Gerard Debreu

Gérard Debreu

Gérard Debreu (July 4, 1921 – December 31, 2004) was a French-born economist and mathematician who became a naturalized citizen of the United States and taught at the University of California, Berkeley. Debreu greatly fostered the reputation of economics as a science.

In 1983 he won the Nobel Prize in Economics for his work which was of vital importance for the understanding of the market. He is also credited with having proven mathematically the "invisible hand" that Adam Smith described as causing the economy to naturally function in ways that lead to an equilibrium of supply and demand. Such an equilibrium benefits all in society, producers and consumers alike, even though their motivations may have been only to satisfy their individual needs without conscious regard for the good of the whole. Both Smith's and Debreu's models of an economic system eventually must make assumptions about the basic morality of human nature operating in that system, with crime, corruption, cheating, and terrorism all undermining the working of the "invisible hand." In this sense economics operates within the larger context of axiology, the study of values.

Biography

Gerard Debreu was born in Calais on the far northern coast of France on July 4, 1921. His father was the business partner of his maternal grandfather in lace manufacturing, a traditional industry in Calais.

Just prior to the start of World War II he received his baccalauréat, and went to Ambert to begin preparing for the exam for entering a grande école. Later on he moved from Ambert to Grenoble to complete his preparation, both being in the so-called "Free Zone" during World War II. In 1941 he was admitted to the École Normale Supérieure in Paris, along with Marcel Boiteux. He was significantly influenced by his mathematics teacher Henri Cartan and his Bourbaki circle. After D-Day, Debreu delayed taking his exams in order to join the French Resistance forces, where he served until July 1945, before resuming his scholarly work.

Debreu married Françoise Bled in 1946 and had two daughters, Chantal and Florence, born in 1946 and 1950 respectively. In 1948 he visited the USA on a Rockefeller Fellowship which allowed him to visit several American universities, as well as those in Uppsala and Oslo in 1949-1950.

In 1960-1961, Debreu worked at the Center for Advanced Study in the Behavioral Sciences at Stanford. He devoted himself mostly to the complex proof of a general theorem on the existence of economic equilibrium.

In January of 1962, he started working at the University of California, Berkeley where he taught economics and mathematics. During the late 1960s and 1970s he visited universities in Leiden, Cambridge, Bonn, and Paris.

Did you know?

Gerard Debreu won the Nobel Prize in Economics in 1983

In 1976 he received the French Legion of Honor, and in 1983 he won the Bank of Sweden Prize in Economic Sciences in memory of Alfred Nobel for having incorporated new analytical methods into economic theory and for his rigorous reformulation of general equilibrium theory.

In 1990, Debreu served as President of the American Economic Association. He died in Paris at age 83 of natural causes on December 31, New Year's Eve, 2004 and was interred in the Père Lachaise Cemetery. He was survived by his wife, two daughters, five grandchildren and four great-grandchildren.

Career

Bourbaki roots

Debreu's encounter with Henri Cartan, alias Bourbaki, as his mathematics teacher fundamentally shaped Debreu's concept of mathematics. The influence goes so far that everything one could say about Bourbaki, “applies with equal force to Gerard Debreu” (Weintraub 2002, 113). It impressed his intellectual ethos for all his years to come:

The three years during which I studied and lived at the Ecole Normale were rich in revelations. Nicolas Bourbaki was beginning to publish his Eléments de Mathématique, and his grandiose plan to reconstruct the entire edifice of mathematics commanded instant and total adhesion. Henri Cartan, who represented him at the Ecole Normale, influenced me as no other faculty member did. The new levels of abstraction and of purity to which the work of Bourbaki was raising mathematics had won a respect that was not to be withdrawn. (Debreu 1991, 3)

Bourbaki was always mysterious. The seven founding members all came from the Ecole Normale: Jean Dieudonne, Claude Chevalley, Szolem Mandelbrot, Rene de Possel, Jean Delsarte, Andre Weil, and Henri Cartan who brought in Debreu. At their beginnings, keeping their names secret, “Bourbaki”—as the new philosophical and methodological apparatus of finite mathematics became known—soon was surrounded by mysticism.

