The classical dichotomy in the walrasian system: a critical examination

Abstract

Walras' general equilibrium model with money is presented and the allegation that it retains the classical
invalid dichotomy is re examined. It is shown that, although mathematically incorrect, the model retains
the properties of a consistent system and a slight modification makes it determinate without changing its
basic features. In fact Walras' model is shown to be equivalent to the standard neoclassical general
equilibrium model with money as developed mainly by Patinkin.