FRENCHMAN WINS NOBEL IN ECONOMICS

Author: By David Warsh, Globe Staff

Date: Wednesday, October 19, 1988
Page: 87
Section: BUSINESS

Maurice Allais, 77, said he had all but given up hope of earning the prize for a skein of work he began publishing during the Nazi occupation.

"It was not till now that we discovered his greatness," Swedish economist Assar Lindbeck told a Stockholm news conference. "Allais has been studied by us for many years and we are now certain he is a giant."

Allais' fame rests partly on a couple of books, the 900-page "In Search of an Economic Discipline" in 1943 and "Economics and Interest" in 1947. Untranslated for the most part, the books have been little read beyond the French-speaking world. Yet it was the rigorous grounding they offered for general equilibrium among markets and the accompanying efficiency that was singled out yesterday by the citation accompanying the announcement of the prize.

In fact the same discoveries had been made separately at more or less the same time by John Hicks in England and Paul Samuelson in the United States. Published in English, Samuelson's and Hicks' contributions swept the English- speaking economic world and laid the foundations for modern technical analysis. Samuelson won the Nobel prize in 1970; Hicks in 1972.

"It is a very interesting prize," said MIT's Paul Krugman yesterday. ''You couldn't call the work seminal, because nothing changed as a result. On the other hand, it compares favorably with Hicks' 'Value and Capital' and Samuelson's 'Foundations of Economic Analysis.' It raises interesting philosophical issues, like the proverbial tree falling unheard in the forest."

Allais also made contributions in other areas of economics as well, including the theories of capital and of money, but it was a 1953 paper extending his theories to the domain of risk-bearing -- it was unmentioned in the citation -- that has kept Allais at the forefront of technical economics, according to Stanford's Kenneth Arrow, another Nobel laureate.

In it, Allais argued against the hypothesis of "expected utility," and backed up his thesis with a series of questionnaires designed to illuminate consumers' choices under circumstances of risk and uncertainty.

Indeed, when Allais experimented with a roomful of top-flight theoretical economists at a celebrated meeting in France in 1952, Arrow recalled, the answers given suggested the scholars wouldn't behave according to their own axioms when confronted with the certainty of short-term gain against the possibility of long-term windfalls.

The striking results weren't tabulated for 15 years, Arrow recalled, but Allais, meanwhile, won his argument utterly in Europe and eventually has seen the tide turn in his favor in America, in the work of psychologists like Stanford's Amos Tversky and Harvard's Richard Herrnstein, and of questionnaire-wielding economists like Yale's Robert Shiller.

As much as anything, Allais' award was taken to be a recogition of the spreading influence of French mathematical economists is the now tightly- integrated scholarly world. An engineer by training, Allais yesterday told the Paris news conference he had been converted to economics by a trip to the United States during the Depression. After the war, he taught a generation of students including Gerard Debreu (the 1986 Nobel laureate), Edwin Malivaud (a likely future winner) and Marcel Boiteaux (who recently retired as head of France's electricity monopoly.)

Allais has published something like 1,500 scholarly papers, including studies in history and geophysics. "Now I can afford to continue my work," he said yesterday of the $400,000 prize."

Allais has been a professor at the Ecole Nationale Superieure des Mines de Paris and director of the school's economic research institute since 1944.

WARSH ;10/18 NKELLY;10/19,11:44 NOBEL19