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French Contributions
to the Birth of Economics
Boisguilbert and Cantillon
History of Economic Thought
Boise State University
Fall 2015
Prof. D. Allen Dalton
Background: 17th Century France
• Descartes
– deductive natural law rationalism
• Louis XIV
– Franco-Dutch War, War of League of
Augsburg, War of Spanish Succession,
War of Devolution, and War of Reunions
• political, military, cultural dominance
• economic stagnation
• Colbert
– systematic regulation of the economy
Background: Colbertism
• Jean Baptiste Colbert
(1619-1683)
– finance minister (1665-1683)
under Louis XIV (r. 1643/16611715)
– mercantilist export-import
policy; monopoly privileges,
regulation of manufactures
and labor; extensive support
of guild system
• Turgot’s observations in eulogy
In Praise of Gournay
– Multiplicity of taxes; taxexemption of aristocracy and
church
Sébastien Vauban (1633-1707)
• Marshal of France
• foremost military engineer
of the 17th century
• military advisor to Louis XIV
– Condemned repeal of Edict of
Nantes
• Dîme Royale (1707)
– repeal of all taxes and
imposition of single tax of
10% on net produce of
agriculture
Pierre de Boisguilbert (1646-1714)
• born in Rouen of noble lineage
• educated at Petites Écoles of Port-Royal,
center of Jansenism
• trained as lawyer, wrote successful
historical novels and after marriage
became magistrate in Normandy
• Caretsian influence
• exiled in 1707 (6 months), along with
Vauban, for attack on tax system
Major Works
• Le détail de la France, 1695.
• Dissertation de la nature des richesses…
1704.
• Traité de la nature, culture, commerce et
intérêt des grains, 1704.
• Factum de France, 1707.
• Causes de la rareté de l'argent, 1707.
Pierre de Boisguilbert (1646-1714)
Le Détail de la France (1695)
– Detailed ruinous economic status of
France caused by Colbert’s policies
– Argued that wealth consisted of what a
country produces and exchanges, not in
the possession of bullion
– Equalization of taxes would aid
consumption of poor, encourage
production and increase general wealth.
– Argued for 10% tax on revenue of
property
– Argued for end to internal customs
duties and greater freedom of trade
Pierre de Boisguilbert (1646-1714)
Dissertation de la nature des richesses (1704)
– Accounts for social division of labor
– Wealth is enjoyment of the necessities and
superfluities of life
– All economic activity interrelated; harm to
one impairs the orderly system of exchanges
– An orderly system of exchanges occurs at
appropriate prices, in proportion to one
another and in proportion to the expenses
occurred in the production of commodities
– Sources of crises
• excessive taxation
• excessive gain at expense of trading partners
• excessive expenditure on luxury goods
Pierre de Boisguilbert (1646-1714)
Traité de la nature, culture, commerce
et intérêt des grains (1707)
• Laid foundations of laissez-faire
– Critique of mercantilism (money
idolatry)
– Critique of taxation (impoverishes
nation by reducing consumption)
– Notion of natural equilibrium
arising from conflict of interests
• role of Jansenism/Providence
– Superiority of natural order to
regulated economy
Further Reading
• General History
– Will and Ariel Durant, The Age of Reason Begins,
1961.
– Will and Ariel Durant, The Age of Louis XIV, 1963.
• General Economics
– Hazel Roberts, Boisguilbert: Economist of the
Reign of Louis XIV, 1935.
– Gilbert Faccarello, Studies in the History of
French Political Economy, 1998.
– Gilbert Faccarello, The Foundations of Laissezfaire: The economics of Pierre de Boisguilbert,
1999.
Richard Cantillon
The First Modern Economist
Richard Cantillon (1680?-1734?)
• Early Life
– born southwest Ireland to Catholic landlords
dispossessed by Cromwell
– assistant to British paymaster during War of
Spanish Succession, travels Europe
– Matthew Decker (British East India Company helps his start in banking)
– Emigrates to France to take over banking
business of cousin (1714)
– Lord Bolingbroke (Jacobite leader in exile introduces Cantillon to leading thinkers,
including Montesquieu, Voltaire, Mirabeau)
Richard Cantillon (1680?-1734?)
