Walrasian economic theory — little better than nonsense

5 February, 2016 at 13:15 | Posted in Economics | 3 Comments

You enquire whether or not Walras was supposing that exchanges actually take place at the prices originally proposed when the prices are not equilibrium prices. The footnote which you quote convinces me that he assuredly supposed that they did not take place except at the equilibrium prices … All the same, I shall hope to convince you some day that Walras’ theory and all the others along those lines are little better than nonsense!

Letter from J. M. Keynes to N. Georgescu-Roegen, December 9, 1934

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  1. Walras effectively proved that a market economy could NOT exist, but few economists took up that obvious interpretation of his work.

  2. De Broey’s take:

    “In my view, Walrasian theory ought to be regarded as a branch of political philosophy, different in language from others (because of the use of the mathematical language), yet nonetheless close to, for example, Rawls’s theory of justice. It thus comprises an unavoidable normative dimension. If this is true, as a matter of social usefulness, economists should not consider themselves superior or inferior to other political philosophers. If they are experts, it is in the way political philosophers are.”

    • That’s a great quote. Thanks Dwayne! Walrasian theory is one form of political philosophy. Although it uses maths, it is still normative. You can use it as your methodological framework, but you must justify your use of that particular framework, and other philosophical frameworks must be considered.


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