Maurice Allais whose full name is Maurice Felix Charles Allais is a French economist whose entire gamut of work is so powerful and analytical that it could alter the whole of economic theory. He is one of the major economists of the twentieth century who deserves a special mention because his contributions have been unparallel towards the discipline of economics. He is the one who endeavored to carry forward the message of the authentic Lausanne School of Walras and Pareto into the contemporary times.
Life and Career
He was born in Paris, France on 31 March 1911. Allais began his educational journey from Polytechnic School followed by National School of Mines in Paris. His educational journey gave way to his professional career and he joined the state-owned French Mine Administration in 1937 and serving them for a couple years he switched over to Ecole des Mines as professor. But this was just the beginning of an illustrious career and he became a Director at the National Center for Scientific Research in the1940s. Finally he received an opportunity to enlist his name among the officers of the Legion of Honor in 1977.
Contribution to Economics
Maurice Allais has made valuable contribution to the discipline of economics. He made major contributions to Monetary Policy and Decision Theory in economics. He is particularly remembered for the Allais Paradox created by him. It is decision problem presented by him for the first time in economics history in 1953. The paradox negates the Expected Utility Theory.
The three stalwarts in economics namely Walras, Irving Fisher and Vilfredo Pareto heavily influenced Allais. Two of his major treatise named “A la recherche d’une discipline economique”, “Economique et internet” were published in 1952 and 1947 respectively. These derived their existence from the works of the three major economists mentioned above.
Allais’ proposals were radical in nature. His theory paved the way for the Paretian System. He provided the first set of validations for the Fundamental Welfare Theorem. He unraveled the conventional ideas on the failure of the market system in a general equilibrium setting. He recognized the impending implications of transaction costs, natural monopoly, and abnormal rents on the competence of the market. He also suggested the nationalization of land and income redistribution. Allais introduced the OLG model and the Golden Rule for Optimal Growth.
Allais’ novel and most remarkable work is known as the “Allais Paradox”. He ascended the throne of popularity through this paradox theory. The theory precisely analyzes and describes the difference between the utility theory and its application in real life situations. Moreover, he finds behavior that is diametrically opposed to the expected rule of utility theory. The concept put forward by Allais is that there exists a systematic relationship between the attitude of an agent towards risk and the “degree of certainty”. This later came to be known as the ‘common consequence effect’. Based on this finding many new theories of decision-making under uncertainty were formulated.
Allais’ contribution does not end with the paradox. Ha also introduced the concept of an intertemporal equilibrium. In 1971 he proposed a theory of market economies instead of the Neo-Walrasian economies. This theory is based on the theory of surpluses, which is briefed in his book “Theorie Generale des Surplus”.
Major Works of Allais
Maurice Allais is a genius and had written many books on economics and also other disciplines. Some of his major works on economics are:
A La Recherche d'une Discipline Économique, 1943
Économie et Intérêt, 2 volumes, 1947.
Le Role de Mathematiques en Economie, 1949
Traite d'Economie Pure, 1953
The Role of Capital in Economic Development
The General Theory of Surplus and Pareto's Fundamental Contribution, 1973
The Foundations of the Theory of Utility and Risk, 1984
"Determination of Cardinal Utility According to an Intrinsic Invariant Model", 1986, in Dabone et al, editors, Recent Developments in the Foundations of Utility and Risk Theory
He received the Nobel Prize in economics in the year 1986.