- ISBN-10:
- 0521394082
- ISBN-13:
- 9780521394086
- Pub. Date:
- 07/21/2011
- Publisher:
- Cambridge University Press
- ISBN-10:
- 0521394082
- ISBN-13:
- 9780521394086
- Pub. Date:
- 07/21/2011
- Publisher:
- Cambridge University Press
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Product Details
| ISBN-13: | 9780521394086 |
|---|---|
| Publisher: | Cambridge University Press |
| Publication date: | 07/21/2011 |
| Pages: | 368 |
| Product dimensions: | 6.00(w) x 8.90(h) x 0.80(d) |
About the Author
Donald A. Walker is University Professor and Professor of Economics Emeritus at Indiana University of Pennsylvania. He is the author of Walras's Market Models (Cambridge University Press, 1996), Advances in General Equilibrium Theory (1997), and many articles and reviews in professional journals, chapters in collections, and entries in handbooks and encyclopedias. Professor walker is the editor of William Jaffe's Essay's on Walras (Cambridge University Press, 1983), Money and Markets: Essays by Robert W. Clower (Cmabridge University Press, 1984), Equilibrium (3 vols., 2000), The Legacy of Leon Walras (2 vols., 2001), and, with J.-P. Potier, of La Correspondance entre Aline Walras et William Jaffe (2004), among other works. He was President of the History of Economics Society in 1987–1988, Editor of the Journal of the History of Economic Thoughts from 1989–1999, and the first President of the International Walras Society, 1997–2000.
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Cambridge University Press
0521858550 - Walrasian Economics - The Creation of Modern Cell Biology - by Donald A. Walker
Excerpt
Introduction
An overview of the objectives of the book
This book is about Walrasian economics, meaning the economics of Léon Walras and the economics in which other scholars have used his ideas. It has two general objectives. One is to present an accurate account of the foundations and basic components of Walras's models of general economic equilibration and equilibrium.1 The other is to trace the influence of that legacy on his contemporaries and successors. It will be understood that when reference is made in this book to his "legacy," the word is used to mean his legacy of economic theorizing, not of his normative ideas.
In treating the subject, I have made an effort to reach an audience wider than general equilibrium specialists. I have therefore explained some theoretical propositions that are elementary knowledge to general equilibrium specialists but not to some students and not to some economists who concentrate on other fields of research. The book is as self-contained as is possible with subject matters that are infinitely extendable in various detailed respects. Virtually all the material in this book is new research, undertaken specifically for it, but treatments in greater depth of a few of the topics, notably a few of the topics taken up in Chapters 5 and 6, are given in Walker 1996.
Léon Walras and his economics
A biographical sketch
Walras's biography is an oft-told tale,2 so here will be given only a brief sketch of his life. He was, of course, the founder of the modern theory of general economic equilibrium. He was born on December 16, 1834, in Evreux, France, and christened Marie Esprit Léon. He had an excellent education during the period 1844 to 1854, covering such subjects as logic, philosophy, ethics, history, physical sciences, chemistry, mechanics, elementary mathematics, geometry, and calculus (Dockès and Potier 2001, pp. 14-16). After his lycée education, however, he failed the entrance examinations for the Ecole Polytechnique, and did not have high enough grades to be retained in the program at the Ecole impériale des Mines. Responding to his predominant interests at that time, he abandoned the plan of becoming an engineer in 1856. He began the pursuit of a literary career and, in fact, published a novel (2, 1858) and a short story (7, 1859). In 1859, however, he began the fulfillment of a promise to his father, Auguste Walras, to give up his literary pursuits in order to devote himself to the study of social science.
