Founding member of CIRET Professor René Passet, a founding member of the Centre International de Recherches et Études Transdisciplinaires (CIRET), who has just passed away at the age of 99, is the French economist who succeeded in liberating economic discourse from its confinement in order to consider it within the infinitely broader context of life on Earth. Contemporary economic discourse has its origins in the image of the pin factory put forward by Adam Smith in his seminal work The Wealth of Nations. We are familiar with the principle. A craftsman, working alone in his workshop, can at best produce 10 pins in a day’s work. Therefore, ten craftsmen will produce around one hundred. However, ten workers working together in a machine-equipped factory and dividing the work between them may produce 10,000 pins, i.e., 1,000 each. This represents a 10,000% increase in productivity. National prosperity will therefore increase by the same amount. To this is added the principle of comparative advantage, which suggests that the English should manufacture and sell textiles to the Portuguese, in return for which the Portuguese will sell them Port wine. The entire contemporary economic system is based on this dual principle. The problem is that it oversimplifies reality. First question: Is a factory worker, who spends their time performing repetitive tasks that are imposed on them, more or less happy than a craftsman in their small workshop? Economists are more or less silent on this point. Second question: Is the desired abundance compatible with the quantity of raw materials and energy available in the Earth’s subsoil, and can the waste from industrial activity be absorbed by the Earth without causing damage? The classical economist is also silent on this point. And so it is René Passet who, in his best-known book, L’Economique et le Vivant, asks whether the principle of economic efficiency is indeed compatible with the principle of preserving and reproducing living organisms. However, this question has become fundamental to the very survival of humanity. Some people suggest that the ‘green economy’, ‘sustainable development’ and ‘renewable energies’ will make it possible to ensure compatibility between economic life and the preservation of living organisms. However, these are merely words. As Nicholas Georgescu-Roegen, who was an economist but also a physicist, clearly demonstrated, ‘economic development’ manifests itself as a local expression of negentropy. And energy consumption, in whatever form, cannot sustainably exceed the amount of energy available. And as soon as energy consumption on Earth exceeds the supply of solar energy, we have to draw on reserves, which are limited. We can see this clearly, for example, in the case of ‘rare earth elements’, which are now indispensable for electronics. The question, in line with the logic of the living world as espoused by René Passet, is how we got to this point. This is the subject of the comprehensive work he published under the title Les grandes représentations du monde et de l’économie à travers l’histoire (‘The Major Representations of the World and the Economy Throughout History’), which spans over 900 large-format pages. We will not attempt here to present a summary of this work, which would inevitably be incomplete. What we will take away from it is that the economic discourse, as it currently drives the majority of humanity, is an ideological construct. This ideological construct draws on philosophical currents that can be traced through history, and which have led to a worldview characteristic of the ‘modern world’. This worldview is leading humanity towards catastrophe, and that is why the assertion of a critical mindset is not only necessary but urgent, given the increasing effects of global warming and the poisoning of the biosphere. I will conclude with a personal reflection. In 1975, René Passet was the chair of my doctoral thesis examination board at what was then the University of Paris 1. I cannot imagine any professor of economics other than him who would have accepted a topic that fell more within the domain of anthropology than economics, and whose opening words were borrowed from Prof. Jacob Viner, ‘Economics is what economists say’. The passing of a man who will probably be recognised in the future as a pioneer therefore places a duty on us at CIRET to continue along the path he has thus charted. Hubert Landier René Passet, L’économique et le vivant, Petite bibliothèque Payot, 1983. René Passet, Les grandes représentations du monde et de l’économie à travers l’histoire, Les Liens qui Libèrent, 2010.
