The Rise and Fall of Walrasian Microeconomics: The Keynesian Effect

43 Pages Posted: 30 Sep 2009 Last revised: 23 May 2010

See all articles by D. Wade Hands

D. Wade Hands

University of Puget Sound - Department of Economics

Date Written: June 2010

Abstract

Two common claims about mid-to-late twentieth century economics are that Walrasian ideas had an influence on the particular version of Keynesian macroeconomics that became dominant during the 1950s and 1960s, and that Walrasian general equilibrium theory passed its zenith in microeconomics at some point during the 1980s. This paper does not challenge either of these standard interpretations of the history of modern economics. What the paper argues is that there are at least two very important relationships between Keynesian economics and Walrasian microeconomic theory that have not generally been recognized within the literature. The first is that influence ran not only from Walrasian theory to Keynesian, but also from Keynesian theory to Walrasian. It was during the neoclassical synthesis that Walrasian economics emerged as the dominant form of microeconomics and I argue that its compatibility with Keynesian ideas influenced certain aspects of its theoretical content and also contributed to its success. The second claim is that not only did Keynesian economics contribute to the rise of Walrasian general equilibrium theory, it has also contributed to its decline during the last few decades. The features of Walrasian theory that are often suggested as its main failures – stability analysis and the Sonnenschein-Mantel-Debreu theorems on aggregate excess demand functions – can be traced directly to the features of the Walrasian model that connected it so neatly to Keynesian macroeconomics during the 1950s and 1960s.

Keywords: Walrasian General Equilibrium Theory, Keynesian Economics, Neoclassical Synthesis, Stability

JEL Classification: B21, B22, B23

Suggested Citation

Hands, D. Wade, The Rise and Fall of Walrasian Microeconomics: The Keynesian Effect (June 2010). Available at SSRN: https://ssrn.com/abstract=1480502 or http://dx.doi.org/10.2139/ssrn.1480502

D. Wade Hands (Contact Author)

University of Puget Sound - Department of Economics ( email )

Tacoma, WA 98416

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
270
Abstract Views
1,730
Rank
206,007
PlumX Metrics