Money, Banks and Finance in Economic Thought

The (re)introduction of modern finance ideas in France between the mid-1970s and the early 1980s and its paradoxes

Jovanovic Franck, TELUQ university

This article aims to study the reintroduction of modern finance ideas in France between the mid-1970 and the mid-1980. To date, the history of financial economics has not discussed in detail the international diffusion of financial economics (henceforth modern finance). Modern finance was supposedly “introduced” in France in the 1970s and according to some historians of financial economics, it is an American author—Leonard J. Savage—who allowed French authors to rediscover Louis Bachelier’s work, confirming that “a prophet is not without honor, save in his own country.” The present article challenges this conventional narrative and studies for the first time how modern finance ideas were disseminated in France between the mid-1970s and the early 1980s. It shows that, when modern finance ideas were “imported” from the United States in France in 1970s, some pioneering French contributions were taught for almost a century in some of the major French universities, in particular in the Université de Lille and the Université de la Sorbonne. Based on this result, the article explains why the French authors who disseminated these ideas rarely referred to the works of French forerunners. It also clarifies the role of the French economists in this dissemination and shows how the institutionalization of management sciences in France created the opportunities for the reintroduction of modern finance ideas. All of this suggests that the “import” of modern financial ideas in France from the US was in fact a reintroduction. By exploring the international dissemination of modern finance ideas in France, this article provides the opportunity to investigate several new questions in the study of the history of financial economics. It also points out two paradoxes. Firstly, while ideas of the French pioneers were still taught in France until the 1950s, French academics failed to capitalize on their national scientific knowledge when they reintroduced modern finance ideas. Secondly, it seems that French academics “imported” financial models, theories and concepts without considering French specificities. American ideas were used for reorganizing the French financial markets in a very performative way: the French reality was modeled after the American reality through the financial economics framework. Option contracts is a telling example.

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Keywords: history of financial economics in France; Modern finance; FNEGE; Louis Bachelier: CESA-HEC

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