumes as much value as the value of that individual's stock of goods, the value of total sales equals the value of total purchase. That is, Walras's law holds. Walras then expanded the theory to include production with the assumption of an existence of fixed coefficients in said production making possible a generalization that the marginal productivity of the factors of production varied with the amount of input, making factor substitution possible. Walras constructed his basic theory of general equilibrium by beginning with simple equations and then increasing the complexity in the next equations. He began with a two-person bartering system, then moved on to the derivation of downward-sloping consumer demands. Next he moved on to exchanges involving multiple parties, and finally ended with credit and money. Walras wrote down four sets of equations: * the quantity of goods demanded; * relating the prices of goods to their costs of production; * the quantities of inputs supplied; * the quantities of inputs demanded. There are four sets of variables to solve for: * the price of each good; * the quantity of each good sold; * the price of each factor of production; * the quantity of each of those factor bought by businesses. To simplify matters, Walras added one further equation (the Walras's law equation), requiring that all the money received must be spent, one way or the other. By Walras's law, any particular market must be in equilibrium if all other markets in an economy are also in equilibrium, because the excess market demands sum to zero. Thus, in an economy with n markets, it is sufficient to solve n-1 simultaneous equations for market clearing. Taking one good as the numéraire in terms of which prices are specified, the economy has n-1 unknown prices that can be determined by the n-1 simultaneous equations, he thus concluded that the general equilibrium exists.Pressman, Steven. ''Fifty Major Economists''. "Léon Walras (1834-1910)." 2nd ed., Routledge, 2006. Though this argument works when all equations are linear, it does not hold when the equations are nonlinear. It is easy to construct a pairs of equations in two variables with no solutions. A more rigorous version of the argument was developed independently by
Lionel McKenzie Lionel Wilfred McKenzie (January 26, 1919 – October 12, 2010) was an American economist. He was the Wilson Professor Emeritus of Economics at the University of Rochester. He was born in Montezuma, Georgia. He completed undergraduate studies at ...
and the pair
Kenneth Arrow Kenneth Joseph Arrow (August 23, 1921 – February 21, 2017) was an American economist, mathematician and political theorist. He received the John Bates Clark Medal in 1957, and the Nobel Memorial Prize in Economic Sciences in 1972, along with ...
and
Gérard Debreu Gérard Debreu (; 4 July 1921 – 31 December 2004) was a French-born economist and mathematician. Best known as a professor of economics at the University of California, Berkeley, where he began work in 1962, he won the 1983 Nobel Memorial Prize ...
in the 1950s.


Walrasian auction

The
Walrasian auction A Walrasian auction, introduced by Léon Walras, is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across ...
is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across all agents equals the total amount of the good. Thus, a Walrasian auction perfectly matches the supply and the demand. Walras suggests that equilibrium will be achieved through a process of ''tâtonnement'' (French for "trial and error"), a form of incremental hill climbing.


Economic value definition of utility

Léon Walras provides a definition of economic utility based on economic value as opposed to an ethical theory of value:
I state that things are useful as soon as they may serve whatever usage, as soon as they match whatever need and allow its fulfillment. Thus, there is here no point to deal with 'nuances' by way of which one classes, in the language of everyday conversation, utility beside what is pleasant and between the necessary and the superfluous. Necessary, useful, pleasant and superfluous, all of this is, for us, more or less useful. There is here as well no need to take into account the morality or immorality of the need that the useful things matches and permits to fulfill. Whether a substance is searched for by a doctor to heal an ill person, or by an assassin to poison his family, this is an important question from other points of view, albeit totally indifferent from ours. The substance is useful, for us, in both cases, and may well be more useful in the second case than in the first one.
In economic theories of value, the term "value" is unrelated to any notions of value used in ethics, they are homonyms.


Legacy

In 1941
George Stigler George Joseph Stigler (; January 17, 1911 – December 1, 1991) was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Early life and e ...
wrote about Walras: What caused the re-appraisal of Walras's consideration in the US, was the influx of German-speaking scientists – the German version of his ''Théorie Mathématique de la Richesse Sociale'' was published in 1881. According to
Schumpeter Joseph Alois Schumpeter (; February 8, 1883 – January 8, 1950) was an Austrian political economy, political economist. He served briefly as Ministry of Finance (Austria), Finance Minister of Austria in 1919. In 1932, he emigrated to the Unit ...
:


Major works


''Éléments d'Économie Politique Pure''

The ''Éléments'' of 1874/1877 are the work by which Léon Walras is best known. The full title is * Éléments d'Économie Politique Pure, ou Théorie de la richesse sociale. The
half title The half-title or bastard title is a page carrying nothing but the title of a book—as opposed to the title page The title page of a book, thesis or other written work is the page at or near the front which displays its title (publishing), ti ...
page uses only the title ('Éléments d'Économie Politique Pure') whereas inside the body (e.g. p. 1 and the contents page) the subtitle ('Théorie de la richesse sociale') is used as if it were the title.


Plan of work

The work was issued in two instalments (''fascicules'') in separate years. It was intended as the first of three parts of a systematic treatise as follows: * 1re partie:– Éléments d'Économie Politique Pure, ou Théorie de la richesse sociale. ** Section I. Objet et divisions de l'économie politique et sociale. ** Section II. Théorie mathématique de l'échange. ** Section III. Du numéraire et de la monnaie. ** Section IV. Théorie naturelle de la production et de la consommation de la richesse. ** Section V. Conditions et conséquences du progrès économique. ** Section VI. Effets naturels et nécessaires des divers modes d'organisation économique de la société. * 2e partie:– Éléments d'Économie Politique Appliquée, ou Théorie de la production agricole, industrielle et commerciale de la richesse. * 3e partie:– Éléments d'Économie Sociale, ou Théorie de la répartition de la richesse par la propriété et l'impôt. Works with titles echoing those proposed for Parts II and III were published in 1898 and 1896. They are included in the list of other works below.


