Léon Walras
Encyclopedia
Marie-Esprit-Léon Walras (December 16, 1834 in Évreux
, Eure
– January 5, 1910 in Clarens, near Montreux
, Switzerland
) was a French mathematical economist
associated with the creation of the general equilibrium
theory.
. His father was a school administrator and 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 Paris School of Mines, but grew tired of engineering. He also tried careers as a bank manager, journalist, romantic novelist and a clerk at a railway company before turning to economics.
Walras also inherited his father's interest in social reform. Much like the Fabians, Walras called for the nationalization
of land, believing that land’s value would always increase and that rents from that land would be sufficient to support the nation without taxes.
Another of Walras’ influences was Augustin Cournot, a former schoolmate of his father. Through Cournot, Walras came under the influence of French
Rationalism
and was introduced to the use of mathematics in economics.
Professor of Political Economy
at the University of Lausanne
, Switzerland
, Walras is credited for having founded what subsequently became known, under direction of his Italian disciple, the economist and sociologist Vilfredo Pareto
, as the Lausanne school
of economics.
Because for a long time most of Walras' publications were only available in French, only a relatively small section of the economics profession really became familiar with his work. This changed in the 1950s, largely due to the work of William Jaffé, the translator of Walras' main works, and the editor of his Complete Correspondence (1965).
revolution,
he was not familiar with the two other leading figures of marginalism, William Stanley Jevons
and Carl Menger
, and developed his theories independently.
individual markets, it was unclear that an equilibrium existed for all markets simultaneously.
Walras created a system of simultaneous equations
in an attempt to solve Cournot’s problem "(which supposedly Walras at first thought was complete merely because the number of equations equalled the number of unknowns)"
The crucial step in the argument was Walras' Law
which states that considering any particular market, if all other markets in an economy are in equilibrium, then that specific market must also be in equilibrium. Walras’ Law hinges on the mathematical notion that excess market demands (or, inversely, excess market supplies) must sum to zero. This means that, in an economy with n markets, it is sufficient to solve n-1 simultaneous equations for market clearing. Taking one good as the numeraire
in terms of which prices are specified, the economy has n-1 prices that can be determined by the equation, so an equilibrium should exist. A more rigorous version of the argument was developed by Kenneth Arrow
and Gerard Debreu
in the 1950s.
wrote about Walras: There is no general history of economic thought in English which devotes more than passing reference to his work. … This sort of empty fame in English-speaking countries is of course attributable in large part to Walras’ use of his mother tongue, French, and his depressing array of mathematical formulas. What ever caused the u-turn of Walras’ consideration in the US, the influx of German-speaking scientists – the German version of the Éléments is of 1881 – after Hitler’s rule was the initial start. To Schumpeter: Walras is … greatest of all economists. His system of economic equilibrium, uniting, as it does, the quality of ‘revolutionary” creativeness with the quality of classic synthesis, is the only work by an economist that will stand comparison with the achievements of theoretical physics.
Évreux
Évreux is a commune in the Eure department, of which it is the capital, in Haute Normandie in northern France.-History:In late Antiquity, the town, attested in the fourth century CE, was named Mediolanum Aulercorum, "the central town of the Aulerci", the Gallic tribe then inhabiting the area...
, Eure
Eure
Eure is a department in the north of France named after the river Eure.- History :Eure is one of the original 83 departments created during the French Revolution on 4 March 1790...
– January 5, 1910 in Clarens, near Montreux
Montreux
Montreux is a municipality in the district of Riviera-Pays-d'Enhaut in the canton of Vaud in Switzerland.It is located on Lake Geneva at the foot of the Alps and has a population, , of and nearly 90,000 in the agglomeration.- History :...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
) was a French mathematical economist
Mathematical economics
Mathematical economics is the application of mathematical methods to represent economic theories and analyze problems posed in economics. It allows formulation and derivation of key relationships in a theory with clarity, generality, rigor, and simplicity...
associated with the creation of the general equilibrium
General equilibrium
General equilibrium theory is a branch of theoretical economics. It seeks to explain the behavior of supply, demand and prices in a whole economy with several or many interacting markets, by seeking to prove that a set of prices exists that will result in an overall equilibrium, hence general...
theory.
