France, economics in (after 1870)

After 1870, classical liberals gradually lost their

influence. Political economy began to be taught in

university faculties of law, and also in some of the

engineering schools. This laid the foundations for a long-

standing divide between two groups of economists.

Professors of political economy in the law faculties often

inclined to an institutionalist approach, and opposed the

mathematical approach to political economy that economic

engineers and some mathematicians adopted. This antagonism

abated after the Second World War as French economists

strengthened their relations with foreign colleagues.

The publication of Léon Walras’s Éléments d’économie politique pure

in 1874 marks an important turning point in the history of

economic analysis. But for many years his ideas remained

misunderstood. Recognition of the importance of his work on

the part of French economists followed a lengthy and difficult

period, in which the publication of Maurice Allais’s À la

recherche d’une discipline économique, l’économie pure in 1943 marks a

vital stage. Allais introduced the analysis of risk and

intertemporal choice to the theory of general equilibrium and

in this way posed new questions to which Gérard Debreu, Marcel

Boiteux, Edmond Malinvaud and many others would respond.

Nonetheless, many French economists had considerable

reservations about the theory of general equilibrium. They

favoured an emphasis upon the role of institutions, and the

need to integrate the various elements of the social sciences

– economics, sociology and history – if economic phenomena

were to be understood.

From 1870 to 1943

In the years after 1870 the domination of the liberal

school was increasingly questioned, and this was largely the

consequence of institutional developments (Le Van-Lemesle,

2004). The teaching of political economy was introduced into

the faculties of law in 1877, but the professors in law in

charge of this teaching progressively became scientifically

independent. In 1887 they founded the Revue d’Économie Politique so

that the new political economy might be more widely diffused,

and this quickly became far more influential than the liberal

Journal des Économistes.

Classics liberals and institutionalists

The best known of the last classical liberals, Gustave de

Molinari and Paul Leroy-Beaulieu, sought to defend very

different positions. Liberals had maintained that the state

should limit itself to the provision of individual security

but de Molinari (L’évolution politique et la révolution, 1884) argued that

it was necessary to go much further. All branches of

production, including the judiciary, the police and defence,

should be freed from state control. If a need for security

exists and if the state does not foresee it, then this need

will be met by private initiative, and so much the better.

Leroy-Beaulieu did not challenge the principle that a state

2

had its prerogatives and that it would exercise them. However,

while Molinari defended the classical theory of distribution,

Leroy-Beaulieu (Essai sur la répartition des richesses, 1881) thought it

necessary to abandon this theory. The consequences which it

foresaw – a fall in the rate of profit, an increase in the

rate of rents, and a reduction of wages to subsistence levels

– were refuted by factual evidences: wage rates were

increasing, and rents were diminishing in proportion.

Institutionally Leroy-Beaulieu belonged to the group of older

classical liberals, but he abandoned the propositions basic to

this school.

Charles Gide occupied a leading place among the professors

of the law faculties. He was a staunch eclectic, which led him

to reject extreme theses in favour of an intermediate

synthesis. In studying prices and distribution he made use of

ideas borrowed from Jevons and Walras, but played down their

contribution. If Jevons’s analysis of value was ingenious, it

was nonetheless not new; Condillac had long before made clear

that the utility of an object determined its value. Gide was

somewhat reluctant to make use of the notion of marginal

productivity, since he did not consider that the distribution

of revenues to be solely determined by economic factors, and

he argued (Principes d’économie politique, 1901) that social relations

among agents also played a part.

Adolphe Landry and François Simiand were part of a very

small group of philosophers educated at the École Normale who

chose to become economists. In his Révolution démographique (1934)

Landry distinguished three types of regulation as of

3

importance to the study of demographic development. First,

under the ancien régime, parents did not concern themselves with

the consequences of the birth of children. Mortality played

the principal role in regulating the population. Second,

during the transitional phase, men and women chose their age

of marriage so that they might maintain the standard of living

to which they had become accustomed, and there was no

voluntary birth control in marriage. Third, in modern times,

on the contrary, the timing and number of births had become a

matter of choice. Landry used this argument to persuade

parliament to vote through, in 1932, 1939 and 1946, the three

laws which determine the allocations of family support: for if

the birth rate is the product of choice, then one can hope to

end demographic decline with the aid of a system of financial

incentives.

