chapter iv. economic thought and other intellectual ...hugokim2016@41... · chapter iv. economic...

Chapter IV. Economic Thought and Other Intellectual Developments

Book IV. The French Revolution and the Industrial Revolution, 1715-1815 311

Photo IV-0-1. The Enlightenment and Economics in the Eighteenth Century Source: http://www.valubit.com/wp-content/uploads/2015/08/valubit_monetary_musing_12.jpg

CHAPTER IV ECONOMIC THOUGHTS 1715-1815

1. Pre-Classical Economic Thought 315Richard Cantillon, Francois Quesnay, Anne Turgot

David Hume, James Steuart

2. Adam Smith: Classical Capitalism 341Adam Smith, Jean-Baptiste Say

3. Ricardo and Malthus: Neo-Classical Capitalism 375Thomas Robert Malthus, David Ricardo

4. Other Intellectual Developments 391Writings on History, Literature and Art, Classical Music

Education, Scientific Advance, Medicine

(Please click each line to see the first page of contents)

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Map IV-0-1. Colonial Trade Routes in the Eighteenth Century Source: http://blogs.lse.ac.uk/southasia/files/2013/06/traderoutes-e1372156465780.jpg

Pre-Classical Economics: Physiocracy

Francois Quesnay, Jacques Turgot; David Hume, James Steuart

1755-76

Francis Hutcheson

1694-1745 Classical Economics

Adam Smith

1723-90

J. B. Say

1767-1835

Bernard de Mandeville

1670-1773

Thomas Malthus

1766-1834

Neo-Classical Economics

David Ricardo

1772-1823

Wm. Nassau Senior

1790-1864

John Stuart Mill

1863-73

John E. Cames

1824-75

Utilitarianism

Jeremy Bentham

1748-1832

James Mill

1773-1836

Figure IV-0-1. Classical Economics Source: Ingrid Hahne Rima, Development of Economic Analysis (New York: Routledge, 1996), 64 (Modified)

http://blogs.lse.ac.uk/southasia/files/2013/06/traderoutes-e1372156465780.jpg



CHAPTER IV. ECONOMIC THOUGHT AND

OTHER INTELLECTUAL DEVELOPMENT FROM 1715 TO 1815

The Renaissance in Italy realized the dignity of man and the worldliness of human nature. In the

sixteenth century, Martin Luther divided the Christianity into Protestant and Catholic through the

religious reformation. Spain created a new empire by discovery of new lands and the expansion

of colonies with their naval powers sided with Portugal, followed by the Netherlands, England,

and France; and their mercantilism controlled foreign trade and exchange rates for their national

interests. In the seventeenth century, Louis IV strengthened the foundation of the absolute dynasty

in France, and England achieved the Glorious Revolution by passing the Bill of Rights by the

Parliament in 1688, not by the king. Meanwhile, Isaac Newton synthesized rationalism with

empiricism in scientific studies; John Locke wrote a contract theory of the people with the

government in politics, and William Petty argued that civil laws against natural laws would be

vain and fruitless, and that government intervention would not be beneficial in the economy. Such

developments provided a bright and progressive background for the rise of capitalism. First, the

enlightenment favored reason and pursued natural rights: Voltaire criticized the oppression of

absolute regime, the lack of religious toleration and of freedom of thoughts; and J. J. Rousseau

wrote on social contract focusing on general will for the common good of the community. It

provided an ideological basis for the revolutions, and liberal political thoughts helped undisturbed

market activities. Second, while political thoughts were liberalized, Adam Smith justified profit

motive in ethics, introduced laissez faire in the market, and advocated capital investment for

productivity growth; that stimulated the rise of capitalism. Third, the Industrial Revolution was

accompanied by intensive factor mobilization with old technology and productivity growth with

new technology; and the expansion of production required exports of finished goods and imports

of raw materials; which expedited international trade and stimulated the rise of capitalism.

Moreover, the recognition of private property and profit-motivated activities are essential for

the rise of capitalism. Plato sees that the ruling class is corrupted if they acquire a taste for money

and possessions, and suggests that the best political community should share everything as

common property, and the citizens should not accumulate wealth in the form of money.1 But

Aristotle believes that private property is more highly productive, gives more pleasure to the owner,

and provides them more virtues of temperance and liberality than communal property. 2

Nevertheless, Christian Bible disapproves wealth by treating it with hostility. Saint Augustine

views that private property is responsible for various evils such as dissension, war, and injustice

though he admits that it belongs to human right rather than divine right. 3 Thomas Aquinas

establishes private property under the law of nature: “Common ownership and universal freedom

are by nature right because private property and slavery are not arrangement of nature but human

contrivances for the good running of society.”4 He justifies profits from mercantile activities in

terms of self-support, charity, and public service; but considers that unlimited profits from trade

are dishonorable: the just price is the value of goods where the amount of labor embodied, from

which civil law allows the trading price with reasonable deviation. Despite church’s prohibition

of usury (intrinsic title), Aquinas compromises the traditional doctrine with economic reality by

allowing interest of loans which covers suffered damage, escaped gains, default, and business risk

(extrinsic titles).5 John Locke views private property as a natural right that exists ahead of

government,6 but Rousseau denounces private property as a source of all evils of civilization.7

Finally, Adam Smith clearly defined the issues on private property and profit motive in trade and

investment: private property belongs to untouchable natural rights and profit motive in economic

transactions does not or at least not necessarily undermine the public interest.



In production, the mobilization of input factors is essential for the rise of capitalism. First,

Smith views that individual savings provide a new source of capital investment, which requires

additional labor with advanced technology. As a result, the economy produces more output with

less cost, which improves social welfare as a whole. The banking system with full-fledged credit

facilities is essential to supply capital for investment. The acquired capital should be efficiently

allocated with the provision of proper infrastructure for industrial expansion. Second, additional

quantity of labor is supplied by population growth, released labor from agriculture and war, and

foreign labor. The specialized quality of labor is supplied by education and training, that require

enough time and money in terms of human capital. Third, the advancement of science and

technology contributes to the rise of capitalism. Even a small case of invention or renovation can

provide an opportunity or a turning point of industrial progress. The mobilization of input factors

with existing technology and the growth of productivity with new technology expand industrial

output dramatically. When Smith published the Wealth of Nations in 1776, he never recognized

that technological advancement would change the industrial world so rapidly. But when Ricardo

wrote his Principles in 1817, Britain had experienced the Industrial Revolution; hence, he could

develop his theory based on Smith’s book with economic reality of the time: specialization in

production and free trade with comparative advantage.

The specialization combines labor and capital efficiently, that expedites mass productions in

each country, expands the production possibility frontier of the world, and diffuses benefits of

gains from trade. The specialization with comparative advantage of factor endowment for trade

partners was Ricardo’s outstanding contribution to the theory of international economics. In

consumption, the rise of capitalism requires sufficient demand generation. The rapid growth of

population in Europe in the eighteenth century generated additional demand for food, clothing,

housing, and others, while the agricultural revolution in Britain generated surplus to purchase

manufacturing products. The expansion of foreign markets such as America, Africa, and Asia

became an important source of demand generation for European countries. According to Say,

supply creates demand: if the supply is restricted, the demand will be restricted in general. Say

views that the balance between supply and demand is an adjustment process of the economy in

the short or long run. However, Malthus is against Say’s Law of Markets in two ways: rising

population increases unemployment and rising investment reduces purchasing power. Malthus

emphasizes an optimum propensity to consume: an adequate and effective consumption creates

demand for products. If the supply side is constantly prepared, domestic and foreign demand for

its products must be an essential element to reach an equilibrium position.

In the market, the undisturbed and fair competition is important for the rise of capitalism.

Smith suggests that the principle of laissez faire is guided by invisible hand. Either government

intervention or monopoly in the market distorts resource allocation by creating bottlenecks and

idle capacities, which reduces economic efficiency and diminishes individual welfare as a whole.

Smith views that political freedom is unable to prosper without economic freedom. In the inter-

national market, the adjustment of domestic currency to the price change of foreign currencies is

a necessary process in trade. In fact, as soon as an exporter receives a “bill of exchange,” the bill

should be sold in the foreign exchange market. Ricardo concerned that the exchange price of

domestic currency to this foreign currency decides the profit margin, which is essential to continue

foreign trade. If the price of domestic currency is too low, the profit of exports will decline though

the volume of exports may rise. If the price of domestic currency is too high, the opposite would

be true. Thus, an adequate level of domestic and foreign demand by Malthus, undisturbed

competition in the market by Smith, and fair prices of foreign exchanges by Ricardo formed

significant theories and practices for the rise of capitalism in the eighteenth century.



1. Pre-Classical Economic Thought

From the sixteenth to the eighteenth century, mercantilism was dominant in trade policy and

economic doctrine; securing export monopoly, exchange control, and the balance of trade by

imposing high tariffs especially on manufactured goods. In addition, other policies have included

“forbidding colonies to trade with other nations; monopolizing markets with staple ports; banning

the export of gold and silver, even for payments; forbidding trade to be carried in foreign ships;

subsidies on exports; promoting manufacturing through research or direct subsidies; limiting

wages; maximizing the use of domestic resources; and restricting domestic consumption through

non-tariff barriers to trade.”8 Its trends appeared in early modern Venice, Genoa, and Pisa,

controlling the Mediterranean trade of bullion. In England, businessmen, merchants, and govern-

ment officials like Thomas Mun (1571-1641), Gerard de Malynes, and Edward Misselden wrote

mercantilist treatises. In France, Jean-Baptiste Colbert (1619-83) worked to ensure that the French

East India Company had access to foreign markets by pursuing mercantilist policies.

The mercantilist doctrine has been interpreted in history as follows. Frist, the mercantilist

writers confused money with wealth: gold and silver are indeed the measure of trade. Charles

Davenant and Josiah Child argued that “net inflow of money was a barometer that signaled

whether a nation won or lost in its trade with other countries,” which proved to be folly. Secondly,

mercantilism was interpreted as the theory and practice of state-making – a reflection of modern

state bureaucracy and its interests. Mercantilist writers to find means and ways to enrich the nation,

emphasizing how increased wealth is a precondition for a strong and militarily powerful state. But

mercantilism has often been regarded as an excuse for protective policies by the state. Thirdly, the

English mercantile writers supported a favorable balance of trade because they saw an advantage

in higher prices. The doctrine of the favorable balance of trade was the idea of the need to have

more money in circulation in the time of the shortage of money that would curtail economic growth.

Fourthly, the idea of a specific mercantilist central theory in modern sense has been rejected by

scholars, but it has been hard to root out. “They thought that the export of more manufactured

goods would lead to an increase in England’s income. The profit would stem from the importers

…not only paying England for its raw materials, but also for its labor costs.” This is distinctively

different from the bullionist idea of an inflow of money making the country rich.9 Mercantilist

idea can be traced in modern forms of protectionism: a protectionist school emerged with the late

mercantilists such as James Steuart, who wrote the Principles of Political Economy in 1767.

As discussed in my Book III (pages 503-6), the decisive impulse towards political arithmetic

was inspired by some economists. William Petty (1623-87) dealt with “problems of taxation, of

money, of the policy of international trade particularly with a view to getting the better of the

Dutch, and so on. He stimulated statistical studies in English and attempted to measure the relative

wealth and income of England, France, and Holland to see the real conditions of the English people.

Charles Davenant (1656-1714) suggests that export surplus is indispensable to finance war, and

that the population growth is beneficial for the state because its high density will provide an

incentive to industry with invention. Gregory King (1648-1712) estimated the population and

wealth of England, and provided the statistical summary for the king in 1697. Daniel Bernoulli

(1700-82), a Swiss mathematician, applied the calculus for the measurement of the marginal utility

of wealth or income. On the other hand, there appeared liberal economic thought. John Child

(1630-99) opposed to monopolistic restrictions of trade, which are harmful to the interest of the

state. John Locke (1632-1704) was against a high interest rate that raises the production cost,

which reduces its demand, so does the trade volume. In the quantity theory of money, he sees the

importance of money velocity. His theories supported economic liberalism.10



Photo IV-1-1. An Imaginary Seaport with a transposed Villa Medici

at the height of mercantilism, painted by Calude Lorrain around 1637 https://upload.wikimedia.org/wikipedia/commons/thumb/4/4d/Claude_Lorrain_010.jpg/300px-Claude_Lorrain_010.jpg

Photo IV-1-2. The Montagu Family at Sandleford Priory (Berkshire), 1744 Source: http://huntingtonblogs.org/wp-content/uploads/2013/03/Rural-11.jpg

https://upload.wikimedia.org/wikipedia/commons/thumb/4/4d/Claude_Lorrain_010.jpg/300px-Claude_Lorrain_010.jpg

http://huntingtonblogs.org/wp-content/uploads/2013/03/Rural-11.jpg



Richard Cantillon (1680s-1734) was an Irish-French economist and author of an Essay on

the Nature of Trade in General, “a book considered by William Stanley Jevons (d. 1882) to be the

cradle of political economy. Although little information exists on Cantillon's life, it is known that

he became a successful banker and merchant at an early age. His success was largely derived from

the political and business connections he made through his family and through an early employer,

James Brydges. During the late 1710s and early 1720s, Cantillon speculated in, and later helped

fund, John Law's Mississippi Company from which he acquired great wealth (see pages 327-8 in

my Book III). However, his success came at a cost to his debtors, who pursued him with lawsuits,

criminal charges, and even murder plots until his death in 1734. Essay remains Cantillon's only

surviving contribution to economics. It was written around 1730 and circulated widely in

manuscript form, but was not published until 1755. His work was translated into Spanish…

probably in the late 1770s, and considered essential reading for political economy. Despite having

much influence on the early development of the physiocrat and classical schools of thought, Essay

was largely forgotten until its rediscovery by Jevons…Cantillon was influenced by his experiences

as a banker, and especially by the speculative bubble of John Law's Mississippi Company. He was

also heavily influenced by prior economists, especially William Petty. Essay is considered the

first complete treatise on economics, with numerous contributions to the science. These

contributions include: his cause and effect methodology, monetary theories, his conception of the

entrepreneur as a risk-bearer, and the development of spatial economics. Cantillon's Essay had

significant influence on the early development of political economy, including the works of Adam

Smith, Anne Turgot, Jean-Baptiste Say, Frédéric Bastiat and François Quesnay.”11 His Essay of

the Nature of Trade in General consists of three parts to be discussed below.