Tribute to Roger Guesnery (1943–2026)
By Jean-Jacques Pluchart On Tuesday, 14 April 2026, a tribute will be paid to the memory of the economist Roger Guesnery, Honorary President of PSE-Paris School of Economics and Professor Emeritus at the Collège de France, holding the Chair in ‘Economic Theory and Social Organisation’. His work contributed to advances in research on the functioning of public services: asymmetric information between the State and citizens, international coordination in the fight against global warming, rational expectations of agents, and the ‘second-best’ equilibrium, among other topics. Roger Guesnery co-founded DELTA (Département et laboratoire d’économie théorique et appliquée – Department and Laboratory of Theoretical and Applied Economics) with François Bourguignon. At the request of François Furet, then President of the EHESS, he was also the first head of the doctoral programme ‘Economic Analysis and Policy’ from 1981 to 1991. He served as Chair of the Board of Governors of the Paris School of Economics, and was a member of the Conseil d’analyse économique (Economic Analysis Council) and of the editorial boards of several renowned professional journals. He was Co-Editor-in-Chief of Econometrica (from 1984 to 1989), President of the European Economic Association (1994), President of the Econometric Society (1996) and President of the Association Française de Sciences Économiques (2003). He was awarded the CNRS Silver Medal (1993) and appointed as an Honorary Foreign Member of the American Economic Association (since 1997) and as a member of the American Academy of Arts and Sciences. The event brought together, in the Daniel Cohen Amphitheatre of the Paris School of Economics, around forty economics researchers, including two Nobel Prize winners and several professors from the Collège de France, the EHESS and the world’s leading universities. The speeches, which were often moving, provided an opportunity to appreciate Roger Guesnery’s human qualities, as well as the vitality of French research in economics – and especially in econometrics – which has already been honoured with five Nobel Prizes. Roger Guesnery’s latest publications Guesnerie R. et Stern R., Deux économistes face aux enjeux climatiques, Paris, Le Pommier, coll. « Essais – Savoirs et débats économiques », 2013, 128 p. Guesnerie R., Pour une politique climatique globale. Blocages et ouvertures, Paris, Éditions Rue d’Ulm, collection du CEPREMAP, 2010. Geoffard P.-Y., Guesnerie R. et Le Grand J., La Santé par quels moyens et à quels prix ?, Paris, PUF, 2010.
Markowitz’s Portfolio Theory
By Philippe Alezard With Wiener, modern finance had found a way to give uncertainty a mathematical form. Brownian motion made it possible to conceive of price fluctuations as the cumulative effect of an infinite number of elementary shocks – random, unpredictable, yet nevertheless capable of being placed within a rigorous probabilistic framework. In other words, uncertainty ceased to be a mere market intuition and became a mathematical object. However, this initial breakthrough did not exhaust the issue. For knowing that prices fluctuate according to a stochastic dynamic does not yet tell us how an investor should behave in the face of this instability. Once uncertainty had been described, the next step was to structure how it was used. It is precisely at this point that Harry Markowitz enters the picture. Whereas Wiener provided finance with the probabilistic grammar of uncertainty, Markowitz developed its decision-making logic. His primary concern was no longer the evolution of a price over time, but rather the selection of a portfolio of assets in a world where the future remains irreducibly uncertain. With him, finance crossed a new threshold of formalisation: it no longer contented itself with modelling market movements, but sought to determine how a rational agent should allocate their capital within these movements. The only son of a Chicago grocery store owner couple, Harry Markowitz was born in Chicago on 24 August 1927. At secondary school, his first interests were physics and philosophy [1]. One of the arguments that particularly impressed him was David Hume’s claim that, even if we drop a ball a thousand times and it falls to the ground each time, we have no necessary proof that it will fall the thousand and first time. In 1947, he enrolled at the University of Chicago to study for a Bachelor of Philosophy degree on the OII (‘Observation, Interpretation and Integration’) programme, but by 1950, he was drawn to the economics of uncertainty. At that time, he was interested in the work of von Neumann [2] and Morgenstern on expected utility, as well as that of Milton Friedman and Leonard Savage on the utility function. Having never taken a single finance course and never bought a single share, he was invited to join the renowned Cowles Commission for Research in Economics [3], an institution that has produced twelve Nobel Prize winners in Economics to date, including Markowitz himself. At the time, its director was Tjalling Koopmans [4], who would go on to win the Nobel Prize in 1975 for his work on the theory of the optimal allocation of resources. Among the lecturers who would teach the young Markowitz were, notably, Milton Friedman and Leonard J. Savage [5]. For the record, it is to the latter that we owe the rediscovery of Louis Bachelier’s thesis, which he had Paul Samuelson read. It was also while reading John Burr Williams’ The Theory of Investment Value [6] that Markowitz came up with the idea for his doctoral thesis topic. As he himself recounts in his autobiography, published on the occasion of his Nobel Prize award, ‘Williams proposed that the value of a share should be equal to the present value of its future dividends. Since future dividends are uncertain, I interpreted Williams’ proposition as meaning that a share should be valued on the basis of its expected future dividends. But if the investor were concerned