The Proof of the Original Walras' Law

Abstract

General equilibrium is the foundation of Economics, while Walras' law the foundation of general equilibrium. However, because Walras could not prove his own law, this law has been misunderstood to be the exercise of counting equations, and eliminating some equation or market. This paper shows how the original Walras' law can be correctly reestablished. It is actually Say's law. General equilibrium should be more correctly called pair-wise equilibrium. Disequilibrium, which should be better called balancing disequilibrium, is also an important part of Walras' law. A correct understanding of this Walras' law is important to many fields of studies, e.g., international trade and unemployment theories.