PART I attempts to prove “that the real value of everything used by man is proportion-able

to the quantity of land used for its production and for the upkeep of those who have fashioned it.”

(i) The land is the source or matter from whence all wealth is produced. The labor of man is the

form which produces it: and wealth in itself is nothing but the maintenance, conveniences, and

superfluities of life. To all this the labor of man gives the form of wealth. (ii) Human societies:

Even if the Prince distribute the land equally among all the inhabitants, it will ultimately be divided

among a small number…If however we suppose that the land belongs to no one in particular, it is

not easy to conceive how a society of men can be formed there…if the land were left to the first

occupier in a new conquest or discovery of a country, it would always be necessary to fall back

upon a law to settle ownership in order to establish a society, whether the law rested upon force

or upon policy. (iv) Market towns: Prices are fixed by the proportion between the produce exposed

for sale and the money offered for it; this takes place in the same spot, under the eyes of all the

villagers of different villages and of the merchants or undertakers of the town. When the prices

had been settled between a few the others follow without difficulty and so the market-price of the

day is determined. The peasant goes back to his village and resumes his work. (vii) The Labor of

the husbandman is of less value than that of the handicrafts-man. (viii) Some Handcrafts-man

earn more, others less, according to the different cases and circumstances. (ix) The Number of

laborers, handicraftsmen and others, who work in a state is naturally proportioned to the demand

for them: It often happens that laborers and handicraftsmen have not enough employment when

these are too many of them to share the business. (x) The Price and intrinsic value of a thing in

general is the measure of the land and labor which enter into its production: The quantity of the

produce of the land and the quantity as well as the quality of the labor will of necessity enter into

the price. (xi) The Par or Relation between the value of land and labor: the value of the day’s

work has a relation to the produce of the soil, and the intrinsic value of anything may be measured

by the quantity of land used in its production and the quantity of labor which enters into it.12



(xii) All Classes and Individuals in a state subsist or are enriched at the expense of the

proprietors of land: The farmers have generally two thirds of the produce of the land, one for their

costs and the support of their assistants, the other for the profit of their undertaking: on these two

third the farmer provides generally directly or indirectly subsistence for all those who live in the

country, and also several mechanics or undertakers in the city in respect of the merchandise of the

city consumed in the country. The proprietor has usually one third of the produce of his land and

on this third he maintains all the mechanics and others whom he employs in the city as well,

frequently, as the carriers who bring the produce of the country to the city. (xiii) The Circulation

and exchange of goods and merchandise as well as their production are carried on in Europe by

undertakers and at a risk: The proprietors of land alone are naturally independent in a state; and

all the other classes are dependent whether undertakers or hired, and all the exchange and

circulation of the state is conducted by the medium of these undertakers. (xiv) The Fancies, the

Fashions and the modes of living of the prince, and especially of the landowners, determine the

use to which land is put in a state and cause the variations in the market-prices of all things.13

(xv) The Increase and decrease of the number of people in a state chiefly depend on the taste,

the fashions, and modes of living of the proprietors of land: It is not to be doubted that if all land

were devoted to the simple sustenance of man, the race would increase up to the number that the

land would support in the manner to be explained. The natural and consistent way of increasing

population in a state is to find employment for the people there, and to make the land serve for the

population of their means of support. (xvi) The more labor there is in a state, the more naturally

rich the state is esteemed: The point which seems to determine the comparative greatness of states

is their reserve stock above the yearly consumption, like magazines of cloth, linen, corn, etc. to

answer in bad year or war. And as gold and silver can always buy these things, even from the

enemies of the state, gold and silver are the true reserve stock of a state, and the larger or smaller

actual quantity of this stock necessarily determines the comparative greatness of kingdoms and

states. (xvii) Metals and money: The market value of metals, as of other merchandise or produce,

is sometimes above, sometimes below, the intrinsic value, and varies with their plenty or scarcity

according to the demand. Money or the common measure of value must correspond in terms of

land and labor to the articles exchanged for it. Gold and silver, like other merchandise and raw

produce, can only be produced at costs roughly proportion-able to the value set upon them, and

whatever man produces by labor, this labor must furnish his maintenance.14

PART II deals with market prices, money and its circulation, and interest of money. (i) Barter:

In a market town where there is twice as much corn as is consumed there, we compared the whole

quantity of corn to that of silver, the corn would be more abundant in proportion than the silver

destined for its purchase. (ii) Market Prices: It is clear that the quantity of produce or of

merchandise offered for sale, in proportion to the demand or number of buyers, is the basis on

which is fixed or always supposed to be fixed the actual market prices; and that in general these

prices do not vary much from the intrinsic value. (iii) The Circulation of Money: In general in

England, a farmer must make three rents: the rent to the proprietor; the cost of production including

maintenance of the farm; and undertaking profits. The circulation of money takes place when they

make those payments of rents; and is equal in value to two of these rents, or two thirds of the

produce of the land, if the farmer pays once a year. (iv) Further reflection on the rapidity or

slowness of the circulation of money in exchange: In fine there is so great a variety in the different

orders of the inhabitants of the state and in the corresponding circulation of actual money, that it

seems impossible to lay down anything precise or exact as to the proportion of money sufficient

for the circulation. The actual money necessary for the circulation of the state corresponds nearly

to the value of the third of all the actual rents of the landlords.15



(v) The Inequality of the circulation of hard money in a state: The inequality of the circulation

of money in the different states constitutes the inequality of their respective power, other things

being equal; and this inequality of circulation is always respective to the balance of foreign trade;

which considers the quantity of money and the speed of circulation. (vi) The Increase and decrease

in the quantity of hard money in a state: The abundance of money or its increase in exchange,

raises the price of everything. The quantity of money brought from America to Europe for the last

two centuries justifies this truth by experience. The rapid circulation of money in exchange is

equivalent to an increase of actual money up to a point. If the increase of money in the state

proceeds from a balance of foreign trade, this annual increase of money will enrich a great number

of merchants and undertakers in the state. This will increase the consumption and raise the price

of land and labor. (viii) The abundance of money increases consumption and imports of foreign

goods, so the state begins to lose some branches of its profitable trade, which reduces the balance

of trade surplus. When a state expands by trade and the abundance of money raises the price of

land and labor, the prince or the legislator ought to withdraw money from circulation, keep it for

emergencies, and try to retard its circulation by every means except compulsion and bad faith, so

as to forestall the too great dearness of its articles and prevent the drawbacks of luxury. (ix) Interest

of money and its causes: The interest of money in a state is settled by the proportionate number of

lenders and borrowers, just as the prices of things are fixed by the quantity of things to the quantity

of money. (x) The Causes of interest rate changes: The increased quantity of currency in a state

reduces the interest rates, but this idea is not always true or accurate. If the consumer spending

rose, the available money to loan declines, so that the opposite would happen. The balance of

trade would affect the amount of money to loan, which similarly affect interest rates. The current

rate of interest in a state seems to serve as a basis and measure for the purchase price of land.16

PART III includes foreign trade, finance, and banking. (i) Foreign Trade: It is true that the

continued increase of money will at length by tis abundance cause a dearness of land and labor in

the state. The goods and manufactures will in the long run cost so much that the foreigner will

gradually ceased to buy them, and will accustom himself to get them cheaper elsewhere, and this

will by imperceptible degrees ruin the work and manufactures of the state. The same cause which

will raise the rents of landlords (which is the abundance of money) will draw them into the habit

of importing many articles from foreign countries where they can be had cheap. Such are the

natural consequences. The wealth acquired by a state through trade, labor and economy will

plunge it gradually into luxury. States who rise by trade do not fail to sink afterwards. There are

steps which might be, but are not, taken to arrest this decline. But it is always true than when the

state is in actual possession of a balance of trade and abundant money it seems powerful, and it is

so in reality so long as this abundance continues. (ii) The Exchanges and their nature: When

exchange is regulated between two cities or places where the money is quite different, where the

coins are of different size, fineness, make, and names, the nature of exchange seems at first more

difficult to explain, though at bottom this exchange differs from that between Paris and Chalons

only in the jargon of bankers. At Paris one speaks of the Dutch exchange nu reckoning the ecu of

three livres against so many deniers de gros of Holland, but the parity of exchange between Paris

and Amsterdam is always 100 ounces of gold or silver against 100 ounces of gold or silver the

same weight and fineness. 102 ounces paid at Paris to receive 100 ounces at Amsterdam always

comes to 2 percent above par. The banker who effects the remittance of the balance of trade must

always know how to calculate parity. But in the language of foreign exchange, the price of

exchange at London with Amsterdam is made by giving a pound sterling in London to receive 35

Dutch escalins at the bank: with Paris in giving at London 30 deniers or pence sterling to receive

at Paris one ecu or three livres tournois. Bankers know the amount of local currency to receive.17



(iii) Further explanation: We have seen that the exchanges are regulated by the intrinsic value

at par, and their variation arises from the costs and risks of transport from one place to another

when the balance of trade has to be sent in specie. Bankers sometimes introduce refinements into

practice. If England gains regularly a balance of trade with Portugal and always loses a balance

with Holland, the rates of exchange with Holland and Portugal make speculation: at London the

exchange on Lisbon is below par, and Portugal is indebted to England. It will be seen also that

the exchange on Amsterdam is above par and that England is indebted to Holland. But the quantity

of the debt cannot be seen from the exchanges. It will not be seen whether the balance of silver

drawn from Portugal will be greater or less than what has to be sent to Holland. Exchanges rise

more or less above par in proportion to the great or small costs and risks of the transport of money

and this being granted they naturally rise much more above par in the cities of states where it is

forbidden to export money than in those where its export is free. (iv) The variations in the

proportion of values with regard to the metals which serve as money: It is the market price which

decides the ratio of the value of gold to that of silver, taking the ratio such as at 1 to 15 in England,

and 1 to 8 in Japan. If market price varies considerably, that of the coinage must be reformed to

follow the market rate. By reducing the value of gold, the value of silver continues to rise in the

market. In some centuries, the value of silver rises slowly against gold. (v) The augmentation

and diminution of coin in denomination: We often see in the increases and decreases practiced in

France such strange variations that it might be supposed that market prices correspond rather to

the nominal value of coin than to its quantity in exchange, the quantity of livres tournois in money

of account rather than the quantity of marks and ounces, which seems directly opposed to our

principles. The change of nominal value of money causes present-day inflation effects.18

(vi) Banks and their credits: The bankers contribute to accelerate the circulation of money and

to prevent so much of it from being hoarded as it would naturally be for several intervals. They

lend it out at interest at their own risk and peril, and yet they are or ought to be always ready to

cash their notes when desired on demand. (vii) Further explanations and enquiries as to the utility

of a National Bank: In 1720 the capital of public stock and of bubbles of private companies at

London, rose to the value of 800 million sterling, yet the purchases and sales of such pestilential

stocks were carried on without difficulty through the quantity of notes of all kinds which were

issued, while the same paper money was accepted in payment of interest. But as soon as the idea

of great fortunes induced many individuals to increase their expenses, to buy carriages, foreign

linen and silk, cash was needed for all that, I mean for the expenditure of the interest, and this

broke up all the systems. In the regular course of circulation, the help of banks and credit of this

kind is much smaller and less solid than is generally supposed. Silver alone is the true sinews of

circulation. (viii) The refinement of credit of general banks: The national Bank of London is

composed of a large number of shareholders who make choice of Directors to govern its operations.

Their primitive advantage consisted in making a yearly distribution of the profits made by interest

on the money lent out of the bank deposits. Later the public debt was incorporated with it, on

which the state pays an annual interest. It is undoubted that a bank with the complicity of a

minister is able to raise and support the price of public stock and to lower the rate of interest in the

state at the pleasure of this minister when the steps are taken discreetly, and thus pay off the state

debt. But these refinements which open the door to making large fortunes are rarely carried out

for the sole advantage of the state, and those who take part in them are generally corrupted. The

excess banknotes, made and issued on these occasions, do not upset the circulation, because being

used for the buying and selling of stock they do not serve for household expenses and are not

changed into silver. But if some panic or unforeseen crisis drove the holders to demand silver

from the bank, the bomb would burst and it would be seen that these are dangerous operations.19



Physiocrats and French Pre-Classical Political Economy: From the seventeenth century,

“a unique combination of forces prepared the way for the new science of political economy. One

was the scientific revolution that overturned the ancient categories of physics, astronomy, biology,

and mathematics, emphasized observation and experimentation and promoted a congenial climate

for the development of new, imaginative hypotheses. The second was the increasing importance

of the market economy, colonial trade expansion, and, in the eighteenth century, the beginnings

of the technological revolution, first in agriculture and then in industry. The third force at work

was the growth of the philosophy of natural law and natural rights, which made the individual’s

welfare and property the new measuring rod of governmental policy.”20 Economic concepts had

been developed and theoretical relationships between them were considered by medieval writers

and even ancient Greeks, but “economics as a science dealing with a class of data that is not wholly

within a province of other fields of knowledge and that is subject to stable and logically consistent

laws – in short, modern economics – began only in the seventeenth and eighteenth centuries.”

With the rise of individualism, “the market economy was creating an economic division by placing

the individual in a position of greater dependence upon objective market forces. The natural-law

and natural-rights philosophy expressed the individual’s political separation from, and even

opposition to, the state. This transformation in the way individuals could view their relation to the

world made it possible to envisage an objective social science of economic behavior. The new

discoveries in the natural and biological sciences fostered a new excitement in intellectual circles

both in England and France during this period, and it seemed logical to believe that the

marketplace too could be shown to exhibit regularities of behavior that could be expressed by laws;

that such laws could be examined and compared; that, in short, a science of economics was feasible.

