Professional Documents
Culture Documents
Born on October 31, 1902, Abraham Wald was a pioneer in the fields of
Statistics, Economics as well as Mathematics. Born in present –day Cluj,
Romania to Jewish parents Abraham Wald was tutored privately. However in
1927, he enrolled with the University of Vienna and received his PhD in
mathematics. Although he studied Mathematics but did not attend many
courses and instead spent time solving open mathematical problems.
Major Works
In the course of this study, Wald was introduced to Karl Menger and attended
the latter’s maths colloquium. This was the period that saw most of his work on
geometry and topology working on Steinitz theorem and a characterization of
Lebesgue measure as a measure which assigns the value 1 to every unit cube. .
After obtaining his PhD in 1931, Wald applied for a position at the University of
Vienna but due to the adverse political and economic situation and Karl
menger’s intervention , Wald became a private lecturer in mathematics to karl
Schlesinger. Schlesinger introduced Wald to the idea of Walrasian equation
systems, the period characterizing his fascination with general Equilibrium
theory with the publication of three of his major works on the same. These were
as listed below:-
Another problem with Cassel’s model was the manner in which the production
side was incorporated. Pointed out by Stackelberg in 1937, a case where the
number of industries exceeded the number of factors, the system would once
again become indeterminate as there could be multiple solutions. Even if the
number of industries is more than the total inputs the system would only be
determinate if all inputs are used by all industries.
The Walras- Cassel model as pointed out by Neisser also did not take into
account the notion of free goods and free services for which equilibrium prices
are either negative or zero. On the same lines Zeuthen pointed out the implicit
assumption of the model that all factors have prices because they are scarce is
essentially incorrect owing to the fact that for many factors of production
supply is typically more than demand at every positive price.
Abraham Wald and Karl Schlesinger took up this critique of the Walras- Cassel
system and introduced inequalities in the system to make it determinate and
prove the existence and uniqueness of the so determined equilibrium. As
regards the indeterminacy, Wald dealt with the issue by introducing an
inequality wherein the supply of a factor of production has to be greater than or
equal to its demand. The insertion of the case where there is excess supply at
any price implies that wages to the factor or factor price is in effect zero, given
the basic condition that only non-negative price vectors are considered in the
model. Inspired from this correction , later on Jon Von Neumann introduced
another inequality that required price of each commodity to be less than or
equal to the cost of production, thereby incorporating the case of free goods as
well.
Walras had also realised the same problems but perhaps found the use of
inequalities rather cumbersome and detrimental to the solution of the system.
However Wald provided necessary and sufficient conditions to prove the
existence of a unique equilibrium. The Existence proof was based on an
assumption of the Weak Axiom of Revealed preference at the individual level as
well as the market level. He also employed the methodology of linear
programming with a primal and a dual, the underlying notion being that of
induction of n number of commodities. Wald also coined the Complementary
slackness conditions that require the Lagrangian multipliers for both the primal
and the dual to be solution vectors to the other. These conditions established
that at positive prices, factor markets clear and that a good is produced only if
price is greater than the cost of production. In this manner it was ensured that
there were no free foods per se because for every commodity with a zero
equilibrium price Wald had proved there was zero excess demand.
The impact of Wald’s work was so crucial that even today it is the Wald system
which we study in order to understand the Walrasian system in complete detail.
Abraham Wald was an economist dedicated to his work, made tactful by his
knowledge of mathematics and famed by his work in Statistics. The
combination of these qualities can be used to judge his clarity of thought as is
also hailed by his fellow economists- evident in Morgenstern’s 1950 article on
Wald in Econometrica.
Abraham Wald died at a rather early age in 1950 in a plane crash, while flying
over India.
Box 2