Factoids and Snippets about Property Valuation Methods

Marie-Esprit-Léon Walras (1834 –1910)

While delving into the history behind the development of AVMs, we came across this interesting pioneer. Léon Walras was a French economist who formulated the marginal theory of value (independently of William Jevons and Carl Menger) and pioneered development of general equilibrium theory.

“I say that things are useful whenever they can be put to any use at all” - Léon Walras

In the early 1870s the theory of marginal utility started a brand new microeconomics. The main impact on future development of AVMs was the theory of value. Before these bright sparks, the classical thought was that exchange value was based on building costs, particularly labour. Marginalist theory linked value with use and demand. So, if you flood the market with new property, the demand is diluted and the cost becomes almost irrelevant.

Initially Walras enrolled at the School of Mines in Paris but didn’t like engineering and quit. He tried several diverse careers. These include, but are not limited to: a journalist, a railway clerk, a bank director, and even a published romantic novelist! He applied for economics posts in France but was under qualified, and complained that the orthodox French economists passed on their chairs to their relatives. Finally he obtained tenure at the University of Lausanne in Switzerland.

Whilst Jevons was lauded in England, just as Menger was in Austria, poor Walras was in Switzerland where the academic appreciation of economics did not have a major role. However, Walras continued his dedication to his theories, and simulated an artificial market process that would get the system to equilibrium, a process he called “tâtonnement” (French for “groping”). He hypothesised that tâtonnements in the markets for productive services and for consumer goods are interrelated.

In 1895 Walras’s successor to the chair of economics at Lausanne, Pareto, presented Walras’s ideas in his own books, and finally began their widespread dissemination.

In 1904, Walras wrote to old friends about his future:
“I have not the least doubt about the future of my method and even of my doctrine; but I know that success of this sort does not become clearly apparent until after the death of the author”. then in 1909 a celebration of his jubilee was held by the University of Lausanne. He was honoured as the first economist to establish the conditions of general equilibrium, thus founding the School of Lausanne.

Walras's prediction of success proved accurate. His theory of general equilibrium has been developed further in the 20th century and these have become an integral part of mainstream modern economics.

For sheer genius, and intuitive power in divining the underlying structure of fundamental economic relationships and their extensive interdependencies and consequences, Walras has been surpassed by no one.

Acknowledgements: The Concise History of Economics 2nd Edition, Léon Walras: The life of Léon Walras and perspectives on his thought edited by John Cunningham Wood, Advances in Automated Valuation Modelling edited by Maurizio d'Amato, Tom Kauko,