JOURNAL

OF ECONOMIC

THEORY

3, 146-155 (1971)

The Le Chatelier
Principle
as a Corollary
to a Generalized
Envelope Theorem
EUGENE SILBERBERG
Department of Economics, University of Washington, Seattle, Washington 98105
Received June 29, 1970

In a series of articles Samuelson explores the comparative statics of

equilibrium
systems under varying degrees of constraints [3-5, also 61.
In particular, he derives the generalized Le Chatelier principle for
the maximizing process:
Maximize

z = f(xl ,..., x3 - i
id

olixi .

(1)

Assuming the matrix of cross-partials off, (fiJ negative definite, the

Le Chatelier principle asserts that as constraints are added to the firstorder equilibrium conditions, then

where the subscript outside the parentheses indicates the number of

additional constraints places on the xis1 The purpose of the present
paper is to demonstrate that the Le Chatelier principle and other interesting
economic theorems are consequences of one heuristically obvious proposition: In a maximization
problem, in a neighborhood of the maximum
position, the fewer restrictions placed on the independent variables,
the larger will be the value of the objective function. I call this proposition
the generalized envelope theorem; it includes, as a special case, the
envelope theorem presented in Ref. [3], pp. 34 and 35.
1 These constraints must of course be consistent with the original equilibrium. They
are just binding at the original parameter values. Thus, they do not change the equilibrium position, but do effect the rates of change of the variables with respect to parameter changes.