only with the expected values of securities, he or she would be concerned only with the expected value of the portfolio; and, to maximise the expected value of a portfolio, it would be sufficient to invest in a single security. I knew that this was neither how investors behaved nor how they should behave. Investors diversify because they are as concerned about risk as they are about return.” Markowitz’s insight [7], though seemingly simple, is in fact of considerable significance. Prior to him, financial analysis tended to assess investments primarily on an individual basis, based on their promised returns, their soundness or their reputation. Markowitz radically shifted the focus of the problem by demonstrating that, from the investor’s perspective, the relevant unit is not the individual asset, but the portfolio as a whole. In his seminal article, ‘Portfolio Selection’, published in the March 1952 issue of the Journal of Finance, he proposed representing a portfolio not as the simple sum of several securities, but as an overall structure resulting from their combination. This is because what matters is not only the intrinsic quality of each asset, but the combination of their behaviours, since the risk of a portfolio depends not only on the risk inherent in each security, but also on how these securities vary in relation to one another. The financial decision thus ceases to be a simple matter of selecting good securities and becomes a question of portfolio composition. This shift is decisive, as it reveals that risk itself cannot be considered in a purely individual manner. An asset may be highly volatile when considered in isolation, but it can become fully acceptable within a portfolio if, through its relationships with other assets, it helps to stabilise the whole. Conversely, apparently safe securities, if they all react in the same way to the same events, can collectively generate greater fragility than one might imagine. In this way, Markowitz introduces the idea that financial rationality is not a property of individual instruments, but of the way they are combined. This idea is formulated through the distinction between expected return and risk. According to Markowitz, the investor optimises this return–risk pair at the portfolio level, either by seeking the highest return for a given risk or by seeking the lowest risk for a given return. It thus becomes possible to represent the portfolio using utility functions that depend solely on the expected return, i.e., the mathematical expectation, and on a measure of risk, i.e., variance. In Markowitz’s work, variance derives its legitimacy not from its common use in statistics, but from its economic relevance. It is justified by the
CAPITALISM, ALONE: The Future of the System That Rules the World, Harvard University Press , 2019, 300 pages.
Since his book entitled Global Inequalities, Branko Milanovic has asserted himself as one of the champions of the fight against socio-economic inequalities. He deepens the reflection initiated by Fukuyama on “the end of history”, by trying to show that capitalism now reigns supreme in Europe, the United States and Asia (in an authoritarian form). The capitalist system presents the same three principles in these three areas: production dictated by profit, a mostly salaried workforce, and private capital with rather decentralized governance. However, it distinguishes two forms of capitalism: liberal and meritocratic, authoritarian and state-run. He shows that the spread of capitalism has contributed to raising the average standard of living, but also to widening inequalities, as the share of capital in global income has increased by 4 to 5% at the expense of labor, both in rich and poor countries. The author also analyzes the evolution of forms of work and predicts a development of remote work, and therefore, a decline in population migration. He finally wonders about the alternatives to the current capitalism, concluding that they can only be worse. Notes by Jean-Jacques Pluchart
CAPITAL AND IDEOLOGY, Editions du Seuil, 2019, 1024 pages
In his latest monumental book, Thomas Piketty continues his reflection on social inequalities on a global scale, trying to show, contrary to popular belief, that they are not natural but are generated by “conservative ideologies and discourses”. According to him, the legitimacy of these inequalities throughout history is based on simulacra of objectification. He denounces in particular the “proprietary ideology” based on the right of ownership inherited from the French Revolution, which is supposed to guarantee the stability of institutions and avoid “generalized chaos”. He perceives in individual property a “particular form of social domination”. He formulates proposals aimed at eradicating the concentration of wealth and promoting “the circulation of capital”: confiscatory tax on capital of up to 90% of income; universal endowment of capital to each citizen… Opening up a 3rd way between capitalism and collectivism, he finally advocates a development of co-management of companies between shareholders and employees. Thomas Piketty’s previous book (“Capital in the 21st Century”) had been criticized by economists for its methods and sometimes questionable statistical sources. This latest book meets the skepticism of political economists for its sometimes questionable scientific ethics, because the author “is careful not to measure the economic and social consequences of “going beyond private property”. The book raises various questions about the reasons for its success. Is it a provocation to neo-liberal economists? Does it call for the advent of a new crypto-collectivist system? Is it trying to launch a new movement of “French theory” on American campuses? Is it a new encyclopedic curiosity? review by J-J.Pluchart
ANTI-PIKETTY. LONG LIVE CAPITAL IN THE TWENTY-FIRST CENTURY, Jean-Philippe Delsol, Nicolas Lecaussin and Emmanuel Martin (coord.), Librechange Editions, 2015, 380 pages.
