Walras on capital: interpretative insights from a review by Bortkiewicz

A review by Bortkiewicz, wholeheartedly approved by Walras, of the second edition of the Eléments supplies an important insight, until now neglected, on how Walras interpreted his own capitalization equations before the fourth edition. The insight helps to explain why Walras was for so long unable to perceive that his given vectorial endowment of capital goods was incompatible with the uniform rate of return on supply price that he was assuming. Walras seems to have confusedly considered the capital endowments relevant for the determination of equilibrium rentals to be the ones resulting from the production of new capital goods, and therefore as having already undergone an adjustment of their composition toward the one required for URRSP. Realization of the erroneousness of this view can explain the unobtrusive but crucial changes in the discussion of capitalization in the fourth edition, and most likely also the introduction of the ‘bons’.