Walras’s Market Models describes and evaluates Léon Walras’ models of competitive markets. Through identification of his career phases and the associated general equilibrium models, which are shown to be very different in character, this book differs from previous examinations of his work.
This is a new book and not simply a collection of essays. Although based on some essays, it differs from them in various ways. I have changed all of them to some degree, and I have extensively rewritten many of them so as to present the material as effectively as possible and to reflect the limited number of ways in which my views have changed since the essays were written.
Moreover, I have devised titles of parts, sections, and chapters that are intended to guide the reader through the complexities of the subject matter, and I have organized the material in a way that displays clearly the phases and sequence of Leon Walras’s modeling of markets.
In most cases, the chapters have titles that differ from those of the essays. I have eliminated most of the repetitions that are to be found in the essays, but I found that preserving some of the repetitions is desirable.
In a general way, the book accomplishes three major tasks. First, by emphasizing the concept of models in relation to Walras’s work, it becomes possible to identify many of his constructions that have until now been passed over as comments on the real economy or as brief speculations about economic relationships, or that have escaped notice altogether.
The word “model” rather than “theory” will ordinarily be used in reference to Walras’s work because in many instances he defined special situations not found in reality and created a variety of different hypothetical constructions relating to the same general subject matter. Second, the book reveals in broad outlines and great detail that Walras had a mature phase of theoretical activity followed by a phase of decline of his analytical powers.
Recognition of this circumstance is enormously liberating and energizing for the historian of Walrasian economic thought. Everything falls into place. It becomes clear that Walras put the models of his mature phase and the models of his last phase, despite their incompatibility, into the same edition of the Elements d’ economie politique pure.
It then becomes clear, for example, why it has been possible to have such divergent interpretations of his work on tatonnement, and how scrutiny of one and the same text – the 1926 edition of the Elements d’ economie politique pure – can lead one scholar to argue that Walras was interested in the dynamics of market processes and another to argue that he was exclusively interested in statics.
The reader will see that students of Walras’s work have been laboring in the dark because they have tried to understand it on the basis of their scrutiny of the fourth and fifth editions of his Elements d’economie politique pure. They have not been furnished with the information that would enable them to have a true understanding of what is on the page in front of them.
The plight of readers of William Jaffe’s translation of the fifth edition is even worse, because in addition to presenting the admixture of conflicting models, it does not correctly convey Walras’s meaning in a number of respects that are crucially important for an understanding of his entire body of work.
Third, Walras’s Market Models analyzes and evaluates Walras’s models. There is no point in studying the history of economic thought, except as an antiquarian pursuit, unless lessons can be learned from it. That entails revealing its structure and implications, knowing whether or not it is nonsense, showing its insights and suggestive ideas – in short, indicating why some of it is worth studying and why some of it does not merit much attention.
Accordingly, Walras’s Market Models reveals the character of the models that Walras constructed during his mature phase, showing that he made his finest contributions during that phase and that he produced inferior work during his last phase. Unfortunately, the latter was used as the basis of modern general-equilibrium theory.
Scholars have unwittingly filled in some of the blanks in Walras’s last comprehensive model, have supposed that his equations make sense in relation to it, and have imputed their own beliefs about the workings of competitive markets to it.
For example, Walras’s written pledges model was regarded by Oskar Lange, Don Patinkin, Michio Morishima, and other writers as being the true expression of Walras’s thought on tatonnement, so they neglected his earlier writings.
Jaffe represented them only as constructions that Walras discarded on the way to the definitive formulation that Jaffe considered the written pledges model to be, or believed that those earlier writings should be interpreted as having the same intent as the written pledges model but as being imperfect expressions of its characteristics.
An appreciation of the fact that Walras had a mature phase of theoretical activity followed by a phase of decline provides a corrective to that situation. The student of his work is able to approach the material that he introduced in his last phase without the supposition that it presents his best thoughts.
Part I. The models of the mature phase
- Background and preliminaries
- The mature comprehensive model
Part II. The models of the phase of decline
- The written pledges models
- Other models and conclusion