Sleeping beauties in economics: Allais, Arrow, and the 75th anniversary of the 1952 Paris conference on risk

Abstract The conference on risk held in Paris in May 1952 was a landmark event in economic analysis, especially decision theory. Several groundbreaking ideas were first presented there: some had an immediate impact, while others remained “sleeping beauties,” exerting their influence only much later. These include Allais’s critique of expected utility theory and his paradox, and Arrow’s approach to state-contingent consumption. This paper makes three main contributions. First, on the conference’s 75th anniversary, it reconstructs the rich exchange of ideas that unfolded at the meeting. Second, it offers a systematic account of the theory of decision making under risk that Allais elaborated between 1952 and 1953, after reconsidering the various arguments presented at the conference. Third, it addresses the “sleeping beauty puzzle” associated with Allais and Arrow: why did their ideas have little influence for more than twenty-five years, and how did they rise to prominence in the late 1970s? Because the Allais puzzle is likely more relevant to readers of the Journal of Risk and Uncertainty , we focus on it more closely.