Arsène Jules Émile Juvénal Dupuit, 1804-66.

Arsène Jules Émile Juvénal Dupuit, often shortened simply to Jules Dupuit, was perhaps the most illustrious of the French engineer-economists.  Trained at the École des Ponts et Chaussées in Paris, Dupuit had a distinguished career as a civil engineer.  Starting out as chief engineer in the Sarthe region, Dupuit wrote several first-class theoretical and practical studies of road deterioration and maintenance (1837, 1842), for which he earned a Légion d'honneur in 1843.  His studies on flood management (1848), drawn from his experience in the Loire, also made a big impression.  Dupuit was called to Paris in 1850 and made chief engineer. It was here that Dupuit undertook studies of municipal water systems and hydraulics and supervised the construction of the Paris sewer system.  In 1855, he was named inspector general of the Corps des Ingénieurs and served on the Conseil des Ponts et Chaussées until his death.  

Engineering questions led Jules Dupuit to his seminal contributions to economics.  Perhaps most famous is Jules Dupuit's 1844 article  in the Annales des ponts et chaussées  on the utility of public works, following up on an earlier 1830 work by Henri Navier.  In traditional engineering fashion, public works were often evaluated in terms of their costs to produce, and choice of projects ranked accordingly.  For example, if there are two possible routes to lay a road from Paris to Lille, then the route chosen will be the one that is cheaper to produce. However, while this might make sense for profit-oriented private projects, this was evidently unsatisfactory for public works, where the objective was not to benefit the builder, but rather to benefit the community at large. However, contemporary economics did not have tools available for measuring public benefits.  That is, cost-oriented classical economics gave an idea of how to quantify the benefits to the producer (i.e. profits), but the benefit to consumers (e.g. users of the road) seems subjective, or at least unquantifiable. This is what Dupuit set out to quantify.

Dupuit followed up on the insight already provided by Navier: that the social benefits of a new road or canal can be deduced from the costs saved by users of that route.  Dupuit made two important corrections to Navier's analysis.  Firstly, he criticized Navier's narrow focus on transportation costs.  Dupuit noted that a new road might also open access to new sources of cheaper raw materials, which translates into lower manufacturing costs and thus lower prices of consumer goods. So Dupuit proposes that the proper measure of cost savings is the total reduction in production costs by users of the road (which include, but are not limited to, lower transportation costs).  Dupuit's second point was more revolutionary: Navier had recognized that cheaper transportation costs not only benefited existing traffic, but might induce an increased volume of traffic. Navier proposed to apply the same costs per unit saved by the old traffic to estimate the costs saved by the new traffic. Dupuit noted that this was an error that led to overestimation - as evidently the new traffic did not think it worthwhile to travel before, so they are not saving the same costs per unit as the old traffic.  From this kernel, Dupuit went onto construct his theory of consumers' surplus, demand and utility.

Dupuit (1844) uses the example of a town that imports 10,000 tons of stone per year from far away as construction material (p.349).  If a new canal cheapens the cost of the stone imported by 5 francs, at first glance it seems the social benefit (what Dupuit calls "utilité") of the canal is 10,000 ×5 = 50,000 francs saved per year.  But Dupuit noted the volume of stone imported is not likely to remain that same, that with the new lower cost of stone, more construction projects will be undertaken that were not contemplated before, so the total volume imported will increase (in his example, from 10,000 to 30,000 tons). (p.352)  How do we measure the social benefit of this increase?   This is where Dupuit makes his breakthrough.  He recognizes that the increase implies that there are people who did not value the stone as worth importing when its cost was higher.  Consequently their benefit is not 5 francs saved per ton, but something less.  Evidently, their willingness to buy stone only at the lower price reflects a low "strength of desire" for the stone, whereas those consumers who were importing it before, when price was higher, must have a higher "strength of desire".  Dupuit consequently proposes to measure  the  "strength of desire"  ("vivacité de ses désirs") in terms of the price consumers are willing to pay (or as he states it, the price that will make a consumer "renounce buying a good").  As a mental exercise, Dupuit uses a varying tax to construct a demand curve - that is, calculates the incremental decline in purchases of stone that results from raising the price of stone by increments of 1 franc (p.352). He consequently proposes that the gain to consumers is the area under the demand curve, what Dupuit calls the "utilité relatif" (i.e. the consumers's surplus, the difference between what consumers are willing to pay and the price they actually pay).   The total benefit to consumers from the new canal is the sum of the cost savings made by the old importers  plus the estimated "utilité relatif" of the new importers.  He calls this sum the "total relative utiility" ("utilité totale relatif").

Dupuit thus shows how to estimate the benefit of a public project with his incremental method of calculating cost savings, and how the resulting number is much lower than Navier's naive application of the same cost savings across the board.  But Dupuit does not stop there. He uses this insight to launch a wider criticism of classical economics in general, and  Jean Baptiste Say in particular, for considering market price a measure of utility or value.  Dupuit's new method had shown that the real utility or use value of a product was not the exchange value, but the consumers' surplus.  So while utility and price are connected to each other, they are not the same as each other.  Dupuit elaborates on this in his 1853 article, where using the water-diamong paradox, Dupuit identifies value as being based on the combination of utility and scarcity, constructing marginal utility. He congratulates Say for having moved towards that insight, but chides him for abandoning it for cost of production theory, on the mistaken assumption that value measures utility anyway. 

Dupuit went on to write a second paper, in 1849, applying his new theory on the optimal toll of a bridge.  He also contributed to the theory of monooply, price discrimination, marginal cost pricing and theory of industrial location.

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