Walras's Law in Macroeconomic Disequilibrium

Robert L Greenfield

Australian Economic Papers, 1986, vol. 25, issue 47, 257-60

Abstract: Does Walras's Law hold in general disequilibrium? This note finds in the affirmative. Against a depression's unmistakably effective excess supplies of goods and services stands an effective excess demand for money. Expressed in terms of effective excess demands, Walras's Law, far from the equilibrium condition that some writers portray, is a tool of disequilibrium analysis. The Law reminds us how effective and notional demands diverge in the first place and why any apparent failure of effective demand for currently produced output stems from attempts to hold cash balances adding up to more money than actually exists. Copyright 1986 by Blackwell Publishers Ltd/University of Adelaide and Flinders University of South Australia

Date: 1986
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