Of course, Walras had to earn a living for himself and his family, so during the years 1860 to 1870 he worked first as a journalist, then worked in a bank and a railroad office, became managing director of a cooperative association bank, and worked for another bank. During this time he undertook economic research. That was a subject to which he devoted himself for many years, so it is not surprising that the degree of his technical sophistication and the character and quality of his theoretical work changed. His first phase of intellectual activity in regard to economic theory, beginning in 1859 and continuing until 1872, consisted largely of journalistic applications of his knowledge of existing theory and was experimental in regard to his original ideas.3 Walras's participation in a conference on taxation in Lausanne in 1860 (27, 1861) and his publication of a book on property and justice in that year (15, 1860) - one that mainly set forth the ideas of his father - are examples of his interest in economic topics. Among those ideas was the argument that the state should own all land because land is not produced as the result of the activity of any economic agent and because its value is given to it by the growth of population and of the economy. Walras also wrote many analyses of then-current economic problems, notably contributing articles to the journals La Presse, L'Indépendant de la Moselle, Journal des Economistes, and Le Travail, and giving and publishing public lectures on his ideas about an ideal society. Those writings can be seen to be his early efforts to adopt an analytical approach to the study of practical economic issues, an approach that he refined in later years.
Moreover, at the start and again toward the end of that period, Walras began to use mathematics in the construction of rudimentary models dealing with exchange (16, 1860; 91, 1869; 95, 1871). He relates in his autobibliography: "The idea of creating mathematical economics, that I had announced in my letter offering my services to the Council of State of Vaud, never ceased to occupy my mind after 1860" (239, 1893, 1, p. 5). He did not, however, have an adequate foundation in mathematics and lacked some of the concepts that he needed to establish the foundations of a theory of supply and demand and of the interrelationships of markets. Nothing that he wrote during that phase of his career can be considered a valuable contribution to economic theory.
Walras's 1860 paper on taxation drew him to the attention of Louis Ruchonnet, a Swiss statesman. Ten years later, Ruchonnet recommended successfully that Walras be offered an appointment, despite his lack of formal credentials in economics, at the Académie (subsequently Université) de Lausanne. Walras began his duties there as a professor without tenure in 1870, and the next year his appointment became permanent. His subsequent attempts to obtain a position in a French university were rebuffed - for, after all, he still lacked the necessary educational credentials and, moreover, he was an exponent of mathematical economics, which was regarded unfavorably by the academic establishment. He therefore remained at Lausanne for his entire academic career. He retired in 1892, and died on January 5, 1910, in Clarens, Switzerland.
Influences on Walras
It should be recalled when reading the cursory statements here about links between Walras's ideas and those of his predecessors that this book is concerned with his theories and his influence on other economists and not with the influence of other scholars upon him. Nevertheless, it is interesting to note briefly his intellectual predecessors and contributions of theirs that helped him in conceiving and constructing his general equilibrium model. Although the ideas of a number of scholars were important in preparing him for that achievement, Walras declared ungenerously that "the only two men who produced previous works which have aided me are...A.-A. Walras, my father, and Mr. Cournot" (239, 1874, 1, p. 397). It is quite true that his father influenced a number of Léon's philosophical and economic ideas. Auguste was a secondary school administrator whose writings on economics, whose library of books on the topic, and whose belief that economics could be transformed into a mathematical discipline were all important in the formation of Walras's thought. Auguste had tried to make some progress on the question of the determination of prices, and bequeathed that problem to his son, along with an interest in utility and scarcity as elements that should be used in its solution. Auguste provided a number of concepts that were given an important place in Léon's economic models, providing him with "points of departure or foundations for the establishment of the general theory [sic] of economic equilibrium" (239, 1903, 3, 217). These included a concept of marginal utility, the distinction between durable goods and those that are used only once, a classification of economic resources, a treatment of productive factors as different kinds of capital that yield services, and an aspect of the concept of a numeraire.
As for Antoine-Augustin Cournot (1810-1877), Walras expressed very early in his career (30, 1863) his debt to that eminent scientist. Admiring as Walras did René Descartes' analytical approach, and regarding mathematical economics as being in the same class of scientific achievements as Descartes' geometry (118, 1876, p. 367), Walras wrote that he was deeply impressed when, in 1853, he found a concrete expression of that approach in Cournot's work (1838). He learned from Cournot that some aspects of economics could in fact be expressed in mathematical terms, specifically with the use of calculus (239, 1874, 1, pp. 366, 398, 421), which pointed him down the route that he should travel to achieve the objective of mathematizing economics. He wrote that he "saw, from that time on, that economics would not be a true science until the day on which the theory of value in exchange would be established...by means of the application of the calculus of functions" (213, 1905, p. 1, column 2). In 1853 he began to study geometry, calculus, and mechanics as they were presented in the works of Descartes, Isaac Newton, and J. L. Lagrange (240, 1893, in 239, 1, p. 2).
