Walras’s law of markets as special case of the general Triangle Theorem: a laconic proof

Kakarot-Handtke, Egmont (2013): Walras’s law of markets as special case of the general Triangle Theorem: a laconic proof.

Abstract

From the set of the first three structural axioms follows the - economic - triangle theorem. It asserts that the product of the three 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 triangle 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.

• Item Type: MPRA Paper
• Language: English
• Keywords: new framework of concepts; structure-centric; axiom set; market clearing; commodity market; labor market; full employment; wage rate flexibility
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C00 - General; D - Microeconomics > D4 - Market Structure, Pricing, and Design > D40 - General; D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General

References

Arrow, K. J., and Hahn, F. H. (1991). General Competive Analysis. Amsterdam, New York, NY, etc.: North-Holland.

Benetti, C., and Cartelier, J. (1997). Economics as an Exact Science: the Persistence of a Badly Shared Conviction. In A. d’Autume, and J. Cartelier (Eds.), Is Economics Becoming a Hard Science?, pages 204–219. Cheltenham, Brookfield, VT: Edward Elgar.

Buiter, W. H. (1980). Walras’ Law and All That: Budget Constraints and Balance Sheet Constraints in Period Models and Continuous Time Models. International Economic Review, 21(1): 1–16. URL http://www.jstor.org/stable/2526236.

Feynman, R. P. (1992). The Character of Physical Law. London: Penguin.

Kakarot-Handtke, E. (2011). The Pure Logic of Value, Profit, Interest. SSRN Working Paper Series, 1838203: 1–25. URL http://ssrn.com/abstract=1838203.

Kakarot-Handtke, E. (2012). Primary and Secondary Markets. Levy Economics Institute Working Papers, 741: 1–27. URL http://www.levyinstitute.org/publications/?docid=1654.

Kakarot-Handtke, E. (2013). Confused Confusers: How to Stop Thinking Like an Economist and Start Thinking Like a Scientist. SSRN Working Paper Series, 2207598: 1–15. URL http://ssrn.com/abstract=2207598.

Patinkin, D. (2008). Walras’s Law. In S. N. Durlauf, and L. E. Blume (Eds.), The New Palgrave Dictionary of Economics Online. Palgrave Macmillan, 2nd edition. URL http://www.dictionaryofeconomics.com/article?id=pde2008_W000020.

Viner, J. (1917). Some Problems of Logical Method in Political Economy. Chicago Journals, 25(3): 236–260. URL http://www.jstor.org/stable/1819612.