146

347

LE CHATELIER PRINCIPLE
I. THE GENERALIZED

ENVELOPE

~~~~~~

Leff(x, ,-, x, , a) be strictly concave in the xis and twice di

with respect to the x$s and 01, a parameter. Suppose that for each (Y,
a unique point of maximization is associated with the following problem:
Maximize
The optimal

2 = f(xI ,a..9x, , ~2).

xts are given by

j&*

)...) x,*, a) = 0,

i=l

)..., n.

(4)

Suppose now that Y additional constraints gj(xl ,..., x,) = 0 are imposed
on the xis such that gj(x,* ,..., x,*) = 0, j = l,.., r, r < M.
let these constraints be independent, i.e., the matrix (3gj/axi) has rank r.
The Lagrangean for this problem is
L = f(x, ,...) x, ) a) i

i Xjgj(x, )... ~x,),

j=1

co

Thus, the first-order conditions now become

where,fi = i3f/axi and g, = agj/axi . Throughout

the paper, the maximization point is assumed to be regular, i.e., the Jacobian associated with
Eqs. (6) and (7) is nonzero for any number of constraints Y < n. The
equations can therefore be solved (in principle) for the xis and the
Xis in terms of oi:

iv* = lqa),

j = l,..., 1.

49)

The indirect objective function z = I

is obtained by substituting
Eq. (8) into z =f(xI ,..., x, , CX). $(a) gives the maximum value of z
for any CX,as all the xis adjust optimally, i.e., according to Eqs. (6) and (7).
For notational ease, the asterisks will now be dropped; all xi)s and his
will be presumed to satisfy Eqs. (8) and (9).
Since the number of constraints r is to be varied, the following notation
will be used: Let (.), @ denote functions relating to a system (3) with r

148

SILBERBERG

constraints. Since the constraints are consistent with the unconstrained

maximization,
#(a) = +T-l(ol), Y = l,..., ~1.AIso,~

The comparative

statics of the system is given by the matrix equation

(fp)

(11)

where
(fp)=
i

F 1 G
-_-_)-_-_
GTT ) 0

.
i

F is the n x M matrix (fij),3 G, is the n x r matrix (gj) with c its

transpose. Let Hr be the determinant of (Hr), and HA be the cofactor

of the element in the i-th row and j-th column.

The following ordinary comparative statics relations obtain:
($,=

($,=-gl&*,

Differentiating

-gl&J$+,

i=

(124

l,..., y2,

j=l,...,

r.

Wb)

Eq. (10) once more and using Eq. (12a),

2 Note that& is really just (dz/dor).

3 Since the constraints are just binding at the maximum point, and the Lagrange
multipliers are continuous functions of 01, these multipliers zero at that one point;
hence Li5 = & . This proposition emphasizes the local nature of the results.

LE

CHATELIER

PRINCIPLE

149

When r = 0, Eq. (13) becomes Samuelsons envelope theorem. By a wellknown theorem [3, Appendix A] the submatrix of (Hr)-1 consisting of
the first IZ rows and columns is negative semidefinite of rank YE- Y,
hence 4Ey(a) >,feol. (When P = 0, (HO)- is negative definite; hence
since the degenerate case +a,(~) = & ,
5% > focy.) Alternatively,
K(4 2 #,,(4.
How do +:%(a) and #L;(a) compare?
THEOREM

(Generalized

Envelope Theorem).

Under the Qss~l~~~iu~s

aboue,

Proof of(c).

Using the well-known Jacobian theorem on reciprocal determinants [I],

A * A,,,,, = A,,, . A,, - A,, . A,, , where A,i,,,,,r, denotes the cofactor
of the element ars in the determinant A,,, , and noting that P-I =
fc+T,n+r >

Since dhr/da = -C~=l,f~ol(H~+T,klH))

we get

since M and Hr-l must be of the same sign [2, Appendix A]. Hence, for
regular maxima,

150

SILBERBERG

In the more general case where z =f(xl ,..., X, , 01~,..., OI,& a result
corresponding to Eq. (15) can be derived for the cross partials of 4.
Using Eqs. (12),

(17)
The exact same determinants are involved here as in the proof of(c) above,
thus by similar manipulation,

This expression is in general indeterminate in sign (except when s = t).

Thus, no general Le Chatelier Envelope Theorem for maximizing problems
is possible for off-diagonal terms. However, since these Lagrange multipliers are often imputed rents, the expression may be useful.

II. APPLICATIONS

1. In the special case where z = f(x, W) = h(x, ,. .., x,) - C wixi

(e.g., the profit-maximizing
competitive firm), then dz/dwi = &, = -xi
and &,,i = -((a~,/&$.
The classic Le Chatelier principle as stated in
Ref. [3] and at the beginning of this paper thus emerges as a particular
case of our envelope theorem.
How does the degree of substitutability
or complementarity
among
factors change as an institutional
restriction fixing a certain factor k
is removed? From Eq. (18),

- (Z) + (gg = - jg (g)(g)>

(19)

where hk is the Lagrange multiplier

associated with the constraint
xp - xko = 0. (hk is thus the imputed rent to that factor.) By conventional
comparative statics analysis, it is easy to verify the reciprocity relations
(&ik/aw$ = (ax,/axk). 1n addition, since a relaxing of the constraint
xk = xko is the same as increasing the use of factor k by reducing its price,

axi T z
sgn ( axko1

sgn

(-

-.@f$.-)+,

(20)

LE CHATELJER PRINCIPLE

k-51

where (3xi/8w$-l
refers to the system without the constraint xk = xkO~
(A formal proof of Eq. (20) is given in the Appendix). Assume now that
the Hicks-Morishima
rule that substitutes of substitutes are substitutes,
etc. hslds4 Then the expression on the right side of Eq. (19) must be
negative if factors i and j are substitutes (8xi/~wj > 0), and positive if
factors i and j are complements (axi/awj > 0). ence factors i and j
will be weaker substitutes the fewer restrictions are placed on other
factors, be these other factors complements or substitutes. S~mi~arly~
if factors i and j are complementary, they will be less so with fewer restrictions on the other inputs. The absolute values of the cross-elasticities of
factor demands must be less when fewer restrictions are placed on the
other inputs, under the above assumptions.
2. The present analysis can be readily applied to the analysis of
the effects of rationing on consumer behavior. After some rather lengthy
mathematics, Tobin and Houthakker
[7] derive some results for the
ordinary (uncompensated) demand curves using quantitative information
about income elasticities, substitutability of goods, etc. A strictly qualitative result for the income compensated demand curves is proven-that
the compensated demand curves are more elastic the fewer restrictions
are placed on the other commodities. The reason why no qualitative
(i.e., embodying no quantitative information other than the ma~m~zation
hypothesis) results concerning the effects of rationing are forthcomi~~g
in the uncompensated case is that ax,/8ppi is not the second partial of
some indirect objective function. For the compensated case, which can
stated as max(--M) = -zpixi
subject to U(x, )..., x,) = U, ) a constant:
-cJM/LI~ = -aMjapi
