Monday, August 11, 2014


“The Startling Story behind a Famous Footnote
For thirty years the official story of general equilibrium went like this: Kenneth Arrow and Gerard Debreu, working independently at first, then joining forces,   proved that Adam Smith was right, and the rest is history. Beginning with Jürg Niehans’ magisterial A History of Economic Theory: Classic Contrbutions 1720-1980 (Johns Hopkins, 1990), the received version shifted slightly.

By 1950, under the influence of The Theory of Games and Economic Behavior, convexity and duality were very much on the minds of mathematical economists.  Nevertheless, the only economic models for which a general equilibrium had been proved were those of Wald  and von Neumann, the first for an economically unappealing model, the other for a growth model without final consumption.  In Value and Capital, though it introduced English-reading economists to general equilibrium, [John] Hicks never bothered about existence proofs and negative prices.  Indeed, he sometimes expressed himself as if he believed that the counting of equations and variables was enough.  Morgenstern, then learning about these things from von Neumann, chided Hicks mercilessly (and unfairly) for his mathematical complacency.

It remained for Arrow, who admired Hicks, and to Debreu, to prove the existence of a competitive equilibrium for a Walrasian general equilibrium model. J. F. Nash’s existence proof for a n-person game, mentioned above in the chapter John von Neumann, showed the way. The result was the 1954 Arrow-Debreu model of general equilibrium, the neatest and most compact model of an economy since Cantillon’s [literary] Tableau Economique, in terms of land, and vastly richer and more general.*

* An existence proof of a somewhat different kind was published earlier in the same year by Lionel McKenzie). …

All this, and a good deal more is laid out in Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit,  by Weintraub and Düppe, published last week by Princeton University Press. The personalities are discussed. The chronology gets quite a going-over; the indeterminacy of the dates on which the first satisfactory proof was communicated to a larger world is examined.   To my mind it doesn’t change the story that much. There are all kinds of reasons the story came out the way it did. The authors examine them all. Their aim was to “repersonalize” mathematical economics, and they certainly have done that.
The above is an extract from David Warsh’s post this week in his magnificent “Economic Principals” Blog, (by low subscription - check google).
It is very high-quality journalism on economics as it happens in the world, largely about the activities of top US economists and their employers in academe, journalism, and the State.
This week’s account, fully detailed, of the sad machinations of one of the co-originators of the great advance in General Equilibriun theory who apparently contrived to downplay a potential rival theorist’s claims to a share in academic recognition for his contribution to the mathemarical proof of GE.  
David Warsh indentifies Debreu’s questionable behaviour that resulted in excluding Lionel McKenzie’s original contempory work on GE, thus potentially depriving him of a share in the professional glory in the award  the 1985 Nobel Prize for GE.
I find this behaviour disappointing in academe. Professor E. Roy Weintraub, a distinguished scholar and formidable force in the History of Economic Thought as a subject, has co-authored a new book that supplies the details: “Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit,  Princeton University.
Adam Smith in Moral Sentiments noted how competition between rivals is morally acceptible but:
In the race for wealth, and honours, and preferments, he may run as hard as he can, and strain every nerve and every muscle, in order to outstrip all his competitors. But if he should justle, or throw down any of them, the indulgence of the spectators is entirely at an end. It is a violation of fair play, which they cannot admit of” (TMS II.ii.2.2: p 83).

Apparently, Gerard Debrue, an economist and a brilliant mathematician, did not heed Smith’s admonition, assuming he read his “Theory of Moral Sentiments” (1759 and 1790).  
More’s the pity. Quelle demage.


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