In specific regard to the mathematization of economics, Walras credited Cournot with introducing him to the idea that the demand of each individual for any commodity can be mathematically expressed (240, 1893, in 239, 1, p. 5), and to the mathematical theory of monopoly (123, 1877, p. 376; § 376, p. 659; 239, 1877, 1, p. 535). He expressed his indebtedness to Cournot again at the end of his career. Looking back on it, he commented that he wanted to acknowledge that Cournot's application of mathematics to economics "has had, on the direction of my ideas and of my work, a particular influence" (213, 1905, p. 1, columns 1-2).
Despite his acknowledging only the influence of his father and Cournot, and although he had many original thoughts on the functioning and interdependence of all parts of the market system, Walras's ideas benefited from a variety of contributions by other scholars. For example in 1758, François Quesnay had constructed a rudimentary scheme of the relationships that he thought existed between different parts of an economic system. That was suggestive to writers that preceded Walras and perhaps to him also, although he criticized the absence in it of any notion of a theory of prices - that is, of the functioning of markets (123, 1877, pp. 328-29; § 341, pp. 605-6). Jean Baptiste Say, whose writings were frequently mentioned by Walras, emphasized in the early 1800s that the production and consumption sides of markets are interrelated, a relationship that is fundamental in Walras's economic models. Say also developed a theory of the entrepreneur that must have provided a stimulus to Walras's thought, although Walras was critical of certain aspects of Say's theory (Walker 1996, pp. 281-82). Achylle Nicolas Isnard's 1781 treatise (see Jaffé 1969, p. 20, n. 8) probably provided Walras with some ideas, inasmuch as Isnard devised a mathematical model of exchange, used mathematics in his treatment of production and capital, and defined a numeraire in precisely the way that Walras subsequently did (Jaffé 1969; Klotz 1994).
The physicist Louis Poinsot, in his Eléments de statique (1803), developed a model of general equilibrium of the phenomena in a physical system that Walras declared was an important source of inspiration for his theory of general economic equilibrium (239, 1901, 3, p. 148). "I opened the Statique of Poinsot one evening" in 1853, he wrote, "and that theory of equilibrium achieved through the linking and unlinking of forces and of connected elements seemed to me so luminous and so straightforward that I read half of it in one sitting. The next day, I finished off the second half" (ibid.). Poinsot's systems of equations treating the physical universe, Walras wrote, showed him the methods by which he could treat the economic universe. In actuality, he must have been aware that a great many previous scholars had argued that the Newtonian approach to physical science - namely, analyzing the mutual determination of the values of the atomistic variables in a system - should be emulated in the social sciences.
It was certainly true, nevertheless, that Poinsot's method was suggestive to Walras in specific and detailed respects. His aim became the construction of
...a new science: the science of economic forces analogous to the science of astronomical forces. I cite astronomy because it is in fact the type of science like which, sooner or later, the theory of social wealth ought to become. In both there are natural facts, in the sense that they are and remain superior to social conventions and that they impose themselves on the human will; laws equally natural and consequently necessary, some of principal importance, few in number, the others secondary, quite numerous, varied and complex; facts and laws suitable for an extensive and fruitful application of calculus and mathematical formulas. The analogy is complete and striking (239, 1862, 1, pp. 119-20).
Achieving a consensual understanding of Walras's legacy
Past interpretations of specific parts of Walras's legacy: Walras's fertile mind delved into subjects that have remained pertinent, and it did so in suggestive ways that led successive generations of economists to turn to his writings. These later generations interpreted many aspects of his work in the same way, but inasmuch as they had somewhat different knowledge, experiences, interests, theoretical views, and methodological predilections, they arrived at different interpretations and evaluations of some particular aspects of his theories. In fact, some scholars introduced their articles by stating that other scholars have erroneous views on the part of his legacy they were about to examine (see, for example, Burgenmeier 1994, Witteloostuijn and Maks 1988, Walker 1990, Witteloostuijn and Maks 1990, Currie and Steedman 1990, Koppl 1992, Burgenmeier 1994). Many of the ostensible disagreements arise because the authors believe they are discussing the same subject when in reality they actually are focusing upon different ideas presented by Walras under the same name at different phases of his career. Some differences of opinion reflect different views about the degree of importance that should be attached to one or another part of his writings. Other disagreements concern the meaning or logical quality of one and the same group of passages in Walras's writings viewed from essentially the same frame of reference, suggesting the possibility that some of the interpretations are demonstrably false.
