ABSTRACT
Arthur Marget (1935, p. 152) has pointed to the ‘extravagant praise’ bestowed on Vilfredo Pareto for his work on monetary theory by members of the Lausanne school.2 This greatly irritated Marget as there were no such words of praise for the great Léon Walras, whose innovative and original work on monetary theory was left to languish by Pareto and his followers. Of course, Walras’s contribution to monetary theory is now well appreciated. His notion of circulation à desservir, introduced in the first edition of the Éléments d’Économie Politique Pure published in 1874, anticipated Fisher’s equations of exchange. This notion was then replaced in the subsequent editions of the Éléments by the new concept of encaisse desirée (demand for cash balances), which is credited with largely anticipating the ‘Cambridge’ cash balance approach to the quantity theory, though the extent of the anticipation is disputed.3 In the fourth edition of his Éléments, which was the last edition published in his lifetime, Walras actually attempted to fully integrate
the encaisse desirée specification of cash balances within his system of general equilibrium.4