French positive economics developed with the work of

François Simiand (La méthode positive en science économique, 1912). He

rejected both the approach of the German Historical School as

well as what he termed ‘orthodox’ economics, referring in this

way to French liberals, the Austrian School and mathematical

economics. The German Historical School, he suggested, lacked

principles and had produced nothing but an empty accumulation

of knowledge. ‘Orthodox’ economists constructed theories that

were poorly founded, since they drew upon incomplete or

implicit observations. Simiand, by contrast, made use of long

statistical series, analysing them in terms of models that

described the behaviour of social groups. He applied this

method to the study of the development of wages and prices in

4

his major works of the 1930s (Recherches anciennes et nouvelles sur le

mouvement des prix du 16ème au 19ème siècle, 1932, et Le salaire, l’évolution

sociale et la monnaie, 1932). In these works he argued that

variations in the money supply drove the cycle and that

cyclical fluctuation was a necessary part of economic

progress. This approach influenced Ernest Labrousse (Esquisse du

mouvement des prix et des revenus au 18ème siècle, 1933) who, on the basis

of meticulously constructed statistical series, put forward a

simple theory of the crisis of the ancien régime as engendered by

the agricultural cycle: bad harvests brought about a rise in

the price of wheat, consumers spent an increasing proportion

of their revenues on agricultural goods and so the crisis was

transmitted to industry.

Albert Aftalion (Les crises périodiques de surproduction, 1913) and

Jean Lescure (Des crises générales et périodiques de surproduction, 1906)

took their inspiration from Say and their analysis of crises

from Juglar. They retained Say’s Law of Markets. From Juglar

they drew three lessons. Their analysis rested upon study of

empirical data. They used price movements to determine the

phases of the cycle. The crisis was defined as the point at

which prices ceased rising, inevitably followed by a fall in

prices – it was only one phase of the cycle. But whereas

Juglar put forward a monetary theory of crises, Aftalion and

Lescure proposed a real theory. At the bottom of a recession

production had difficulty satisfying needs. The marginal

utility of consumer goods and their prices would thus rise. To

meet this demand, machinery is needed. The price of machinery

rises and in turn stimulates production. However, when the new

5

production goods come into service consumer goods become over-

abundant. Their final utility and value collapse and this has

repercussions for the price of machinery. The crisis becomes

almost, or entirely, general. Lescure placed the emphasis on

the role of profits and on the interdependence between

activities. At the end of an expansionary phase, costs rise

faster than prices and new enterprises that have paid a high

price for their means of production face losses. Their

insolvency brings about the crisis, which spreads from one

branch to another. The crisis is not general, but generalized.

Over a lengthy period, French economists had criticized the

version of the quantity theory of money advocated by partisans

of the Currency School, and this continued after 1870.

Bertrand Nogaro (Contribution à une théorie réaliste de la monnaie, 1906)

noted that money was the object neither of demand nor supply;

the general price level is not determined, as the quantity

theory supposed, by the relation between the money stock and

desired cash holdings, but by global demand for goods, or as

argued by Aftalion (Monnaie, prix et change, 1927), by the

relationship between monetary revenue and the volume of

production. The consequences of a variation in the stock of

money depended for its effect upon the demand and supply of

goods, and hence on the way that it is introduced into the

system. Nogaro and Aftalion rejected the idea that variations

in the price of goods explained variations in the exchange

rate. The direction of causality was not necessarily from

prices to exchange rates. The current exchange rate depended

upon the expected future rate and, since it affected producer

6

costs and agents’ revenues, domestic prices are determined by

psychological factors.

Walras, the mathematicians and the statisticians

For many years both mathematicians and engineers had

reservations about the idea of general equilibrium. They

considered partial equilibrium quite adequate for the study of

most problems. Walras’s use of mathematics seemed quite

superfluous. Even when the importance of Walras’s work

gradually became more generally accepted, his successors

remained critical of his methodology. Instead they shared

Pareto’s view that the criterion of a theory’s truth lies in

its correspondence to reality. They did not attempt to resolve

the theoretical difficulties presented by the Walrasian

construct. Instead, they were interested in understanding the

instruments which permitted the analysis of facts while using

economic theory. The procedure followed by Albert Aupetit, the

leading disciple of Walras, is quite typical. His

dissertation, Essai sur la théorie génerale de la monnaie (1901), presents

itself both as a development of Walrasian monetary theory and

as verification of its empirical relevance.

