Walras's Law of Markets as Special Case of the General Period Core Theorem

Abstract

From the set of the first three structural axioms follows the Period Core theorem. It asserts that the product of the key ratios, which characterize the firm, the market outcome, and the income distribution, is always equal to unity.The theorem contains only unit-free variables, is testable in principle, and involves no behavioral assumptions. The differentiated Period Core theorem applies to an arbitrary number of firms. Therefrom Walras’s Law can be derived without recourse to demand and supply functions or the notion of equilibrium. It is shown that the familiar interpretation is methodologically illegitimate.

Keywords: new framework of concepts, structure-centric, axiom set, market clearing, product market, labor market, full employment, wage rate flexibility

JEL Classification: C00, D40, D50