Maurice Allais: Dynamic Equilibrium Theory Ahead of Its Time

By Sjostrom, Tomas | History of Economics Review, Summer 2012 | Go to article overview

Maurice Allais: Dynamic Equilibrium Theory Ahead of Its Time


Sjostrom, Tomas, History of Economics Review


Abstract: The appendices of Maurice Allais's Economie et Interet (1947) contain original contributions that were largely overlooked at the time, but which foreshadow many later developments in economic theory. The first appendix contains a proof of the golden rule of capital accumulation with zero population growth. The second appendix, which contains a two-sector overlapping generations model, analyses how government policies (such as taxation and public debt) influence private capital formation. The third appendix introduces a notion of multi-self Pareto optimum.

1 Introduction

It cannot be denied, I think, that Professor Allais's original contributions could have been made to stand out more clearly, and that his recommendations for policy could have reached a wider audience, if he had been content to write a shorter book. (Shackle 1949: 88)

Had his earliest writings been in English, a generation of economic theory would have taken a different course. (Samuelson, Wall Street Journal, 19 October 1988:B1 l)

Maurice Allais's well-deserved Nobel Prize fortuitously brought to our attention an injustice inadvertently done him, to which we were unknowing accessories. For years the literature has ascribed to us the parentage of the transactions-cost model of optimal cash balances, with its notorious square-root formula derived from inventory theory. Recently, we found that its essence is contained in Allais's 1947 Economie et IntOrOt. (pp. 238-41). (Baumol and Tobin 1989:1160)

When the Allies liberated Paris, Sir John and Lady Hicks were the first economists in the city. They made their way to an attic where, once their eyes adjusted to the dark, they could see a group with miners' lamps on their heads listening to a lecturer at a board. The lecturer was Allais, and he was talking about whether the interest rate should be 0% [zero per cent] in a stationary state. (Pool 1988:511)

In 1988 Maurice Allais received the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for his 'pioneering contributions to the theory of markets and efficient utilisation of resources' (Nobel Foundation 1988). Specifically, the prize committee singled out A la Recherche d'une Discipline Economique (1943) and Economie et Interet (1947). (1) These books contain original contributions that were largely overlooked at the time, but which foreshadow many later developments in economic theory. Appendix 2 of Economie et Interet introduced the first ever overlapping generations (OLG) model. This contribution had been more or less forgotten when Edmond Malinvaud (1986; 1987; 1995) reminded the profession of it. (2) Malinvaud's lucid account does justice to Allais's OLG model. However, Malinvaud summarised Allais's contribution in a way which may have misled some readers. Namely, he emphasised the complexity of the model, and that 'the data of technical feasibilities as well as consumer preferences do not suffice for the determination of the rate of interest and the allocation of resources' (Malinvaud 1995:111). Accordingly, some readers seem to have concluded that the Allais OLG model contained 'indeterminacies' or in any case was too complex to be useful. Thus, they hesitate to fully credit Allais as the originator of the OLG model. For example, in his survey on 'Samuelson's OLG model', Philippe Weil (2008) relegates Allais to a footnote:

It behooves an economist who received his early training in France to mention here that Allais (I 947) developed what amounts to an early version of the overlapping generations model in a 135-page appendix to his book. To explain why it attracted little attention, Malinvaud (1987) opines that it is 'rather complex, leading to consideration of many cases and to introduction of long formulas'. But h tout seigneur, tout honneur: credit must be given where it is due. (Weil 2008:116)

There is no need to apologise for fully crediting Allais with the first OLG model. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Maurice Allais: Dynamic Equilibrium Theory Ahead of Its Time
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.