Steve Roth's Walras and The Carpenter was really good. Sumner's The third way was really good, till I got distracted by his use of "less" for "fewer" hours. Yichuan Wang's Macroeconomics: The Illustrated Edition didn't do it for me, not before I read the other two, and not after. Even though Sumner says it was excellent, and even though Steve made it interesting.
I checked out a Walras link at Wikipedia, and things just got worse:
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Yeah, that's what I do. I figure out how much I'm willing to spend, in dollars, on all of the millions of different products that are offered for sale every day. And for each of those products I calculate my demand at every possible price. Yeah.
There are of course infinitely many possible prices for each of those products.
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Imagine Walmart shoppers wandering aimless and silent, awaiting the announcement of prices, then submitting via their smartphones how much they are willing to pay, and then waiting for new prices to be announced after the auctioneer receives and processes all the smartphone data. Meanwhile nobody buys anything, and no one will buy anything until everyone present has agreed upon an announced set of prices. Then, in an instant, everything in the store is sold and the customers are left to empty the store out into their cars.
Is that how the economy works? Is that the future? Is that the alternative of choice to the problem of menu costs? Give me a break!
Under what conditions will such a process terminate in equilibrium? That's what they're worried about? Don't waste my time.
I'm with Jack, who comments on Steve Roth's post:
The question that immediately comes to mind after reading your post regarding the “Walrasian view” is, Why on Earth would anyone spend even a moment of thought on such a concept?
Granted, this is a first impression.
2 comments:
From the Crisis Chronicles:
"With the auctioneer unable to find a price at which bulbs would sell, the panicked withdrawal of purchasing speculators spread to panicked “fire sales” by leveraged speculators who had bought bulbs on margin and needed to sell. “The market for tulip bulbs simply ceased to exist,” as Tulipomania reports. When bulbs could be sold, it was for 1 to 5 percent of the previous value."
From endnote 9 for chapter 3 in Geoff Mann's In the Long Run We Are All Dead:
While the expectation that a market left to its own devices always clears is as essential to the work of David Ricardo as it is to that of Milton Friedman, the framework that has probably most influenced the way in which Say’s Law is operational-ized is the so-called “Walrasian” general equilibrium system developed by the political economist Léon Walras and others in the 1870s. Walras—a socialist, it turns out—argued that prices are determined as if there were an economy-wide grand auctioneer, who gradually “discovered” equilibrium prices through tatônnement, or “groping” (the word’s connotations in English have led even English texts to use the French).
[the note continues:]
Walras was the first to posit—but could not prove—that this process of discovery could determine a set or “vector” of prices that simultaneously clear all markets. The logical possibility such a vector exists is the formal condition of “general equilibrium.” When Gérard Debreu and Kenneth Arrow finally proved this in the early 1950s, and in the process further emboldened the burgeoning “mathematization” of economic thought, they provided an ex post facto formal foundation for Say’s Law. Indeed, Arrow-Debreu (or AD) is the “scientific” basis for contemporary capital’s opposition to state “meddling.” See Kenneth Arrow and Gérard Debreu, “Existence of an Equilibrium for a Competitive Economy,” Econometrica 20, 1954, 265. For more on Keynes’s critique of Say’s Law, see Chapters 9, 10, and 11.
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