The tradition of engineer–economists continued with Clément

Colson. His works (Cours d’économie politique, 1901–7) drew more on

Dupuit’s analysis than on Walras’s, but he encouraged François

Divisia, René Roy and Jacques Rueff to study Walrasian theory

since he was aware of the importance of the interdependence of

markets. It was not possible to study the determination of

wages independently of that of the rate of interest. Since

7

labour and capital are substitutes, the proportions in which

they should be employed depended both upon the wage rates and

interest rates. Here one can see at work the fundamental idea

that had driven Walras to use mathematics and make use of

models of general equilibrium.

Divisia’s analysis of monetary phenomena illustrates this

connection of theory to empirical research. It had sometimes

been thought that the quantity equation implies that prices

vary with the quantity of money. Divisia rejected this idea,

arguing that the transactions equation is an identity.

Appealing to statistical observation for verification is an

absurdity, but it does allow the definition of what should be

an indicator of prices. Weights are quantities of goods and

services exchanged, not quantities produced or consumed.

Divisia (L’indice monétaire et la théorie de la monnaie, 1925–6) explained

that it is not possible to set these weights; the index should

be a chain index. In order to determine the value of money in

1900 relatively to its value in 1800, it is not enough to know

the quantities of goods and services bought in 1800 and 1900,

all the intermediate values should also be known. René Roy

followed the same line of argument. He introduced (De l’utilité,

contribution à une théorie des choix, 1942) the idea of the indirect

utility function to demonstrate that the consumer price index

is the number by which primary prices have to be multiplied to

render the satisfaction of an individual (under the assumption

of constant monetary income) equal to his satisfaction at

current prices.

8

Even while invoking Walras, Rueff appeared above all to be

the defender of classical arguments against attack by

Institutionalists and by Keynes. Contrary to Nogaro, he argued

(Théorie des phénomènes monétaires, 1926) that price variations are

determined by effective holdings of cash relative to desired

holdings. He based his arguments on a reformulation of the

theory of purchasing power parity in dealing with the problem

of transfers. Contrary to Keynes, he maintained that the sole

levy that would enable the Germans to pay reparations to

France would be a rise in taxes. Of course, in the flexible

exchange rate regime that was then prevailing, the D-Mark

would depreciate and the wage rates of German workers

expressed in foreign currency would diminish; but the price of

German products would diminish in proportion, so that real

wages remained unchanged. It was, however, his analysis of

unemployment that made him famous. Following the First World

War, unemployment rose in Great Britain and changed in nature:

instead of being cyclical, it became permanent. Drawing upon

the relation he had put forward between unemployment and the

real wage rate, Rueff suggested that this development followed

from the emergence of a system of unemployment relief which

checked the fall in the money wages despite the existence of

an excess labour supply.

The establishment of a more direct link between theory and

empirical research involved the development of statistics.

Lucien March was the first Frenchman to make Karl Pearson’s

work known, and he took (Les principes de la méthode statistique, 1930)

from Pearson three fundamental techniques: the method of

9

moments, the system of curves, and correlation analysis.

Marcel Lenoir’s 1913 doctoral dissertation (Etudes sur la formation

et le mouvement des prix), which dealt with price formation and

price movements, marked the beginning of econometrics. He not

only made careful use of correlation and regression, but he

posed, and resolved, the problem of identification. If one had

a time series of quantities exchanged and their prices it was

possible to plot a path on a graph, but not to interpret this

graph as a supply or a demand curve. Lenoir, using moving

averages, plotted the long-run trend of cyclical fluctuations.

He then calculated regression coefficients and interpreted his

results by introducing the idea that short-run variations in

prices reflected shifts of the demand curve, while long-term

variations were more indicative of shifts in the supply curve

and the influence of monetary factors.

