General Equilibrium Theory

(19th century- )

First developed by French-born economist Leon Walras (1834-1910), general equilibrium theory studies simultaneous equilibria in a group of related markets.

Attributed to Walras, who studied a theoretical economic system in which all consumers were utility maximizers and firms were perfectly competitive, the model shows that a unique stable equilibrium can exist under such conditions.

Economists have since questioned whether such an equilibrium is stable, unique, and (if a general equilibrium does exist) whether there are many sets of prices at which markets will clear.

Also see: equilibrium theory, partial equilibrium theory, Walras's stability, Say's law, classical macroeconomic model, arrow-debreu model, theory of the core

Source:
E R Weintraub, General Equilibrium Theory (London, 1974)

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