Éléments d'Économie politique pure ou Théorie de la Richesse sociale.
Lausanne: L. Corbaz & Cie, 1874-1877. First edition, rare, of both parts of Walras’ most important work, his mathematical theory of general economic equilibrium. “Walras is in my opinion the greatest of all economists. This system of economic equilibrium, uniting, as it does, the quality of ‘revolutionary’ creativeness with the quality of classic synthesis, is … the outstanding landmark on the road that economics travels toward the status of a rigorous or exact science” (Schumpeter (1954), p. 827). Milton Friedman wrote that Walras’ Éléments “is a great work which marked an important step forward in the development of economics as a science, and which still plays an important role in economic thinking … There are two main themes in the Elements: the analysis of rareté, or marginal utility, and the theory of general equilibrium.” The theory of economic equilibrium was his “claim to immortality, that great theory whose crystal-clear train of thought has illuminated the structure of purely economic relationships with the light of one fundamental principle … few contributions in the field of monetary policy compare with his” (Schumpeter (1952), pp. 76-77). “For sheer genius and intuitive power in penetrating the veil of the chaos of immediately perceived experience and divining the underlying structure of fundamental economic relationships and their extensive interdependencies and consequences, Walras has been surpassed by no one” (New Palgrave). The first part of the Éléments deals with the theory of exchange (pp. 1-208), the second (pp. 209-377) with the theory of production. “Walras’s two-part Elements of Pure Economics (1874-77) was monstrously neglected everywhere despite his indefatigable efforts to get the book noticed. That was in part because Walras set himself a task that went beyond Jevons and Menger, his co-discoverers of marginal utility theory, namely, to write down and solve the first multi-equational model of general equilibrium in all markets. In addition, Walras went far beyond Jevons in employing a mathematical mode of exposition, and this was enough to scare off most of his contemporary readers. But whereas Jevons and Menger are now regarded as historical landmarks, rarely read purely for their own sake, posthumous appreciation of Walras's monumental achievement has grown so markedly since the 1930s that he may now be the most widely-read nineteenth-century economist after Ricardo and Marx, particularly since the translation of the Éléments into English in 1954” (Blaug). RBH lists four copies. Léon Walras (1834-1910), whose full name was Marie Esprit Léon Walras, was born in Évreux, a provincial town in Normandy, France. “After having twice failed the entrance examination to the École Polytechnique in Paris for lack of preparation in mathematics, Walras entered the École des Mines in 1854. Leaving school after a year, he tried literature unsuccessfully. In 1858 his father, the economist Auguste Walras, persuaded him to devote his life to economics. Lacking the necessary formal training, however, Walras could not get a university position. After a brief flirtation with journalism, he worked for several business firms unsuccessfully. Sharing in the popular belief that cooperatives offered an alternative to the revolutionary activity in western Europe, Walras and Léon Say in 1865 began a bank for producers’ cooperatives, of which Walras became managing director. The two men also began to publish a monthly journal on cooperatives, Le travail (‘Work’), in 1866. Both the bank and the periodical failed in 1868, but two years later Walras was appointed to the chair of political economy at the Academy of Lausanne, Switzerland” (Britannica). “Walras began his scholarly activity in Lausanne in 1870. In a period of great creativity that lasted until 1878, he developed most of the foundations of the theory of general equilibrium that appeared in the first edition of the Éléments” (New Palgrave). “Walras begins the analytical part of the Éléments by analysing a problem similar to the one that had been studied by Jevons: he imagines a situation with two persons and two goods whose supply is fixed. How can one characterise the equilibrium of such an economy? He goes into this problem in great detail, the discussion of the two-by-two case fills more than 60 pages in the book. “He starts by drawing demand curves for the two goods and shows how an analysis based on these curves determines the quantities that will be exchanged between the two individuals in a situation of equilibrium. After a careful statement of the utility maximisation problem of the consumer he goes on to the analysis of equilibrium … Walras shows that the model determines the ratio between the quantities traded of the two goods. Then he points out that since the value of the quantity sold by one individual must be equal to the value of the quantity purchased by the other individual, the ratio of prices must be equal to the inverse ratio of the quantities. So the model determines prices, but only the relative price … moving for a moment beyond the two-commodity case, we may choose one of the commodities as a unit of account and state all other prices in units of this commodity, which Walras calls the numeraire. The price of this commodity can therefore be set equal to 1 … “Walras’s discussion of the consumer as a utility maximising agent is far clearer than those of Jevons and Menger. Like Jevons, he assumes that utility is a magnitude that is attached to the consumption of each commodity separately, so that total utility is the sum of all commodity-specific ‘utilities.’ He then shows that to obtain maximum utility the consumer must compose his consumption in such a way that marginal utility – or rareté, as he calls it – divided by price must be the same for all commodities … It follows that it is the consumers’ marginal utilities of the different goods – the structure of their preferences – that determine prices in an exchange economy. Walras summarises the core results of his theoretical model as follows: ‘The exchange of two commodities for each other in a perfectly competitive market is an operation by which all holders of either one, or both, of the two commodities can obtain the greatest possible satisfaction of their wants consistent with the condition that the two commodities are bought and sold at one and the same rate of exchange throughout the market’ … “The two-by-two model is evidently to be considered as a simplified introduction to the more general version of the theory. The generalisation implies an extension to the case of many consumers and commodities, also moving beyond the simple case of pure exchange to incorporate the production side of the economy. It was in the analysis of this more general case that Walras made his most important contributions to economic theory. “Walras was careful to specify the structure of the interrelationships between markets, or the economic circulation in society. Firms supply finished goods that are demanded by the consumers. In order to produce consumer goods, firms demand factors of production, labor in particular, that are supplied by consumers. Consumers maximise utility and firms maximise profit, and both consumers and firms take market prices as given. General equilibrium exists when (1) the consumers’ demand is equal to forms’ supply for all consumer goods, and (2) the firms’ demand is equal to the consumers’ supply for all factors of production. “Now let us assume that there is an arbitrary number m of commodities and a corresponding number of prices. We can then write the conditions for general equilibrium as a set of equations, one for each commodity, which says that demand, which is a function of all prices in the economy, is equal to supply, which is also a function of all prices. Because we have m markets altogether, we have m such equations. We have therefore as many equations as there are unknowns (i.e., prices,) and this should normally ensure that in the mathematical sense prices are determined by the system of equations … “For the individual consumer, it must be the case that the value of what he consumes is equal to the value of his stock of goods, or, equivalently, the value of what he sells must equal the value of what he buys. But since this must be true for all consumers, it must also be true on the aggregate: the value of total sales must equal the value of total purchases. Suppose now that demand is equal to supply in m – 1 markets, say in the markets for the goods 2 to m. This means that the value of sales must equal the value of purchases for these m – 1 markets. But if that is the case, the value of sales must be equal to the value of purchases – supply must be equal to demand – for the first market as well, so all markets must be in equilibrium. In other words, if m – 1 of the m markets are equilibrium, the last market must also be in equilibrium. This result is known as a Walras’s law … Walras’s model of general competitive equilibrium for the economy as a whole is one that determines all relative prices expressed in units of the numeraire. “Walras went on to extend the theory to an economy with production. He started, following the lead of the classical economists, by assuming that there were fixed coefficients in production, and then generalised the analysis to the case where the marginal productivity of the factors of production varied with the amount of input, and where factor substitution was possible. He derived the conditions for cost minimisation and concluded that ‘free [perfect] competition brings the cost of production down to a minimum.’ “The nominal price level cannot be determined until one brings monetary factors into the picture. As regards this part of his theory, Walras was basically a quantity theorist, although his theory of the demand for money was a sophisticated one. This theory started from the assumption that the agents of the economy faced a lack of synchronisation of income and expenditure payments. The function of money was to bridge the liquidity problems that this entailed. Walras has showed that the theory led to the conclusion, familiar from the earlier and simpler quantity theory: money is neutral with respect to the real economy. A doubling of the quantity of money would lead to a doubling of all nominal prices and therefore leave relative prices and real decisions unaffected … “Walras was not satisfied with having demonstrated the internal consistency of his theory. The system of equations described the nature of the equilibrium, but a model that claimed to say something about the real world – about the real-type concepts versus the ideal-type concepts – would also have to explain how the market mechanism arrived at the equilibrium. The theory that underlies the system of equations that determines equilibrium prices cannot itself explain how the markets arrive at them. If general equilibrium theory aims to explain the actual formation of prices, it must be able to argue that the market always has a tendency to approach the equilibrium. This implies that the description of equilibrium must be extended by a dynamic theory of the movement towards equilibrium. Walras attempted to do this with his famous theory of the tâtonnement. The term is not easy to translate. ‘Groping’ has been suggested as a term that communicates some of the essence of the concept, but most economists tend to prefer the French term. “Walras’s theory of market adjustment must also be seen on the background of his methodological argument about the necessity of reasoning by means of idealised concepts. He imagines a market where there is an administrator or auctioneer. The auctioneer begins by crying out prices at random for all commodities that are subject to trade. At this prices consumers and firms write down the quantities that they wish to buy and sell. The auctioneer then collects this information, summing the planned quantities of supply and demand for each individual market. If he finds that for some or all commodities the planned demand is not equal to the planned supply, he cries out a new set of prices. He increases the prices of the commodities where the planned demand exceeds the planned supply and decreases them in markets in which the reverse is true. At the new set of prices, consumers and firms again write down the quantities that they wish to buy and sell and the process continues. In other words, prices increase where there is excess demand and fall where there is excess supply. This mechanism, Walras claims, will lead the economy to a situation of general equilibrium. The market mechanism is stable … “Walras’s theory of general equilibrium was a major step forward for the theory of price formation in competitive markets … His ambition and great achievement was to show that theories of individual market behaviour could be fitted together to an integrated whole, to a model of general equilibrium that gave a logically consistent description of the functioning of a competitive economy. This very general version that Walras developed in the Éléments did not in itself provide much opportunity for application to practical problems, but with the passage of time other economists gradually came to accept it as the standard competitive model that would serve as a general reference for future developments of the theory” (Sandmo, pp. 195-210). According to Jaffe (p. 79), the first part of the Éléments was published on 27 July 1874, the second on 6 September 1877. It was not a financial success. Jaffe further notes (p. 85) that Walras purchased 212 copies of the first instalment and 210 copies of the second instalment for his own use and distribution to economists all over the world gratis, and that by 1891, when Walras came to close his accounts with his publisher of the first edition of the Éléments and several other publications, no more than 500 copies of the first instalment and little over 350 copies of the second instalment were sold in normal course. Batson, p. 34; Cossa 279 (171); Einaudi 5965; Mattioli 3796; Walker 106 & 123. Blaug, Great Economists Before Keynes, 1986. Friedman, ‘Leon Walras and His Economic System,’ The American Economic Review 45 (1955), pp. 900-909. Jaffe, William Jaffe’s Essays on Walras (Walker, ed.), 1983. Sandmo, Economics Evolving, 2011. Schumpeter, Ten Great Economists, 1952. Schumpeter, History of Economic Analysis, 1954. Walker, Walrasian Economics, 2006. Walras, Correspondence of Leon Walras and Related Papers, Vol. I 1857-1883 (Jaffe, ed.), 1965.
8vo (210 x 132 mm). Half-title, 3 folding engraved plates. Contemporary half-morocco over pebbled cloth, blind-stamped "WK" at the base of the spine, marbled endpapers. Custom cloth folding case.
Item #6393
Price: $50,000.00
