Joseph A. Schumpeter: Bernard Lavergne: La théorie des marchés économiques [Review] (1913)

Schumpeter welcomes Lavergne’s book as a distinguished contribution to the revival of French economic theory after a period marked by Léon Walras’s isolation. This historical framing makes the book evidence of renewed theoretical vitality:

Um so erfreulicher ist die kräftige Neubelebung theoretischen Schaffens, die sich gegenwärtig immer mehr geltend macht und schon viele gute Leistungen aufweisen kann.

English translation: All the more gratifying is the vigorous revival of theoretical work which is at present asserting itself ever more strongly and can already point to many good achievements.

Schumpeter values the work both as independent research and as an introduction to theory. He identifies its organizing foundation succinctly:

Es enthält eine Theorie des Wirtschaftsprozesses auf Grund der Grenznutzenlehre.

English translation: It contains a theory of the economic process on the basis of the doctrine of marginal utility.

The review follows this framework through value, distribution, interest, wages, rent, and entrepreneurial profit. Its central critical question is whether Lavergne’s distinctions clarify price formation or give secondary differences excessive explanatory weight.

Lavergne distinguishes markets for consumption goods, money and credit, productive services, and immovable capital. Schumpeter approves the use of theoretical markets but questions the separation of productive services, priced through marginal productivity, from fixed capital, explained through the absorption of surplus values. He acknowledges distinctive features in the latter without accepting the need for a separate principle. His preferred distinction would separate markets for individual productive services from markets for durable goods themselves.

Schumpeter praises the opening treatment of value and price formation, while approaching interest with greater caution:

Nach einer vorbereitenden Analyse der Produktionselemente trägt Lavergne eine originelle und beachtenswerte Zinstheorie vor, über die viel zu sagen wäre.

English translation: After a preparatory analysis of the elements of production, Lavergne presents an original and noteworthy theory of interest, about which much would remain to be said.

Lavergne interprets interest as payment for society’s consent to an individual producer’s activity: money and credit provide access to technical means of production without themselves constituting such means. Schumpeter objects that this consent is embodied in the transfer of productive resources, leaving open whether interest is ultimately paid for those resources. His reservation concerns the independence of the explanation, not its originality. He judges the wage theory particularly successful.

Entrepreneurial profit prompts the review’s strongest methodological defense of equilibrium analysis. Lavergne explains profit through entrepreneurs who organize production more effectively than the marginal entrepreneur while paying identical input prices; their surplus resembles consumer surplus. Schumpeter appreciates this argument but considers Lavergne’s emphasis on unequal production costs, especially against Walras, overstated. Walras’s claim concerns the elimination of profit in equilibrium, not a denial that profit exists.

Schumpeter likewise distinguishes the limited empirical realization of free competition from its analytical usefulness. Transport costs and locational disadvantages do not by themselves refute equilibrium cost equalization, since these differences affect the valuation of land services. The review thus joins encouragement of theoretical innovation to scrutiny of its conceptual foundations. Its favorable judgment survives substantial objections, especially where Lavergne treats observed economic differences as grounds for rejecting equilibrium reasoning.