In Bourbaki’s words, mathematical forms appear without being “freighted with special intuitive references” (Bourbaki 1950, 227) or, in Debreu’s words, without being “marred by a substantial margin of ambiguity” (Debreu 1986, 1266).

Within this hierarchy the first three “mother-structures,” as they called them, are topology, order, and algebra. Bourbaki wanted to bring order into mathematics that was diffused in various fields out of which mathematic problems arose. They wanted to avoid mathematics “becoming a tower of Babel” (Bourbaki 1950, 221, 227), so that mathematics could speak with one voice. The so called “axiomatic method” was one of the tools for this.

As Mandelbrot explained Bourbaki’s “top-down” approach in opposition to more “bottom-up” approaches to mathematics: “the former tend to be build around one key principle or structure … the latter tend to organize themselves around a class of problems” (Mandelbrot 1989, 11). In this effect, Bourbaki can justly be called "the ideology of rigour" that appeared in 1962 and/or proponent of “axiomatic method” that eventually gave rise to Operations Research and other quantitative applications in economics. Mandelbrot has confirmed the political agenda behind that ideology:

Bourbaki showed extraordinarily wide-reaching concern with political influence across the age groups and across the disciplines. Power to school the children [of which Debreu was one], to educate the young to have the ‘correct’ taste. And ‘export’ of their standards of rigour and taste they do not belong to has done untold harm (Mandelbrot 1989, 12).

"Economic transformation"

Later, under the tutelage of economist Maurice Allais, who was not Bourbakian but a scientist of many-layered interests, Debreu became interested in economics. That “interest” was slowly transformed into a lifetime dedication when he was introduced into the mathematical theory of general economic equilibrium.

The theory of general economic equilibrium was first described by Léon Walras in 1874-1877, and young Debreu came to it via the formulation given by Maurice Allais in his 1943 book, A la Recherche d'une Discipline Économique. In his biography, Debreu wrote:

The two and a half years following the Agrégation were devoted to my conversion from mathematics to economics (Debreu, 1984).

Still under the equilibrium spell, he published his first economic article in French (Debreu 1949). This article, which reads like a survey of Hicksean general equilibrium theory, is the least formal article he ever wrote, and he showed considerable respect to the interpretive sensitivity of economic claims. At the end of the article can be found one of the rare cases where Debreu made some effort to interpret economic terms. He even made the reader aware of a “certain danger” regarding the welfare interpretation Pareto-optimum, which, at that time, was the center of major discussion between left-leaning economists and those favoring the “free-market.”

Here, as in many crossroad-points later, he could not simply digest the mathematics because dynamic equations implied computational methods, which as a Bourbakian he could not consider rigorous. In that first article is the echo of the dilemma he would be faced with throughout his years. He was torn between his mathematical values and his interest in making an economic claim.

However, in the same way he believed Bourbaki to be good for the working mathematician, Debreu believed that he could help the economist to be more explicit, precise, concise, and simple, to see contradictions more easily, and to unravel unnecessary assumptions. He wanted to give economists a feeling for consistency—a sense of rigor—and let them participate in the fascination that he experienced with Bourbaki. He may have never believed that this sense of consistency could meet the full need of scientification in economics, yet, it certainly should have added something valuable to it.

American career

Debreu's later studies centered mainly on the theory of differentiable economies where he showed that in general aggregate excess demand functions vanish at a finite number of points. Basically, showing that economies have a finite number of price equilibria.

At a seminar in Salzburg he acquired a first taste of the New World when—after meeting Wassily Leontief and Robert Solow—he started reading the Theory of Games (encountering thus the use of Bourbaki-proof fix points). Thereafter, in the summer of 1950, he was approached by Tjalling Koopmans, who had just become the Director of Research of the Cowles commission. Debreu was welcome because he would help Koopmans to push “Cowles Mark II.” Cowles, at that time, was advancing mathematical economics of the rather “theoretical” type; the Bourbakian label, with which Debreu now appeared, was therefore eminently useful, thoroughly discussed and even emulated.

