The Marshallian Market and the Walrasian Economy. Two Incompatible Bedfellows

Abstract

The aim of this paper is to question a view which is usually taken for granted, namely that the Marshallian partial equilibrium and Walrasian general equilibrium analysis stand in a relationship of continuity. It will be claimed that the contrary is true: the generalisation of the Marshallian market does not lead to a Walrasian economy or, conversely, the Walrasian economy is not composed of Marshallian markets. To bring this point home, the basic methodological choices underpinning the analysis of the Marshallian market and of the Walrasian economy will be compared. The issue of why no full‐fledged Marshallian representation of the economy has arisen which might stand as an alternative to the Walrasian account will also be investigated and a series of reasons for this lack of generalisation of the Marshallian market will be considered. Finally, it will be claimed that if the Marshallian economy concept has no explicit existence, it has nonetheless an implicit one. It forms the background against which a series of reasoning about the working of the economy as a whole, which cannot fit the Walrasian economy framework, are developed. No less prestigious names than those of Keynes, Hicks, Patinkin, Friedman, Clower and Leijonhufvud will be adduced as witnesses.

Patinkin on IS-LM: An Alternative to Modigliani

“…Cf. De Vroey 1999a, 1999b tâtonnement and to the Walrasian budget constraints suggests he was not more Walrasian than in 1944. 18 In other words, the Walrasian theory was actually alien to Modigliani's IS-LM.…”

Getting Rid of Keynes? A Reflection on the Recent History of Macroeconomics

“…See Hicks ([1934. 4 For a more in-depth examination, see (De Vroey 1999a. For alternative accounts of the opposition between the Marshallian and the Walrasian approaches, see Hoover (2006aHoover ( , 2006b) and Leijonhufvud (2006b Let me now evoke the implications of adopting the auctioneer hypothesis.…”

Is Walras’s Theory So Different From Marshall’s?

“…At the same time, there are economists who claim that there are differences between Walras's theory and Marshall's theory (De Vroey, 2009;Jaffe, 1971;Ingrao & Israel, 1990). The main difference is that Marshall's theory considers only partial equilibrium and not a general equilibrium theory, whereas Walras's theory considers only a general equilibrium theory (Screpanti & Zamangi, 1993, p. 178;Dasgupta, 1990, p. 245;Donzelli, 2008;Stigler, 1990, p. 5;Dardi, 2003;De Vroey, 1999a, 1999bHayes, 2006)). …”