General Economic Equilibrium

In Pareto’s view, studies on demand and supply were simply a preliminary to the study of general equilibrium which, insofar as it constituted a representation (even if only a first approximation) of economic phenomena, he considered to be the principal issue in economic theory. He thus contrasted Alfred MarshallMarshall, Alfred, who “has not yet understood what general equilibrium is and, more specifically, does not grasp the mutual interdependence among economic phenomena” (Hence Marshall, adding “nothing of note to our stock of knowledge”, makes excessive use of mathematics, Pareto to Pantaleoni, 17th June 1895, see Pareto (Letters to Maffeo Pantaleoni 1890–1896 (Lettere a Maffeo Pantaleoni 1890–1896), Complete works, tome XXVIII.I, ed. Gabriele De Rosa. Geneva: Droz, 1984, pp. 417–418)), with WalrasWalras, Léon, whose equations represented a development of Ce qu’on voit et ce qu’on ne voit pas (What is seen and what is not seen) by Frédéric BastiatBastiat, Frédéric (Pareto to Pantaleoni, 9th July 1895, ibid., pp. 423–424. Here Pareto is alluding to Bastiat (Ce qu’on voit et ce qu’on ne voit pas. Reprinted in Bastiat (1854, pp. 336–392), 1850).) and more specifically “they interpret the whole range of economic phenomena and … lend themselves to any amplification necessary in order to take every detail into account”. (Pareto to Pantaleoni, 9th July 1895, in Pareto, Letters to Pantaleoni, 1890–1896, p. 425.) In this regard, the major points will be briefly outlined below, from Pareto’s first characterisation of general equilibrium, displaying a certain number of additions in relation to Walras’ original (Sect. 4.1), to Pareto’s exposition of WalrasWalras, Léon’ version (Sects. 4.2 and 4.3) and to some of his comments relating to the consequences of the introduction of monopolies into the general equilibrium of free competition (Sect. 4.4).