Educator, Economist (1834–1910)
Leon Walras is credited as the father of general equilibrium analysis and heavily contributed to the marginal revolution.
Leon Walras’ main contribution to economics is general equilibrium theory. General equilibrium theory looks at multiple markets simultaneously (rather than a single market in isolation) and how the decisions of agents are coordinated across these markets. Walras’ aim was to prove that the mechanisms of demand and supply would work across multiple markets in such a way as to bring all markets and prices to their own equilibria.
One important step in his theory was Walras’ Law: any particular market must be in equilibrium if all other markets are also in equilibrium. This requires that excess market demands must sum to zero across all markets in the economy. Thus, in an economy with n markets, it is sufficient to solve for n-1 simultaneous equations to prove that markets are clearing.
Additionally, he is credited as one of the founders of the marginal revolution after postulating the idea of marginal utility. Marginal utility is the additional benefit that a consumer derives from buying an additional unit of a good.
Marginalism then seeks to explain the decisions of economic agents based on the marginal utility of goods; it essentially argues that, when choosing between rival alternative goods, a consumer will choose that which has the greatest marginal utility. This helps to explain why diamonds are more expensive than water; because diamonds bring a greater additional satisfaction than than water, despite water being necessary for human survival.
“It took from a hundred to a hundred and fifty or two hundred years for the astronomy of Kepler to become the astronomy of Newton and Laplace, and for the mechanics of Galileo to become the mechanics of d’Alembert and Lagrange. On the other hand, less than a century has elapsed between the publication of Adam Smith’s work and the contributions of Cournot, Gossen, Jevons and myself.”
– Leon Walras