Moreover, science was also leading to many practical inventions; the idea that scientific principles

could be applied in useful ways was carried over into economics.”21

“Physiocracy (from Greek for Government of Nature) is an economic theory developed by a

group of 18th century Enlightenment French economists who believed that the wealth of nations

was derived solely from the value of land agriculture or land development and that agricultural

products should be highly priced. Their theories originated in France and were most popular during

the second half of the 18th century. Physiocracy is perhaps the first well-developed theory of

economics. The movement was particularly dominated by François Quesnay and Anne-Robert-

Jacques Turgot. It immediately preceded the first modern school, classical economics, which

began with the publication of Adam Smith's The Wealth of Nations in 1776. The most significant

contribution of the Physiocrats was their emphasis on productive work as the source of national

wealth. This is in contrast to earlier schools, in particular mercantilism, which often focused on

the ruler's wealth, accumulation of gold, or the balance of trade. Whereas, the Mercantilist school

of economics said that value in the products of society was created at the point of sale, by the seller

exchanging his products for more money than the products had previously been worth, the

Physiocratic school of economics was the first to see labor as the sole source of value. However,

for the Physiocrats, only agricultural labor created this value in the products of society. All

industrial and non-agricultural labor was unproductive appendages to agricultural labor. At the

time the Physiocrats were formulating their ideas, economies were almost entirely agrarian. That

is presumably why the theory considered only agricultural labor to be valuable. Physiocrats

viewed the production of goods and services as consumption of the agricultural surplus, since the

main source of power was from human or animal muscle and all energy was derived from the

surplus from agricultural production. Profit in capitalist production was really only the rent

obtained by the owner of the land on which the agricultural production is taking place.”22 Let’s

now investigate new economic ideas of Francois Quesnay and Jacques Turgot.



Francois Quesnay (1694-1774), the first Physiocrat, born near Paris, became a doctor of

medicine in 1744, subsequently being made physician and eventually the first physician to Louis

XV, actually medical advisor to Madame de Pompadour. Coming to economics in his sixties, he

defines that physical law as “the regulated course of all physical events which is evidently the

most advantageous to mankind,” and moral law as “the rule of every human action conforming to

the physical order evidently most advantageous to mankind” both which form natural laws. Since

natural laws are the best possible laws for mankind, the role of government is minimized such as

“only to preserve the natural rights of citizens including their property rights; to provide a system

of courts for the resolution of disputes; to engage in public works to encourage commerce, such

as dredging harbors; and to establish a system of education.” He recommended laissez-faire

including free trade, and the single tax on the net income from land. Quesnay views that only the

primary sector yields a surplus, measured by the difference between the values of input and output

in the sector, becoming the typical basis for capital accumulation in agriculture. He believes that

the quantities of primary products and their monetary values are essential to evaluate the wealth

of a nation, so that it is necessary to improve techniques of cultivation and to assure the products

to be sold at the proper prices in the market, which increases productivity and total revenue.

Quesnay applied a new structural and quantitative method for economic studies in his Tableau

Economique, which was the first input-output table with three sectors of proprietors, farmers, and

manufacturers and businessmen. It is a simplified model of economic equilibrium based on the

concept of the general interdependence of three sectors to analyze flows of goods and money

between sectors. It is a primitive model of an Input-Output present-days.

In 1758 he published the Tableau économique, which provided the foundations of the ideas

of the Physiocrats. “This was perhaps the first work to attempt to describe the workings of the

economy in an analytical way, and as such can be viewed as one of the first important contributions

to economic thought. The publications in which Quesnay expounded his system were the

following: two articles, on Fermiers (Farmers) and on Grains, in the Encyclopédie of Diderot and

D'Alembert (1756, 1757); a discourse on the law of nature in the Physiocratie of Dupont de

Nemours (1768); Maximes générales de gouvernement economique d'un royaume agricole (1758),

and the simultaneously published Tableau économique avec son explication, ou extrait des

économies royales de Sully; Dialogue sur le commerce et les travaux des artisans; and other minor

pieces. The Tableau économique, though on account of its dryness and abstract form it met with

little general favor, may be considered the principal manifesto of the school. It was regarded by

the followers of Quesnay as entitled to a place amongst the foremost products of human wisdom,

and is named by the elder Mirabeau, in a passage quoted by Adam Smith, as one of the three great

inventions which have contributed most to the stability of political societies, the other two being

those of writing and of money. Its object was to exhibit by means of certain formulas the way in

which the products of agriculture, which is the only source of wealth, would in a state of perfect

liberty be distributed among the several classes of the community, and to represent by other

formulas the modes of distribution which take place under systems of Governmental restraint and

regulation, with the evil results arising to the whole society from different degrees of such

violations of the natural order. It follows from Quesnay's theoretic views that the one thing

deserving the solicitude of the practical economist and the statesman is the increase of the net

product; and he infers also what Smith afterwards affirmed, on not quite the same ground, that the

interest of the landowner is strictly and indissolubly connected with the general interest of the

society.” 23 Quesnay’s approach to economics may be divided into three areas: the problem of the

French economy, the method of analysis he adopted, and the solutions he suggested. His principal

aim was to discover ways in which the wealth of a country could be increased.



(a) Tableau Economique: (i) Problem: There had been an endemic shortage of foodstuffs and

famines were a recurring phenomenon; and the population of France had fallen from 24 million to

16 million between 1650 and 1750. The nobles and the clergy also suffered from serious financial

problems; the revenues from their landed estates decreased sharply during the same period…

Financial conditions in France had been under severe strain for several decades. In the face of

continually rising expenditure on the military as well as on supporting the Court at Versailles,

public receipts were permanently inadequate.” The fiscal system was inefficient causing huge

expenses. “By the middle of the eighteenth century, the problem of French finances was worse

than it had ever been. In this environment, it comes as no surprise to find that Quesnay’s objects

of analysis are the mechanism which influence the wealth of the country. He tried to provide a

logical apparatus from which to derive useful recommendations for the economic policy of the

government, so that the sovereign authority, always guided by what is self-evident, should institute

the best laws and cause them to be scrupulously observed, in order to provide for the security of

all and to attain to the greatest degree of prosperity possible for the society.”

(ii) Method: The level of national income per capita is the best indicator of the economic

prosperity of the country. Quesnay thought that economic facts should be understood and

explained on the basis of specific relationships of cause and effect connecting the actions of

individuals, which formulated a general causal model of the economy, which included a definition

of wealth and shed light on the causes of its increase according to natural laws. Natural laws are

normative rules, but they can be disturbed by men and by the rulers of nations. Quesnay describes

the method of abstraction and simplification to build up a general model of the natural order of

society. His methodology is an original mixture of rationalism and empiricism: our understanding

of society must be based on the fundamental needs of human beings and their attempts to satisfy

them. He analyzed social and economic activities on a materialistic basis, reflecting mutual

economic interests of men. Quesnay uses several assumptions in his Tableau economics. 1) The

primary sector uses the best techniques of production. Large scale cultivation has been extended

to all lands, which are exploited by rich farmers, acting as capitalist entrepreneurs. 2) The

exploitation of land should be secured against any form of retaliation, from the landlords or from

the administration. 3) The existence of free trading conditions, particularly in foreign trade, must

be essential for the production of French agriculture. 4) The tableau prices are regarded as constant,

which hypothesis defines the limits of the analysis of the Tableau. 5) There is a single tax; that

the expenditures of the landlords are one half of their agricultural revenue; and that the sovereign

and the Church neither save nor hoard money in any form.

(iii) Solutions: It is viewed that wealth and revenue come from agriculture: they identify major

cause of the misery and backwardness of France as the decline of its agriculture, so that

administrators must implement measures to raise its productivity, yielding a surplus. In this regard,

there were three policy recommendations as follows. Frist, the fiscal system and the corn trade:

free farmers should be free from several types of taxes which ultimately prevented any planning

of production and investment; and free foreign trade should be designed to establish the most

favorable market conditions for French primary goods. Second, landlords and all the other classes

must avoid buying manufactured goods, mainly from foreign merchants, and shift their pattern of

expenditure in favor of the products of French agriculture. Third, the amount of cultivated land

must be increased and farmers must use their gains to cooperate with the state in extending

cultivation by means of drainage scheme; agricultural entrepreneurs must raise the capital invested

in tools and instruments, livestock and hours, and all the items which form part of the equipment

required for the efficient cultivation of land; and the increase in such capital should be

accompanied by modernization of the methods of cultivation.24



(b) Value and Wealth: The amount of agricultural produce is the basis of the prosperity of the

people; and the size of agricultural surplus indicates the growth potential of the nation. The

abundance of products and their high values are the source of wealth and revenue, so that the

country with higher prices is relatively richer and more powerful than the other. In primary

commodities, the more they are sold at high prices, the more net product cultivation yields. The

technique of cultivation is also essential to improve the conditions of production in agriculture and

to ensure that the products will be sold at a proper price. In eighteenth-century France, mercantilist

views were already losing ground, while it was believed that the only true wealth of a nation was

the number of its inhabitants: people made a country opulent and rich. “Quesnay maintained that

the quantities of consumable agricultural products, and not money and people, were what could

bring prosperity to a country.” Since wealth is something that can be exchanged according to the

rules of a market economy, a commodity must possess two qualities: the possessors of the good

must be able to sell it, and there must be a market for the good to be sold. Quesnay links wealth

and revenue directly to the existence of stable and normal prices for the products of land: high and

favorable prices like at the first-hand sales are not sufficient to give wealth both to individuals and

to countries. Quesnay regarded industry as a true and proper sector of the economy; but “It is

important to note that in France in the middle of the eighteenth century, many industrial activities

were still part of agriculture. These occupations were known as industire rurale, or campagnarde,

and were wide spread in several regions of France. Such industry consisted mainly of the

production of clothes. All these occupations were actually carried out either by peasant families

or by peasants who had become artisans. The latter were still closely linked to agriculture, both

because they received from it all the necessaries of life and because farmers were the main buyers

of their products.” The physiocrats advocates the reduction on primary products and the abolition

of all types of fiscal barriers between the provinces of France.25

(c) The Theory of Prices in Physiocrats - Individualism and laisses-faire: The Physiocrats,

believed that self-interest is the motivation for each segment of the economy to play its role. “Each

individual is best suited to determine what goods he wants and what work would provide him with

what he wants out of life. While a person might labor for the benefit of others, he will work harder

for his own benefit; however, each person's needs are being supplied by many other people. The

system works best when there is a complementary relationship between one person's needs and

another person's desires, and trade restrictions place an unnatural barrier to achieving one's goals.

Laissez faire was popularized by physiocrats Vincent de Gournay (1712-59) who is said to have

adopted the term from François Quesnay's writings on China.” Quesnay distinguishes their use

value from their exchange value: the use value of a commodity is only a prerequisite of its

exchange value, because it ensures that it can be sold on the market. “People who exchange

commodities act only in view of their own satisfaction and self-interest, but this fact does not lead

to arbitrary values of prices, depending on the reciprocal strength of buyers and sellers. These

contrasting forces are checked and regulated by the market. Quesnay believes that, if a market

exchange economy is allowed to work according to the laws of the natural order, it reconciles the

different interests of the exchangers, because none of them can fix a price according to his own

interest. Hence the prices of exchangeable products depends neither on the buyer nor on the seller.”

Therefore, there are two main forces which influence the prices of commodities: supply and

competition. Merchants are the necessary links between farmers and artisans, who produce the

commodities, and landlords and other consumers who want to buy them. The interest of traders

are opposed to those of the majority of citizens, and their profits must not be accounted for as

revenue for the nation. Prices in a market are not necessarily influenced by sudden changes in

annual output; but are influenced mainly by the conditions and the rules of trade.26



Quesnay thanks to the introduction of free foreign trade and international competition that

greatly reduces its fluctuations, and the quantity produced each year is rendered less important for

the determination of prices in sales at first-hand. Competition becomes the most relevant factor

in the process of price formation. In physiocratic analysis, the value of the current price changes

continuously, while the prix fondamental is remarkably stable. But these two notions are

connected, because Quesnay does not accept the process of price formation is influenced by

natural laws, and not by chaos. “Therefore the fundamental value of a commodity defines the

stable and permanent level of the current price in sales at first-hand” since there is free competition

in international markets. Quesnay writes: “as result of this general intercommunication and these

successive and mutual alternations of abundance and scarcity, prices always remain at an

intermediate level, determined by the average fundamental price in these countries which are

joined together by trade.” The level at which the current price finally settles is not the result of

the opposing forces of supply and demand, but is regulated by the fundamental price of

commodities. This is the most important notion of price introduced by Quesnay, “because it

provides a benchmark for all the other price concepts used by the physiocrats, and illustrates their

view of the value of commodities.” Most of pre-physiocratic economists believed that the forces

that went under the traditional headings of supply and demand affected the market values of

commodities. “Cantillon made a sharp distinction between the market price of a commodity and

its intrinsic value, which is the measure of the quantity of land and of labor entering into its

production, having regard to the fertility or produce of the land and to the quality of the labor.”

