Walrasian Intertemporal Theory: Profit, Tastes and Technology

Abstract

The most fundamental development in neoclassical economics during the last third of the nineteenth century is now widely accepted to have been the general-equilibrium analysis of Walras.¹ Schumpeter’s sentiments, for example, are typical:

Economics is a big omnibus which contains many passengers of incommensurable interests and abilities. However, so far as pure theory is concerned, Walras is in my opinion the greatest of all economists. His system of economic equilibrium … is the only work by an economist that will stand comparison with the achievements of theoretical physics.²

Since the 1930s the significance of Walras’s work has become increasingly recognised and his ideas have been developed by neoclassical theorists of the highest calibre.³ Moreover, the Walrasian school has increasingly placed emphasis upon the logical rigour by which conclusions are reached and stressed that general-equilibrium analysis provides a framework in which all neoclassical economics can be developed. Consequently, Schumpeter referred to Walras’s early work as the ‘Magna Charta of exact economics’;⁴ and, as such, the development of Walrasian analysis is the principal achievement of neoclassical economics.