Apart from the engineers, French mathematicians took hardly

any interest in political economy. Two of them however, Louis

Bachelier and Émile Borel, did, at the beginning of the 20th

century, make fundamental contributions to the development of

economic science. The arguments advanced in Bachelier’s Théorie

de la speculation (1900) lie at the origins of the mathematical

analysis of finance: here can be found the essentials of the

theory of efficient markets and the premises of the notion of

Brownian motion which he developed in 1913. Borel’s point of

departure is the analysis made by Joseph Bertrand of the game

of baccarat in his Calcul des probabilités (1889). Bertrand

highlighted the existence of a strategic interdependence

between the players similar to that which, he suggested,

10

Cournot had wrongly ignored in his analysis of duopoly. But

Borel in turn accused Bertrand of overlooking the case where

players determined their strategy by drawing lots. He argued

that, if one were to reveal the psychological mechanism

governing choices, then it had to be connected to the notion

of probability: at each moment, each player chooses his or her

strategy with a given probability. The player’s mathematical

hope of gain depends on the way in which the probabilities are

allocated to each alternative. In a symmetric game no

information can provide one of the players with the certainty

of the gain advantage. The best strategy is to distribute

probabilities so that one does not lose whatever the opponent

does. Borel demonstrated in La théorie du jeu et les équations intégrales à

noyau symétrique (1921) that a solution exists for a game in

which two players could choose between three ways of playing.

Nonetheless, it was von Neumann who in 1928 demonstrated at a

general level the theorem of the minimax. Jean Ville suggested

in 1938 a more simple demonstration, and showed that the

result applied to continuous variables.

From 1943 to the present day

The publication in the early 1940s of books by Robert

Marjolin (Prix, monnaie et production, 1941), Maurice Allais (À la

recherche d’une discipline économique, 1943), François Perroux (La

valeur, 1943) and by Jacques Rueff (L’ordre social, 1945) all

testify to a shift in the analyses of French economists. But

if they were all certain of the need for a break with

11

traditional liberalism, their work led in different, even

contradictory, directions.

Liberals, Keynesians and Institutionalists

If, despite the efforts of Daniel Villey and Louis Baudin,

the heritage of French classical liberalism was fading, after

1940 liberalism experienced a renaissance, but it was a

liberalism quite different from that of Molinari and Leroy-

Beaulieu. Its most typical representatives, Rueff and Rist,

admired Walras for the manner in which he showed that

variations in prices always led to equilibrium, since they

continued up to the point where they stabilized. René Courtin

took up exactly this point in his Cours de théorie économique (1950)

when he accused Keynes of having assumed absolute rigidity of

prices, and of nominal wages in particular. If such a rigidity

exists (a doubtful interpretation of Keynes’s book), it is

never absolute, for while it is capable of explaining

unemployment in the short run, it cannot explain its

persistence. According to Rueff, the modern social order rests

on two institutions: property rights which prevent

appropriation by violence, and the market, with its

characteristic flexibility of prices which mutually adjust to

the point where equilibrium is reached. A property right

should be understood as a pool of value, of known volume,

which can be filled with whatever wealth offered on the market

at the behest of its owner. In so far as the value of this

pool corresponds to the value of the goods that it contains,

one can say that the right is a real one. But if this is not

12

so, then the right is false. Rights of this sort can be

introduced in a number of ways. The simplest example is that

of a budget deficit financed by the creation of money. The

state, by buying goods or leasing services, creates rights for

its creditors. When these expenditures are covered by taxes

the rights are real; but if they are not so covered then they

are false rights – state creditors hold paper claims to wealth

which does not exist. Inevitably, policies of this kind lead

to inflation. And in so conducting itself the government

weakens the judicial system that protects the social order.

Some individuals are not able to provide the rights which they

hold with the volume of their choice. The unconditional

character of the law is irremediably compromised.

Soon after the publication of the General Theory, several

works inspired by Keynes appeared, in particular the works of

Marjolin (Prix, monnaie et production, 1941), Claude Gruson (Esquisse

d’une théorie générale de l’équilibre économique, 1949) and Alain Barrère

(Théorie économique et impulsion keynésienne, 1952). They touched on

Keynes’s work in a very specific manner. Their common problem

was the construction of dynamic analysis. They had doubts

about the analysis that Keynes had developed in the General

Theory, but his book had the merit of addressing – even if not

fully consciously – the economic problems of growth, and the

most fundamental economic policy issue, that of growth

coordinated by deliberate and conscious policy. They showed

little interest in the models that Modigliani and Hicks had

introduced to analyse short-term monetary and budgetary

13

policy. The IS–LM model was for many years neither taught nor

discussed in France.

