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

Abstract

This paper shows that Marshall’s theory is generally equivalent to Walras’s one. It shows that Walras used two types of demand functions: (1) the original (ordinary) demand curve (function); and (2) the derived (general) demand function. Marshall also used both types of demand curves (function); however he did so in a very simplified and vague manner. Walras used a common method of equilibrium establishment and re-establishment of equilibrium for all four types of economies. First, he discussed the problem of equilibrium establishment using initial basic data. Second, Walras starts the adjustment process by using a model to describe the equilibrium state. He then describes the process of equilibrium establishment from a position of disequilibrium, by the use of his famous algorithm – tâtonnement. Finally, Walras discussed the problem of the variation of prices, or the problem of the re-establishment of equilibrium, as a result of changes in the initial basic data for any individual or any group of individuals. Marshall also used the same method, but in an incomplete form. Despite that, Marshall did not formulate the model for individual economies, he discussed the conditions of its optimality; and discussed the process of equilibrium establishment. Furthermore, despite the fact that Marshall described verbally the complete model for the whole (macro) economy in a similar way to Walras, he did not formulate mathematically that model. Marshall also discussed the problem of the re-establishment of equilibrium, as a result of changes in the initial basic data. Therefore, Friedman’s statement that they are alternative theories is mistaken.