Solving a Longstanding Conundrum: The Uneasy Coexistence of Alternative Equilibrium Conceptions in Walras’s Theoretical System

The evolution of Walras’s theoretical ideas over the last thirty years of the 19th century is highly tormented: from the early outline of Walras’s theoretical system, as sketched in his surviving Geneva lecture notes (1871-72), through the various editions of the Éléments (1st: 1874-77; 2nd: 1889; 3rd: 1896; 4th: 1900), Walras’s exposition of General Equilibrium Theory undergoes a process of ceaseless revisions, which often do not blend with each other, occasionally giving rise to self- contradictory statements. This paper purports to show that such a tortured development can ultimately be traced to the uneasy coexistence in Walras’s approach of two different conceptions of economic equilibrium: a more traditional one, where an equilibrium of the economy is viewed as the outcome of a balancing of forces, themselves unrelated or only barely connected with individual optimizing behavior; and a more innovative conception, resting on the then revolutionary idea that an equilibrium ought to be viewed as a consistent array of optimally chosen individual plans of action. Starting from the first conception, which pre-dates Walras’s discovery of the link between individual demand and utility maximization (fall 1872), Walras strives to progressively enhance the role played by the second, without ever fully succeeding in his attempt. This is the root cause of most of the inconsistencies marring Walras’s Éléments, as well as indirectly affecting the subsequent developments of General Equilibrium Theory.