Life and career
Walras was the son of French economist Auguste WalrasAuguste Walras
Auguste Walras 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....
. His father was a school administrator and 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 Paris School of Mines, but grew tired of engineering. He also tried careers as a bank manager, journalist, romantic novelist and a clerk at a railway company before turning to economics.
Walras also inherited his father's interest in social reform. Much like the Fabians, Walras called for the nationalization
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of land, believing that land’s value would always increase and that rents from that land would be sufficient to support the nation without taxes.
Another of Walras’ influences was Augustin Cournot, a former schoolmate of his father. Through Cournot, Walras came under the influence of French
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
Rationalism
Rationalism
In epistemology and in its modern sense, rationalism is "any view appealing to reason as a source of knowledge or justification" . In more technical terms, it is a method or a theory "in which the criterion of the truth is not sensory but intellectual and deductive"...
and was introduced to the use of mathematics in economics.
Professor of Political Economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
at the University of Lausanne
University of Lausanne
The University of Lausanne in Lausanne, Switzerland was founded in 1537 as a school of theology, before being made a university in 1890. Today about 12,000 students and 2200 researchers study and work at the university...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, Walras is credited for having founded what subsequently became known, under direction of his Italian disciple, the economist and sociologist Vilfredo Pareto
Vilfredo Pareto
Vilfredo Federico Damaso Pareto , born Wilfried Fritz Pareto, was an Italian engineer, sociologist, economist, political scientist and philosopher. He made several important contributions to economics, particularly in the study of income distribution and in the analysis of individuals' choices....
, as the Lausanne school
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. The central feature of the Lausanne School was its development of general equilibrium theory...
of economics.
Because for a long time most of Walras' publications were only available in French, only a relatively small section of the economics profession really became familiar with his work. This changed in the 1950s, largely due to the work of William Jaffé, the translator of Walras' main works, and the editor of his Complete Correspondence (1965).
Marginalist theory
Although Walras came to be regarded as one of the three leaders of the marginalistMarginalism
Marginalism refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity...
revolution,
he was not familiar with the two other leading figures of marginalism, William Stanley Jevons
William Stanley Jevons
William Stanley Jevons was a British economist and logician.Irving Fisher described his book The Theory of Political Economy as beginning the mathematical method in economics. It made the case that economics as a science concerned with quantities is necessarily mathematical...
and Carl Menger
Carl Menger
Carl Menger was the founder of the Austrian School of economics, famous for contributing to the development of the theory of marginal utility, which contested the cost-of-production theories of value, developed by the classical economists such as Adam Smith and David Ricardo.- Biography :Menger...
, and developed his theories independently.
General equilibrium theory
In 1874 and 1877 Walras published Elements of Pure Economics, a work that led him to be considered the father of the general equilibrium theory. The problem that Walras set out to solve was one presented by Cournot, that even though it could be demonstrated that prices would equate supply and demand to clearMarket clearing
In economics, market clearing refers to either# a simplifying assumption made by the new classical school that markets always go to where the quantity supplied equals the quantity demanded; or# the process of getting there via price adjustment....
individual markets, it was unclear that an equilibrium existed for all markets simultaneously.
Walras created a system of simultaneous equations
Simultaneous equations
In mathematics, simultaneous equations are a set of equations containing multiple variables. This set is often referred to as a system of equations. A solution to a system of equations is a particular specification of the values of all variables that simultaneously satisfies all of the equations...
in an attempt to solve Cournot’s problem "(which supposedly Walras at first thought was complete merely because the number of equations equalled the number of unknowns)"
The crucial step in the argument was Walras' Law
Walras' law
Walras’ Law is a principle in general equilibrium theory asserting that when considering any particular market, if all other markets in an economy are in equilibrium, then that specific market must also be in equilibrium. Walras’ Law hinges on the mathematical notion that excess market demands ...
which states that considering any particular market, if all other markets in an economy are in equilibrium, then that specific market must also be in equilibrium. Walras’ Law hinges on the mathematical notion that excess market demands (or, inversely, excess market supplies) must sum to zero. This means that, in an economy with n markets, it is sufficient to solve n-1 simultaneous equations for market clearing. Taking one good as the numeraire
Numéraire
Numéraire is a basic standard by which values are measured. Acting as the numéraire is one of the functions of money, to serve as a unit of account: to measure the worth of different goods and services relative to one another, i.e. in same units...
