The Vaud authorities’ bet on the Walrasian project
In the Canton de Vaud, the new 1869 law on the Academie de Lausanne provided the opening of the first chair in political economy. Jules Ferry suggested Walras’s name to Louis Ruchonnet, a young lawyer that Walras had met in 1860.
Ruchonnet had become an influential politician, and was in charge of Waldensian Public Education. On September 6, 1870, Leon Walras sent his official application. He was appointed as Adjunct Professor on 12 November 1870 and Full Professor on 24 July 1871. His appointment to the first chair of political economy at the University of Lausanne owes much to his ideological proximity with Vaud radicalism (Dumez 1985). His pure economics, almost non-existent at the time, cannot be said to have resulted in getting “that French man with no university degree” appointed; actually, he owed his professorship far more to his “Republican political economy”, as this matched perfectly this “reformist nebula” (Bourdeau 2005). In the early 1860s, Walras deployed a real research program directed towards the scientific resolution of the question sociale, and it was this program that was his key asset.In the early years in Lausanne, his pure economics courses did not incorporate the fundamentals of marginalism or of general equilibrium. His mathematical economics was not yet formally developed. In 1873, during a lecture at the Academie des sciences morales et politiques in Paris on the “Principle of a mathematical theory of exchange”, Walras publicly presented the concept of rarete that he had inherited from his father, but the mathematics in it proved problematic, particularly to Louis Wolowski and Emile Levasseur, who is credited with the famous phrase “Freedom cannot be put into equations”. As he could not find publishers in Paris, it was thanks to the support of Louis Corbaz in Lausanne that he managed to publish the first instalment of the first edition of Elements d’economie politique pure ou theorie de la richesse sociale in the summer of 1874.
Part I, “Object and divisions of political and social economy”, presented the Walrasian research programme and enshrined its pure economics within his political and social economy. In the second part, “Theory of exchange”, he presented the formulation of trade between several commodities and the relationship between demand and utility. The third part, “Of Numeraire and Money”, deals with the issue of a medium of exchange. The second instalment of this first edition of Elements did not come out until 1877. It contained a fourth part on pricing in a production economy, a fifth part including capital commodities, and it ended with considerations on the impact of monopolies and taxes on various incomes and products.Continuing his work in this direction, he published, in 1877 in France, his Theorie mathematique de la richesse sociale, a collection of papers written in 1875-76 for the Societe vaudoise des sciences naturelles and integrated later into the Elements. Gerolamo Boccardo - who translated and published the text entitled “Une branche nouvelle de la mathematique” in the Giornale degli Economisti, that Walras completed in 1876, but failed to publish in France - undertook to publish the Theorie mathematique in Italian (1878) as well. The German edition was not published until 1881. Walras added four extra papers and, in 1883, completed a more comprehensive book with the same title. In that same year, two more episodes were added to the already endless controversy regarding the mathematization of political economy. In a joint review of Cournot’s Recherches and of Walras’s Theorie mathematique, Joseph Bertrand (1883) pointed out, among other things, the impact on endowments of trade out of equilibrium, as well as their consequences for the determination of equilibrium. Walras explicitly replied in 1885 in a note, fully assuming the no-trade-out-of-equilibrium hypothesis. As for mathematics as a method, Walras advocated, in his private correspondence with Carl Menger, the idea that mathematics is altogether a method of research, demonstration and presentation, whereas Menger claimed that mathematics cannot be a research method but is, at best, only an auxiliary tool (Jaffe 1965).
However, it is the monetary issue that attracted most of his attention. To the lessons on credit and on the stock market that he was preparing for his Cours d’economie politique appliquee, three more texts must be added: the “Theorie mathematique du billet de banque” (1881), “Monnaie d’or avec billon d’argent regulateur” (1884) and Theorie de la monnaie (1886). In July 1889, delayed only by the studies on the issue of money, the second edition of the Elements was eventually published, with major changes. Walras added an introduction to the mathematics used in his book (OEC VII: 236-60) and he changed the order in which chapters were organized. While the actual definition of social wealth still implies three general facts (property, value in exchange and industry), in the second edition, a fourth science was added: pure moral science, which was seen as affecting the relationships among sciences (see below). The theory of capitalization was fully developed and, above all, he drastically altered his monetary theory. Financial and monetary issues had always preoccupied him, owing to their potentially destabilizing nature, and the causes of the crisis were gradually “endogenized” into a very sophisticated monetary theory. The publication of the second edition revived the controversy over pricing and another controversy was raised, this time with Francis Ysidro Edgeworth (1889) who criticized Walras’s tatonnement (trial and error). The exchange of letters between the two men only demonstrates they utterly misunderstood each other, and Walras asked Ladislaus von Bortkiewicz to respond to Edgeworth’s criticism. Which he did, in his review of the Elements (1890).