At the Ecole Pratique des Hautes Etudes

Few students of literature chose to become economists, but their role in the evo­lution of economic thought was nevertheless important. Adolphe Landry (1874­1956) and Franςois Simiand (1873-1935) have several features in common.

Adolphe Landry defended his doctoral thesis in 1901, devoted to L’utilite sociale de la propriete individuelle. This work caused such a sensation with its progressive ideas that even the mainstream press reacted to it, and the Catholic newspaper La Croix was indignant, wondering “how such a daring demonstration had not been suppressed by the university authorities” (4 June 1901, 1). The recep­tion of his thesis by the academic community was not much better. At issue were mainly his socialistic views on property (see Chapter 12). To Landry, the system of private property is the source of a loss of wealth, for many reasons. He asserted that owners did not use the means of production at their disposal in the most productive way. He rejected Cournot’s analysis of the duopoly (1838) and thus found, without apparently having read it, Bertrand’s conclusions (1883, see below). He considered that in a duopoly, both producers would come to an agreement. When the num­ber of competitors is large, it is undoubtedly more difficult for them to reach an agreement, but Landry maintained that competition is never absolute.

It remained to be seen whether, by setting different prices for different buyers, the producer could make profits at least equal to those he would make by reducing production. Dupuit, Tavernier (1888, 1889) and Colson saw this price discrimina­tion as a remedy for social inequality, since prices were then proportionate, if not to need, at least to the ability to pay. But Landry believed that price discrimination was hardly achievable and that at best the producer can only set a few prices; then it would again become profitable to reduce production. Finally, in contrast to the analyses made by the classics, Landry considered the behaviour of the producer, who seeks to increase his net profit by reducing the quantity of production factors used, as harmful to the interests of society. Indeed, while it is in the producers’ interest to use smaller quantities of land or capital for the benefit of all, the same does not apply to labour:

the price which a worker demands in exchange for his labour is not deter­mined by the utility of that labour, by the price which that worker knows he should get. It is determined first of all by the needs of this worker.

(1901, 79)

In other words, the remuneration of labour is not determined like land rent or the interest of capital by the balance between supply and demand: it must be at least equal to a subsistence standard. Therefore, when a producer dismisses a worker, it is not obvious that the worker will find a job elsewhere. The producer’s decision to reduce employment is contrary to the interests of society, if it deprives workers of any employment.

Since the rich who can buy the goods produced are precisely those owners who, in order to increase their income, decrease social welfare, one is led to acknowl­edge that the damage caused by property is greater than appeared at first sight. Landry concluded that “the institution of individual ownership of the means of production necessarily [gives rise] to opposition between particular interests and the general interest, that in many cases and in many ways it sacrifices the latter to the former” (1901, 407).

It should also be noted that, in L ^,interet du capital (1904), Landry criticised and restated Bohm-Bawerk’s analysis of capital. According to Landry, the difficulties encountered by Bohm-Bawerk originated in the consideration of only one factor to explain why the interest rate is positive: the preference for present commodities.^[127] Landry proposed the following analysis, which explains both why borrowers are willing to pay interest and why lenders are able to demand it:

On the one hand, there are a certain number of activities in which capital can be invested and in which it will yield a profit; these activities can be ranked in order of decreasing profit, and we thus have the demand curve for capital. On the other hand, virtual capital can be arranged according to the surplus value it must yield in order to be employed as capital, in order to become real capital: thus we have the supply curve of capital................................................................................................................. Interest

equals both the marginal surplus value that the employed capital will give and the marginal sacrifice that is involved in capitalisation.............................................................. It is the over­

all demand curve for capital and the overall supply curve that determine the rate of interest, which must be the same for all capital, in the same market and at the same time.

(Landry 1908, 639-40)

Landry’s thesis marked an important stage in the evolution of economic thought in France. He clearly introduced socialist ideas into the academic world, where they had until then scarcely been allowed to exist. Into this world - admittedly on its fringes, since his thesis was not defended at the Law faculty, but at the Fac­ulty of Literature - he introduced the analyses of Cournot and Dupuit which, until then, had hardly been read by anyone other than mathematicians and engineers. Of course, his reading of them was quite particular, since he did not limit himself to reporting them but tried to develop new proposals on their basis. But this is pre­cisely what makes his book so valuable.

Franςois Simiand’s contribution was also singular, and his thinking especially attracted the attention of sociologists (Chapter 13). Simiand (1912) contrasted posi­tive economics, which relies on experimental methods, with traditional political economy, called abstract or pure economics, and economic historicism, which was, for him, a mere description of facts. He acknowledged that criticising a theory as abstract may sound equivocal because all scientific knowledge proceeds by abstrac­tion. His criticism of some economists, particularly of Landry (Simiand 1903-1904), focused on their own specific use of abstraction (Chapter 13). In the experimental method advocated by Simiand, the researcher constantly sets his abstract reason­ing against the facts. But, according to Simiand, Landry’s approach was different: the abstractions from which he developed his theory were mere “ideas”, without immediate match to the facts. In conceiving his statements, he undoubtedly relied on his observations of the active or passive psychology of the “economic man”: one would say, for example, that men are driven by self-interest. But in subsequent work, Landry did not set the conclusions drawn from these propositions against the facts, and his basic propositions are only postulates. Depending on how one interprets the question, for example, how one interprets the idea that agents follow their self­interest, the reasoning leads to different conclusions regarding their choices. If eco­nomics is to remain a positive science, the conclusions of the reasoning must be set against the facts. If not, the economist’s research does not concern the real economy, and economics does not appear as a positive discipline but a normative one. Simiand thus addressed a series of questions that fuelled debates during the inter-war period.

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