Quesnay defines that the fundamental price includes costs, taille, and rent; while costs consist of

wages, raw materials, and consumption of fixed capital.27

(d) Capital, Competition and the Origin of Surplus: The doctrine of exclusive productivity of

agriculture is opposed by two ways: one is that agriculture will give people their subsistence, but

only manufacture will bring money and wealth; the other is that industrial production yields a

more stable revenue to entrepreneurs and to the country because it is safer than agriculture. But

agricultural labor is productive only when it is assisted by the necessary amount of capital: “the

more advances are made in the primary sector the higher is the productivity of the workers, so

only large-scale farming is productive, while the small-scale techniques of production used by the

poor can hardly give a surplus.” The existence and the size of agricultural surplus depend mainly

on the techniques of production of agriculture. “The physiocrats believe that the possibility for

French manufactures are highly insecure; with laissez-faire they have no hope of making any

profit. According to them, the exports of French manufacture are always threatened by completion

from foreign industries.” There is the possibility that some manufacturers may make a profit,

when they are protected by exclusive privileges, which give them the unjust right of selling their

products above their natural value. And competition does not have the same effect on the prices

of primary commodities. Quesnay and his disciples are convinced that the existence of competitive

market conditions for the products of land is compatible with a permanent and stable surplus value

over costs. According to them, competition should have the same features in markets for the

products of land as in those for manufactured commodities. A high level of consumption of gives

rise to strong competition among buyers, which increases the price of foodstuffs. High and stable

prices for the products of land are seen as a basic feature of a prosperous nation, but French

agriculture is not in such a favorable situation. The physiocrats envisage a type of international

free trade, which can make France, economically, and perhaps politically, the most powerful

country in the world, to the disadvantage of her trading partners. They tried to justify the exclusive

productivity of agriculture with the spheres of productivity and of the market, but weaknesses

were observed with the lack of balance in the analysis of market and production phenomena.28



(e) The Theory of Distribution: In Grains, Quesnay says that in the cultivation of corn, the

net product must be distributed approximately in the following way: for the landlord 3/5; for the

taille 1/5; and for the farmer 1/5. The gain is not limited to the cultivation of corn, but arises in

all the productive activities of the primary sector. According to Quesnay, “in order to see whether

the cultivator makes either a profit or a loss, one must examine the fundamental price of corn and

the average price that the farmer obtains. A profit accrues to the farmer in so far as the price at

which he sells the product exceeds the overall expenses incurred for the production of one unit of

output.” If the technical costs of production, the rent and the taille are given and fixed, “The sum

of these three items is the fundamental price, which depends on three sets of data: (i) the methods

of production, (ii) the value of rent, and (iii) the value of taxation. The fundamental price is known

before the products are sold on the market and does not include profit because it is the price at

which the cultivator makes neither losses nor gains. Given the above three sets of data, the size of

the profit depends entirely on market conditions in the sales at first-hand. The physiocratic notion

of profit has most of the features of profit on alienation whose size is influenced by the selling

price of a commodity.” Quesnay also speaks of the interests on the advances of the productive

class as 10 percent of the original advances of the cultivator. Despite the fact that Quesnay links

profits to the advances and expenses of farmers, “his analysis of prices and markets clearly shows

that he considers the gains of entrepreneurs much more as part of the social surplus than as a

necessary cost of production.” We can divide the components of social surplus into two elements:

profits and revenue, that is to say rent and taille – in terms of their expenditure: “The landlord

purchase goods and services for their own consumption, while the profits of farmers are reinvested

in production. Farmers and landlords spend their share of surplus: the features and roles of the

two classes are clearly separated in the process of economic development.”29

(f) Physiocracy and the Origin of Political Economy: Quesnay wants to reduce the expenses

necessary to maintain the workers; “the means of production must replace the peasants in

cultivating the soil: it is necessary to increase production and to diminish the expenses, as much

as possible, by means of livestock, machines, and all the other means which can replace the

expenses.” Two major preoccupation guide Quesnay’s analysis of the labor process. “First, he

want to secure the introduction of new machinery and new techniques in agriculture…Secondly,

the expenses of cultivation must be reduced, to make it possible to reduce the selling price of

products, without a reduction either in farmers’ profits, or in the revenues of the landlords and of

the crown. In fact, with lower retail prices more people may consume the products of French

agriculture, which, most importantly, become more competitive on international markets.

Therefore, overall effective demand for French foodstuffs increases.” In defending the doctrine

of the exclusive productivity of agriculture, Quesnay had a clear view of the division of labor in

society, where each individual has a role to play, though he does not use the idea of division of

labor to analyze the labor process, either on land or in factories. “The physiocrats also justify the

existence of surplus in agriculture by arguing that with free competition in foreign trade, wealthy

foreign merchants ensure a high effective demand for the products of land, which causes a high

level of competition among buyers and therefore raises current prices. The existence of permanent

excess demand justifies and guarantees the existence of a net product. Despite their attacks on

mercantilism, Quesnay and his disciples end up by welcoming a positive balance of trade for

France even though the net balance must be composed of the products of land. Advantageous

foreign trade is still a condition of the phsyocratic process of development and growth.” Finally,

there are contrasting interests of classes, the interests of farmers and landlords cannot easily be

reconciled. Profits are the only sources of capital accumulation in agriculture, and are the most

important economic factor in the development of the country.30



Anne Robert Jacques Turgot (1727-1781) was the best known Physiocrat, next to Quesney.

Born in Paris, he was educated for the Church, and after brilliantly sustaining his thesis for the

degree of Bachelor of Theology, in 1749 he was admitted to the Maison de Sorbonne, an annex of

the theological faculty of the University of Paris, to read for this license. He was soon elected

prieur, a largely honorary office which involved presiding over assembly of theological students

and delivering on certain occasions a discourse in Latin. In this capacity, Turgot delivered A

Philosophical Review of the Successive Advances of the Human Mind, and On Universal History

both in 1750.31 Abandoning his ecclesiastic career, he entered the service of the crown in 1751.

After holding minor posts in the parlement of Paris, in 1761 he was appointed to intendant of the

district of Limoges serving with great success until 1774, and continuously served as Minister of

the Navy for a few months and as Comptroller-General of Finance during 1774-76. “He was a

great civil servant devoting to state and society as the economist in action to improve the financial

administration: he improved the allotment of taxes, remedied injustices, organized a civil service,

freed the trade in grain, abolished the craft guilds, built 450 miles of roads, and persuaded the

inhabitants to grow potatoes as human food, which brought great relief during the famine period

of 1768-1772 in France. Some historians may say that he might have prevented the Revolution by

tightening over expenditures of the government.” In his occasional visits to Paris, he contracted

a friendship with David Hume at the British Embassy during 1763-66, and became acquainted

with Adam Smith in Paris in 1766, when Turgot wrote his Reflections on the Production and the

Distribution of Riches for the benefit of two young Chinese students returning to China.

(a) A Philosophical Review (1750): Turgot views that the human race like each individual

has its infancy and its advancement over the period since its origin. Since the original ideas are

based on sensation, “the same senses, the same organs, and the spectacle of the same universe”

give the same ideas. Nevertheless, “they do not all move forward at the same rate along the road”

because circumstances either encourage or discourage its development, and “it is the infinite

variety of these circumstances which brings about the manifest inequality in the progress of

nations.” The progress of the human mind alone caused the rise and fall of civilization. Turgot

considers two factors in processes. “Frist, the general process of the growth and development of

societies is a natural process, comparable to the process of growth of the individual from infancy

to adulthood, or that of the plant from seed to flower. Second, the main reasons why societies

tend in the long run to develop towards greater perfection are to be sought in the economic sphere.

In the discourse, Turgot emphasizes in this connection (i) the crucial importance of the emergence

in the agricultural stage of development of a social surplus, which not only make possible the

development of towns, trade, the useful arts and accomplishments, the division of occupations’,

etc., but also facilitates the creation of a leisured class which bends all its strength to the cultivation

of the arts’; (ii) the way in which the development of commerce is associated with the perfection

of astronomy, navigation, and geography; (iii) the important role of the towns – the centers of

trade and the backbone of society – in preventing the decline of the arts and sciences in periods of

barbarism; and (iv) the way in which the mechanical arts are preserved in times of general decline

by the needs of life, and are developed in the long run merely by virtue of the fact that time

passes…All these ideas were clarified and developed further in On Universal History, which,

together with the companion work On Political Geography, was written by Turgot, while he was

at the Sorbonne, or shortly after he left it…On Political Geography is interesting not only as further

evidence of the extraordinary breath and novelty of the young Turgot’s interests and ideas, but

also because it contains an important development of the three states theory. Turgot’s notes

consist essentially of a description of five political maps of the world, the first of which would

contain details of the following…people who are shepherds, hunters, husbandmen.”32



(b) On Universal History (1750): Turgot makes a much more extensive use of the three stages’

theory in it than any of his earlier works. “In the beginning, when men could devote themselves

to nothing but obtaining their subsistence, they were primarily hunters, in much the same situation

as the savages of America. But in countries where certain animals like oxen, sheep, and horses

were to be found, the pastoral way of life was introduced, resulting in an increase in wealth and

greater understanding of the idea of property. Eventually, in fertile countries, pastoral peoples

moved on to the state of agriculture, and as a result of the surplus which agriculture was able to

generate there arose towns, trade, and all the useful arts and accomplishments, a leisured class,

and so on. Within this conceptual framework, Turgot sets an account of wars and conquests among

early peoples, the ways in which different nations were led to intermingle, and the overall effects

of this intermingling…the development of society is essentially a kind of unintended by-product

of the conflict of human wills and actions which are often directed towards quite different ends.

The passions of ambitious men, says Turgot, have led them on their way without their being aware

of where they were going…They were, so to speak, the leading-strings with which nature and its

Author guided the human race in its infancy…It is only through upheavals and ravages that nations

have been extended, and that order and government have in the long run been perfected.” “Thus

the passions have led to the multiplication of ideas, the extension of knowledge, and the perfection

of the mind, in the absence of that reason whose day had not yet come and which would have been

less powerful if its reign had arrived earlier.” 33 “Invention of printing spread not only the

knowledge of books, but also that of the modern arts, and it has greatly perfected them…It was

like a new world, in which everything pricked their curiosity.”34

(c) Reflections on the Production and the Distribution of Riches (1766): Schumpeter admired

that “Turgot’s theoretical skeleton is, even irrespective of its priority, distinctly superior to that of

the Wealth of Nations.” Chapter I – XXVIII. Commerce is impossible upon the supposition of an

equal division of lands, where in every man should possess only what was necessary for his own

support; which hypothesis has never existed and could not have continued. The diversity of soils

and the multiplicity of wants lead to the exchange of the products of the land for other products.

The products of the land require preparations long and difficult, in order to render them fit to

satisfy the wants of man. The necessity of these preparation brings about the exchange of produce

for labor. The husbandman is the first mover in the circulation of labor; it is he who causes the

land to produce the wages of all the artisans. The wages of the workman are limited to his subsist-

ence by the competition among the workmen. The husbandman is the only person whose labor

produces something over and above the wages of the labor; so he is the sole source of all wealth.

The society is divided into two classes: the productive class or the cultivators; and stipendiary

class or the artisans. In the first ages, the proprietor cannot have been distinguished from the

cultivator. All the lands have a master; and the proprietors begin to be able to throw the labor of

cultivation upon hired cultivators. Inequality in the division of properties: first, a man of greater

strength, more industrious, more anxious about the future, took more of it than a man of a contrary

character. He whose family was more numerous, as he had more needs and more hands at his

disposal, extended his possessions further. Secondly, all piece of ground are not equally fertile:

two men, with the same extent of ground and the same labor, could obtain a very different produce

from it. Thirdly, properties, in passing from fathers to children, are divided into portions more or

less small, according as the families are more or less numerous. Finally, the contrast between the

intelligence, the activity, and above all, the economy of some and the indolence, inaction and

dissipation of others would cause inequality. The negligent and improvident proprietor, who

cultivates badly, who, in abundant years, consumes the whole of his superfluity in frivolities, finds

himself reduced, on the lease accident, to request assistance from his prudent neighbor.35



As a consequence of this inequality, the cultivator is distinguished from the proprietor. The

produce is divided into two parts: the one includes the subsistence and the profits of the

husbandman, which are the reward of his labor and the condition upon which he undertakes to

cultivate the field of the proprietor. What remains is that independent and disposable part which

the land gives as a pure gift to him who cultivates it, over and above his advances and the wages

of his trouble; and this is the portion of the proprietor or the revenue, with which the latter can live

without labor and which he carries where he will. Then, we have the society divided into three

classes: the class of husbandmen or the productive class; the class of artisans and others who

receive stipends from the produce of the land; and the class of proprietors, the only one which, not

being bound by the need of subsistence to a particular labor, can be employed for the general needs

of the society, such as war and the administration of justice, either by a personal service, or by the

payment of a part of their revenue with which the state or the society may engage men to discharge

these function – called disposable class. The labor of the cultivators produces his own wages and

the revenue paid to artisans and other stipendiaries; while the artisans receive simply their wages.

How the proprietors are able to draw the revenue from their lands: first method is cultivation by

men who are paid wages; second is cultivation by salves; third is alienation of the estate in return

for a fixed payment of rent; fourth is the metayer system, by giving up to cultivator a fixed portion

of the produce, usually a half, the proprietor undertaking to make the advance of cultivation; fifth

method is farming or the letting-out of land to farmers, who undertake to make all the advances

of the cultivation, and who promise to give the proprietor, during the number of years agreed upon,

and unvarying revenue. The two last methods of cultivation are those most generally used, to wit:

cultivation by metayers in poor countries, and cultivation by farmers in the richer countries.36

Chapter XXIX – LXXI. There is another way of being rich, without laboring and without

possessing lands, of which I have not yet spoken. It is necessary to explain its origin and its

connection with the rest of the system of the distribution of riches in the society, of which I have

just drawn the outline. This way consists in living upon what is called the revenue of one’s money,

or the interest one drawn from money placed on loan. Reciprocal want has led to the exchange of

what people have for what they have not. People exchange one kind of produce for another, or

produce of labor. In these exchanges it is necessary that the two parties should agree both as the

quality and the quantity of each of the things exchanged. In this agreement it is natural that each

should wish to receive as much as give as little as he can; and both being equally masters of what

they have to give in the exchange, each has to balance the attachment he has for the commodity

he gives against the desire he has for the commodity he wishes to receive, and to fix in accordance

therewith the quantity of each of the thing exchange. Then how does the current value establish

itself in the exchange of commodities? The price mid-way between the different offers and the

different demands will become the current price, where to all the buyers and sellers will conform

in their exchanges, until a diminution of the offer on the one side or of the demand on the other

causes this valuation to change. Commerce gives to each article of commerce a current value,

with respect to every other article; whence it follows that every article of commerce is the

equivalent of a certain quantity of every other article, and can be regarded as a pledge which

represents it. For example, if one bushel of corn is the equivalent of six pints of wine, and one

sheep is the equivalent of three bushels of corn, this same sheep will be the equivalent of eighteen

pints of wine. Hence each article of commerce can serve as the scale or common measure

wherewith to compare the value of all others. Every commodity has the two essential properties

of money, those of measuring and representing all value; and in this sense, every commodity is

money. Reciprocally, all money is essentially merchandise. The metals, and especially gold and

silver, are more fit for this purpose than any other substance.37



Gold and silver are constituted, by the nature of things, money, and universal money;

independently of all convention and of all law. The employment of the other metals for these

purposes is only subsidiary. The use of gold and silver as money has augmented their value of

materials. The value of gold and silver, compared with the other articles of commerce and with

one another, varies. It is well known that we now give in European from fourteen to fifteen ounces

of silver for one ounce of gold; while at present in China, they give only about twelve ounces of

silver to get one ounce of gold. The reserve of annual products is moveable riches. It is evident

that men worked hard to obtain as much as possible of this kind of wealth before they became

acquainted with money. All the various kinds of labors, whether in the cultivation of the land, in

industry, or in commerce, require advances for (i) purchase of an estate of land, (ii) manufacturing

and industrial enterprises, which would be paid by their profit they ought to yield. (iii) In advances

for the enterprises of agriculture, the competition of capitalist undertakers in it establishes the

current price of leases, and farming on a large scale; while the lack of capitalist undertakers

restricts agriculture to the small-farming method. The class of cultivators is divided into farmers

and mere wage-earners. (iv) In commerce, the undertakers, either in the cultivation of the land or

in manufactures, get back their advances and their profits only from the sale of the fruits of the

earth or of the manufactured commodities. However, without the assurance of his return and of

indispensable profits, no merchant would undertake commerce, and no one could possibly go on

with it, for which the merchant directs his speculation. It is this advance and this continual return

of capitals which constitute what one must call the circulation of money. (v) The possessors of

money balance the risk their capital may run if the enterprise does not succeed, with the advantage

of enjoying a definite profit without labor; and they are influenced thereby to demand more or less

profit or interest for their money, or to consent to lend it in return for the offered interest.38

