Markets, Productivity, and Happiness in a Historical Perspective

Optimal Pricing: The Marginal Cost Theory Put to the Test (1943-1951)

Mueller Thomas , Université Paris 8
Fèvre Raphael, Université Côte d'Azur

After the Second World War, the optimal pricing of natural monopolies quickly became an important debate on an international scale. The welfare enhancing properties of marginal pricing started to be widely discussed, especially among American and British scholars. Yet, the technical computation of marginal costs also became a major issue. It was unclear how to compute marginal costs, mainly in view of the discontinuities of the cost function. In the context of the reconstruction and of practically implementing a policy of marginal pricing, this technical debate also became a major political confrontation. Our contribution focuses on France, with particular reference to the so-called “Calais traveler’s paradox” and the emergence of a school of engineer-economists, capable of contributing at the same time to the theoretical debate and the practical implementation of pricing at marginal cost. This debate connects with the history of economic calculus and the rise of public economics and with larger debate concerning the socialist calculation, and the possibility to compute optimal (welfare enhancing) prices in front of market failures.

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Keywords: Allais, Boiteux, marginal cost, electricity pricing, French economic engineers

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