And then Paul Jorion created a Theory of Prices

Original Post : And then Paul Jorion created a Theory of Prices.

Translated by Lorna MiskellySee the original article in French
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It’s the ‘rentrée littéraire’ in France. Among the 700 books that will be released between now and the end of October -500 of which are written in French- there is one that has grabbed us. “Le Prix” (The Price) written by the economist and blogger Paul Jorion. After having published a essay in 2009 about the invention of truth and reality, he has now formulated his “theory of prices” in this latest opus. Jorion, surprised by the way that prices are determined in the artisinal fishing industry in Brittany and in Africa wanted to get down to the bottom of this problem. Is price established (as we are told) according to the point where supply and demand meet? Or rather a system bringing truth and price together?

My latest book, Le prix (The Price, Éditions du Croquant) has just been released. As was the case for Comment la vérité et la réalité furent inventées (How Truth and Reality Were Invented, Gallimard 2009), this is a book that I have worked on for quite some time. It consists of my observations on price determination over a period of thirty-six years in the Breton fish markets, the makeshift markets on the beaches of Africa and the trading rooms of European and American banks.

It is really an anthropologist’s book. I’m used to saying “I am not an economist”. Now, I have gone beyond this negative perception and I have advanced onto economists’ territory and said to them;“You need a theory of prices: here it is!”

Exactly one year ago, at a conference in Arc et Senans, a rather irritated economist stormed up to the blackboard, drew two curves that crossed and turned back towards the room, saying: “Price determination is really very simple; it is the point where supply and demand meet!”

It is so simple that that is not how it works. I wanted to ask him: “Are you absolutely sure? Have you ever confirmed that with the figures?” I didn’t do so for two reasons.

The first reason was due to the fact that he was the type of economist that would have quite simply taken me for a madman. The second reason was that I already knew the answer; I had tried to verify the above supposition with the figures and the verdict was also very simple, it didn’t work.

To get you salivating, I have included the introduction of The Price below:

Truth and Price
I wrote a book about How Truth and Reality Were Invented (Comment la vérité et la réalité furent inventées, Gallimard 2009). This book falls under the realm of epistemology, or the philosophy of science. The book you are holding comes from a politico-economic or anthropological economics perspective. However, the two books are linked due to the fact that I used the same methods for both of them.

What allowed me to do this is the two phenomena -that of truth and price- exhibit an identical structure; the only difference between the two of them is that truth is expressed with words and price with numbers. If we speak about truth, we are talking about the very fact that something functions like a price and if we speak about price, we are talking about the very fact that something functions as the truth. It could be said that price is the truth of human things expressed in numbers and price that of humans things expressed in words.


A price necessarily involves two people, a buyer and a seller. The truth also calls for two people, the interlocutors, Austin, the philosopher of language wrote one day: “ It takes two to make a truth” (Austin 1970 [1950]:124). In the constitution of truth words are exchanged. If an agreement had been reached about the same sentence, so that each party could separately say “I believe it” and the parties together “we know it” then they would have formed someshared knowledge; and in doing so they would have forged a connection which now means that there is a bit of one person in the other person and vice versa. They could meet several years later without having seen one another since then and would be surprised to realise that in parallel their thoughts had followed the same path over that period, as if they had been continuing to create the truth together. This is what physicists call the principle of non–separability with regards to elementary particles. In the constitution of price, numbers are exchanged and if an agreement is reached on the same number then money is given in exchange for a commodity (material or immaterial), the person who possessed the commodity ends up with money whilst the other person who possessed the money ends up with the commodity. The exchange created a connection between the two parties that decided upon a price and they would be more than willing to do it again.

The system of truth in our culture is called Science while the system of price in our culture is called Economics.
Our modern societies are entirely under the control of the dual action of these two systems. There are very few things in our societies that cannot easily be explained by Science or Economics or by the two in conjunction. The scholar who produces science has replaced what was once the place of the Wise One, the business man who produces prices has replaced the Warrior; as for the place of the Saint, there are not a lot of takers…

Thank you Jan Bruegel for having painted this splendid fish market which gives for a no less splendid book cover. Thank you Alain Oriot for having produced a very beautiful book which you can find here.

3 thoughts on “And then Paul Jorion created a Theory of Prices”

  1. Interesting, confusing and very necessay subject!

    Price, value & profit.

    If one starts to analyse this complex world it is very easy to feel lost, a world with repair.

    How to interpetate Bernard Lietaers famous lines on the backcover of the dutch version of his book The future of Money 1998/1999:

    Money rules the world. But the power of money remains largely invisible. Few realise we are living in a global casino in wich almost 2 trillion dollars changes hands every day. No less then 98% is in speculations, i.e., money not used for goods and services. The negative consequences of this are all to familiar: poverty, enveironmental pollution and chronic lack of time.

    The translation of profit on paper and in our minds, created a split between real economy and virtual economy. In a recent french tv-program Mrs Sophie Menton mentioned that earlier on “only” ten dollar was needed to get one dollar in the real economy. Today she said (february 2011) we need 260 (virtual???) dollars to get 1 dollar in the real economy.

    I wrote a little pamphlet early 2004: which shows how ‘paper profit’ by businesses leads to production of more new ‘laws and rules’ by the government. But in fact we play hide and seek behind these paper ‘truths’, without taking responsibility.

    The split in economic stream is by far the most important reason today why politiciens and economst can’t reach agreement while it is impossibly, we flip flop constantly between these two economic worlds, without getting solid scientific ground below our feet.

  2. Dear M. Jorion, what is according to you the impact of “profit” on “price” and “value”?

    Is this not the basis of the instability of the system, the disconnection between “real” and “wishfull thinking”?

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