Chapter LXXII – CI. A loan is a reciprocal contract, free between the two parties, which they

make only because it is advantageous to them. The price of money ought be higher if the lender

runs a risk of losing his capital by the insolvency of the borrower. The bargain is perfectly equal

on both sides, and consequently fair. The price of borrowed money is regulated, like that of all

other merchandise, by the balance of supply and demand: thus, when there are many borrowers

who need money, the interest of money becomes higher; when there are many holders of money

who offer to lend it, interest falls. Therefore, it is a mistake to suppose that the interest of money

in commerce ought to be fixed by the laws of Princes. Money has two different valuations in

commerce: the one expresses the quantity of money we give to procure the different sorts of

commodities; the other expresses the relation of a sum of money to the interest it procures in

accordance with the course of commerce. These tow valuation are independent of each other, and

are governed by quite different principles. In the valuation of money with regard to commodities,

it is the money considered as metal that is the subject of the estimate. In the valuation of the penny

of money, it is the use of the money during the definite time that is the subject of the estimate.

The price of interest depends immediately upon the relation between the demand of the borrowers

and the offer of the lenders; and this relation depends chiefly on the quantity of moveable riches

accumulated, by the saving of revenues and of annual products, to form capitals withal, whether

these capitals exist in money or in any other kind of effects having a value in commerce. Money

invested in land brings the least of return; money placed on loan brings rather more than the

revenue of landed estates acquired with an equal capital; money invested in agricultural,

manufacturing, and commercial undertakings is bound to bring more than the interest of money

on loan. But the products of these different employments are limited by one another. The total

wealth of a nation is composed: 1st, of the net revenue of all the estates in land, multiplied by the

rate at which land is sold; 2nd, of the sum of all the moveable riches existing in the nation.39



Pre-Classical Economics in Britain: As described earlier, in Britain in the seventeenth

century, a new scientific methodology was introduced by empiricists like Francis Bacon, and the

Royal Society was founded in 1660 for the promotion of science; the theory of natural law was

established by Thomas Hobbes and John Locke; and with the rise of individualism, the concept of

the market economy was “creating an economic division by placing the individual in a position of

greater dependence upon objective market forces.” William Petty was influenced by Hobbes and

Bacon; and his Political Arithmetic attempted to measure the relative wealth and income of

England, France, and Holland (see pages 503-4 in my Book III). “Locke stated the basic idea of

the quantity theory of money very clearly, but it was not until Hume, half a century on, that the

links between the quantity of money, the price level, and the balance of payments were clarified.

Many elements of later theories of capital accumulation surfaced in the debates over interest rates

without being brought together. It was just at this point, when the makings of a real advance seem,

in retrospect, so obvious, that the advance of the 1690s fizzled out. Policy debates continued, of

course, but nothing really new or substantial emerged from them for many years.” Several key

figures died before discussions on major issues: Petty died in 1687, North in 1691, Child in 1699,

and Locke in 1704. In this period, the major debates were driven by immediate policy problem.

“Once the main issues of the 1690s were settled – the legal interest rate was not lowered after all,

take the argument further. Other, noneconomic, issue took center state. There were advances in

the following period, but in France (Cantillon and others) or Scotland (Hume and others).”40 The

case of Joh Law of France was already described in Book III (pages 327-8). Now let’s investigate

about David Hume and James Steuart as Pre-Classical economists in Britain.

David Hume (1711-76): Hume’s philosophy was also described in Chapter III (pages 268-

72). His economic thoughts appear in his Political Discourses (1752) and partially in A Treatise

of Human Nature (1739-40). (a) His Treatise in Part II deals with Justice and Injustice. (i) Justice,

whether a natural or artificial virtue? No action can be virtuous or morally good, unless there be

in human nature some motive to produce it, distinct from the sense of its morality. (ii) The origin

of justice and property: In the state of nature, there be neither justice nor injustice; and there was

no such thing as property. (iii) The rules which determine property: The general rule, that

possession must be stable, is not applied by particular judgments, but by other general rules, which

must extend to the whole society, and be inflexible either by spite of favor. The possession of all

external goods is changeable and uncertain; which is one of the most considerable impediments

to the establishment of society, and is the reason why, by universal agreement, express or tacit,

men restrain themselves by what we now call the rules of justice and equity. The right of

succession is a very natural one, from the presumed consent of the parent or near relation, and

from the general interest of mankind, which requires, that men's possessions should pass to those,

who are dearest to them, in order to render them more industrious and frugal. (iv) The possession

and property should always be stable, for a plain utility and interest, except when proprietor

consents to bestow them on some other person. But sensible transference of property is commonly

required by civil laws, and also by the laws of nature. (v) The obligation of promises: The rule

of morality, which enjoins the performance of promises, is not natural. All morality depends upon

our sentiments; so a promise is naturally something altogether unintelligible, nor is there any act

of the mind belonging to it. (vi) Some farther reflections concerning justice and injustice: there

are two different foundations: that of interest, it is impossible to live in society without restraining

themselves by certain rules; and that of morality, when this interest is once observed and men

receive a pleasure from the view of such actions as tend to the peace of society, and an uneasiness

from such as are contrary to it. Interest is once established and acknowledge, the sense of morality

in the observance of these rules follows naturally, and of itself, it is also augmented.41



(b) Eugene Rotwein’s view on David Hume:42 (i) In economic psychology, Hume’s economic

thought takes “the form of a natural history of the rise and progress of commerce in which he seeks

to explain the development of economic activity through the impact of changing environmental

forces on certain human passions.” Hume views that the motives of labor are action, pleasure,

liveliness, and avarice. Man desires action because of curiosity or the love of truth, requiring

challenge to his capacity and possessing some measures of utility, like hunting and gaming; man

works for avarice or the desire for gain since money gives the buying pleasure with “lucrative

employment”; man desires liveliness in which “quick march of spirits” is essential for one’s daily

life contrasted to idleness without passion just like sleeping; man works for pleasure derived from

the consumption of wealth; nevertheless, man works for multi-dimensional motives.43

(ii) In political economy, Hume deals with money, interest, markets, taxes, and fiscal policies.

In his monetary theory, money is not the wheel of trade but its oil making the motion of the wheels

more smooth and easy. The supply of money raises the prices of commodities, which depend on

“the proportion between commodities and money,” and any considerable alteration on either

makes prices higher or lower. More commodities make prices lower, and more money makes

prices higher, ceteris paribus. He introduces the concept of time lag occurring between money

supply and price change: monetary expansion stimulates consumption without fear of inflation

during the lagging period, which generates income and employment. In his interest theory, the

supply of money does not affect interest rates, and the rising or fall of interest rates depends on

demand for borrowing, the great or little riches to supply that demand, and rising or falling of

profits from commerce. The rising of profits produces more lenders which lower interest rates,

while the falling of profits makes the opposite. The relationship between interest rate and profit

rates is mutually inter-dependent and functional rather than causal one. In the trade theory,

emphasizing the role of foreign trade as a promoter of economic development, he believes that

foreign trade is mutually beneficial since it brings the pleasure of luxury, the profits of commerce,

the generation of employment, and the transfer of technology with diffusion of foreign products.

In taxation and public finance, Hume views both suppressive and stimulating effects of the tax-

burden or public debt. The advantages of public debt is to provide investment outlet for idle funds

of merchants and other investors giving expansionary effects, while the disadvantages of that is

the growth of the rental class of idleness and foreign control of domestic assets. Continuous

expansion of public debt is not sustainable, since it will ultimately result in total bankruptcy, and

heavy tax burden will ruin the landowners and destroy the basis of political power.44

(iii) In moral economics, Hume views that luxury must be judged since it is the source of

many ills; that the growth of economic activity introduces that of industry, knowledge, and

humanity; and that commerce is beneficial since it promotes a nation’s spirit, defense capacity,

and political harmony. Believing that “wealth is the friend of virtue,” Hume understands that

economic growth and prosperity provides the national security, a civilized social life, political

liberty, and a fulfillment of individual talents and of human satisfaction; and that economic change

is fundamental to social and political changes. He views that property is “nothing but those goods,

whose constant possession is established by the laws of society; that is, by the laws of justice”

along with their scarcity; and property is useful and absolutely necessary to human society. The

rule of property assignment to the present possessor is natural, but its possession is changeable

and uncertain, so that the question is how to separate their possessions through occupation,

prescription, accession, and succession. Hume endorsed the unequal distribution of property:

perfect equality seems to be highly useful and ideal, but its economic cost is prohibitive with

impoverishment and its political consequence is disastrous with tyranny or anarchy. As a fellow

Scotsman, Hume was a close friend of Adam Smith though 12 years younger than him.45



(c) Political Discourses (1752):46 (i) On Commerce: The greatness of the sovereign and the

happiness of the state are united with regard to trade and manufacture. Trade and industry are

really nothing but a stock of labor, which, in time of peace and tranquility, is employed for the

ease and satisfaction of individuals; but in the exigencies of state, may, in part, be turned to public

advantage. Foreign commerce increases the stock of labor in the nation; and the sovereign may

convert what share of it he finds necessary to the service of the public. “Foreign trade, by its

imports, furnishes materials for new manufactures; and by its exports, it produces labor in

particular commodities, which could not be consumed at home. In short, a kingdom, that has a

large import and export, must abound more with industry, and that employed upon delicacies and

luxuries, than a kingdom which rests contended with its native commodities. It is, therefore, more

powerful, as well as richer and happier. The individuals leap the benefit of these commodities, so

far as they gratify the senses and appetites. And the public is also a gainer, while a greater stock

of labor is, by this means, stored up against any public exigency; that is, a greater number of

laborious men are maintained, who may be diverted to the public service, without robbing any one

of eh necessaries, or even the chief conveniences of life. Men become acquainted with the

pleasures of luxury and the profits of commerce. Where riches are in few hands, these must enjoy

all the power, and will readily conspire to lay the whole burden on the poor, and oppress them still

farther, to the discouragement of all industry. In this circumstance consists the great advantage of

England above any nation at present in the world, or that appears in the records of any story. It is

true, the English feel some disadvantages in foreign trade by the high price of labor, which is in

part the effect of the riches of their artisans, as well as of the plenty of money. The poverty of the

common people in France, Italy, and Spain, is, in some measure, owing to the superior riches of

the soil and happiness of the climate; yet there want not reasons to justify this paradox.47

(ii) Of Money: It seems a maxim almost self-evident, that the prices of everything depend on

the proportion between commodities and money, and that any considerable alteration on either has

the same effect, either of heightening or lowering the price. Increase the commodities, they

become cheaper; increase the money, they rise in their value. The opposite of the former may

cause contrary tendencies. It is also evident that the prices do not so much depend on the absolute

quantity of commodities and that of money, which are in a nation, as on that of the commodities,

which come or may come to market, and of the money which circulates. It is the proportion

between the circulating money, and the commodities in the market, which determines the prices.

Goods, that are consumed at home, or exchanged with other goods in the neighborhood, never

come to market; they affect not in the least the current specie; with regard to it they are as if totally

annihilated; and consequently this method of using them sinks the proportion on the side of the

commodities, and increases the prices. But after money enters into all contracts and sales, and is

everywhere the measure of exchange, the same national cash has a much greater task to perform;

all commodities are then in the market; the sphere of circulation is enlarged; it is the same case as

if that individual sum were to serve a larger kingdom; and therefore, the proportion being here

lessened on the side of the money, everything must become cheaper, and the prices gradually fall.

The want of money can never injure any state within itself, since men and commodities are the

real strength of any community. It is the simple manner of living which here hurts the public, by

confining the gold and silver to few hands, and preventing its universal diffusion and circulation.

On the contrary, industry and refinements of all kinds incorporate it with the whole state, however

small its quantity may be: they digest it into every vein, so to speak; and make it enter into every

transaction and contract. As prices of everything fall by that means, the sovereign has a double

advantage: he may draw money by his taxes from every part of the state.48



(iii) Of Interest: Prices have risen near four times since the discovery of the Indies; and it is

probable gold and silver have multiplied much more. But interest has not fallen much above half.

