Re: Question regarding Wald (1933); (1951) Econometrica

[Greg Nowell <GN842@xxxxxxxxxxxxxxxxx>]

Actually as Alan Issac responded off list, the better translation is
"gross substitutability."  The gist is that to find a unique solution to a
Walrasian series of equations, you can only do so under a set of highly
restictive assumptions, including gross substitutability of goods: an
increase in the price of one implies an increase in the demand for
others.  One of the things that has to be eliminated from such a
restrictive assumption is paired complentarity of goods, e.g., that the
sale of automobile tires is paired with the sale of automobiles.  The
implication of no unique solution to Walrasian price schemes is that there
are multiple possible equilibria in an economy, which is why it is part of
a background chapter in an introductory book on Keynes.  "Brute
substitutabilite" is probably best translated following the paradigm of
"produit national brut" (=gross national product).   But the main point is
that from the time Walras really framed the problem it was nearly fifty
years till anyone had a solution, and that solution could only be found
under non-real-world assumptions.   If markets can clear in a classical
system only under such bizarre assumptions--as a purely mathematical
proposition--one wonders why the classical approach has had such
adherence.

Davidson has a few mentions of gross substitutability in PKMT (pp. 25, 27,
302, and have a dozen more under "gross substitution," which is discussed
inter alia, in relation to trade adjustments), where it is identified with
the neoclassical position.   I wouldn't have found it without a nudge from
Issacson: in effect, working from "brute substitutabilite," I wouldn't
have known where to look it up in the index.   Wasn't in the MIT
dictionary.

Basically the book I'm translating is the book non-economists should read
*before* reading PKMT.   The presentation of Marshall working on prices
within an economic branch and Walras working on prices among all economic
branches is most helpful in seeing where Keynes (& by implication,
Davidson) is coming from.

-gn.

David Gleicher wrote:

> Greg,
>
> I suspect what you're looking for is the assumption that all goods are
> 'imperfect substitutes.'
>
> DG



--
Gregory P. Nowell
Associate Professor
Department of Political Science, Milne 100
State University of New York
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