Misunderstanding Walras' Economics

ARIEL DVOSKIN; ANDRÉS LAZZARINI

Congreso; VI STOREP Conference: "Le crisi finanziarie nella visione degli economisti"; 2009

STOREP

It is broadly acknowledged that Walras is one of the founders of the Marginalist school. Moreover, most of contemporary neoclassical authors think of Walras as the most rigorous exponent of the traditional neoclassical paradigm, empathizing a theoretical line of continuity between their own work and the one we find in Walras´ Elements of Pure Economics. According to our opinion, however, this element of continuity is not well founded. In effect, once we delve into the content of contemporary General Equilibrium models (also known as neo-Walrasian), that connection completely vanishes. Our aim is to show that, although one can find a formal resemblance between Walras analysis and the new schemes of general equilibrium i.e. in both cases the physically heterogeneous capital goods are treated as data, the coincidences stop there. As our work argues, while the French author was a champion of the long period method, i.e. his aim was to explain the internal mechanisms by which market prices converge to natural values, neo-Walrasian authors, on the contrary, aim at finding the conditions that guarantee the existence of a vector of prices that clears all markets simultaneously. Consequently, while Walras´s equilibrium is conceived as a resting position of the economic system, i.e. as an outcome defined by persistent forces that are capable of overcoming the contingencies undergone by market prices, the neo-Walrasian models are compelled to ex ante (and hence extrinsically) define what equilibrium is, without being able to explain its real economic content.