in terms of which prices are specified, the economy has n-1 prices that can be determined by the equation, so an equilibrium should exist. A more rigorous version of the argument was developed by Kenneth Arrow
Kenneth Arrow
Kenneth Joseph Arrow is an American economist and joint winner of the Nobel Memorial Prize in Economics with John Hicks in 1972. To date, he is the youngest person to have received this award, at 51....
and Gerard Debreu
Gerard Debreu
Gérard Debreu was a French economist and mathematician, who also came to have United States citizenship. 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 Economics.-Biography:His father was the...
in the 1950s.
Reception
In 1941 George StiglerGeorge Stigler
George Joseph Stigler was a U.S. economist. He won the Nobel Memorial Prize in Economic Sciences in 1982, and was a key leader of the Chicago School of Economics, along with his close friend Milton Friedman....
wrote about Walras: There is no general history of economic thought in English which devotes more than passing reference to his work. … This sort of empty fame in English-speaking countries is of course attributable in large part to Walras’ use of his mother tongue, French, and his depressing array of mathematical formulas. What ever caused the u-turn of Walras’ consideration in the US, the influx of German-speaking scientists – the German version of the Éléments is of 1881 – after Hitler’s rule was the initial start. To Schumpeter: Walras is … greatest of all economists. His system of economic equilibrium, uniting, as it does, the quality of ‘revolutionary” creativeness with the quality of classic synthesis, is the only work by an economist that will stand comparison with the achievements of theoretical physics.
See also
- Walras' LawWalras' lawWalras’ Law is a principle in general equilibrium theory asserting that when considering any particular market, if all other markets in an economy are in equilibrium, then that specific market must also be in equilibrium. Walras’ Law hinges on the mathematical notion that excess market demands ...
- Walras' AuctionWalrasian auctionA Walrasian auction, introduced by Leon 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 all agents equals the total amount of the good...
- General equilibriumGeneral equilibriumGeneral equilibrium theory is a branch of theoretical economics. It seeks to explain the behavior of supply, demand and prices in a whole economy with several or many interacting markets, by seeking to prove that a set of prices exists that will result in an overall equilibrium, hence general...
- Cost the limit of priceCost the limit of priceCost the limit of price was a maxim coined by Josiah Warren, indicating a version of the labor theory of value. Warren maintained that the just compensation for labor could only be an equivalent amount of labor . Thus, profit, rent, and interest were considered unjust economic arrangements...
- Progressive theory of capitalProgressive theory of capitalThe 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 * Capital goods* Capital services* Capital stocks* Walras-Cassel System...
Major Works of Léon Walras
- Francis Saveur, 1858.
- "De la propriété intellectuelle", 1859, Journal des économistes.
- L'économie politique et la justice; Examen critique et réfutation des doctrines économiques de M. P.J. Proudhon précédes d'une introduction à l'étude de la question sociale, 1860.
- "Paradoxes économiques I", 1860, Journal des économistes.
- "Théorie critique de l'impôt", 1861.
- De l'impôt dans le Canton de Vaud, 1861.
- Les associations populaires de consommation, de production et de crédit, 1865.
- "La bourse et le crédit", 1867, Paris Guide.
- Recherche de l'idéal social, 1868.
- "Principe d'une théorie mathématique de l'échange", 1874, Journal des économistes.
- Éléments d'économie politique pure, ou théorie de la richesse sociale (Elements of Pure Economics, or the theory of social wealth, transl. W. Jaffé), 1874. (1899, 4th ed.; 1926, rev ed., 1954, Engl. transl.)
- "
- "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.
- "Leone Walras, Autobiografia", 1908, Giornale degli Economisti.
- "Un initiateur en économie politique, A.A. Walras", 1908, La Revue du Mois.
- "Économique et méchanique", 1909, Bulletin de la Societe Vaudoise de Sciences Naturelles
- Correspondence of Léon Walras and related papers(ed. by William Jaffé, 3 vols.), 1965.