However, the majority of the disagreements, and the most significant ones, do not stem from those causes. Walrasian scholars, past and present, have been highly capable economists, skilled in the exercise of their particular professional specialties. Their disagreements have a deeper cause than their abilities, educations, interests, and intellectual experiences as academic economists - which are, after all, very similar. It is that they have concentrated upon only some of his passages, and have unknowingly neglected others that must also be considered in order to assemble the full context necessary to understand correctly the meaning of any of the relevant passages. This matter is illustrated in a particularly striking way by the materials assembled in Chapters 1, 2, and 3 that reveal that there has been a neglect of not merely an isolated comment or two in which Walras argued in favor of empiricism, but of passage after passage and of page after page on that topic, many of which are in his major theoretical publications.
The approach taken in this book: The approach taken here therefore follows the advice of François Bompaire. It is Bompaire to whom credit must be given for having been the first to declare that an understanding of Walras's theories (and Cournot's and Vilfredo Pareto's as well) requires a study of all his scholarly writings, not just his models and equations. Bompaire gave a detailed literary exposition of Walras's general equilibrium economics as it relates to a laissez-faire competitive economy, and examined Walras's equations. Regarding not only Walras but Cournot and Pareto as well, however, he emphasized that:
The reader should not expect to find that our study has a purely economic and mathematical character. We have studied our authors as they are, bringing together all their writings, economic, mathematical, political, sociological, philosophic, in order to attain the best possible knowledge of their true thought in regard to the good and the bad effects of the principle of liberty. (Bompaire 1931, p. 7)
A dissenting view on the value of consulting Walras's writings other than his principal theoretical models has been expressed by Michio Morishima; that view must be considered because of its denial of the value of the approach taken in this book. Regarding "the conventional concept of the history of economic thought," Morishima noted that "the aim...is to provide realistic portraits of great economists of the past; it is then necessary for the historian to read 'collateral material such as correspondence, recorded speeches and other published works' in addition to the major work of the economist investigated, as Peach claims" (Morishima 1996, p. 92). Morishima explained, by contrast, that his own
...view of the subject of history of economic thought is very different. Its task is not to present a precise and realistic portrait of a giant in history, but to reveal hidden and concealed relationships in thought (vision and analysis) between great economists, such as Ricardo, Marx and Walras in my own case.4
Morishima suggested an approach that he believed is appropriate:
For this purpose, the traditional method which Peach supports is not very useful; there was no possibility of correspondence between Marx and Ricardo, or between Walras and Ricardo. It is almost useless to dig in the library in the hope of discovering a new document. Instead, we have to read the major works of the economists concerned as deeply as possible....I believe that the history of economic thought should not degenerate into a portrait museum; it should play the role of an information centre which informs us, based on the examination of the works of the economists of the past, how their various technical ideas and perspectives are connected with each other, what their essential contributions to present-day economics are, and how useful and suggestive they are for the future development of economics (ibid.). That is surely not a defensible position. To understand the major theoretical works of an economist as profoundly as possible, whether for their own sake or to discern their relation to the work of other economists and modern theorizing, it is useful to bring to bear all the relevant information about those works. Indeed, Morishima has also expressed the opinion that "we can only judge the full value of [Walras's] pure economics by considering it in the context of his original farsighted scheme," which, Morishima noted, included his social and applied economics (Morishima 1977, p. ⅶ). Moreover, in the case of Walras, his correspondence with many eminent economists is available and is very useful for understanding the relation of his ideas to his predecessors' and his contemporaries', inasmuch as he discussed their work and his own in his letters and in other writings also.
In short, therefore, in order to understand Walras's legacy, the part of this book that is devoted directly to his ideas will draw not only on his accounts of the behavior of the real economy of his day and on his work on general equilibration and equilibrium, but also on his philosophical and methodological ideas, his views about human nature, his methodology, relevant passages in his books on social and applied economics, his jottings, and his correspondence.
