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General equilibrium theory both studies economies using the model of equilibrium pricing and seeks to determine in which circumstances the assumptions of general equilibrium will hold. The theory dates to the 1870s, particularly the work of French economist Léon Walras in his pioneering 1874 work Elements of Pure Economics. [2]
He formulated the marginal theory of value (independently of William Stanley Jevons and Carl Menger) and pioneered the development of general equilibrium theory. [4] Walras is best known for his book Éléments d'économie politique pure, a work that has contributed greatly to the mathematization of economics through the concept of general ...
Walras's law is a principle in general equilibrium theory asserting that budget constraints imply that the values of excess demand (or, conversely, excess market supplies) must sum to zero regardless of whether the prices are general equilibrium prices. That is:
Walras suggested that equilibrium would always be achieved through a process of tâtonnement (French for "trial and error"), a form of hill climbing. [1] In the 1970s, however, the Sonnenschein–Mantel–Debreu theorem proved that such a process would not necessarily reach a unique and stable equilibrium, even if the market is populated with ...
Essays on Some Unsettled Questions of Political Economy (1844) is a treatise on political economics by John Stuart Mill. [1] Walras' law, a principle in general equilibrium theory named in honour of Léon Walras, [2] was first expressed by Mill in this treatise. [3]
The central feature of the Lausanne School was its development of general equilibrium theory. Laurent's article presented a simplified version of this theory. [2] Lausanne School is also associated with the Italian School and the Paretian School, which were based on the works of Pareto. [3]
T. Kompas (1992) Studies in the History of Long-Run Equilibrium Theory. Manchester, UK: Manchester University Press. D.A. Walker (1996) Walras's Market Models. Cambridge, UK: Cambridge University Press. L. Walras (1874) Elements of Pure Economics: Or the theory of social wealth. 1954 translation of 1926 edition, Homewood, Ill.: Richard Irwin.
Although Marshallian demand is in the context of partial equilibrium theory, it is sometimes called Walrasian demand as used in general equilibrium theory (named after Léon Walras). According to the utility maximization problem, there are L {\displaystyle L} commodities with price vector p {\displaystyle p} and choosable quantity vector x ...