Published Mar 22, 2024 Unfortunately, you haven’t provided specific details for a glossary entry about the “Lausanne School.” However, below is an extended glossary-style entry based on what the Lausanne School typically refers to in economics. — ### Lausanne School #### Definition of Lausanne School The Lausanne School is a school of thought in the field of economics that emerged in the late 19th and early 20th centuries. It is named after the University of Lausanne in Switzerland, where two of its leading proponents, Léon Walras and Vilfredo Pareto, worked and contributed their pivotal ideas. The Lausanne School is recognized for its development of the mathematical and equilibrium analysis in economics, marking a significant departure from the classical economics theories of the time. It focused on the conditions of general economic equilibrium and the notion that markets could reach equilibrium through the interplay of supply and demand. #### Key Contributions 1. **General Equilibrium Theory**: Léon Walras is credited with developing the general equilibrium theory, an analytical framework that describes the equilibrium allocation of resources in all markets simultaneously. This framework considers the interdependence of markets and the way in which changes in one market can affect other markets. 2. **Marginalism**: The Lausanne School advanced the theory of marginalism, emphasizing the significance of marginal changes in economic analysis. It highlighted the utility consumers derive from goods and services and how decisions are made on the margin. 3. **Pareto Efficiency**: Vilfredo Pareto introduced the concept of optimum allocation of resources, known as Pareto efficiency or Pareto optimality. This condition is achieved when no individual can be made better off without making someone else worse off, highlighting the efficiency in the distribution of resources. 4. **Welfare Economics**: The School made substantial contributions to the development of welfare economics, exploring the conditions under which market equilibrium results in an optimal distribution of resources from a societal perspective. #### Example To illustrate the principles of the Lausanne School, consider the market for apples. According to general equilibrium theory, the price and quantity of apples will adjust to reach a point where the quantity supplied equals the quantity demanded. This equilibrium reflects a state where the marginal utility of apples to consumers equals the marginal cost of producing apples to suppliers. If the market for fertilizer, which is used to grow apples, experiences a price increase, the general equilibrium framework would examine not only the direct impact on the apple market but also the subsequent effects on other related markets. #### Why the Lausanne School Matters The theories developed by the Lausanne School laid the groundwork for modern microeconomics and greatly influenced the mathematical modeling of economies. By introducing a systematic, analytical approach to understanding economic equilibrium, the School helped move the discipline toward a more scientific and less philosophical methodology. This has enabled economists to formulate policies that aim to guide markets toward outcomes that maximize societal welfare, based on principles of efficiency and equity. #### Frequently Asked Questions (FAQ) – **How does the Lausanne School’s view of equilibrium differ from classical economics?** – **Can a real-world economy achieve Pareto efficiency?** – **What is the relevance of the Lausanne School in today’s economic policy-making?** In conclusion, the Lausanne School represents a pivotal movement in economic thought, introducing concepts and analytical tools that continue to shape the understanding and application of economics in contemporary society.
The Lausanne School’s notion of equilibrium is more comprehensive, considering all markets in an economy simultaneously, whereas classical economics focused more on partial analyses, such as individual markets in isolation.
While Pareto efficiency is a useful theoretical benchmark for analyzing economic efficiency, in practice, multiple factors such as market imperfections, externalities, and information asymmetry make it difficult to achieve.
The principles of the Lausanne School, especially in terms of welfare economics and general equilibrium, continue to influence economic policy. They provide a framework for understanding the potential outcomes of policy decisions, aiming to optimize resource allocation and improve societal welfare.
Economics