Studies in Applied Economics StudiesinAppliedEconomicsisanEnglishtranslationof Étudesd’économie politiqueappliquée(1898)byLéonWalras(1834–1910). Untilnow,Élémentsd’économiepolitiquepure(1874)wastheonlybookby Walras available in English (Elements of Pure Economics, 1954). It contains the theory of general economic equilibrium under free competition, with the conceptofutilitymaximizationasitscore.Walras’sconclusionwasthatwhere freecompetitionispossible,itshouldbetherule. So, in the present book, he advocates protective regulation, within which economicagentsmaycompetefreely.Forwater,gasorrailwaytransport,for instance,wherefreecompetitionisimpossible,rulesareformulatedtomaintain its advantages. Issues such as money, capital, credit, banking and the stock marketsarealsodealtwith.Thebook’sfinalchapterrecapitulatesthethemes of Walras’s three main works: Éléments, Études d’économie sociale and this volume,Étudesd’économiepolitiqueappliquée. Walras’s aim was to provide an economic blueprint for a social ideal where poverty and similar evils could be banished. His three main books include all the elements necessary ‘to complete the mathematical theory of economicequilibrium’.Unfortunately,thissynthesiswasneverdeveloped,but the current book sheds light upon this point, providing a unique insight into LéonWalras’smindandabetterunderstandingofhisÉléments. This translation was prepared under the auspices of the Centre Auguste et Léon Walras, Université Lyon-2. Most of the annotations are translations of those by Jean-Pierre Potier (Centre Walras) in Études d’économie politiqueappliqué(Paris:Economica,1992).Thesenotesandthetranslator’s introductionmakethebookindependentlyreadable. Jan van Daal is an expert on the life and works of Léon Walras. A former memberoftheEconometricInstituteoftheErasmusUniversityRotterdam,he isnowattheCentreWalras.Hehasalsowrittenonsuchdiversesubjectsasthe workofH.H.Gossen,trafficmodelsinDutchinlandnavigation,aggregation problemsanddemandsystems. Studies in Applied Economics Theory of the production of social wealth Volume I Léon Walras Translated and introduced by Jan van Daal Englishtranslationfirstpublished2005 byRoutledge 2ParkSquare,MiltonPark,Abingdon,OxonOX144RN SimultaneouslypublishedintheUSAandCanada byRoutledge 270MadisonAve,NewYork,NY10016 RoutledgeisanimprintoftheTaylor&FrancisGroup This edition published in the Taylor & Francis e-Library, 2007. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Englishtranslationandintroductorymaterial©2005JanvanDaal Allrightsreserved.Nopartofthisbookmaybereprintedor reproducedorutilizedinanyformorbyanyelectronic, mechanical,orothermeans,nowknownorhereafter invented,includingphotocopyingandrecording,orinany informationstorageorretrievalsystem,withoutpermissionin writingfromthepublishers. BritishLibraryCataloguinginPublicationData AcataloguerecordforthisbookisavailablefromtheBritishLibrary LibraryofCongressCataloginginPublicationData Acatalogrecordforthisbookhasbeenrequested ISBN 0-203-92836-9 Master e-book ISBN ISBN0–415–34617–7(volumeI) ISBN0–415–34618–5(volumeII) ISBN0–415–34616–9(two-volumeset) Contents Preface xi Abbreviationsandnotesonthetext xiv Introduction xv 1 LéonWalras xv 1.1 Factsofhislife xv 1.2 Professionallife xvii 2 Generalideasaboutscience,socialscience andeconomics xx 2.1 Socialscience xx 2.2 Economics xxi 3 Pureeconomicsandsocialeconomics xxiii 3.1 Freecompetition xxiii 3.2 Generaleconomicequilibrium xxiv 3.3 Tâtonnement xxix 3.4 Socialeconomics xxxii 4 Genesisof Étudesd’économiepolitiqueappliquée xxxiv 4.1 History xxxiv 4.2 Bibliography xxxiv 5 Contentsof Étudesd’économiepolitiqueappliquée xxxvi 5.1 PartI:Money(sevenchapters) xxxviii 5.2 PartII:Monopolies(onechapter) xli 5.3 PartIII:Agriculture,industry,commerce (threechapters) xliv 5.4 PartIV:Credit(onechapter) xlvi 5.5 PartV:Banking(twochapters) xlvii 5.6 PartVI:Stockmarkets(onechapter) xlix 