The rate of interest, therefore, is not derived from the quantity of the precious metals. High interest

arises from three circumstances: a great demand for borrowing; little riches to supply that demand;

and great profits arising from commerce; and these circumstances are a clear proof of the small

advance of commerce and industry, not of the scarcity of gold and silver. Low interest, on the

other hand, proceeds from the three opposite circumstance: a small demand for borrowing; great

riches to supply that demand; and small profits arising from commerce; and these circumstances

are all connected together, and proceed from the increase of industry and commerce, not of gold

and silver. An increase of commerce, by a necessary consequence, raises a great number of lenders,

and by that means produces lowness of interest. First, in the landed interest, when a people have

emerged ever so little from a savage state; those who possess more land than they can labor,

employ those who possess none, and agree to receive a determinate part of the product. Hence,

the landed interest is immediately established without any settled government. Secondly, in the

great or little riches to supply the demand, the effect depends on the habits and way of living of

the people, not on the quantity of gold and silver. In order to have, in any state, a great number of

lenders, it is not sufficient nor requisite, that there be great abundance of the precious metals. It

is only requisite, that the property or command of that quantity, which is in the state, whether great

or small, should be collected in particular hands, so as to form considerable sums, or compose a

great monied interest. Thirdly, an increase of commerce raises a great number of lenders, which

may cause lowness of the interest. All these circumstances determine the profits of commerce,

and the proportion between the borrowers and lenders in any state; while interest is the barometer

of the state – the lowness of interest is a sign of infallible economic conditions.49

(iv) Of Balance of Trade: Can one imagine, that it had ever been possible, by any laws, or

even by any art or industry, t have kept all the money in Spain, which the galleons have brought

from the Indies? Or that all commodities could be sold in France for a tenth of the price which

they would yield on the other side of the Pyrenees, without finding their way thither, and draining

from that immense treasure? What other reason, indeed, is there, why all nations, at present, gain

in their trade with Spain and Portugal; but because it is impossible to heap up money, more than

any fluid, beyond its proper level? The sovereign of these countries have shown, that they wanted

not inclination to keep their gold and silver to themselves, had it been in any degree practicable.

But as anybody of water may be raised above the level of the surrounding element, if the former

has no communication with the latter; so in money, if the communication be cut off, there may, in

such a case, be a very great inequality of money. Thus the immense distance of China, together

with the monopolies of our India companies, obstructing the communication, preserve in Europe

the gold and silver, especially the latter, in much greater plenty than they are found in that kingdom.

But notwithstanding this great obstruction, the force of the causes above-mentioned is still evident.

The skill and ingenuity of Europe in general surpasses perhaps that of China, with regard to manual

arts and manufactures; yet are we never able to trade thither without great disadvantage. And were

it not for the continual recruits, which we received from America, money would soon sink in

Europe, and rise in China, till it came nearly to a level in both places. Nor can any reasonable

man doubt, but that industrious nations, were they as near us as Poland or Barrary, would drain us

of the over-plus of our specie, and draw to themselves a larger share of the West Indian treasures.

We need not have recourse to a physical attraction, in order to explain the necessity of this

operation. There is a moral attraction, arising from the interests and passions of men, which is full

as potent and infallible. I scarcely know any method of sinking money below its level, but those

institutions of banks, funds, and paper-credits, which are so much practiced in this kingdom.50



These render paper equivalent to money, circulate it throughout the whole state, make it

supply the place of gold and silver, raise proportion-ably the price of labor and commodities, and

by that means either banish a great part of those precious metals, or prevent their farther increase.

Before the introduction of paper-money into our colonies, they had gold and silver sufficient for

their circulation. Since the introduction that commodity, the lease inconveniency that has followed

is the total banishment of the precious metals. And after the abolition of paper, can it be doubted

but money will return, while these colonies possess manufactures and commodities, the only thing

valuable in commerce, and for whose sake alone all men desire money. Our modern politics

embrace the only method of banishing money, the using of paper-credit; they reject the only

method of amassing it, the practice of hoarding; and they adopt a hundred contrivances, which

serve to no purpose but to check industry, and rob ourselves and our neighbors of the common

benefits of art and nature. All taxes, however, upon foreign commodities, are not to be regarded

as prejudicial or useless, but those only which are founded on the jealousy above-mentioned. A

tax on German linen encourages home manufactures, and thereby multiplies our people and

industry. A tax on brandy increases the sale of rum, and supports our southern colonies. And as

it is necessary, that imposts should be levied, for the support of government, it may be thought

more convenient to lay them on foreign commodities, which can easily be intercepted at the port,

and subjected to the impost. A thousand years, the money of Europe has been flowing to Rome,

by an open and sensible current; but it has been emptied by many secret and insensible canals; and

the want of industry and commerce renders at present the papal dominions the poorest territory in

all Italy. Thus a government has great reason to preserve with care its people and its manufactures.

Its money, it may safely trust to the course of human affairs, without fear or jealousy. Or if it ever

give attention to this latter circumstance, it ought only to be so far as it affects the former.51

(v) Of Taxes: The best taxes are such as are levied upon consumptions, especially those of

luxury; because such taxes are least felt by the people. They seem, in some measure, voluntary;

since a man may choose how far he will use the commodity which is taxed; they are paid gradually

and insensibly; they naturally produce sobriety and frugality, if judiciously imposed; and being

confounded with the natural price of the commodity, they are scarcely perceived by the consumers.

Their only disadvantage is, that they are expensive in the levying. Taxes upon possessions are

levied without expense; but have every other disadvantage. Most states, however, are obliged to

have recourse to them, in order to supply the deficiencies of the other. But the most pernicious of

all taxes are the arbitrary. They are commonly converted, by their management, into punishments

on industry; and also, by their unavoidable inequality, are more grievous, than by the real burden

which they impose. It is surprising, therefore, to see them have place among any civilized people.

In general, all poll-taxes, even when not arbitrary, which they commonly are, may be esteemed

dangerous; because it is so easy for the sovereign to add a little more, and a little more, to the sum

demanded, that these taxes are apt to become altogether oppressive and intolerable. On the other

hand, a duty upon commodities checks itself; and a prince will soon fine, that an increase of the

impost is no increase of his revenue. It is not easy, therefore, for a people to be altogether ruined

by such taxes. Historians inform us, that one of the chief causes of the destruction of the Roman

state, was the alteration, which Constantine introduced into the finances, by substituting a

universal poll-tax, in lieu of almost all the tithes, customs, and excises, which formerly composed

the revenue of the empire. The people, in all the provinces, were so grinded and oppressed by the

publicans, that they were glad to take refuge under the conquering arms of the barbarians; whose

dominion, as they had fewer necessities and less art, was found preferable to the refined tyranny

of the Romans. In years of scarcity, the weaver either consumes less or labor more, or employs

both these expedients of frugality and industry, by which he is able to survive.52



(vi) Of Public Credit: War is attended with every destructive circumstance; loss of men,

increase of taxes, decay of commerce, dissipation of money, devastation by sea and land. The

consequences of public debts can be examined: in our domestic management, by their influence

on commerce and industry; and in our foreign transactions, by their effect on wars and negotiations.

Public securities are with us become a kind of money and pass as readily at the current price as

gold or silver. Our national debts furnish merchants with a species of money that is continually

multiplying in their hands, and produces sure gain, besides the profits of their commerce. This

must enable them to trade upon less profit. The small profit of the merchant renders the commodity

cheaper, causes a greater consumption, quickens the labor of the common people, and helps to

spread arts and industry throughout the whole society. Frist, national debts cause a confluence of

people and riches to the capital, by the great sums, levied in the provinces to pay the interest.

Secondly, public stocks, being a kind of paper-credit, have all the disadvantages attending that

species of money. They banish gold and silver from the most considerable commerce of the state,

reduce them to common circulation, and by that means render all provisions and labor dearer than

otherwise they would be. Thirdly, the taxes, which are levied to pay the interests of these debts,

are apt either to heighten the price of labor, or be an oppression on the poorer sort. Fourthly, as

foreigners possess a great share of our national funds, they render the public, in a manner tributary

to them, and may in time occasion the transport of our people and our industry. Fifthly, the greater

part of the public stock being always in the hands of idle people, who live on their revenue, our

funds, in that view, give great encouragement to an useless an un-active life.

(vii) Of the Populousness of Ancient Nations: The chief difference between the domestic

economy of the ancient and that of the moderns consists in the practice of slavery, which prevailed

among the former, and which has been abolished for some centuries throughout the greater part

of Europe. Our present business is only to consider the influence of slavery on the populous-ness

of a state. At present, all masters discourage the marrying of their male servants, and admit not

by any means the marriage of the female, who are then supposed altogether incapacitated for their

service. But where the property of the servants is lodged in the master, their marriage forms his

riches, and brings him a succession of slaves that supply the place of those whose age and infirmity

have disabled. He encourages, therefore, their propagation as much as that of his cattle; rears the

young with the same care; and educates them to some art or calling, which may render them more

useful or valuable to him. In disadvantages of populous-ness, (i) we may observe that the ancient

republics were almost in perpetual war, a natural effect of their martial spirit, their love of liberty,

their mutual emulation, and that hatred which generally prevails among nations that live in close

neighborhood. The maxims of ancient war were much more destructive than those of modern,

and ancient battles were much more bloody, by the very nature of the weapons employed in them.

(ii) It appears that ancient manners were more unfavorable than the modern, not only in times of

war, but also in those of peace; and that too in every respect, except the love of civil liberty and

of equality, which is, I own, of considerable importance. In ancient history, we may always

observe, where one party prevailed, whether the nobles or people that they immediately butchered

all of the opposite party who fell into their hands, and banished such as had been so fortunate as

to escape their fury. No form of process, no law, no trial, no pardon. The maxims of ancient

politics contain, in general, so little humanity and moderation, that it seems superfluous to give

any particular reason for the acts of violence committed at any particular period. (iii) There are

many other circumstances, in which ancient nations seem inferior to the modern, both for the

happiness and increase of mankind. Trade, manufactures, industry, were nowhere, in former ages,

so flourishing as they are at present in Europe. The only garb of the ancients, both for males and

females, seems to have been a kind of flannel, which they wore commonly white or grey.53



James Steuart (1712-80) was born in Edinburgh and studied law at the Edinburgh University.

Passing a bar examination in 1735, he spent the years traveling Europe during 1735-40, studying

at the Universities of Leyden and Utrecht in Holland for two years, and visiting various cities of

Spain, Italy, and France. Returning to Edinburgh, as a Jacobite, he was involved in an ill-fated

attempt for Prince Charles to restore Scotland to the Stuarts with the support of France during

1744-46. He exiled to Paris and Angouleme where he remained until 1755. He went to Brussels

and Spa, and traveled German cities; and settled at Tubingen for four years, while his studies had

made much progress through exchanging of ideas with professors and visiting and observing of

economic conditions at various places. Moving to Rotterdam and Antwerp in 1761, his family

returned to Spa, where he became a prisoner by the French troops. Being released by the peace

of 1763, he gained liberty and his family returned to Scotland. He published An Inquiry into the

Principles of Political Economy in London in 1767, which was the final output of eighteen years

of thought and travel. Since Steuart was trained in law and had been away from the British Isle

during major part of his adult life, and wrote a bulk of his Principles in exile in Germany; his

economic thought was influenced by German Cameralism,54 the German counterpart of the French

mercantilism, advocating government intervention in the economy, rather than British liberalism.

He paid attention to matters of state action and to approximate a system of economic policy rather

than economic theories. He was appreciated in Germany, while Malthus and Ricardo in Britain

recognized his name as a forerunner of political economy, but Smith kept silence. Being fully

pardoned by 1771, he was invited by the East India Company to examine the currency problem of

Bengal, which study was published in 1772. He wrote essays on various subjects with practical

commitments until he died. He was political economist, precursor of Keynes, advocate of the

planned economy, and the last of the great mercantilist. His Principles consists of five books.

BOOK I. Population and Agriculture: James Steaurt describes as below. The rapid progress

that has been made in our own country during the last fifty years, in tracing the origins and progress

of the present establishment in Europe. I consider mankind as savages, living on spontaneous fruits

of the earth and confined as to numbers to the actual extent of these productions. (i) In exchange

economy or money economy, men were then forced to labor because they were slaves to others;

men are now forced to labor because they are slaves to their own wants. I deduce modern liberty

from the independence of the same classes, by the introduction of industry and circulation of an

adequate equivalent for every service. (ii) A general tacit contract from which reciprocal and

proportional services result universally between all who compose it. Framers produce the

subsistence; and free hands procure subsistence out of the superfluity of the farmers. Many will

run to the plow; the superfluity of the farmers will augment; the rich will call for superfluities; the

free hands will supply them and demand food in their turn. These will not be found a burden on

the husbandman as formerly; the rich who hired of them their labor or service, must pay them

money and this money in their hands will serve as equivalent for the superfluity of nourishment

produced by additional agriculture. (iii) Growth in one sector of the economy must bear a definite

relationship to growth in the other: agriculture among a free people will augment population, in

proportion only as the necessitous are put in a situation to purchase subsistence with their labor;

the other is that the augmentation must be made to bear a due proportion to the progress of industry

and wants of the people or else an outlet must be found for disposing of the superfluity. 55

“Population growth proceeds on the basis of an agricultural output which exceeds the requirements

of the farm population. It will be produced in response to a reciprocal demand, that of the

nonagricultural population for foodstuffs and that of the farmers for manufactures. Industrial

development thus becomes a prerequisite both of the expansion of production in the agricultural

sector and of the growth of the population facilitated by such an expansion.”56



BOOK II. Trade and Industry: (i) Trade is a form of activity which follow on the introduction

of industry. Trade within and between states, would immeasurably increase the possibilities of

economic growth through the provision of wider markets and the stimulation given to relatively

backward nations. Hence, trade has an evident tendency towards the improvement of the world

in general. Intercourse tends to unite the most distant nations as well as to improve them; and

their mutual interest leads them to endeavor to become serviceable to one another. If one considers

the variety which is found in different countries, in the distribution of property, subordination of

classes, genius of people, proceeding from the variety of forms of government, laws, climates and

manners, one may conclude that the political economy in each must necessarily be different. (ii)

We have suppose a country capable of improvement, a laborious people, a taste for refinement

and luxury in the rich, an ambition to become so, and an application to labor and ingenuity in the

lower classes of men. According to greater or lesser degree of force, or concurrence of these and

like circumstances, will the country in question become more or less cultivated, and consequently

peopled. We are now engaged in a more complex operation; we represent different societies,

animated by a different spirit; some given to industry and frugality, others to dissipation and luxury.

While there are different states, there must be separate interests, and when no one statesman is

found at the head of these interests, there can be no such thing as a common good, and when there

is no common good, every interest must be considered separately.

