------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (October 2008)

Jean-Philippe Touffut, editor, _Augustin Cournot: Modelling Economics_. 
Cheltenham, UK: Edward Elgar, 2007. xv + 148 pp. $90 (hardcover), ISBN: 
978-1-84720-586-5.

Reviewed for EH.NET by Martin Shubik, Department of Economics, Yale 
University.


In the early 1950s, when I was a graduate student at Princeton, I had 
two academic heroes. They were Cournot and Edgeworth (in my lesser 
Pantheon were Jevons and Walras). As soon as John Nash discussed his 
thesis on noncooperative games with me, I pointed out to him that his 
solution which was mathematically highly general was in essence the one 
that Cournot had applied to economics and had presented in his great 
book of 1838.  The solution called for individual mutually consistent 
expectations. At that time game theory in either cooperative or 
noncooperative form was virtually ignored in economics. It seemed to me 
that this natural extension of Cournot, whose work was unknown to Nash, 
was going to extend the scope of oligopolistic studies considerably. 
Nash and I were joined by John Mayberry in writing an article accepted 
by _Econometrica_ (?A Comparison of Treatments of a Duopoly Situation,? 
1953, 141-54.) This, I believe was the first treatment of oligopoly 
expanding on Cournot?s work utilizing modern game theory.  The 
mathematical tools were being forged to expand vastly the noncooperative 
equilibrium methods to economics so brilliantly started by Cournot.

This book edited by the Director of the Cournot Center, Jean-Philippe 
Touffut, contains an introduction and seven contributions honoring 
Cournot and his contributions to modeling in economics.

Jean Magnan de Bornier?s essay is devoted to Cournot as an economist. He 
notes the considerable gap between the presentation and acceptance of 
Cournot?s models. It was towards the end of his life that Cournot noted 
that ?mon minuscule? was finally being understood by young economists 
such as Jevons and Walras. In 1881 Bertrand wrote a highly negative 
review, based essentially on the empirical question of whether the prime 
strategic variable should be price rather than quantity.  Game theoretic 
understanding of the strategic form has shown that both can be cleanly 
mathematized, as can be models involving various levels of 
substitutability and complementarity among goods and services.

Thierry Martin deals with Cournot?s probabilistic epistemology. He 
stresses the diversity of Cournot?s interests, but deals in particular 
with Cournot?s interests in the basic foundations of probability. He 
notes Cournot?s concern both about the objective and subjective 
significance of probabilities. Cournot noted it ?sometimes pertains to a 
certain measurement of our knowledge, and sometimes to a measurement of 
the possibility of things, independently of the knowledge we have of 
them.? This essay also notes his concern for the use of statistics in 
economics.

Bernard Walliser deals with the functions of economic models. He 
suggests six: 1. the iconic; 2. the syllogistic; 3. the empirical; 4. 
the heuristic; 5. the pragmatic; and 6. the rhetorical function. Under 
these headings (explained in the text) Walliser evaluates Cournot?s 
considerable contributions with a stress on the use of mathematics in 
economic application. Walliser also notes Cournot?s concern about the 
misuse of formalism.

Glen Shafer discusses ?From Cournot?s Principle to Market Efficiency.? 
Cournot?s principle states that an event of small or zero probability 
singled out in advance will not happen! This is considered in terms of 
the developments of probability theory over the last century.  The 
discussion is devoted to considering open partial equilibrium models 
without bankruptcy as applied to finance. Shafer claims to deal with 
competition and efficiency, but he covers only a narrow partial 
equilibrium aspect of finance and omits the considerable literature on 
oligopoly and open and closed economic models based on variants of 
Cournot?s model.

Robert Aumann?s Nobel address is essentially reproduced with some 
editing and no references whatsoever to Cournot and his work.

Robert Solow discusses Cournot and the social income. He notes the two 
chapters in Cournot that can be regarded as containing preliminary 
remarks pertaining to the mathematization of a closed equilibrium model 
are somewhat disappointing in their discussion of social income and do 
not provide much of a link to macroeconomics, as is indicated by 
Cournot?s inadequate consideration of the distinction between annual 
sales and final consumption.

The last essay is by Alain Desrosiers on comparing the incomparable: the 
sociology of statistics. He contrasts the approach of Adolphe Quetelet 
with that of Cournot, noting that Quetelet was an advocate of national 
offices of statistics, with that of Cournot who was more concerned with 
the theoretical foundations of statistics than the practical use of 
economic statistics.

I read this book with highly mixed reactions. As Cournot is one of my 
academic heroes I look forward to any celebration of his contributions. 
This collection presents a mixture.  The articles of de Bornier, 
Walliser and Solow cover Cournot?s role as an economist including both 
his strengths and weaknesses.  However, to some extent, they do not do 
full justice to the considerable influence of his work on game theory 
and its applications to economics.

The articles by Martin, Shafer and Derosieres are addressed to the study 
of Cournot the probability theorist and statistician.

The prize talk of Aumann on war and peace is out of context and does not 
belong in this book. It does not pertain to the topic at hand. A far 
more appropriate reprint would have been ?Markets with a Continuum of 
Traders,? _Econometrica_ 32 (1964), 39-50.

In the opinion of this reviewer Cournot not only was a mathematician and 
probabilist, he was an excellent modeler linking the economic world with 
basic abstract models. Not mentioned in this book on modeling economics 
is the enormous proliferation of works based on Cournot?s modeling and 
application of a mutually consistent expectations model to oligopoly and 
economic competition.  Among those clearly influenced have been, Aumann, 
Dubey, Geanakoplos, Mas-Collel, Shapley, Shell, Shubik, Tirole and many 
others.


Martin Shubik is Seymour Knox Professor of Mathematical Institutional 
Economics (emeritus) at Yale University.  Among his twenty books and 
over two hundred articles are _Readings in Game Theory and Political 
Behavior_ (New York: Doubleday, 1954) and _The Theory of Money and 
Financial Institutions_ (MIT Press, 2004 and forthcoming, three volumes).

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