Economic Behaviour in the Face of Uncertainty and Risk

In the first field of “social mathematic”, that is, at the individual level, Condorcet’s developments were mainly in line with those of the Bernoullis. But he went further, especially in the questions related to the problem of the absent or marine insurance (Crepel 1988, 1989).

When a merchant makes a conjecture [fait une speculation] implying a significant risk, it is not enough that his profit be such that the mean value of his expectations be equal to his stake [sa mise] plus the interest that a riskless trade would have brought him. In addition he must have... a very high probability that he would not suffer a loss in the long run. To submit this kind of project to calculus, one should thus determine, for the funds that each trader could suc­cessively employ in such a risky trade, what is the excess of profit that he must obtain in order either to have a sufficient probability not to lose his entire funds, or to lose only part of them, or to just get them back, or to get them back with a profit. (Condorcet 1986: 561-2)

However, a second field for “social mathematic” is related to the collective level (public economics, social choice). Here Condorcet is clearly continuing Turgot’s analy­sis of public economics, who had already made some definite advances concerning the political organization of a modern state in a free society based on the respect of human rights, and the nature of public interventions in markets - for example, the definition and classification of public goods, a reflection on the nature of taxation from a quid pro quo perspective, the taking into account of externalities and the free rider problem (Faccarello 2006). Of particular interest are Condorcet’s ideas on taxation and decision­making processes.