The end of the nineteenth century brought a rupture that shaped the world, a paradigm shift in which values ceased to refer to any fixed object. Values – whether religious, metaphysical, aesthetic, or economic – no longer relied on a transcendental idea (cf. anti–essentialism).

Meanwhile, the stock machine was coming into being; it is not by chance that normative value ended just as markets were developing. The market relentlessly converts values (shares, bonds, derivatives, etc.) into commodities, which is possible because value has itself become volatile.

Yet why should Walras, rather than Marx or Smith, be associated with this historic, historical paradigm shift? The value of work was central to Marx and Smith, the two authorities for liberals and socialists. Walras changed this, sensing a shift from an objective to a subjective conception of value. The idea of desire substitutes the idea of work needed for production as the universal measure of economic value.

The economy ceases to be driven by poverty and scarcity. "The neoclassical school began from abundance and satiety, concerning themselves above all with situation of the man who is sated." What extra pleasure can the possession of one more object bring me? How many hats, how many pairs of shoes, do I need in order to be satisfied? Marginalism describes the point of indifference, the moment of satiety where a once desired good loses its appeal, and thus its value.

On financial and commodity markets, desire is unlimited since it focuses on money, the desire for which is theoretically infinite. Our conception of economics, especially since the revolution of 1870, has depended on Smith's idea of the market, and on Ricardo and Marx's ideas of the value of work and of goods. Yet financial markets deserve to be understood by following Walras' approach of the instability of value.

Neoclassical economists defend the idea of rational actors and the efficient market hypothesis. They claim market prices reflect an underlying value, presupposing that sufficient information is available for market decision–making, and that there can be an enduring evaluation of value. Behaviourists challenge this belief. For them, the irrationality of markets is evident from the phenomenon of contagion.

Keynes, unlike the efficiency school, considered that the future is always uncertain, and that there is no necessary link between the real economy and the financial markets. Is it possible to know the worth of a business at a given moment? Keynes thought not.

Whereas neoclassical economists consider market trading to be rational, to the point where risk is downplayed entirely, Orléan's self–referential hypothesis proposes that trading is always risky: the nature of the market means that contagion effects and switches from boom to bust are always possible. His position is thus distinct both from the neoclassical view (where, because of limits to arbitrage, rationality need not exclude risk) and from the behaviourist school, which focuses on irrationality.

This takes the idea of behavioural economics that an investment should take into account the general opinion of the market, but abandons the idea that this general opinion is the product of collective irrationality. Rather, it supposes that all participants are equally rational, and look at the market opinion in order to find the most profitable investment. Decisions are made in anticipation of the decision of other actors. Simply put, traders retain their rationality — but it is a rationality oriented towards the opinions of others, not just on the fundamental value of the asset.

The need must be recognized to reconnect markets with the real economy and to avoid succumbing to the mirage of "risk–free risk". A market, can function effectively only with detailed and widely–available information about the quality of products. Yet the information required in order to evaluate the quality of financial securities is both incomplete and unevenly distributed. Moreover, the information itself is strongly asymmetrical. It is easy to see who will suffer losses in times of crisis, with or without state intervention: inevitably, it is the worst–informed participants.

P–N. Giraud evokes a situation in which there was absolute separation between banks and market finance. This would mean that, deposit banks, which would be authorised only to offer loans, would not invest in securities. The central bank would be an exception, and would hold a monopoly on monetary creation. If the banking system were to be isolated from market finance, then all risk would be concentrated on the stock exchanges and the derivatives markets.

The re–insertion of the financial economy within the real economy would mean going against the current tendency, namely the attempt to build immaterial economies separate from the physical world. Such attempts have been driven by an awareness of the scarcity of raw materials, something identified by Marx and Ricardo. If we exclude a country like Russia, rich in raw materials, disconnection succeeds. Nations have imagined ways to disconnect their economies from the physical world: with finance, with "green" economies, with a war economy (as in the USA), or with credit (as in China).

Re–anchoring the economy in the real world means abandoning a vision of the economy dominated by the opinion market and by intangible factors. It means renouncing a limited and limiting vision of the economy.

The situation is highly paradoxical: the crisis, both in the USA and in Europe (particularly in Spain and Ireland), has broken out on housing, the same terrain upon which confidence is to be re–established.

Re–establishing confidence is a political matter. Political leaders get themselves heard in an emergency, but it is not certain that they have comprehended the extent of an economy essentially undergoing a crisis of "shared values", be they economic, political, metaphysical or aesthetic. Renewing confidence need not mean reinventing a transcendental reality, the value of value, an ad–hoc God or an unshakeable gold standard. Rather, it means re–imagining values that can be shared outside the market of opinion, in the media as much as in finance.

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The instability of value — Olivier Mongin