[T]he direction economics, and particularly theoretical economics, took in the 20th century was to a great extent due to Walras’ influence. This was not so much the result of his own results but rather a reflection of his vision. He was convinced that economics should have ‘sound mathematical foundations’ and his concern for this is reflected in his correspondence with his contemporaries such as [Henri] Poincaré. However, his specific vision of the nature of equilibrium became the benchmark for modern economic theory and led us to the Arrow-Debreu model which is characterised by its lack of institutional features, and the lack of any proof of stability under adjustment, as later to be shown by Sonnenschein, Mantel and Debreu. Above all there is no place in this framework for out of equilibrium dynamics. Whilst Walras is to be lauded for his insistence on the interdependence of markets, we should also be aware that he set us on a path towards economic models which, while admirably internally consistent, seem to be unable to match the empirical evidence.

Can we learn anything about the efficiency of real world market economies by studying the efficiency of Arrow-Debreu-style general equilibrium models?