Debreu thus joined the Cowles Commission at the University of Chicago and became a research associate in June 1950 for an eleven-year term. At Cowles, Debreu’s Bourbakism was reinforced since it was an effective means to avoid making an economic claim or to be forced to take responsibility. Rigor (read: axiomatic method), the Bourbakian void, and its surrounding silence meant to Debreu to be saved from being blamed for something he is not in control of.

The axiomatic method, that was serving him in good stead, certainly represents the peak of abstraction in the history of mathematical economics. It is commonly ascribed to a particular school of thought, “neo-Walrasian” economics. How little Leon Walras and Debreu had in common is obvious when Debreu’s polemic against the Walras-Cassel representation of the economy is considered, as well as his argument mainly against the differential analysis of Pareto and Hicks. The main connector of Debreu with the Walrasian tradition was the rejection of the mathematics that has been applied leaving the economic intuitions rather untouched. It is Abraham Wald, one of the members of the Carl Menger colloquium in Vienna, who can be identified as the mediator between Walrasian and neo-Walrasian economics.

Debreu remained with the Cowles Commission in Chicago for five years, returning to Paris periodically. In 1954 he published a breakthrough paper entitled Existence of an Equilibrium for a Competitive Economy (together with Kenneth Arrow), which dealt with the basic question of whether a preference preorder on a topological space can be represented by a real-valued utility function. In this paper Debreu provided a definitive mathematical proof of the existence of general equilibrium, using topological rather than calculus methods:

The paper of 1954 was indeed closer to von Neumann than to Wald in that it presented an equilibrium as a generalization of a game. It was a paper that could not reach the common interest of economists as for example Hicks and was rather an internal success at Cowles. How difficult it was in 1954 to get the paper accepted, shows the objection of the first referee who rejected the paper because it was not rigorous! (Weintraub 2002, ch. 6.)

In 1955 Debreu moved to Yale University and in 1959 he published his classical monograph—henceforth "The Monograph"—Theory of Value: An Axiomatic Analysis of Economic Equilibrium, (Cowles Foundation Monographs Series), which is one of the most important works in mathematical economics. He also studied several problems in the theory of cardinal utility, the additive decomposition of a utility function defined on a Cartesian product of sets.

"The Monograph"

In "The Monograph," Debreu set up an axiomatic foundation for competitive markets. He established the existence of equilibrium using a novel approach. The main idea was to show that there exists a price system for which the aggregate excess demand correspondence vanishes.

He does so by proving a type of fixed point theorem based on the Kakutani fixed point theorem. In Chapter 7 of the book, Debreu introduces uncertainty and shows how it can be incorporated into the deterministic model. There he introduces the notion of a contingent commodity, which is a promise to deliver a commodity should a state of nature realize. This concept is very frequently used in financial economics as, the so-called, Arrow-Debreu security.

However, two major questions had to be answered in "The Monograph" first:

• Uniqueness, that is, the logical determinability (“is there one equilibrium or could all states be an equilibrium?”), and, then
• Stability (“does an equilibrium hold more than one moment or are we every moment in another equilibrium?”).

For an economist these two questions are essential regarding the intuition of general equilibrium theory. The issue of stability was so pressing because only then the market “brings about” something, makes a difference, and can be played out in a context where there are also other alternatives to the market. Only then the market matters.

And here Debreu showed his utmost theoretical discreetness; he did not engage in the question of stability (Ingrao and Israel 1990.) Consider the following reply he gave when asked about “dynamic analysis.” His rigorously-pursued "scientification" of economics and the history of economic thought is fully present in these lines. Debreu had reservations about “dynamic analysis” and formulated the answer accordingly:

I had my own reservations about dynamics in spite of the fact that I had studied classical mechanics … I thought that the whole question was very facile, and that in economics one did not specify, then test, the dynamic equations that we so easily taken up because of the analogy to classical mechanics. So I was very, always very, suspicious of dynamics, and that is a view I have held very consistently … I thought about those questions of course, as every economist must, but it seemed to me that the contributions made were not important (Weintraub 2002, 146).