(iii) In the rates of growth and the corresponding emphasis on policy, Steuart considers the

three stages of trade. First, in infant trade, the object of policy is to encourage industry and to

introduce manufactures and machines: I apprehend to be the reason why we see certain

manufactures after remaining long in a state of infancy, making in a few years a most astonishing

progress. Secondly, in foreign trade, the potential of growth is at a maximum. “At this point the

restrictive policies used in the first period are no longer relevant and the object of policy must be

to watch over internal price levels rather than protection or import control.” The ruling principles

are to banish luxury to encourage frugality, to fix the lowest standard of prices possible. Thirdly,

in inland trade, “internal price levels were almost bound to get out of line with average (world)

prices; a situation which could be offset by the use of subsidies and premiums in the short run, but

which must inevitably lead to a loss of markets.” The growth of all bodies, natural as well as

artificial, is stopped by internal causes derived from their enormous size and greatness.

(iv) Price Theory: In the price of goods, I consider the real value of the commodity, and the

profit upon alienation. The real value of a good is determined the value of the workman’s

subsistence and necessary expense, both for supplying his personal wants, and providing the

instruments belong to the profession, which must be taken upon an average, reflecting working

time and substance. The price of manufacture cannot be lower than the real value, whereas profit

will fluctuate in response to the changing circumstances of demand. By the extensive dealings of

merchants, and their constant application to the study of the balance of work and demand, all the

above circumstances are known to them, and are made known to the industrious, who regulate

their living and expense according to their certain profit. “Steuart’s theory of demand opens a

window to what later was to become the theory of markets. If competition is great among buyers,

price will be high; if it is great among sellers, price will be low. Competition is simple when it is

stronger on one side of the market than on the other, double when there is competition on both

sides. Demand is interpreted in the schedule sense – rising prices stop it, falling ones increase it.

Under the influence of double competition the balance of supply and demand, called by Steuart

work and demand, is sustained in equilibrio, that is, the quantity supplied is in proportion to the

quantity demanded. The word equilibrium, was already employed by the Physiocrats and others.”

Changes in demand call for the intervention of the statesman.57



BOOK III. Money and Coin: (i) The proportion between gold and silver in the coin can be

established by the market price of the metals only; because an augmentation and rise in the demand

for gold or silver has the effect of augmenting the value of the metal demanded. The active demand

for either gold or silver, which makes the price of the metals to vary, I think language would be

more correct never to mention the sinking of the price of either gold or silver. As to every other

merchandize, the expression is very proper; because the diminishing of the price of one commodity,

does not so essentially imply the rise of any other, as the sinking of one of the metals must imply

the rising of the other, since they are the only measures of one another’s worth. Consequently,

merchandize which has not varied in its relative value to any other thing but to gold and silver,

must be measured by the mean proportion of the metals, and the application of any other measure

to it is altering the standard. If it is measured by the gold, the standard is debased; if by silver, it

is raised, as shall presently be proved. (ii) Concerning the deviations in the coin from the

proportion in the market price of the metals, and from the legal weight, we lay down this principle

that the value of the money-unit of account is not to be sought for in the statues and regulations of

the mint, but in the actual intrinsic value of that currency in which all obligations are acquitted,

and all accounts are kept. The operation of raising and debasing the coins is performed in three

ways: by augmenting or diminishing the weight of the coin; by augmenting or diminishing the

proportion of alloy in the coin; and by augmenting to diminishing the proportion between the

money (coin) and the money of account, as if every sixpence were a shilling.58

BOOK IV. Credit and Debts: (i) There is in every state a certain number of persons who have

occasion to borrow money, and a certain number of persons who desire to lend: there is also a

certain sum of money demanded by the borrowers, and a certain sum offered to be lent. The

borrowers desire to fix the interest as low as they can; the lenders seek, from a like principle of

self-interest, to carry the rate of it as high as they can. From this combination of interests arises a

double competition, which fluctuates between the two parties. The price of commodities is

extremely fluctuating: they are everyone calculated for particular uses; money serves every

purpose. Commodities, though of the same kind, differ in goodness; money is all, or ought to be

all of the same value, relatively to its denominations. Hence the price of money is susceptible of

a far greater stability and uniformity, than the price of any other thing. (ii) When public credit is

employed for raising money upon payment of a perpetual interest; or if, whatever be the plan laid

down, capitals should not happen to be discharged, but the debts should swell continually; in this

case the contingent consequences are many and various, far exceeding any man’s sagacity to

investigate. All debts will in time disappear, either by being paid, or by being abolished, because

it is not to be expected that posterity will groan under such a load any longer than it is convenient;

and because in fact we see no very old public debts as yet outstanding, where interest has been

regularly paid out of a fund which has remained in the possession of the state.59

BOOK V. Taxes and their proper Application: When in any country the work of manufactures,

who live luxuriously, and who can afford to be idle some days of the week, finds a ready market;

this circumstance alone proves beyond all dispute, that subsistence in that country is not too dear,

at least in proportion to the market prices of goods at home; and if taxes on consumption have, in

fact raised the price of necessaries, beyond the former standard, this rise, cannot, in fact,

discourage industry: it may discourage idleness; and idleness will not be totally rooted out, until

people be forced, in one way or other, to give up both superfluity and days of recreation. For this

reason it is generally thought, because taxes are higher in England than in some other countries,

that foreign trade should therefore be hurt by them. But the sloth and idleness of man, and the

want of ambition in the lower classes to improve their circumstances, tends more, I suspect, to

lessen the production of industry, and thus to raise their price, than any tax upon subsistence.60



Photo IV-2-1. Jean-Baptiste Say Source: https://upload.wikimedia.org/wikipedia/commons/2/2e/Jean-baptiste_Say.jpg

Photo IV-2-2. Adam Smith http://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/56f6e29eb2d7c7b358cf8dad/1459020450333/

https://upload.wikimedia.org/wikipedia/commons/2/2e/Jean-baptiste_Say.jpg

http://static1.squarespace.com/static/56eddde762cd9413e151ac92/t/56f6e29eb2d7c7b358cf8dad/1459020450333/



2. Classical Capitalism: Adam Smith and Jean-Baptiste Say

Capitalism is an economic system based on private ownership of the means of production and

their operation for profit. “Characteristics central to capitalism include private property, capital

accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a

capitalist market economy, decision-making and investment is determined by the owners of the

factors of production in financial and capital markets, and prices and the distribution of goods are

mainly determined by competition in the market. Economists, political economists, and historians

have adopted different perspectives in their analyses of capitalism and have recognized various

forms of it in practice. These include laissez-faire or free market capitalism, welfare capitalism,

and state capitalism. Different forms of capitalism feature varying degrees of free markets, public

ownership, obstacles to free competition, and state-sanctioned social policies. The degree of

competition in markets, the role of intervention and regulation, and the scope of state ownership

vary across different models of capitalism; the extent to which different markets are free, as well

as the rules defining private property, are matters of politics and of policy. Most existing capitalist

economies are mixed economies, which combine elements of free markets with state intervention,

and in some cases, with economic planning. Capitalism has existed under many forms of govern-

ment, in many different times, places, and cultures. Following the decline of mercantilism, mixed

capitalist systems became dominant in the Western world and continue to spread. According to

economist Joseph Schumpeter, capitalism is the most successful economic system that has existed

thus far. Capitalism, he observed, creates wealth through advancing continuously to ever higher

levels of productivity and technological sophistication; this process, known as creative destruction,

requires that the old be destroyed before the new can take over.”61

“Capital has existed incipiently on a small scale for centuries, in the form of merchant, renting

and lending activities, and occasionally also as small-scale industry with some wage labor. Simple

commodity exchange, and consequently simple commodity production, which form the initial

basis for the growth of capital from trade, have a very long history. The capitalistic era according

to Marx dates from the 16th century, i.e. it began with merchant capitalism and relatively small

urban workshops. Early Islam promulgated capitalist economic policies, which migrated to

Europe through trade partners from cities such as Venice.” During the age of discovery, merchant

traders engaged in the geographic exploration of foreign lands, especially from England and the

Low Countries. Mercantilism was a system of trade for profit. “European merchants, backed by

state controls, subsidies, and monopolies, made most of their profits from the buying and selling

of goods. In the words of Francis Bacon, the purpose of mercantilism was the opening and well-

balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of

waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation

of prices...The British East India Company and the Dutch East India Company inaugurated an

expansive era of commerce and trade. These companies were characterized by their colonial and

expansionary powers given to them by nation-states. During this era, merchants, who had traded

under the previous stage of mercantilism, invested capital in the East India Companies and other

colonies, seeking a return on investment.”62 In the eighteenth century, a new group of economists,

such as David Hume and Adam Smith, challenged mercantilist doctrines. During the Industrial

Revolution, the capitalist system was established: “the surplus generated by the rise of commercial

agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the

development of the factory system of manufacturing, characterized by a complex division of labor

between and within work process and the routine of work tasks; and finally established the global

domination of the capitalist mode of production” by abandoning its protectionist policy.



Adam Smith (1723-90): Smith was born in Kirkcaldy in the County of Fife in Scotland to

Adam Smith who was a Scottish writer, advocate, and prosecutor, also serving as comptroller of

Customs in Kirkcaldy. His father died two month after he was born, leaving his mother widow;

and he was close to his mother, who probably encouraged him to pursue his scholarly ambitions.

He attended the secondary school at his home town during 1729-37, where he learned Latin,

mathematics, history and writing. “Smith entered the University of Glasgow when he was

fourteen and studied moral philosophy under Francis Hutcheson. Here, Smith developed his

passion for liberty, reason, and free speech. In 1740 Smith was the graduate scholar presented to

undertake postgraduate studies at Balliol College, Oxford, under the Snell Exhibition. Adam

Smith considered the teaching at Glasgow to be far superior to that at Oxford, which he found

intellectually stifling. In Book V, Chapter II of The Wealth of Nations, Smith wrote: ‘In the

University of Oxford, the greater part of the public professors have, for these many years, given

up altogether even the pretense of teaching.’ Smith is also reported to have complained to friends

that Oxford officials once discovered him reading a copy of David Hume's Treatise on Human

Nature, and they subsequently confiscated his book and punished him severely for reading

it….Nevertheless, Smith took the opportunity while at Oxford to teach himself several subjects by

reading many books from the shelves of the large Bodleian Library. When Smith was not studying

on his own, his time at Oxford was not a happy one, according to his letters…He left Oxford

University in 1746, before his scholarship ended. In Book V of The Wealth of Nations, Smith

comments on the low quality of instruction and the meager intellectual activity at English

universities, when compared to their Scottish counterparts. He attributes this both to the rich

endowments of the colleges at Oxford and Cambridge.”63

Smith began delivering public lectures in 1748 in Edinburgh on rhetoric and his lecture was

successful. As economics grew out of philosophy, Smith was influenced by Bernard Mandeville

(1670-1733), and largely by Francis Hutcheson (1694-1746) who chaired moral philosophy at

Glasgow to lecture in English instead of Latin from 1729.64 Meeting David Hume in 1750, “In

their writings covering history, politics, philosophy, economics, and religion, Smith and Hume

shared closer intellectual and personal bonds than with other important figures of the Scottish

Enlightenment.” Smith was also influenced by A. R. J. Turgot of France. “In 1751, Smith earned

a professorship at Glasgow University teaching logic courses, and in 1752 he was elected a

member of the Philosophical Society of Edinburgh, having been introduced to the society by Lord

Kames. When the head of Moral Philosophy in Glasgow died the next year, Smith took over the

position. He worked as an academic for the next thirteen years, which he characterized as by far

the most useful and therefore by far the happiest and most honorable period of his life.” Smith

published The Theory of Moral Sentiments in 1759, embodying some of his lectures at Glasgow,

concerning how human morality depends on sympathy between agent and spectator, or the

individual and other members of society. In 1762, the University of Glasgow conferred on Smith

the title of Doctor of Laws. At the end of 1763, Smith took the tutoring position for Henry Scott,

the young Duke of Buccleuch – the stepson of Charles Townshend, by resigning from his

professorship. As a tutor, Smith travelled to Toulouse, France where he stayed for one and a half

years. His continuous travel made him to know several great intellectual leaders of the time. In

1766, when Henry Scott’s younger brother died in Paris, Smith returned home to Kirkcaldy, and

he devoted much of the next ten years to his book, An Inquiry to the Nature and Causes of the

Wealth of Nation, published in 1776, which was an instance success, selling out its first edition in

only six months. In 1778, Smith was appointed to the commissioner of customs in Scotland. He

became a founding member of the Royal Society of Edinburg, and occupied the honorary position

of Lord Rector of the University of Glasgow from 1787 to 1789.65



In an introduction for an issue of the Wealth of Nations in 1991, Paul Samuelson of MIT wrote

that Wealth of Nations is his masterpiece. “It is a classic just as Isaac Newton’s Principia is the

classic that described how the heavens and earth are run by the universal law of gravitation. If

you have never heard of Charles Darwin or Sigmund Freud, you are not an educated person. And

to understand the spirit of our age, you certainly do need an acquaintance with Adam Smith’s

doctrine of the invisible hand…As the general public reckons greatness, Adam Smith, Karl Marx,

and John Maynard Keynes are the top economist trio – one for the eighteenth, and one for the

nineteenth, and one for the twentieth century. Although Smith goes back the farthest, I suspect a

century from now his wisdom will stand out highest…Like the Newtonian machine that runs the

planets and stars, Smith conceives the economy to be a self-regulating market mechanism. Each

good gets a natural price set to just cover its competitive costs of labor’s wages, land’s rent, and

capital’s profit. But what makes the wage be high or low? When population is scanty relative to

acres of land and capital goods to work with, superabundant land will bid down rents and most of

the natural product and income will get bid for high wage and profit rate. But fat wages, Smith

thought, would cause the birth rate to soar and the death rate to fall. And lush profits would both

motivate and supply new savings. Result: the vast supplies of labor and capital, with land supply

un-expandable, must bring both wage rate and profit rate back down toward their subsistence

levels. This long-run equilibrium will prevail and an endless circular flow of production and

consumption will persist.” Thus, Smith’s classical capitalism is based on individualism, rested on

the proposition that “if individuals were free to follow their own self-interest and to engage in

exchanges advantageous to themselves, not only the individuals but society as a whole would gain.