• Association with John Law
– Mississippi Bubble (France: 1716-1720)
• Left France due to threats on life
– South Seas Bubble (England: 1720)
• Mid-life in London
– lawsuits from both Bubbles
– accused of attempted murder; imprisoned twice
• The strange case of Cantillon’s death
– murdered by valet and house burned, or
– faked death to escape lawsuits
• individual turns up in Surinam (S. America) with some of
Cantillon’s papers
The Writing of the Essai
• Essai sur la Nature du Commerce en General
(1755)
– French publication of “English translation”
• Published as part of Gournay’s program for economic
liberalism
• Mirabeau possessed copy of Essai for several years and
allowed copies to be made
– the butchered English retranslation
– the “original” English?
• Malachy Postlethwayt’s Great Britain’s True System and
The Universal Dictionary of Trade and Commerce (1757)
– Jevon’s “rediscovery" circa 1880
– Higgs’ translation (1931)
Views of Cantillon and the Essai
• “a systematic and connected treatise,
going over in concise manner nearly the
whole of economics…It is thus the first
treatise on economics.”
– Wm. Stanley Jevons, “Richard Cantillon and
the Nationality of Political Economy”
• “...the first systematic penetration of the
field of economics.”
– Joseph Schumpeter, Epochen der Dogmenund Methodengeschichte, Grundiz der
Sozialökonomik
Views of Cantillon and the Essai
• “superior to anything that the physiocrats
produced… bears a comparison to The
Wealth of Nations... one of the most
extraordinary documents in our subject. The
look of it is something which has not
appeared before.”
– Lord Robbins, A History of Economic Thought:
The LSE Lectures
• “…the founding father of modern
economics.”
– Murray N. Rothbard, Economic Thought Before
Adam Smith
Cantillon’s System
• The Three Parts of the Essai
– Part One
• General analysis of the real economy
– Part Two
• Discussion of the monetary economy,
monetary theory and the theory of interest
– Part Three
• Foreign trade, exchange rates, and banking
Part One of the Essai
• Chapter 1: “Of Wealth”
• Chapters 2-6
– Economic sociology, explanation of formation
of human society and the economic causes
and consequences of the establishment of
villages to capital cities
• Chapters 7-9
– explanation of differences in labor values and
apportionment of labor to demand
Part One of the Essai
• Chapters 10-11
– discussion of “intrinsic value”
• land theory of value
• long-run competitive equilibrium price
• groping for “opportunity cost” concept?
– the par relation between land value and labor
value
• Chapter 12
– anticipation of Physiocratic doctrine (or
common-sense view of subsistence)
Part One of the Essai
• Chapter 13
– discussion of entrepreneurial production and
supply (risk)
• Chapter 14
– command economy “equilibrium” model
followed by market “equilibrium” model
– role of market prices v. intrinsic value
• Chapter 15
– population theory based upon demand for
goods; “standard of living” model
Part One of the Essai
• Chapter 16
– wealth of nation is labor and land
– mercantilist sentiments (or not?)
• Chapter 17: “Of Metals and Money, and
especially of Gold and Silver”
– reasons for choice of gold and silver as money
– characteristics and market value of money
Part Two of the Essai
• Chapter 1: “Of Barter”
– impossibility of fixing intrinsic values and
necessity for finding common measure of
value
– Locke on market prices; errors and
correctness
• Chapter 2: “Of Market Prices”
– the method of fixing market prices
– influence of other markets
Part Two of the Essai
• Chapters 3-5
– determinants of the circulation of money and
its rapidity in exchange
– class considerations for rapidity
– influence of credit and bank notes on speed of
circulation
– effect of spatial inequality of “hard money” on
prices and resource use
Part Two of the Essai
• Chapters 6-8
– effects of change in quantity of “hard money”
– critique of simple quantity theory (Locke)
– “Cantillon” effects and nonneutral effects of
money supply changes on prices
– specie-flow mechanism and cyclical activity
• Chapters 9-10
– loanable funds theory; the origin of interest
– interest, profit and causes of changes in interest
– changes in the quantity of money and the interest
rate
– interest rate regulation
Part Three of the Essai
• Chapter 1: “Of Foreign Trade”
– extended defense of balance-of-trade doctrine
• Chapter 2
– the function and operation of domestic
exchange
– exchange at par and discount (premium)
– equivalence of foreign exchange
• Chapter 3
– reasons for variation in exchange rate from
balance of trade
– counter-productive effects of exchange
controls
Part Three of the Essai
• Chapter 4
– cause of variations in monetary value in bimetallic
systems
– how to and not to maintain bimetallic systems
• Chapter 5
– debasement and augmentation of coinage and the
effects
• Chapters 6-7
– the operations of banks (credit expansion)
– the advantages and disadvantages of banks
– the operation, advantages and disadvantages of a
National Bank