May 7, 2015

What are Walrasians waiting for?

Comment on ‘On the irrelevance of general equilibrium theory’


Walras tried to formulate a general equilibrium theory (GET). Middle-of-the-road economists like Cassel were quite happy with it but when mathematicians like Wald and von Neumann looked closer at it they were struck by the naivete of economists. Von Neumann pointed the way that led ultimately to Debreu, Arrow, McKenzie. General equilibrium has therefore to be regarded as a correction of Walras's untenable model. This formal rectification, though, had to be bought with some unacceptable behavioral assumptions like the auctioneer.

As things turned out, GET in its mathematically correct neo-Walrasian form does not hold water either (Ackerman and Nadal, 2004; Ingrao and Israel, 1990).

So all arguments are on the table and there is no need for me to explain the numerous defects of the Walrasian approach to Ezra Davar who thinks the truth will come to him when he waits long enough (see his preceding post). All proofs are assembled at SSRN and come with a mouse click.

The crucial question is this. If all is clear and settled, why are there still Walrasians around? The answer is long known.
“In economics we should strive to proceed, wherever we can, exactly according to the standards of the other, more advanced, sciences, where it is not possible, once an issue has been decided, to continue to write about it as if nothing had happened.” (Morgenstern, 1941, pp. 369-370)

In economics it is indeed possible to argue ‘as if nothing had happened.’ And this means that, for some reason, the scientific mechanisms do not work properly. This explains why economics is a failed science.

For a heterodox economist there is not one good reason to occupy himself with Walrasianism in any of its futile variants. The issue has been decided long ago.

Equilibrium is a nonentity. It falls to the remaining stray Walrasians to get the point and to rise to scientific standards.

Egmont Kakarot-Handtke

Ackerman, F., and Nadal, A. (Eds.) (2004). Still Dead After All These Years: Interpreting the Failure of General Equilibrium Theory. London, New York, NY: Routledge.
Ingrao, B., and Israel, G. (1990). The Invisible Hand. Economic Equilibrium in the History of Science. Cambridge, MA, London: MIT Press.
Morgenstern, O. (1941). Professor Hicks on Value and Capital. Journal of Political Economy, 49(3): 361–393. URL