5.7 PartVII:[Outlineofadoctrine](onechapter) l vi Contents 6 Conclusion li Appendices lii A Walras’sterminologywithregardtocapital lii B ChronologicalorderofthecontentsofEEPA liv C AugusteetLéonWalras:œuvreséconomiques complètes lviii D Correspondencebetween(A)editions1and2 and(B)thePotiereditionoftheEEPA lix Notes lxiii Bibliography lxiv PARTI Money 1 1 Goldmoneywithregulatingsilvertoken 3 Notes 14 2 Measuringandregulatingvariationsinthevalueofmoney 17 I CriticalexaminationofMrCournot’sdoctrineon changesinrelativeandabsolutevalue 17 II Amethodofregulatingthevariationinthevalue ofmoney 21 III Acontributiontothestudyofpricevariationssince thesuspensionofsilverécuminting 37 Appendix 45 Notes 49 3 TheoryofMoney:prefaceandintroduction 50 Preface 50 Introduction:replytosomeobjections 54 Notes 63 4 TheoryofMoney:PartIexpositionoftheprinciples 70 I Exchangeandproduction 70 II Proportionalityofvaluestoraretés 71 III Establishingthevalueofthemoneycommodity 77 IV Variationinthevalueofthenuméraireandmoney 82 Notes 86 Contents vii 5 TheoryofMoney:PartIIcriticaldiscussionofthesystems 87 I Systemswithasinglestandardorwithtwoindependent standards 87 II Thesystemwithadoubleinterdependentstandard,or bimetallism 89 III Transformationofbimetallismintoagoldmoney systemwitharegulatingsilvertoken 94 IV Problemsofrealization 97 Notes 100 6 TheoryofMoney:PartIIIstatisticaldesiderata 103 I Determinationofthepriceofsocialwealthin money 103 II Theconstructionofthecurveofvariationin thepriceofsocialwealthinmoney 107 III Correctingthecurveofvariationinpriceofsocial wealthinmoney 110 IV Themonetaryquadriga 116 Note:onthe‘theoryofquantity’ 122 Notes 127 7 Themonetaryproblem 132 I AnoteonthesolutionoftheAnglo-Indian monetaryproblem 132 II TheAnglo-Indianmonetaryproblem 134 III ThemonetaryprobleminEuropeand theUnitedStates 138 IV Thebimetallistdanger 143 Notes 152 PARTII Monopolies 159 8 TheStateandtherailways 161 I Publicservicesandeconomicmonopolies 163 II Railwaysaspublicservicesandeconomic monopolies 169 III Railwayrates 175 viii Contents IV Stateinterventioninrailways 180 Note 186 Notes 189 PARTIII Agriculture,industry,commerce 195 9 Theinfluenceofcommunicationbetweenmarkets onthesituationofruralcommunities 197 Notes 213 10 Appliedeconomicsandtheprotectionofwages 216 Notes 229 11 Theoryoffreetrade 232 I [Importingwithoutexporting] 232 II [Importingandexporting] 234 III [Internationaltradeandconsumers’utility] 237 IV [‘Free’doesnotmean‘noregulation’] 239 V [Evaluation:France] 241 Notes 244 PARTIV Credit 247 12 Theoryofcredit 249 I Thenatureofcredit 249 II Long-termandshort-termcredit 252 III Creditsecurities:specialsecurities 256 IV Creditsecurities:generalsecurities 260 V Generalprinciplesofcredit 264 Notes 268 PARTV Banking 271 13 Mathematicaltheoryofbanknotes 273 I Monetarydepreciationcausedbytheissue ofbanknotes 273 Contents ix II Capitalincreasebecauseoftheissueof banknotes:periodofissue 280 III Impossibilityofliquidatingtheissueofbanknotes 285 IV Thefreedomofthebanks 292 Notes 298 14 ThePostOfficeSavingsBankofViennaand comptabilismesocial 299 I Schemeofatransferbank 299 II ThePostOfficeSavingsBankofVienna 302 III Comptabilismesocial:thefixedunityofvalue 306 Comptabilismesocial:[legally]enforcedcurrency– therealroleofaclearingbank 310 Notes 314 PARTVI Stockmarkets 319 15 Thestockexchange:speculationandagiotage 321 I Definitionoffinancialspeculation 321 II Thenatureofstockexchangeoperations 325 III Effectsofstockexchangeoperations 330 IV Freedomoffinancialspeculation 334 V Abusesoffinancialspeculation 339 VI FinancialspeculationinFrance 345 Notes 350 PARTVII Outlineofadoctrine 353 16 Outlineofaneconomicandsocialdoctrine 355 I Distinctionbetweenpurescience,moralscience, appliedscienceandpractice 355 II Purescienceofmanandsociety 360 III Purescienceofsocialwealth 364 IV Moraltheoryofthedistributionofsocialwealth: repurchaseofthelandbytheState 368