Certainly, Debreu never promoted or even referred to a particular school of mathematics. He never was an outspoken Bourbakist in economics, which was crucial for both Debreu’s self-image in economics and the influence he had on the discipline. For Debreu, Bourbaki is mathematics.

In "The Monograph," the Bourbakian document in economics, he refers to the method he applies merely with “the contemporary formalist school of mathematics.” (Bourbaki, 1959).

And so the very name of Bourbaki did not enter economists’ consciousness as the word axiomatic did, although economists were in full impact of Bourbakian values for at least 20 years. Economists, like Debreu, hardly discuss what kind of mathematics they use. With Debreu economics became mathematized, not "bourbakized."

Here we come back to the void of Bourbaki’s platonic vision of mathematics, which translates to Debreu’s methodological discreetness:

When you are out of equilibrium, in economics you cannot assume that every commodity has a unique price because that is already an equilibrium determination. (Weintraub 2002, 146)

Strangely—but, maybe, typically—enough, this statement is as unique as striking: the concept of disequilibrium for Debreu seems to be a bit of contradiction in itself. If we talk about markets, we necessarily always already talk about an equilibrium, since in disequilibria prices have no conceivable identity whatsoever. Equilibrium is tantamount to consistency.

Debreu, however, does not avoid speaking about disequilibria; not because there is every possibility that we live most of the times in such a state—as the empirical economists stress all the time—but because it is beyond a consistent economic theory.

The existence of an equilibrium is the condition of the possibility of economic science. This is why all economic models have to prove first the possibility of an equilibrium solution. This is the point where mathematics and “scientification” of economics fall together. As long as economics cannot conceive of economic theory without any reference to an equilibrium, it is Debreu-Bourbakian.

Legacy

It was Debreu who made economics into a genuine economic science because only since then one can speak of a generic market of inner-consistency and thus a proper object to study; only since Debreu markets have an “economic meaning” and as such can be analyzed.

Debreu was awarded the Nobel Prize in Economics in 1983 "for having incorporated new analytical methods into economic theory and for his rigorous reformulation of the theory of general equilibrium." The Nobel committee noted that Gerard Debreu's major achievement is his work with Kenneth Arrow in proving the existence of equilibrium-creating prices:

Arrow and Debreu designed a mathematical model of a market economy where different producers planned their output of goods and services and thus also their demand for factors of production in such a way that their profit was maximized. ... In this model, Arrow and Debreu managed to prove the existence of equilibrium prices, i.e., they confirmed the internal logical consistency of Smith's and Walras's model of the market economy. ... An essential issue which is related to the market economy and which can also be traced back to Adam Smith concerns the normative properties of the market allocation of resources. Will the fulfillment of self-interest through the "invisible hand" of the market mechanism lead to efficient utilization of scarce resources in society? ... It has long been known that in certain circumstances, market price formation has such efficiency properties, but the exact nature and full extent of the conditions which must be satisfied in order to guarantee them had not been determined. Through the work of Debreu and his successors, these conditions have been clarified and analysed in detail.

In other words, Debreu was able to use of mathematics to develop a scientific articulation of Smith's idea of the "invisible hand" that guides the market.

In his Nobel Lecture, Debreu said:

The axiomatization may also give ready answers to new questions when a novel interpretation of primitive concepts is discovered. ... Axiomatization, by insisting on mathematical rigor, has repeatedly led economists to a deeper understanding of the problems they were studying, and to the use of mathematical techniques that fitted those problems better. It has established secure bases from which exploration could start in new directions. It has freed researchers from the necessity of questioning the work of their predecessors in every detail. ... In yet another manner, the axiomatization of economic theory has helped its practitioners by making available to them the superbly efficient language of mathematics. It has permitted them to communicate with each other, and to think, with a great economy of means.(Debreu 1983)

The press release after Debreu's Memorial Lecture on receiving the Nobel Prize in economics reported:

His clarity, analytical stringency, and insistence on always making a clear cut distinction between a theory and its interpretation have had a profound and unsurpassed effect on the choice of methods and analytical techniques in economics.

