Who Was Maurice Allais?

Maurice Allais (1911–2010) was a prolific neoclassical economist who won the 1988 Nobel Memorial Prize in Economic Sciences for his research on market equilibrium and efficiency. He also won a prestigious French award, the Gold Medal of the National Center for Scientific Research; developed methods that state-owned monopolies, common in France, could use to set prices; and discovered and resolved what became known as the Allais paradox, which explains people's risk management behavior.

Key Takeaways

  • Maurice Allais was a neoclassical economist who won the Nobel Prize for his work in general equilibrium theory in 1988.
  • Allais spent his career as an academic economist and government economic planner for the French government. 
  • He made contributions to several areas of economic theory that anticipated the work of more well-known economists, but because he wrote and published only in French, he was not as well recognized.

Understanding Maurice Allais

Allais was born in Paris, where his family owned a small cheese shop. His father died in a German prisoner-of-war camp during World War I, and his mother raised him in near-poverty. Allais loved math and science, excelling in school and eventually studying mining. Before the outbreak of World War II, he managed French national mining interests, then became a professor of economics at the École Nationale Supérieure des Mines de Paris while also pursuing his own research in experimental physics, particularly the relationship between gravity and pendulum movements.

But a trip to New York during the Great Depression inspired him to become an economist so he might understand what triggered such devastating financial calamities. Throughout his career, Allais stood astride the boundary of socialism and free market economics. He favored achieving economic efficiency regardless of whether the means would be markets or central planning, and sought a synthesis between the two. Contrary to many of his contemporaries, Allais staunchly opposed globalization and was deeply skeptical of European integration, believing that protecting local markets helped to alleviate poverty.

Contributions

Allais worked in relative obscurity for decades, primarily because he resisted writing in English, which is the preferred language of economists internationally. In the 1970s, before Allais was widely known outside France, the American economist Paul Samuelson won a Nobel Prize for similar research into market theories. Samuelson later said that had Allais' earlier works been known in English, "a generation of economic theory would have taken a different course."

Allais' areas of economic research included general equilibrium theory, capital theory, decision theory, monetary theory, and probability theory.

General Equilibrium

Allais' work in microeconomic theory and general equilibrium paralleled or anticipated many of the theories developed by neoclassical and Neo-Keynesian economists in the mid-20th century. This was the primary topic of his first book, A la Recherche d'une Discipline Economique. L 'Economic Pure, which focused on the proof of his two equivalence theorems: 1) that any state of equilibrium in a market economy is also state of maximum efficiency, and 2) that any state of maximum efficiency is also state of equilibrium.

Capital Theory

Allais second book, Economie et Intérêt, focused on capital theory and trade-offs between present and future productivity. Also noteworthy was his so-called golden rule of economic growth: namely that real income grows most efficiently when interest rates and growth rates are equal.

Decision Theory

Allais sought to extend his general equilibrium analysis to economic decision making under conditions of risk and uncertainty. His research into risk management led to his famous paradox: "The less the risk is, the more the speculators flee."

Monetary Theory

Beginning in the 1950s, Allais developed a theory of monetary dynamics based on the supply of money and the demand to hold money. This theory relied on his previous work on intergenerational and psychological aspects of capital theory and decision theory to explain monetary demand. He argued that his theory explained the historical pattern of economic cycles. 

Probability Theory

Allais combined his interest in the physics of oscillations with his observations on economic decision making under uncertainty and economic cycles to later argue that virtually all of the random variation in physical, biological, psychological, and economic time series results from the resonance of vibrations that permeate space throughout the universe. He believed that these almost perfectly periodic vibrations created a deterministic structure to the universe that only appears to be random because it consists of many overlapping vibrations of different frequency and amplitude.