Walras' Law

Walras' Law

Walras’ Law is a principle in general equilibrium theory asserting that budget constraints imply that the values of excess market demands (or, conversely, excess market supplies) must sum to zero. That is:

Walras' Law is named for the economist Léon Walras, who taught at the University of Lausanne, although the concept was expressed earlier but in a less mathematically rigorous fashion by John Stuart Mill in his Essays on Some Unsettled Questions of Political Economy (1844). Walras noted the mathematically equivalent proposition that when considering any particular market, if all other markets in an economy are in equilibrium, then that specific market must also be in equilibrium. The term "Walras' Law" was coined by Oskar Lange to distinguish it from Say's Law. Some economic theorists also use the term to refer to the weaker proposition that the total value of excess demand cannot exceed the total values of excess supply.