= -Xi . Hence (ax,18pJuzu,
= PiW/i;pi2 and our
envelope theorem provides information
about these second partials.
ence, the ke Chatelier principle for compensated price changes fohows
immediately:

The analysis of the cross partials ax,/i?p, is essentially the same as in the
profit maximizing example. The results are the same: Under the same
types of assumptions, the less restrictions (rationing) placed on the
commodities consumed, the smaller the absolute sizes of the cross4 Specifically, this says that sgn @x,/&vJ = sgn @xii&vk) sgn @xk/~wJ for any
number of additional constraints. Note that there is no reason why factors cannot be
substitutes under one set of constraints and complements under another.

152

SILBERBERG

elasticities of demand. These results are consistent with intuition: One

might expect that the more alternatives open to a consumer or producer,
the less the effects will be on any one alternative when relative prices
in the system change. An elegant discussion of the Le Chatelier principle
and related rationing problems is given in Ref. [2].
3. One last example will be given which demonstrates the methodological generality of our results. Consider a firm selling its output in a
competitive market at price p, but purchasing its inputs in an imperfect
market, so that its cost function is of some general form C = C(x, ,..., xn).
(This example will, of course, be valid for competitive factor markets.)
How is the slope of the supply curve affected by institutional restrictions
on the factors ? The profit function is T = py - C(x, ,..., x,), where
Y = f(x1 ,...> x,) is the production function. Letting 4 symbolize the
indirect profit function, we have i?+jap = aTlap = y, az#apz = ayjap.
Hence, the envelope theorem asserts that for this general case, assuming
profits are indeed maximized, ay/iTp will be greater, or the slope of the
firm supply curve as ordinarily drawn will be less, the fewer restrictions
placed on the inputs.
The methodological significance of this result should not be overlooked:
The parameter p enters into all the first-order equilibrium
conditions
of the unconstrained system. Thus, the type of analysis presented in the
section on the Le Chatelier principle in Ref. [3] is not directly applicable
here. Yet the question posed above admits of a simple answer using the
generalized envelope theorem.

APPENDIX:

PROOF OF EQUATION (20)

We consider the problem

maximize 2 = /2(x, ,..., x3 -

wixi ,

C-41)

i=v+l

subject to xj - xjo = 0,

j = l,..., r,

r < n.

642)

The same just binding conditions discussed in the text apply to the
constraints (A2). The Lagrangean expression for this problem is
L = h(x, )...) xn) -

W& + i

i=Wl

j=l

iv(Xj - Xj),

(A3)

LE CHATELIER

and the first-order

conditions

153

PRINCIPLE

are

hi - wi = 0,
hj - Xi = 0,

i = I* + I,..., Iz,

(AdI

j = I,..., r.

The variable xk in the text will be relabeled as x, . The following

tive statics relations are then obtained:

(A3
compara-

Hence,

It is also clear that by differentiation

that
H;,,,
z--L--=AH

of (A4) and (A5) with respect to wj ,

H;,, j
H

Suppose now the constraint x, = x,O were removed, and factor x,

became available at wage w, = XT, the old imputed rent to this factor-j
Then the equilibrium position would remain unchanged, and the following
comparative statics relations would be obtained,
649)
(A7) and (A9) will not be compared. H and EP1 are both positive
a well-known theorem on maximizing behavior [3].

by

5 The hs are not zero here because the factor prices w1 ,..., w, for the fixed factors
were not included. This is a matter of no consequence here: With linear constraints,
the cross-partials of the Lagrangean expression are just those of the objective function.

154

SILBERBERG

In particular,

(AW

The following obvious property of determinants

determinant A = (aij) with signed cofactors Aij ,

is needed: For any

Aij = -

Repeated applications

(All)

of this proposition

to the determinants

HL+T,j and

HJj:l yield the following results:

Let j hij / be the IZ x IZ determinant

tion function h(x, ,..., x,).

of the cross-partials of the produc-

0) For Hi+,,j , the ls in the borders serve to eliminate columns 1

through (r - 1) and rows 1 through r of the submatrix (h& In addition,
column j does not appear since it was eliminated in forming this cofactor.
Hence, H&,,j consists of that as yet unsigned minor of / hij j formed by
deleting rows 1 through r and columns 1 through (r - 1) and column j.
The signing factor of this minor is determined by first noting the factor
(- l)a+r+j for H;+T j , then expanding this cofactor by the last column
(consisting of a 1 in row r), and then eliminating the r - 1 rows and
columns. Hence the signing factor is (- l)n+r+i . (- l)r+n+r--l * (-1),-l =
(-l)z(n+zr-l)+~~

(ii) For HF;l, row r and column j are eliminated in HT-l, with a
signing factor of (-l)T+j. Then rows and columns 1 through r - 1 are
eliminated by the ls in the border (signing factor (-l)-l)
leaving the
identical minor as in H&,,j. The signing factor, however, is (-1)2T+j-1.
Since the signing factor here is an even number plus (j - l), whereas,

LE CHATELIER PRINCIPLE

155

in gfTL+r,j
, it is an even

number plus j, Hi+,,j and Hf; are identical in

absolute value but opposite in sign. Since EP and P-l are of Iike sign,
Eq. (20) in the text is obtained, viz.,

ACKNOWLEDGMENT
The author is grateful to Professor Hugo Sonnenschein, whose comments helped
clarify parts of the manuscript. Any remaining errors are of course my own.

i. A. C. AITKEN, Determinants and Matrixes, Edinburgh Univ. Press, Edinburg,

1949.
2. R. POLLAK, Conditional
Demand Functions and Consumption Theory, Quarwfv
fournal of Economies 83 (1969), 60-78.
3. P. SAMUELSON, Foundations of Economic Analysis, Harvard Univ. Press, Cambridge, Massachusetts, 1947.
4. The Le Chatelier Principle in Linear Programming. Rand Corporation Research
Memorandum, 1949. Also in The Collected Scientific Papers of Paul Samuelson,
(J. Stiglitz, Ed.), Chap. 43, The M.I.T. Press, Cambridge, Massachusetts, 1966.
5. P. SAMUELSON, An extension of the Le Chatelier principle, Eronometrica 28 (196Oj,
368-379; irz Scientific Papers, Chap. 42, The M.H.T. Press, Cambridge, Massachusetts, 1966.
6. P. SAMUELSON, Structure of a minimum equilibrium system, iiz Essays in Economics
and Econometrics: A Volume in Honor of Harold Hotelling, (Ralph W. Pfonts,
Ed.) Univ. of North Carolina Press, Chapel Hill, N. C. 1960; in Scientific Papers,
Chap. 44, The M.I.T. Press, Cambridge, Massachusetts, 1966.
7. J. TOBIN AND H. S. HOUTHAKKER,
The effects of rationing on demand elasticities,
Rev. Econm~ic Studies 18 ('1950), 149-153.