The foundations of a consensus: This book seeks to systematize the aspects of that legacy and thus to construct the foundations for a wider consensus on Walras's work than now exists; it capitalizes on the broad agreement that exists about many important Walrasian matters. All economists now recognize, of course, that his conception of general equilibrium is his most important contribution, even though the agreement is qualified because we do not all have the same understanding of what that conception is. There is also general agreement about the characteristics of specific aspects of his work: about his 1889 model of exchange in a temporarily isolated freely competitive market, for example, along with his theory of consumer demand and his treatment of the economics of the firm. This book validates the realization by modern Walrasian scholars that his contributions have a much wider range, diversity, and richness than was thought to be the case in previous years, a realization that enables the introduction here of new and wider perspectives on Walras's theoretical legacy. The book puts into place the last major necessary rectification of the interpretation of his scientific economic thought, namely an accurate and balanced account of his philosophical and methodological views, one that recognizes and meticulously documents the very extensive empiricist aspects of his philosophy and methodology. With that rectification, and with the exposition of his views on human nature, the analysis of the major components of his mature comprehensive model, the characterization of his written pledges sketch, and the emphasis upon the structure and functioning of his models rather than upon his equation systems, the major part of the heuristic scheme falls into place and a new interpretative synthesis of his economic theorizing is achieved. The synthesis provides a truly rich, more complete, and coherent picture of Walras's contributions and thus provides the foundation for a consensus on the character of his legacy.
Walras's legacy
The initial model: Walras's second phase of theoretical activity, his period of high creativity and maximum theoretical prolificacy, spanned the period 1872 to 1877.5 It was during those years that he developed his initial comprehensive model of general equilibrium. The starting point of his investigations was his realization that the quantity that an individual demands of a commodity does not depend just on its own price, as Cournot had postulated, but also on the price of other commodities and on the income of the consumer (239, 1, p. 5), and (Walras added) on his wealth or purchasing power (239, 1877, 1, p. 535). Another decisive event in the development of Walras's initial model was his learning from Antoine Paul Piccard, a colleague at the Académie de Lausanne, a way of deriving an individual's demand function for a commodity from his utility function (239, 1872, 1, pp. 309-11). That construction provided Walras with a way of introducing scientifically the utility-maximizing motive for economic behavior in markets and the essential utility-maximizing condition of individual equilibrium.
By 1872, armed with those ideas, Walras was ready to begin his period of great creativity and to flesh out his conception of general equilibrium in a functioning model. This he did in four memoirs (124, 1877), the substance and much of the wording of which appear in the Eléments d'économie politique pure (106, 1874; 123, 1877), a treatise that he made the principal vehicle for the expression of his legacy in economic theory. Thus Walras not only expressed the belief that all economic phenomena are interrelated (which had been done by many economists before him), he also specified their interrelations, offered an account of their disequilibrium behavior, and described their conditions of equilibrium. His initial model will not be discussed directly in this book because it has not directly been part of his legacy. That distinction was accorded to his later models. That is not to say that the initial model was not important. It was his brilliant expression of pure originality, and he was careful to preserve the parts of it that were valuable - the majority of it - incorporating them into the model that will now be introduced.
The mature comprehensive model: In Walras's subsequent period of maturity as a theorist, lasting from 1877 to about the middle of the 1890s, he prepared the greatest edition of the Eléments, the second (176, 1889), in which he presented his mature comprehensive model of general economic equilibration and equilibrium.6 In that edition he improved the realism and coherence of his work, refined and extended his concepts and theoretical tools, and introduced calculus. The mature model is a model of exchange, production and consumption of consumer commodities, savings and production and pricing of durable capital goods, markets for loans, and the role of money generally. In the chapters on Walras's ideas that pre-dated the fourth edition of the Eléments (210, 1900), the unqualified word "model" used in reference to his ideas means the mature comprehensive model. When the plural word "models" is used in reference to his ideas, it is to draw attention to the sub-models that constitute the mature comprehensive model, such as his models of the consumer, of the entrepreneur, and of capital formation.
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