Secondly, Debreu had a major effect on the ethos of economists. Theoretical experience seemed to matter less for economic theory (at least to him), or, to evoke Husserl’s words, "in economics, experience does not function as experience."

It is often said that economics today can be called “Debreuan” insofar its theories are indifferent to the intuition and interpretation economists invest in their theoretical engagement. While this may at first glance appear uncomplimentary, it should be noted that Debreu's main thrust was transformation of the "economics-as-an-art" into a scientific discipline.

In Debreu's obituary, UC Berkley professor Robert Anderson noted that "He really was the most important contributor to the development of formal math models within economics. He brought to economics a mathematical rigor that had not been seen before."

As Heilbronner and Milberg (1995) correctly observed, our affective history of Debreu’s entrance into economics is its genetic code. There are identifiable affective “Debreu-symptoms” that clearly separate the time before and after Debreu. To quote only one example of this symptom, the game-theorist Ariel Rubinstein noted:

my greatest dilemma is between my attraction to economic theory, on the one hand, and my doubts about its relevance, on the other (Rubinstein 2006, 866).

Major publications

• 1949. Les Fins du système économique: un essai de définition objective. Revue d’économie politique 600-615.
• [1959] 1972. Theory of Value: An Axiomatic Analysis of Economic Equilibrium. New Haven, CT: Yale University Press. ISBN 0300015593
• 1983. Mathematical Economics at Cowles. Alvin K. Klevorick Cowles Fiftieth Anniversary - Four Essays and an Index of Publications. The Cowles Foundation at Yale University, 1991. ASIN: B000AQG562
• 1983. Economic Theory in the Mathematical Model. Gerard Debreu - Prize Lecture. Nobelprize.org. Retrieved September 28, 2010.
• 1984. Autobiography. Nobelprize.org. Retrieved September 28, 2010.
• 1986. Mathematical Economics: Twenty Papers of Gerard Debreu. Cambridge University Press. ISBN 0521335612
• 1986. Theoretic Models: Mathematical Form and Economic Content. Econometrica 54(6): 1259-1270. Frisch Memorial Lecture of the Econometric Society, August 17-24, 1985.
• 1991. The Mathematization of Economic Theory. The American Economic Review 81(1) : 1-7. Presidential address of the American Economic Association, December 29, 1990.
• Arrow, Kenneth J., and Gerard Debreu. 1954. Existence of an Equilibrium for a Competitive Economy. Econometrica 22 (3): 265-290. Retrieved September 28, 2010.

References

ISBN links support NWE through referral fees

• Bourbaki, Nicholas. 1968. Elements of Mathematics: Theory of Sets. Addison-Wesley. ISBN 9780201006346
• __________. 1949. Foundations of Mathematics for the Working Mathematician. The Journal of Symbolic Logic 14(1): 1-8.
• __________. 1950. The Architecture of Mathematics. The American Mathematical Monthly 57(4): 221-232.
• Heilbroner, Robert L., and William S. Milberg. 1995. The Crisis of Vision in Modern Economic Thought. New York, NY: Cambridge University Press. ISBN 9780521497749
• Ingrao, Bruna, and Giorgio Israel. 1990. The Invisible Hand: Economic Equilibrium in the History of Science. Cambridge, MA: MIT Press. ISBN 9780262090285
• Mandelbrot, Benoit B. 1989. Chaos, Bourbaki, and Poincaré. The Mathematical Intelligencer 11(3): 10-12.
• Rubinstein, A. 2006. Dilemmas of an economic theorist. Econometrica 74(4): 865–883.
• Vane, Howard R., and Chris Mulhearn. 2010. Paul A. Samuelson, John R. Hicks, Kenneth J. Arrow, Gerard Debreu and Maurice F. C. Allais. Edward Elgar Pub. ISBN 978-1848443594
• Weintraub, E. Roy 2002. How Economics became a Mathematical Science. Durham, NC: Duke University Press. ISBN 9780822328711

External links

All links retrieved May 21, 2024.

• U.C. Berkeley News, Gerard Debreu, 1983 Nobel Prize winner and UC Berkeley professor emeritus, dies in Paris at age 83. January 5, 2005.

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