Leon Walras

Léon Walras 1834-1910, French economist. After abandoning his studies in mining engineering, he became a free-lance journalist, advancing the causes of economic and social reform. He later became a professor of political economy at the Univ. of Lausanne (1870-1892). One of the most influential of economists, Walras advanced several theories that served as the foundation of modern economic analysis. He is widely regarded as the founder of the theory of general economic equilibrium, mathematical economics, the concept of "imperfect competition," and the marginal utility theory. A prolific and creative writer, Walras's work also extended to such themes as managed currency, production, credit, and capital formation.

Bibliography: See his correspondence, ed. by W. Jaffé (3 vol., 1965), and Elements of Pure Economics (tr., 1984). See also D. A. Walker, ed., William Jaffe's Essays on Walras (1983).

neo-classical economics Economics, as an academic discipline, is predominantly the study of the allocation of scarce resources to alternative uses via market prices. The dominant paradigm in modern economics is neo-classical theory which developed from the so-called marginalist revolution pioneered by Leon Walras, William Stanley Jevons, and Alfred Marshall in the late nineteenth century. This posits that prices are determined by marginal utility (of consumers) and marginal productivity (of factors of production). Neo-classical theories are based on simple behavioural models at the micro-level (households, firms) which assume perfect information, freedom of movement, individual choice, optimizing and rational decision-making. The basic conditions for these models are private enterprise, consumer sovereignty, and market-clearing prices. Institutional influences on individual behaviour are defined exogenously as given characteristics and do not form part of the basic behavioural model. However, game-theoretic approaches have been developed recently to explain individual behaviour within institutional rules.

A recent development in modern economic theory, developed in the USA, goes under the name of ‘political economy’ and has nothing to do with radical or Marxist versions to which the label is more commonly applied. This literature applies neo-classical principles to areas outside the economy, such as public policy, focusing on artificially induced scarcities (‘rents’) which are produced by political pressure exerted by economic interest groups.