Walrasian Economics

Published by EH.NET (December 2006)

Donald A. Walker, Walrasian Economics. New York: Cambridge University Press, 2006. x + 357 pp. $80 (cloth), ISBN: 0-521-85855-0.

Reviewed for EH.NET by Roger E. Backhouse, Department of Economics, University of Birmingham.

This aim of this volume is to complement Walker’s earlier book, Walras’s Market Models (1996), by placing that work in a broader context. That book offered a detailed analysis of the general equilibrium models found in the four editions of Walras’s Elements of Pure Economics. One of the main arguments of that book concerned the phases in Walras’s thinking, among which the most significant was the deterioration that Walker identified in the quality of Walras’s theorizing after the second “greatest” edition of the book. The heart of this book is a one-chapter summary of what Walker chooses to call the “mature comprehensive model.” This offers concise summaries of the model’s main components, of which the most important is the analysis of market equilibrium and stability. Here we find a contrast between the model that Walras was analysing and his equation system. The former offered an account of processes outside equilibrium in which the outcome was path-dependent. This contradicted the equations. It was in response to the contradictions between his model and his equations that Walras introduced the “written pledges sketch.” This was a model where the tatonnement was virtual. It was the product of the last phase of his work.

To explain Walras’s motivation in his mature comprehensive model, Walker offers four substantial chapters on what may broadly be termed his methodology. The underlying theme is that Walras was thoroughly integrated into nineteenth-century thinking on scientific method, and that he sought to apply those methods in his economic work. Here, the main target is those who claim that Walras was an “arch-rationalist.” He was, Walker claims, a realist and an empiricist as well as a rationalist and an idealist. His philosophy was based on a synthesis of idealism and realism, being based not on ideal types but on real types established by observation and experiment. Conclusions were developed and compared with the results of observations. This was not the hypothetico-deductive method, because it was based on an initial process of induction. Thus the assumption of free competition was made because he believed it was the best account of reality and as a result his equations were derived “scrupulously” from reality. Thus Walras’s work on applied economics is important to understanding his pure economics.

The book’s other main theme is what happened to Walras’s economics after Walras. This is done in two chapters. The first, on his contemporaries and immediate successors, discusses Vilfredo Pareto, Knut Wicksell, Joseph Schumpeter, Henry Moore and Henry Schultz. The treatment ranges from a detailed, and very informative, account of Pareto, to a single-paragraph summary of Schultz. Schultz is perhaps a surprising inclusion here, but Walker makes the point that he showed great interest in the mature comprehensive model, and he had nothing to do with the virtual equilibrium model. The other chapter is on the story, better known to contemporary economic theorists, of how the written pledges sketch was taken up, first by Gustav Cassel, and then by Karl Schlesinger, John von Neumann and John Hicks (in the latter case through reading Pareto rather than Cassel). Though influenced by Walras, this tradition focused on the search for logical consistency and failed to take account of the mature comprehensive model.

This book is to be welcomed. Not only does it present, much more clearly, the significance of Walker’s meticulous examination of Walrasian theory but it also points to some of the major areas of disagreement. Opposing points of view are not analysed in detail, but in pointing out where he believes others have gone wrong Walker provides readers with the necessary references. The discussion of Walras’s influence is arguably much too brief. However, it makes sense if we see it not as trying to tell a story that has been discussed extensively elsewhere, but as trying to make a single, fundamental point: that the influence of the mature comprehensive model and that of the written pledges sketch need to be considered separately. The legacy of the former lies not in the Arrow-Debreu model but in non-tatonnement and computable general equilibrium models.

A key part of Walker’s argument is the conflict between Walras’s model and his equations, which did not fully capture that model, for this was the source of the misinterpretation by subsequent generations of economists for whom Walrasian economics was economics with an auctioneer. The same could be said of the two other economists who dominated twentieth century economics: Alfred Marshall and Maynard Keynes. The Walras that Walker portrays would make an interesting comparison with Marshall (for example their views on human nature), which makes it disappointing that attention was not paid to critics of Walras such as Milton Friedman (surely important in understanding why his work was perceived as it was).

The remaining section of the book contains a valuable comprehensive bibliography of Walras’s writings and a chapter of bibliographical remarks. However, perhaps the most significant aspect of the literature on Walras is the absence of a biography comparable to those we have on Keynes. It would have been impossible to reach the understanding of Keynes that we have today without good biographies, and perhaps the same is true of Walras. Walker discusses William Jaffe’s failure to write his once-planned biography. However, that does not answer the question of why no one else has taken up the challenge. Perhaps that is the next stage in coming to understand Walras.

Roger E. Backhouse is Professor of the History and Philosophy of Economics at the University of Birmingham and is currently Lachmann Fellow in the Department of Philosophy at the London School of Economics. He is the author of The Ordinary Business of Life (Princeton University Press, 2002), alias The Penguin History of Economics (Penguin Books, 2002).