Walras's approach

The purpose of this chapter is to identify and describe the fundamental components of Walras's mature comprehensive model of general equilibration and equilibrium. To convey fully their character, it will, on occasion, be necessary to analyze these components critically. The way he developed the model is in sharp contrast to his approach in his written pledges sketch (Chapter 6), which is the same as the approach of the theorists who created the modern virtual general equilibrium models. The latter is typified by the work of Gérard Debreu. In his Theory of Value (1959), for example, Debreu constructed an equation system on the basis of a number of axioms. He did not mean for them to describe the actual behavior of real economic agents acting in a real economy. His equations are not descriptive of economic behavior, as indicated by the fact that he made no mention of the institutions, technology, spatial features, regulations, pricing procedures and conventions, and other structural characteristics of markets. Such matters, he explained, are “irrelevant for the logical development of the theory” (ibid., p. 35).

Walras, on the other hand, devoted page after page to the description of what he perceived to be the behavior of real economic agents in the setting of real markets with specific characteristics, using the techniques of observation, abstraction, and generalization discussed in previous chapters of this book. He presented that description, and his explanations of how the phenomena are generated and their consequences, as his mature comprehensive model.