The majority of university economists remained distanced

from both liberal arguments and Keynesian ideas. They argued

that it was barely possible to understand economic choices

without studying its social, cultural and institutional

determinants. They argued for a concrete and positive

economics closely linked to other social sciences such as

sociology and history. The will to renew the link to positive

economics was expressed with the foundation in 1950 of the

Revue Économique, which quickly became the most important of

French academic journals. Aftalion was among the founders,

alongside historians such as Braudel and Labrousse. This

conception of economic science led them to place the study of

structure, defined as an ensemble of relations characteristic

of a social and economic system – following the example of

André Marchal’s Systèmes et structures (1959) – at the centre of

their studies. This method was applied in particular to the

analysis of distribution (as in Jean Marchal and Jacques

Lecaillon, La répartition du revenu national, 1958–70), production

structures, spatial organization and the relationships between

national economies.

François Perroux played an important role after the Second

World War. He created and directed the Institut de Sciences

Économiques Appliquées, which for many years was the leading

centre for economic research in France. He became a professor

at the Collège de France, the most prestigious French

scientific institution. Perroux was open to different

14

influences, and which sometimes appeared to conflict. His

first works, in particular his book La valeur, revealed the

influence Austrian marginalists had played in his thinking.

Économie appliqué, the journal that he edited, was one of the

important channels for the diffusion of Keynes’ thinking in

France. But his masters were Chamberlin and Schumpeter. He

admired Schumpeter as the theorist of innovation, and of

creative destruction. What interested him about Chamberlin was

the detailed criticism of hypotheses regarding pure and

perfect competition. He proposed a general theory of the

impact of domination at the level of enterprise, industry and

national economy. He saw in this analysis a first and

indispensable step towards a much larger synthesis between a

theory of the economy and a theory of force, power and of

constraints.

And so following the Second World War French economists

sought to reconnect with the tradition of positive economics

founded with Aftalion and Simiand. This institutionalist

project collapsed at the end of the 1960s when the new

generation turned either to Marxism or the theory of general

equilibrium. Nonetheless, institutionalism has remained an

active force within French political economy up to the present

day with the Convention School (André Orléan, Analyse économique

des conventions, 1994) and the theory of regulation (Robert

Boyer, La théorie de la régulation: une analyse critique, 1986; Boyer and

Saillard, Théorie de la régulation: l’état des savoirs, 1995). In both

schools there is agreement that political economy has to

collaborate with other social sciences, history and sociology.

15

The conventionalists are interested in situations where

existing prices are insufficient to coordinate the activity of

agents on account of uncertainty concerning the future and the

quality of products. It is necessary to take account of

conventions, understood as legitimate routines of

interpretation on the part of agents. The theory of regulation

has much larger ambitions: the development of an economic

theory which presents an alternative to orthodox theory. Its

key concept is the mode of regulation, that is, the manner in

which several institutions (the financial system, the wage

relation, forms of competition) join together to form a

system. Hence the Fordist mode of regulation is characterized

by oligopolistic competition, the development of credit, the

growth of productivity in mass production and the indexation

of wages to gains in productivity. The theory of regulation

addresses itself to the description and explanation of

different forms of regulation and the specificity of the

crises which characterize it.

Reformulations of general equilibrium theory

Divisia and Roy had not profoundly modified the basic

framework of Walrasian analysis. In 1943 Allais had put

forward some new directions for research by introducing

intertemporal economies, where each good is defined by the

location and date at which it becomes available, and in which

there exist markets for all future goods. He demonstrated,

making use of Walrasian tâtonnement, that the equilibrium was

stable. He established the two propositions fundamental to the

16

theory of welfare. In 1947, in Économie et Intérêt, he developed a

synthesis combining the theory of interest, prices and money.

He put forward the first proof of the golden rule. He noted

that the existence of transaction costs explained why agents

hold money rather than stocks and shares. On this basis he

showed that the demand for money is a function of income and

of the rate of interest. To illustrate the influence of basic

elements of the theory of interest, he introduced a model of

overlapping generations. The third fundamental contribution by

Allais was the development of a theory of decisions in a state

of uncertainty. He showed in Le comportement de l’Homme rationnel

devant le risque (1953) that, if one wants to account for the

behaviour of agents, it is necessary to take account of

characteristics of the index of utility other than its

average. Finally, in his La théorie générale des surplus (1981),

Allais put forward a complete modification of the frame of

reference: in place of the Walrasian market model he put

forward a model of markets founded upon the decentralized

search for realizable surpluses.