A bestseller in economic literature, Thomas Piketty’s book Capital in the 21st Century (sold nearly 2.5 million copies) attempts to demonstrate the fundamental inequality that generates a return on capital higher than the growth rate of the economy (r> g), but it has been the subject of much criticism. French liberal economists – such as Alain Madelin, Henri Lepage and Nicolas Baverez – have challenged the assumptions, reasoning, figures and graphs presented by the author. The collective led by Nicolas Lecaussin and Jean-Philippe Delsol – which includes twenty economists, historians and tax experts, including Daron Acemoglu, Martin Feldstein and James A. Robinson – argues that Thomas Piketty’s thesis is more political than economic. The authors claim that economic and social inequalities have not exploded, but rather have been reduced in several areas (including education and health). They consider that “the rich do not eat the bread of the poor”, but that they give it to them, taking risks and creating millions of jobs. Wealth cannot indefinitely grow faster than economic growth, and excessive taxation does not solve problems but rather exacerbates them. According to the authors, Thomas Piketty’s data seem to be used for essentially ideological purposes. The collective proposes “a reasoned and reasonable argument” opposed to the ideology qualified as “Marxist essence” by Thomas Piketty, by opposing academic criticism and contradictory facts. They recall the main scientific criticisms against “Pikettymania” and denounce its simplistic and populist theses. Jean-Philippe Delsol is a director of the Association for Economic Freedom and Social Progress (ALEPS). Nicolas Lecaussin is the Director of Development at the Institute for Economic and Fiscal Research (IREF).
CAPITAL IN THE TWENTY-FIRST CENTURY, Éditions du Seuil, 2013.
The author observes, like Tocqueville, an increasingly unequal distribution of income from capital and labor. His thesis is based on the hypothesis of a return on capital (consisting of natural resources, infrastructure and public and private facilities, net of debt) always higher than the economic growth rate (covering in particular changes in wages), since the beginning of history, except during periods of war and economic depression (as in the 1930s). The unequal relationship between rentiers and workers should, according to him, grow rapidly in the twenty-first century. This structural inequality (denoted r> g) between the return on capital (including the “top 1%” in the income scale) and the return on labor is a potential source of social conflict and threat to modern capitalism. This gap is mainly explained by the rapid increase in savings of the wealthiest households. Thomas Piketty advocates the introduction of a more progressive tax and the establishment of a new global tax on capital. The publication of Thomas Piketty’s latest book has had a global impact. It was considered by some Anglo-Saxon economists as a turning point in economic thought. This thesis has sparked mixed reactions in all Western countries. The author was notably accused of revisiting the Marxist approach to the “class struggle between bourgeois and proletarians.” The work of Thomas Piketty has been the subject of much criticism of an ideological and methodological nature, summarized in the following book, reviewed by the Turgot Club.
