Maurice Allais

Maurice Allais (1911-2010) was a prolific French economist who won the 1988 Nobel Memorial Prize in Economics 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. 

Allais worked in relative obscurity for decades, primarily because he resisted writing in English, which is the preferred language of economists internationally. Nevertheless, his rigorous mathematical proof that markets are ultimately efficient, as first proposed by Adam Smith in the 18^th century, influenced many subsequent economists. His research into risk management led to his famous paradox: “The less the risk is, the more the speculators flee.”

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. That rule influenced free-market economists like Milton Friedman. Even so, Allais himself found inspiration from the interventionist theories of John Maynard Keynes. Contrary to many of his contemporaries, Allais staunchly opposed globalization, believing that protecting local markets helped to alleviate poverty.

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 schools 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 to understand what triggered such devastating financial calamities.

His areas of economic research included monetary policy, economic management and income and taxation. Besides Keynes, Allais’s work was influenced by Leon Walras, Irving Fisher, Vilfredo Pareto and Alexis de Tocqueville. In turn he influenced, besides Friedman, the Nobel winners Edmund Phelps and Robert Solow. 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’s earlier works been known in English, “a generation of economic theory would have taken a different course.”