French economist and mathematician. Cournot was the first economist who, with competent knowledge of both subjects, endeavoured to apply mathematics to the treatment of economics. His main work in economics is Recherches sur les principes mathématiques de la théorie des richesses (1838; Researches into the Mathematical Principles of the Theory of Wealth). His primary concern was the analysis of partial market equilibrium, which he based on the assumption that participants in the process of exchange are either producers or merchants whose goal is the maximization of profit. He therefore ignored the concept of utility. His most important contributions were his discussions of supply-and-demand functions and of the establishment of equilibrium under conditions of monopoly, duopoly, and perfect competition; his analysis of the shifting of taxes, which he treated as changes in the cost of production; and his discussion of problems of international trade.
Carling: Why did you decide to be an economist?
Cournot: I'm not an economist. I'm a mathematician.
Carling: Why, as a mathematician, did you decide to work on economic questions?
Cournot: From Xenophon to Adam Smith, economics suffered from a lack of mathematical rigor because predictions were not concrete enough to be rejected by empirical data. In the words of Wolfgang Pauli, they were “not even wrong.” A theory which doesn't make falsifiable predictions is worse than a theory which has been disproved. Xenonphon's Oeconomicus is an interesting read, but it doesn't reflect economic reality any better than Aristotle's physics represents physical reality. The introduction of mathematics to economics was just as important as the introduction of mathematics to physics by Copernicus, Galileo, Newton, and others.
Carling: Do you think your contributions to economics were as important as Newton's contributions to physics?
Cournot: Does anyone think otherwise?
Carling: If your contributions to economics have been so important, why have you not been awarded the Nobel Prize?
Cournot: It's true that I've made important original contributions to economics, that my publications are widely cited, and that my protégés are widely cited, but my death was a disqualification. If I were still alive, I would win the prize.
Carling: What do you think was your most important contribution to economics?
Cournot: My most important contributions to economics were the invention of game theory and convincing Léon Walras to become an economist.
Carling: Whose recent work on game theory do you find interesting?
Cournot: Nash's formalization and generalization of what I call Cournot Equilibrium has been important in facilitating the wide application of Cournot Equilibrium. If you mean very recent work, asymmetric information games have helped to make game theory applicable to additional fields, such as international conflict resolution and, more recently, law.
Carling: What do you think of Bertrand's duopoly model?
Cournot: Bertrand is a [deleted] id**t! Everyone knows that firms set quantities, not prices. For example, consider my iPad: Apple place orders with the manufacturers in China and then they have to sell them at a price the market will bear.
Carling: Fair enough, but Apple also set a fixed price for iPads and then place orders with the manufacturers every month which vary depending on how many have sold.
Cournot: Bertrand is still a [deleted] id**t! If Bertrand's duopoly model were correct, then duopolies would be perfectly competitive, which is thoroughly refuted by the empirical data.
Carling: Do you have any regrets? What would you do differently if you were still alive?
Cournot: I regret not spending more time mentoring my students. While my work was eventually influential, I could have accomplished more if I had put more effort into helping students develop their research and writing skills.
Carling: What advice do you have for TSE students?
Cournot: Take a broad view and collaborate with colleagues from other disciplines. There are interesting opportunities for economic modeling based on ideas from biology, fluid dynamics, engineering, and cognitive neuroscience. There are also interesting opportunities to apply ideas from economics to other fields such as law, political science, and network engineering.
Carling: Thank you.