Nobel economist Debreu thinks in decades, not years

You were brave,'' said a nationally known economist with a chuckle, when I told him I had gone to Berkeley to talk with Gerard Debreu, this year's Nobel Prize winner in economics.

Not that there is anything forbidding about the smiling, gray-haired, French-born Dr. Debreu. It was scarcely a matter of bearding the lion in his den.

Still, in his office on the Berkeley campus of the University of California, Dr. Debreu's welcome was tinged by reserve. Exposure to the press has made him wary.

''Reporters,'' he said, ''misquote me, even when they put my words in quotation marks.''

When talking with this newcomer to Nobel ranks - the 12th American to win or share the economics award - you do not ask about recession, or inflation, or even about the fearsome budget deficits that spark political fireworks in Washington. Professor Debreu waves such phenomena aside - not as unimportant, but as irrelevant to the basic work for which he is honored.

When the Royal Swedish Academy of Sciences chose Dr. Debreu for this year's economics prize, carrying a cash award of nearly $200,000, it picked a man more at home with mathematical concepts than words, a man who thinks in decades, not years.

The award recognizes Debreu's decades of effort to prove mathematically that the price system in an economy works to produce a balance of supply and demand.

''For very good reasons,'' Debreu says, ''mathematics is not understood by the general public. It is extremely abstract. It is not perceived that, many times in the past - and this process will be repeated in the future - a very abstract idea in mathematics sometimes decades later will have an essential impact on physical theory, which in turn will have an impact on technology.''

The machinery and gadgets of our daily lives, in other words, from automobiles to desk calculators and computers, trace their roots to mathematics. But, says Dr. Debreu, ''the chain is very long, with many links, and one has to understand science quite well to perceive the connection.

''Mathematicians,'' he adds dryly, ''are not very good at explaining their case to the public. By inclination, they do not talk to the public, cannot communicate easily.''

But Dr. Debreu tries, uncovering for the layman the links that lead back to the genesis of the work for which he will be honored in Stockholm this weekend.

It all began in the 18th century with Adam Smith's theory of the ''invisible hand'' - the notion that an unseen force shapes individual decisions by millions of people, producers and consumers, to accomplish a balance between the supply and demand for each good and service.

This theory of General Economic Equilibrium, as it came to be called, operates through the mechanism of prices, which rise or fall until balance is achieved.

Nearly a century passed before Smith's theory was put to a stringent mathematical test, specifically by the French economist Leon Walras, who from 1874 to 1877 wrote what Debreu calls ''one of the greatest, if not the greatest, classics of economics.

''What Walras tried to do,'' he says, ''was to explain how a very large number of agents in an economy - consumers as well as producers - make their decisions independently of each other; decisions that are based on knowledge of the price system, and how those decisions are compatible with each other in the sense that in every market, supply and demand will equal each other.''

The world is replete with economic systems, ranging (to name a few) from laissez faire through socialism to the rigid centralization of Soviet communism. Can equilibrium operate for a wide variety of economic conditions and systems?

Debreu says that was the problem on which Kenneth Arrow - another Nobel economics winner, now at Stanford - and he worked in the early 1950s. ''By now, '' he says, ''there are hundreds of (mathematical) proofs of the existence of equilibrium.''

Surely equilibrium operates more freely, or has wider scope, in a capitalist system than in a centrally planned economy like that of the Soviet Union? Debreu shakes his head.

''Not necessarily, because every economy uses a price system to which agents (consumers and producers) will react. A centrally planned economy also will try to achieve equality of supply and demand for every commodity.''

Otherwise, he said, the system will end up with goods piling up in warehouses , or long lines outside empty stores, ''or a long wait for the automobile which you ordered. It is perfectly natural for a (Marxist) economy to try to avoid those kinds of imbalance.

''Whether the price is determined freely in markets - that is, by the interaction of buyers and sellers - or whether it is determined by a central price-fixing agency, makes no fundamental difference.''

No fundamental difference, he means, to the underlying economic force striving toward a balance of supply and demand, no matter what obstacles the theories of men may place in its way.

The Soviet system, clearly enough, does end up with queues and long waits for cherished goods such as cars. When the system is adapted, notably by Hungary, to accommodate a freer play in market forces, the waiting lines dwindle or vanish. Experts assign part of the blame for relative Soviet inefficiency to overcentralization, a refusal to let market forces work. Not only communists, however, don economic blinders.

It is widely accepted that long gas lines suffered by American motorists after the Arab oil embargo a decade ago resulted more from clumsy US government efforts to allocate supplies than from an actual shortage of fuel.

''There are certain fundamental problems,'' Dr. Debreu says, ''that every economic system tries to solve: the centralization of decisions; the way in which information is gathered, transmitted, processed. Those are properties that are common to all systems, independent of the institutional framework.''

Is General Economic Equilibrium one of the building blocks fed into the econometric models developed by major forecasting organizations?

''Yes, I believe that the economists who formulate those models, and who have been trained in the tradition I have tried to describe, use more or less implicitly some of the ideas essential to the theory of General Economic Equilibrium.''

Would that be a link between the general theory, as developed by Dr. Debreu and others, and its application to specific problems, such as the oil-price shocks of the 1970s?

''It is obviously a link,'' he replies, ''though not immediately evident to the untrained eye. But there is a very deep connection within that general framework.''

Born and educated in France, Debreu came to the United States in 1950, serving in a variety of research and academic posts. He has been at Berkeley since 1962 and a US citizen since 1975. He and his wife, Francoise, live in the hills above Berkeley, overlooking the Pacific Ocean. He is an active hiker and outdoorsman.

Debreu cautions against expecting too much from economists, citing the ''extraordinary complexity'' of economic reality and the inability of ''any mathematical model to cover more than a part of that reality.

''One must take a rather humble view of what economic theory can achieve,'' he says.

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