How will the equilibrium be achieved? Who sets the price, and what happens if there is disequilibrium trading?
Walras struggled with this question, which is now playing a significant role in modern macroeconomic debates. He proposed numerous schemes involving written and oral pledges and a tatonnement process in which an auctioneer (who has since acquired the name the Walrasian Auctioneer) processes all the bids and offers, determines which prices will clear all markets, and only then allows trading. Donald Walker, who has examined these schemes in depth, has concluded that the model is fatally flawed, because Walras did not endow it with enough viable features. Walker’s conclusion is extremely damaging to the new classical branch of macroeconomics, which bases its analysis on the reasonableness of the assumed auctioneer. These problems are substantial, but they do not undermine Walras’s achievement. He set the framework within which many of the best minds in modern economics have posed questions. Issues concerning the existence and stability of a general equilibrium occupied economists well
