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Neoclassical Economics: Léon Walras

Summary

Neoclassical economics is really the birth of mathematics as an inescapable tool for constructing theories that are internally coherent (that is, explained in and of themselves without requiring casuistic examples), escaping the slightly lackadaisical approach of many classical economists like the great Ricardo. This allowed Economics to develop at a much faster pace, and provided the basis for how Economics is studied and investigated today.

Marginalism:

Neoclassical economists:

Léon Walras, a French economist (1834-1910), is considered, along with W. S. Jevons and Carl Menger, a co-founder of marginalism and theory of utility. He is regarded as the founder, along with Pareto, of the Lausanne School. On his “Elements of Pure Economics”, 1874, Walras made his major contribution to economics, general equilibrium theory, on which all demands are interrelated into a coherent set of relationships.

This general equilibrium was reached by means of a “tâtonnement”, changes in price that would gradually approximate supply and demand until a steady statewas reached. A few decades later, Alfred Marshall would present a different general equilibrium theory, on which the steady state would be reached by means of changes in quantities.

Once we have seen the works of the three main marginalist theorists, it’s time to learn about the main neoclassical economists. Neoclassical economics took the tools introduced by marginalism and saw them as a way to construct much further reaching theories. These proved to be the first all-encompassing approach to Economics, with a differentiation between micro and macro and a solid bridge in between. Neoclassical economics is still the framework on which most research is carried out: be it to further it or to discredit it. It also sees the birth of many branches of Economics: welfare economics, econometrics, the economy of growth and even embryonic monetarism. We will start with Alfred Marshall, one of the most important economists of the early 20th century.

Neoclassical Economics: Carl Menger Neoclassical Economics: Alfred Marshall