QUAND LA MACHINE APPREND, Editions Odile Jacob, 2021, 394 pages
This atypical book presents three levels of reading. The life story of a young French engineer with a passion for algorithms who will meet other enthusiasts, go into exile in the United States, work in the largest American laboratories, teach at the University of New York, win the Turing Prize, be considered the father of neural networks or “deep learning” and finally lead the fundamental research of Facebook. But mathematicians and computer scientists will also be able to discover or deepen, through examples of codes and equations, the functioning of these machines which can acquire by themselves the experience and the capacities to accomplish tasks which are assigned to them. Finally, AI users will be interested in its latest developments, but also in its excesses (especially Cambridge Analytica) or its algorithmic biases. Yann Le Cun delivers his vision on the economic, social, societal and ethical impacts of AI, as well as on the future progress of this still young science whose powers of transformation of our society are considerable. Philippe Alezard’s note
THE NEW DOCTRINES OF CENTRAL BANKS
Benoît Coeuré and Hans-Helmut Kotz (eds) Revue d’économie financière-REF (Financial Economics Review) No. 144, 2022 The latest issue of the REF answers the main questions raised by the current revision of the European Central Bank’s monetary policy. It brings together the governors of several central banks and recognized monetary experts. It combines both theoretical and practical approaches to the issues raised by the revision of the ECB’s strategy. It is currently the best French-language source for reflection on the contemporary monetary economy. In the introduction, Benoît Coeuré and Hans-Helmut Kotz draw lessons from the financial crises that have occurred since 2008. They note that central banks have been able to adapt their strategies to changes in their economic and financial environments through the coordinated use of conventional and unconventional instruments. Central banks have been true to their mandates, focusing on the fight against inflation and supporting economic growth through an “inexorable decline in interest rates.” They note that the current economic situation requires the implementation of a new monetary policy. How can we redirect savings towards consumption and investment, initiate disinflation, combine the monetary and fiscal policies of States, support energy and climate transitions, and regulate crypto-assets? In the first part, the authors compare the monetary doctrines applied by the ECB (P-R. Lane) and the FED (R-H Clarida) respectively. They question the effectiveness of unconventional measures (low interest rates, forward guidance, purchase of public debt, liquidity support) and explore the possible new approaches of central banks in a more demanding economic environment, marked by a “double shock” of supply and demand (F. Villeroy de Galhau, V. Brignon, and B. Cabrillac). They analyze the changes in strategies (O. Issing) and the possible exceptional measures in order to practice a “flexible targeting of inflation” (O. Schumacher). In the second part, the experts discuss the ways of “budgeting monetary policies”, recalling that central banks are not in principle intended to intervene in the fiscal policies of governments (S-G. Cecchetti, K-E. Schoenholtz), but that in practice, the ECB’s accommodative policies were intended to support the private economy, but have in fact encouraged the fiscal drift of certain states, particularly in southern Europe (A. Orphanides). In a third part, the authors analyze the new challenges that central banks must face in order to promote energy and climate transitions, as well as to deal with the development of cryptocurrencies. M. Derer, D. Dohrmann and J. Gerik question the role of the ECB in hedging the financial risks generated by climate change, while M. Thiemann assesses the impacts of monetary policies on the management of the Covid crisis. M. Aglietta and N. Valla trace the history of digital currencies and identify the roles of central banks in their regulation and in the creation of central bank digital currencies (CBDCs). Finally, L. Scialom measures the societal responsibility of central banks in crisis management, while P. Berès shows that since Mario Draghi’s “whatever it takes” in 2012, central banks have replaced welfare states. Note by J-J. Pluchart
Olivier Pastré and Jean-Marc Sylvestre, The True Story of the Financial Crisis, Perrin Publishing, 2008, 300 pages (Turgot Prize 2008)
The authors are among the first to trace the subprime crisis – which is not, in their opinion, comparable to that of 1929 – to measure its severity, and then to identify the winners and losers. They propose new ways to regulate financial markets and the creation of new financial vehicles. They believe that the responsibilities of the crisis are collective, each stakeholder (central banks, banks, regulators, rating agencies, traders, states, savers) having not sufficiently measured both the nature and the extent of the risks of the financialization of the economy. Despite these excesses, the authors nonetheless celebrate the virtues of financial globalization, money creation and fiscal discipline. The outcome of the crisis lies in the common will of the many actors involved to thoroughly reform financial markets and global regulatory systems, to revise IFRS prudential standards (deemed pro-cyclical) and to reorganize the banking sector. This last issue is essential, because banks are major providers of credit to SMEs and households, and therefore, creators of productive jobs. A clear and documented analysis of the ins and outs of the last crisis. Olivier Pastré and Jean-Marc Sylvestre are respectively university professor and economic journalist.