Debreu was trained as a mathematician; he had been the

pupil of Henri Cartan and, through him had come under the

influence of the Bourbaki group which had an axiomatic

approach to mathematics. It was through the study of Allais’s

book À la recherche d’une discipline économique that he was initiated

into the theory of general equilibrium. If Debreu found in his

reading of Allais the point of departure for his own studies,

the reorientation is significant. Up to that point economic

analysis consisted in maximizing differentiable functions and

17

deriving the characteristics of maxima from first-order

conditions. Debreu abandoned this approach; differential

calculus gave way to topological arguments which quite clearly

increased the generality and simplicity of theory. But it was

not only the mathematical tools that changed. Allais had

maintained that ‘in the last analysis it was experience, and

only experience, which could determine whether a theory had

merit or whether it must be rejected’ (Allais, 1943, p. 116).

In the work of Debreu, the concern for rigour dominates: he

stipulated that the axiomatic form of analysis or of theory

was, strictly speaking, logically entirely disconnected from

its interpretations. In his Théorie de la valeur (1954) Debreu took

up the analytical framework employed by Allais in 1943. He

demonstrated the existence of an equilibrium and establishes

the two theorems of welfare through the use of convex sets.

But he refrained from discussing the problem of stability

which was central to Allais’s preoccupations. The uniqueness

of equilibrium posed a problem. At the end of the 1960s it

became evident that the hypotheses under which the uniqueness

of equilibrium could be established were too restrictive and

that it was necessary to make do with an analysis of local

equilibrium. Debreu (1970) demonstrated that, using the

hypothesis of differentiability, the number of economies that

did not have a local equilibrium was ‘negligible’, that is,

‘contained in a closed set of Lebesgue measure zero’. This

result, gained by using the concepts and techniques of

differential topology, was the origin of the theory of regular

economies that Yves Balasko in particular developed.

18

Following the Second World war the problems of

reconstruction, of developing a system of indicative planning,

and the management of public enterprises lent Allais, Pierre

Massé and their pupils occasion to apply the theoretical

propositions that they had elaborated. Among the contributions

that French economists made during this period to the theory

of the efficient allocation of resources and to the study of

public policy, Jacques Drèze (1964) underlined the importance

of two themes: the management of public enterprises and the

analysis of the conditions under which the accumulation of

capital is socially effective.

Edmond Malinvaud explicitly introduced (Capital Accumulation and

Efficient Allocation of Resourcestime into the model of general

equilibrium. From this he derived an analysis of the

determination of the rate of interest and the meaning that it

gives to the proposition that the rate of interest is equal to

the marginal productivity of capital. One can only regret that

the economists who became involved in the controversy that led

to the theory of capital did not always record the results

that they arrived at.

Marcel Boiteux (Sur la gestion des monopoles publics astreints à l’équilibre

budgétaire, 1956) suggested a new approach to the management of

public monopolies constrained by budgetary equilibrium. He

sought to define a rule for the management of public

monopolies by adding to natural connections a new constraint:

the budgetary equilibrium. He then defined the shadow prices

which were the solution to the problem. Public monopolies

should maximize their profits in terms of these shadow prices.

19

The gap between real prices and shadow prices is proportional

to the inverse of the price elasticity of compensated demand.

While Dupuit and Colson referred to marginal costs, Boiteux

took account of shadow marginal costs and prices.

What remains to be determined is whether the enterprise or

the regulator is the better at determining tariffs. Jean

Tirole and Jean-Jacques Laffont analysed systematically this

type of problem by using the theory of contracts. The central

idea is that information at the disposal of the managers of a

public monopoly is greater than that available to the

regulator. It is therefore necessary to determine the nature

of the contract which the regulator is able to propose to the

enterprise to minimize the costs of production of the good

which it produces, while explicitly taking account of the

capacity of the agent to manipulate the information.

In Debreu’s model, all agents have, ab initio, access to a

complete system of forward markets and adjustments are made

solely by price. All contracts are concluded on the starting

date; there is no incentive to reopen markets at a later date.

