Maurice Allais (1991)
An independentminded French economist, Maurice Allais strove to carry the
message of the original Lausanne School of Leon Walras and Vilfredo Pareto into
the modern era, through what we have called the Paretian Revolution of the
1930s. Maurice Allais wrote two major treatises in the 1940s, Á la Recherche
d'une discipline économique (1943) and Economique et interet
(1947) whose inspiration was to a great part derived 'from meditation upon the
works of Leon Walras, Irving Fisher and especially Vilfredo Pareto, three great
masters who deeply influenced me' (Allais, 1992). In his 1943 opus,
Allais provided the groundwork for much of the Paretian system, including the
first proofs of the Fundamental Welfare Theorems in both a static and
intetemporal framework. He went on to unveil what are now standard ideas about
market failures in a general equilibrium setting. Recognizing the potential
implications of natural monopolies, transactions costs and unnatural rents on
market efficiency, Allais made several quite 'radical' policy proposals. His
affinity to the old Lausanne school extended to the points on policy, e.g.
sharing the latter's call for the complete nationalization of land and massive
income redistribution by capital taxation.
Among his
contributions in 1947 was the invention of the nowfamous 'overlapping
generations' (OLG) model (before Paul Samuelson). Allais also introduced the
'Golden Rule' for optimal growth. The contribution Allais is generally best known for in the
AngloSaxon world is the Allais Paradox in the theory of choice under
uncertainty  which he presented in a series of papers in 1953. Succinctly, the
paradox claims that the assumptions made in conventional expected utility theory
contradict real life decisions  specifically, Allais finds behavior which
contradicts the expected utility rule. The idea introduced by Allais is that
there is a systematic relationship between an agent's attitude towards risk and
the 'degree of certainty', what was later called the 'common consequence
effect'. Discovering this paradox, Allais led the way to new attempts at
formulating new theories of decisionmaking under uncertainty (e.g. 1983, 1984,
1986, 1988, 1991). Maurice Allais's legacy is mixed. Through his two major works
(1943, 1947) and as mentor of two of the most prominent pioneers of
NeoWalrasian theory, Gerard Debreu and Edmond Malinvaud, Allais channeled
numerous concerns of the original Lausanne School economists into the postwar
General Equilibrium program. Today, he might be best known for his development
of the Allais Paradox in uncertainty theory, but most of Allais's highly
original contributions  notably his surplus theory of exchange and stability
and his unique 'psychologicalrelativistic' theory of money (1966, 1972, 1974,
1975)  have been either completely ignored or surreptitiously stolen by the
mainstream economics establishment without due acknowledgement.
Nonetheless, despite the numerous setbacks during his professional career,
Maurice Allais was vindicated by being made an officer of the Legion of Honor in
1977 and a richlydeserved Nobel Memorial prize in 1988.