Editions

* ''First'' (1874/1877). Most readily available. Described by Walker and van Daal as a 'brilliant expression of pure originality, containing many theoretical innovations' which 'needed alteration and development in a variety of important respects'. * ''Second'' (1889). Revised, corrected and enlarged. * ''Third'' (1896). A minor revision with new appendices. This is considered the best edition by Walker and van Daal. * ''Fourth'' (1900). Revised and extended. According to Walker and van Daal, 'these changes resulted in an incomplete, internally contradictory, and occasionally incoherent text'. * ''Fifth'' (1926). Posthumous; published by his daughter Aline. 'Édition définitive, revue et augmentée'. Follows the fourth.


Derived work

The 'Théorie Mathématique de la Richesse Sociale' included in the list of other works (below) is described by the National Library of Australia as 'a series of lectures and articles that together summarize the mathematical elements of the author's ''Élements'' '.Catalogue record at https://catalogue.nla.gov.au/Record/2018624.


English Translations

* William Jaffé (1954) of the ''fifth'' edition as ''Elements of Pure Economics''. * Donald A. Walker and Jan van Daal (2014) of the ''third'' edition as ''Elements of Theoretical Economics''. Walker and van Daal describe Jaffé's translation of the word ''crieur'' as 'a momentous error that has misled generations of readers'.


Online and facsimile editions

* Online: * Facsimile: cheap photographic reprints are produced by . Both of these are made from the ''first'' edition and are defective in respect of illustrations. The original figures were included as folding plates (presumably at the end of each ''fascicule''). The online edition contains only Figs. 3, 4, 10, and 12 whereas the facsimile contains only Figs. 5 and 6.


Other works

* ''Francis Saveur'', 1858. * "De la propriété intellectuelle", 1859, ''Journal des économistes''. * * "Paradoxes économiques I", 1860, ''Journal des économistes''. * "Théorie critique de l'impôt", 1861. * ''De l'impôt dans le Canton de Vaud'', 1861. * * "La bourse et le crédit", 1867, ''Paris Guide''. * * "Correspondance entre M. Jevons, professeur a Manchester, et M. Walras, professeur a Lausanne", 1874, ''Journal des économistes''. * * "Un nuovo ramo della matematica. Dell' applicazione delle matematiche all' economia politica", 1876, ''Giornale degli economisti''. * ''Théorie mathématique de la richesse sociale'', 1883. * "Notice autobiographique de Léon Walras", 1893. * ''Études d'économie sociale; Théorie de la répartition de la richesse sociale'', 1896. * ''Études d'économie politique appliquée; Théorie de la production de la richesse sociale'', 1898. * "Théorie du crédit", 1898, ''Revue d'économie politique''. * "Sur les équations de la circulation", 1899, ''Giornale degli economisti'' * "Cournot et l'Économique Mathématique", 1905, ''Gazette de Lausanne''. * "La Paix par la Justice Sociale et le Libre Échange", 1907, ''Questions Pratiques de Legislation Ouvrière''. * ''L'état et le chemin de fer'' (1875). * "Leone Walras, Autobiografia", 1908, ''Giornale degli Economist''i. * "Un initiateur en économie politique, A.A. Walras", 1908, ''La Revue du Mois''. * "Économique et méchanique", 1909, ''Bulletin de la Société Vaudoise de Sciences Naturelles'' * ''Correspondence of Léon Walras and related papers'' (ed. by William Jaffé, 3 vols.), 1965.


See also

* Leon Walras at Wikipedia France * Walras's law *
Walrasian auction A Walrasian auction, introduced by Léon Walras, is a type of simultaneous auction where each agent calculates its demand for the good at every possible price and submits this to an auctioneer. The price is then set so that the total demand across ...
*
General equilibrium In economics, general equilibrium theory attempts to explain the behavior of supply, demand, and prices in a whole economy with several or many interacting markets, by seeking to prove that the interaction of demand and supply will result in an ov ...
*
Cost the limit of price "Cost the limit of price" was a maxim coined by Josiah Warren, indicating a (prescriptive) version of the labor theory of value. Warren maintained that the just compensation for labor (or for its product) could only be an equivalent amount of ...
*
Progressive theory of capital The progressive theory of capital is an economic theory posited by Léon Walras in 1874 in part 5 of his book ''Elements of Pure Economics''. See also * Capital (economics) * Capital goods * Capital services * Capital stocks * Walras-Cassel System ...


Note


References


Further reading

* Jaffé, William, and Donald A. Walker (ed.) (1983). ''Essays on Walras''. Cambridge University Press. * Morishima, Michio (1977). ''Walras' economics : a pure theory of capital and money''. Cambridge University Press. * Medema S.G. & Samuels W.J. (2003). "The history of economic thought: a reader" Routledge, London and New York.


External links


Biography and major works
* * {{DEFAULTSORT:Walras, Leon Mines Paris - PSL alumni 1834 births 1910 deaths People from Évreux General equilibrium theorists 19th-century French economists 20th-century French economists Academic staff of the University of Lausanne Georgist economists Neoclassical economists Socialist economists