Walras’ theory of capital formation: an intertemporal equilibrium reformulation

In this paper we propose a mainstream reformulation of the original Walras’ model of capital accumulation. First, we prove the existence of intertemporal competitive equilibria. Our proof combines a well known theorem due to Yannelis and Prabhakar (J Math Econ 12:233–245, 1983) with a lemma due to Geanakoplos (Econ Theory 21:585–603, 2003). Moreover, we remedy the indeterminacy of allocation of savings across multiple types of capital goods by introducing a storage technology. Finally, we show that, for stored capital goods, the equality of rates of returns emerges endogenously in equilibrium, while it was imposed by Walras from the outset in his original contribution.