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What's right with the neoclassical legacy? Allais' response

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  • Olivier Baguelin

    (EUREQUA - Equipe Universitaire de Recherche en Economie Quantitative - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Most important economic problems such as coordinating individual activities or providing correct incentives arise "far" from economic equilibrium; this is especially true within a context of general interdependence. And yet, the walrasian General equilibrium theory, as dominant legatee of neoclassical economics, is only coherent in the close neighborhood of some equilibrium (Foley, 2010). The marshallian approach is an appealing alternative to deal with "general disequilibrium" situations while incorporating neoclassical concepts. The trouble is that it betrays part of the neoclassical legacy when questioning an ordinal interpretation of utility. This paper draws the attention on Allais' General theory of surpluses (1981) as a valuable platform to coherently arrange fundamental neoclassical achievements. It offers a basic but integrative analytical framework: not only does it accommodate disequilibrium situations but it allows connections to such an important development in economic theory as the institutional approach.

Suggested Citation

  • Olivier Baguelin, 2020. "What's right with the neoclassical legacy? Allais' response," Working Papers hal-02541406, HAL.
    • Handle: RePEc:hal:wpaper:hal-02541406
    Note: View the original document on HAL open archive server: https://hal.science/hal-02541406
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    References listed on IDEAS

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    1. Spulber,Daniel F., 2009. "The Theory of the Firm," Cambridge Books, Cambridge University Press, number 9780521736602.
    2. Colander, David & Rothschild, Casey, 2010. "Sins of the Sons of Samuelson: Vision, pedagogy, and the zig-zag windings of complex dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 74(3), pages 277-290, June.
    3. Jean-Marc Tallon & Jean-Michel Courtault, 2000. "Allais' trading process and the dynamic evolution of a market economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(2), pages 477-481.
    4. Luenberger, David G., 1992. "Benefit functions and duality," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 461-481.
    5. Plott, Charles & Roy, Nilanjan & Tong, Baojia, 2013. "Marshall and Walras, disequilibrium trades and the dynamics of equilibration in the continuous double auction market," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 190-205.
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    More about this item

    Keywords

    surplus; loss; general equilibrium; transaction costs JEL codes: D3; D5; D6;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D6 - Microeconomics - - Welfare Economics

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