The model is essentially atemporal; the role of money cannot

be explained, nor the existence of a market for stocks nor the

underemployment of resources. Lindahl and Hicks suggested that

a partial equilibrium framework was appropriate for dealing

with this kind of problem. Michel Grandmont, in a series of

articles published in the course of the 1970s, took up and

then systematically developed this notion by assuming that

agents formed, at every moment, expectations of the future

states of the economy that were not necessarily realized. It

20

was in this framework that, in the 1970s, Jean-Pascal Benassy,

Drèze, Malinvaud and Yves Younès built their theory of

disequilibrium. More recently, this framework was used to

study the relations between value and money (Grandmont, Money

and value, 1983), between competition and underemployment

(Claude D’Aspremont, Louis Gérard-Varet, Rodolphe Dos Santos,

On Monopolistic Competition and Involuntary Unemployment, 1990, and

Benassy, The Economics of Imperfect Competition and Underemployment, 2002)

and rational expectations (Roger Guesnerie, Assessing Rational

Expectations, 2001).

Until the 1970s, French economics had a flavour of its own

with engineer–economists interested in planning and the

management of public enterprises, and with many professors

still following the French institutionalist tradition.

Thereafter, this distinctiveness disappeared and, with the

exception of the Regulation School, French economists became

thoroughly integrated into an international economics

profession.

Alain Béraud & Philippe Steiner

See also Allais, Maurice; Allais paradox; Aupetit, Albert;

Bachelier, Louis; Bertrand, Joseph Loukis François; Braudel,

Fernand; Debreu, Gérard; Divisia, François Jean Marie; Divisia

index; Gérard-Varet, Louis-André; Gibrat, Robert Pierre Louis;

Juglar, Clément; Laffont, Jean-Jacques; Leroy-Beaulieu,

Pierre-Paul; Massé, Pierre; Perroux, François; Roy, René

François Joseph; Sauvy, Alfred; Walras, Léon.

21

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Paris: Economica.

22

Index terms

Aftalion, A.

Allais, M.

Aupetit, A.

Austrian School

Bachelier, L.

Balasko, Y.

Barrère, A.

Baudin, L.

Benassy, J.-P.

Bertrand, J.

birth rate

Boiteux, M.

Borel, E.

Boyer, R.

Braudel, F

Brownian motion

budgetary equilibrium

Cartan, H.

Chamberlin, E.

classical liberalism

Colson, C.

Condillac, E.

consumer price index

contract theory

Convention School

correlation analysis

23

Cournot, A.

Courtin, R.

creative destruction

Currency School

D’Aspremont, C.

Debreu, G.

decisions under uncertainty

demand for money

differentiability

disequilibrium theory

Divisia, F.

Dos Santos, R.

Drèze, J.

econometrics

economic growth

efficient markets

excess labour supply

existence of equilibrium

expectations

family planning

general equilibrium

Gérard-Varet, L.-A.

German Historical School

Gide, C.

golden rule

Grandmont, J.-M.

Gruson, C.

Guesnerie, R.

24

Hicks, J.

identification

indicative planning

inflation

innovation

Institut de Sciences Économiques Appliquées

institutionalism

intertemporal choice

IS–LM model

Jevons, W.

Juglar, C.

Keynes. J. M.

Labrousse, E.

Lacaillon, J.

Laffont, J.-J.

Landry, A.

Lenoir, M.

Leroy-Beaulieu, P.

Lescure, J.

Lindahl, E.

local equilibrium

Malinvaud, E.

March, L.

Marchal, A.

Marchal, J.

Marjolin, R.

Marxism

Massé, P.

25

mathematical economics

method of moments

minimax theorem

Modigliani, F.

Molinari, G. de

monetary theory of crises

money supply

mortality

Nogaro, B.

oligopolistic competition

Orléan, A.

overlapping generations model

partial equilibrium

Pearson, K.

Perroux, F.

probability

purchasing power parity

quantity theory of money

regulation

Regulation School

risk

Rist, C.

Roy, R.

Rueff, J.

Saillard, Y.

Say, J.-B.

Say’s Law

shadow prices

26

Simiand, F.

system of curves

tâtonnement

Tirole, J.

transaction costs

transfer problem

unemployment

Villey, D.

von Neumann, J.

wage determination

Walras, L.

Younès, Y

27