Lausanne, School of

Lausanne, School of

BIBLIOGRAPHY

The expression “School of Lausanne” indicates the body of ideas and analytical techniques associated with the early mathematical formulations of general economic equilibrium, due to Léon Walras (1834–1910) and Vilfredo Pareto (1848–1923); later writers working in that field are occasionally classified as belonging to the School of Lausanne as well.

In 1870, the Frenchman Léon Walras was appointed to the newly created chair of political economy at the University of Lausanne, Switzerland. Walras aimed at attacking La Question Sociale (the problem of the distribution of social wealth) by means of a new approach to economics and social economics revolutionizing its philosophical foundations. He aimed at discovering the scientific laws of the most equitable distribution of the most abundant production. Walras pursued this project during his entire life, but he only managed to achieve a systematic presentation of his Pure economics (Éléments d’économie politique pure, 1874–1877, 1889, 1896, 1900). As Walras surrendered to age and fragile health, in the end his theory of distribution of social wealth (social economics ) and his theory of production of social wealth (applied economics ) had to appear as collections of articles under the titles Études d’économie sociale (1896) and Études d’économie politique appliquée (1898).

In 1893 the Italian Vilfredo Pareto succeeded Walras, taking over the chair officially on October 23, 1894. While retaining Walras’s general equilibrium approach, Pareto severed it from social economics and renounced its use as a conceptual tool to deal with La Question Sociale, thereby denying that it can serve any purpose as an instrument for social reform. In fact, Pareto came from a quite different ideological tradition and was much more concerned with the demonstration of the advantages of free trade than with La Question Sociale. Their philosophical backgrounds are not quite the same either. Walras was an heir to the tradition of French rationalism whereas Pareto was influenced by the English empiricists. In fact, notwithstanding the rather similar mathematical models, Walras and Pareto strongly disagreed regarding to what general equilibrium is supposed to refer. The relationship of individual choices and the market was also interpreted in radically different ways. Whereas for Walras free and absolute competition is a pure, idealized mechanism that logically comes before the actual individual actions, Pareto takes the individual actions as his starting point and sets them in the context of perfect competition as a market form. There are hints of this change of approach beginning with Pareto’s Cours d’Économie politique professé à l’Université de Lausanne (1896–1897). However, it was in the Manuale di Economia politica con una introduzione alla scienza sociale (Manual of political economy, with an introduction to social science, 1906) that Pareto set out the foundation of the modern theory of rational choice, characterized by an ordinal ordering of preferences.

This was perhaps the last important contribution of the Lausanne School to economic theory. Later, in fact, Pareto turned away from the study of individual logical action (pertaining to economics) and dedicated himself to the study of non-logical actions (the domain of sociology). The few articles written by Pasquale Boninsegni (1869–1939), who succeeded Pareto at Lausanne and taught at the University until 1939, did not supply theoretical advances comparable to his predecessors’ achievements.

The School of Lausanne is important not only for its theoretical contributions, but also for its attempt to couch them in mathematical form, or at any rate for having interpreted economic mechanisms by means of mathematical procedures. Walras and Pareto paved the way for the mathematization of economics, and accordingly the School is often referred to as the Mathematical school.

This feature attracted the attention of some renowned mathematicians, beginning with those participating in Karl Menger’s Vienna seminar in the 1930s and later with some at the Cowles Commission for Research in Economics in Chicago.

These new contributors shifted the focus of research toward the formal aspects of the general equilibrium approach, in particular the issues of existence, uniqueness, and stability of equilibrium, leaving the heuristic aspects aside. The existence and uniqueness of a general equilibrium solution were established in the 1950s. The issue of its stability, however, has not yet been solved, and there are indications that it will remain unsettled. In other words, one can prove that under some carefully chosen assumptions in a perfectly competitive world individual choices are mutually compatible; but it is highly unlikely that such coordination actually takes place.

SEE ALSO Competition; Economics; Equilibrium in Economics; General Equilibrium; Marginalism; Mathematical Economics; Neocolonialism; Ordinality; Pareto, Vilfredo; Rational Choice Theory; Utility Function; Walras, Léon

BIBLIOGRAPHY

Busino, Giovanni, and Pascal Bridel. 1987. L’école de Lausanne de Léon Walras à Pasquale Boninsegni. Lausanne, Switzerland: Université de Lausanne.

Ingrao, Bruna, and Giorgio Israel. 1990. La mano invisibile. L’equilibrio economico nella storia della scienza [The Invisible Hand: Economic Equilibrium in the History of Science]. Trans. Ian McGilvray. Cambridge, MA: MIT Press.

Roberto Baranzini