If government impeded such exchanges, individual welfare would diminish…Exchanges must

take place in open markets exposed to competition from others.”66

Adam Smith became the prophet of the commercial society of modern capitalism due to

recognition of profit motive in ethics, introduction of laissez faire in the market, and advocate of

capital investment for productivity growth. First, in The Theory of Moral Sentiments of 1759,

Smith expresses that the drive for economic self-interest does not, or at least not necessarily,

undermine the important moral values of society. He recognizes that self-interest can be a danger

to society’s happiness under certain conditions, but it is not a great danger. To Smith, inequality

is part of the natural order, and the protection of life and property is more important to the best

interest of society for universal happiness. He accepts individual pursuance of self-interest

through private enterprise with profit motives, which is a bold approach to capitalism when British

moral philosophy is in conflict between the principle of self-interest and that of sympathy.67

Secondly, in An Inquiry into the Nature and Causes of the Wealth of Nations of 1776, Smith

explains natural liberty as the principle of laissez faire guided by invisible hand. Smith asserts

that political freedom of Locke cannot flourish without economic freedom. He knows that either

government intervention or monopoly in markets would diminish the welfare of individuals.

Though government attempts to stimulate foreign trade in the mercantilist system, a system of

control and subsidies distorts resource allocation and reduces economic efficiency.68 Thirdly,

Smith believes that individual savings allows new capital investment, which requires additional

labor and raises productivity. As a result, the economy produces more output with less cost, which

raises the level of social welfare as a whole. The productivity growth is a driving force for

economic efficiency of the capitalism. When The Wealth of Nations caught the tide of the

industrial revolution, Smith contributed to the theories initiating and operating the system of

capitalistic economy. His doctrine of free trade and his critical attitude to the institutions and

public policies were linked to the French Revolution, so that although Smith was no reactionary,

the field of political economy came under suspicion as dangerous thoughts.69



The Theory of Moral Sentiments (1759): PART I. The Propriety of Action: Section I,

Chapter I. Sympathy: (i) How selfish soever man may be supposed, there are evidently some

principles in his nature, which interest him in the fortune of others, and render their happiness

necessary to him, though he derives nothing from it, except the pleasure of seeing it. Of this kind

is pity or compassion, the emotion which we feel for the misery of others, when we either see it,

or are made to conceive it in a very lively manner. That we often derive sorrow from the sorrow

of others, is a matter of fact too obvious to require any instance to prove it; for this sentiment, like

all the other original passions of human nature, is by no means confined to the virtuous and humane,

though they perhaps may feel it with the most exquisite sensibility. The greatest ruffian, the most

hardened violator of the laws of society, is not altogether without it. (ii) Sympathy does not arise

so much from the view of the passion, as from that of the situation which excites it. We sometimes

feel for another, a passion, of which he himself seems to be altogether incapable; because when

we put ourselves in his case, that passion arises in our breast from the imagination, though it does

not in his from the reality. We blush for the impudence and rudeness of another, though he himself

appears to have no sense of the impropriety of his own behavior; because we cannot help feeling

with what confusion we ourselves should be covered, had we behaved in so absurd a manner.70

Chapter II. The pleasure of mutual sympathy: But whatever may be the cause of sympathy,

or however it may be excited, nothing pleases us more than to observe in other men a fellow-

feeling with all the emotions of our own breast; nor are we ever so much shocked as by the

appearance of the contrary. Those who are fond of deducing all our sentiments from certain

refinements of self-love, think themselves at no loss to account, according to their own principles,

both for this pleasure and this pain. Man, say they, conscious of his own weakness, and of the

need which he has for the assistance of others, rejoices whenever he observes that they adopt his

own passions, because he is then assured of that assistance; and grieves whenever he observes the

contrary, because he is then assured of their opposition. But both the pleasure and the pain are

always felt so instantaneously, and often upon such frivolous occasions, that it seems evident that

neither of them can be derived from any such self-interested consideration. A man is mortified

when he looks round and sees that nobody laughs at his jests but himself.71

Chapter III. The corruption of our moral sentiments: (i) The disposition to admire, and almost

to worship, the rich and the powerful, and to despise or at least to neglect, persons of poor and

mean condition, though necessary both to establish and to maintain the distinction of ranks and

the order of society, is, at the same time, the great and most universal cause of the corruption of

our moral sentiments. That wealth and greatness are often regarded with the respect and

admiration which are due only to wisdom and virtue; and that the contempt, of which vice and

folly are the only proper objects, is often most unjustly bestowed upon poverty and weakness, has

been the complaint of moralists in all ages. We desire both to be respectable, and to be respected.

(ii) To attain to the envied situation, the candidates for fortune frequently abandon the paths of

virtues; for unhappily, the road which leads to the one, and that which leads to the other, lie

sometimes in very opposite directions. In many governments, the candidates for the highest

stations are above the law; and, if they can attain the object of their ambition, they have no fear of

being called to account for the means by which they acquired it. They often endeavor, therefore,

not only by fraud and falsehood, the ordinary and vulgar arts of intrigue and cabal; but sometimes

by the perpetration of the most enormous crimes, by murder and assassination, by rebellion and

civil war, to supplant and destroy those who oppose or stand in the way of their greatness. They

more frequently miscarry than succeed; and commonly gain nothing but the disgraceful

punishment which is due to their crimes. Though they should be so lucky as to attain that wished-

for greatness, they are always most miserably disappointed in the happiness.72



PART II. Merit and Demerit or Reward and Punishment: Sec. I, Chapter IV. Recapitulation:

(i) We do not thoroughly and heartily sympathize with the gratitude of one man towards another,

merely because this other has been the cause of his good fortune, unless he has been the cause of

it from motives which we entirely go along with. Our heart must adopt the principles of the agent,

and go along with all the affections which influenced his conduct, before it can entirely sympathize

with, and beat time to, the gratitude of the person who has been benefited by his actions. (ii) In

the same manner, we cannot at all sympathize with the resentment of one man against another,

merely because this other has been the cause of his misfortune, unless he has been the cause of it

from motives which we cannot enter sufferer, we must disapprove of the motives of the agent, and

feel that our heart renounces all sympathy with the affections which influenced his conduct. If

there appears to have been no impropriety in these, how fatal so ever the tendency of the action,

which proceeds from them, to those against whom it is directed, it does not seem to deserve any

punishment, or to be the proper object of any resentment.73

Section II. Justice and Beneficence, Chapter III. The utility of this constitution of nature: As

society cannot subsist unless the laws of justice are tolerably observed, as no social intercourse

can take place among men who do not generally abstain from injuring one another; the

consideration of this necessity, it has been thought, was the ground upon which we approved of

the enforcement of the laws of justice, by the punishment of those who violated them. Man, it has

been said, has a natural love for society, and desires that the union of mankind should be preserved

for its own sake, and though he himself was to derive no benefit from it. The orderly and flourish-

ing state of society is agreeable to him, and he takes delight in contemplating it. Its disorder and

confusion, on the contrary, is the object of his aversion, and he is chagrined at whatever tends to

produce it. He is sensible too, that his own interest is connected with the prosperity of society,

and that the happiness, perhaps the preservation of his existence, depends upon its preservation.

Upon every account, therefore, he has an abhorrence at whatever can tend to destroy society, and

is willing to make use of every means, which can hinder so hated and so dreadful an event.

Injustice necessarily tends to destroy it. Every appearance of injustice, therefore, alarms him, and

he runs, if I may say so, to stop the progress of what, if allowed to go on, would quickly put an

end to everything that is dear to him. If he cannot restrain it by gentle and fair means, he must

bear it down by force and violence, and at any rate must put a stop to its further progress. Hence

it is, they say, that he often approves of the enforcement of the laws of justice, even by the capital

punishment of those who violate them. The disturber of the public peace is hereby removed out

of the world, and others are terrified by his fate from imitating this example.74

PART III. The Foundation of our Judgments: Chapter I. The principle of self-approbation and

of self-disapprobation: The principle by which we naturally either approve or disapprove of our

own conduct, seems to be altogether the same with that, by which we exercise the like judgments

concerning the conduct of other people. We either approve or disapprove of the conduct of another

man, according as we fell what, when we bring his case home to ourselves, we either can or cannot

entirely sympathize with the sentiments and motives which directed it. And, in the same manner,

we either approve or disapprove of our own conduct, according as we feel that, when we place

ourselves in the situation of another man, and view it, as it were, with his eyes and from his

situation, we either can or cannot entirely enter into and sympathize with the sentiments and

motives which influenced it.75 Chapter V. The influence and authority of the general rules of

morality: (i) The regard to those general rules of conduct, is what is properly called a sense of duty,

a principle of the greatest consequence in human life, and the only principle by which the bulk of

mankind are capable of directing their actions. Many men behave very decently, and through the

whole of their lives avoid any consider-able degree of blame, who yet, perhaps, never felt the



sentiment upon the propriety of which we found our approbation of their conduct, but acted merely

from a regard to what they saw were the established rule of behavior. (ii) Since these were plainly

intended to be the governing principles of human nature, the rules which they prescribe are to be

regarded as the commands and laws of the Deity, promulgated by those vicegerents which he has

thus set up within us. All general rules are commonly denominated laws: thus the general rules

which bodies observe in the communication of motion, are called the laws of motion. But those

general rules, which our moral faculties observe in approving or condemning whatever sentiment

or action is subjected to their examination, may justly be denominated such.76

Chapter VI. In what cases the sense of duty ought to be the sole principle of our conduct: In

what cases our actions ought to arise chiefly or entirely from a sense of duty, or from a regard to

general rules; and in what cases some other sentiment or affection ought to concur, and have a

principal influence. The decision of this question will depend upon two different circumstances.

(i) It will depend upon the natural agreeableness or deformity of the affection itself, how far our

actions ought to arise from it, or entirely proceed from a regard to the general rule. All those

graceful and admired actions, to which the benevolent affections would prompt us, ought to

proceed as much from the passions themselves, as from any regard to the general rules of conduct.

As the selfish passions hold a sort of middle place, between the social and unsocial affections, so

do they likewise in this. The pursuit of the objects of private interest ought to flow rather from a

regard to the general rules which prescribe such conduct, than from any passion for the objects

themselves; but upon more important and extraordinary occasions, we should be awkward, insipid,

and ungraceful, if the objects themselves did not appear to animate us with a considerable degree

of passion. It is quite otherwise with regard to the more extraordinary and important objects of

self-interest. The spirit and keenness constitutes the difference between the man of enterprise and

the man of dull regularity. Those great objects of self-interest are the objects of the passion

properly called ambition; a passion which, when it keeps within the bounds of prudence and justice,

is always admired in the world, and has even sometimes a certain irregular greatness, which

dazzles the imagination, when it passes the limits of both these virtues, and is not only unjust but

extravagant. (ii) It will depend partly upon the precision and exactness, or the looseness and

inaccuracy of eth general rules themselves, how far our conduct ought to proceed entirely from a

regard to them. The general rules of almost all the virtues, the general rules which determine what

are the offices of prudence, of charity, of generosity, of gratitude, of friendship, are in many

respects loose and inaccurate, admit of may exceptions, and require so many modifications, that

it is scarce possible to regulate our conduct entirely by a regard to them. The common proverbial

maxims of prudence, being founded in universal experience, are perhaps the best general rule

which can be given about it. To affect, however, a very strict and literal adherence to them, would

evidently be the most absurd and ridiculous pedantry. However, one virtue, of which the general

rules determine, requires the greatest exactness. This virtue is justice: the rule of justice are

accurate in the highest degree, and admit of no exceptions of modifications.77

PART. IV. The Effect of Utility upon the sentiment of approbation: Chap. I. The beauty which

the appearance of utility bestows upon all the productions of art, and of the extensive influence of

this species of beauty. That utility is one of the principal sources of beauty has been observed by

everybody, who had considered with any attention what constitutes the nature of beauty. The

convenience of a house gives pleasure to the spectator as well as its regularity, and he is as much

hurt when he observes the contrary defect, as when he sees the correspondent windows of different

forms, or the door not placed exactly in the middle of the building. Ch. II. The beauty which the

appearance of utility bestows upon the characters and actions of men; and how far the perception

of this beauty may be regarded as one of the original principles of approbation.78



PART V. The Influence of Custom and Fashion upon the sentiments of moral approbation

and disapprobation: Chapter I. The influence of custom and fashion upon our notions of beauty

and deformity. Ch. II. The influence of custom and fashion upon moral sentiments: The different

situations of different ages and countries are apt, in the same manner, to give different characters

to the generality of those who live in them, and their sentiments concerning the particular degree

of each quality, that is either blamable or praiseworthy, vary, according to that degree which is

usual in their own country, and in their own times. Among civilized nations, the virtues which are

founded upon humanity are more cultivated than those which are founded upon self-denial and

the command of the passions. Among rude and barbarous nations, it is quite otherwise, the virtues

of self-denial are more cultivated than those of humanity. The general security and happiness

which prevail in ages of civility and politeness, afford little exercise to the contempt of danger, to

patience in enduring labor, hunger, and pain. Poverty may easily be avoided, and the contempt of

it, therefore, almost ceases to be a virtue. The abstinence from pleasure becomes less necessary,

and the mind is more at liberty to unbend itself, and to indulge its natural inclinations in all those

particular respects. Among savages and barbarians, it is quite otherwise. Every savage undergoes

a sort of Spartan discipline, by the necessity of his situation, is inured to every sort of hardship.79

PART VI. The Character of Virtue: Section II, Ch. III. Universal Benevolence: The wise and

virtuous man is, at all times, willing that his own private interest should be sacrificed to the public

interest of his own particular order or society. He is willing that the interest of this order or society

should be sacrificed to the greater interest of the state or sovereignty, of which it is only a

subordinate part: he should, therefore, be equally willing that all those inferior interests should be

sacrificed to the greater interest of the universe, to the interest of that great society of all sensible

and intelligent beings, of which God himself is the immediate administrator and director. If he is

deeply impressed with the habitual and thorough conviction, that this benevolent and all-wise

being can admit into the system of his government no partial evil, which is not necessarily for the

universal good, he must consider all the misfortunes which may befall himself, his friends, his

society, or his country, as necessary for the prosperity of the universe, and, therefore, as what he

ought, not only to submit to with resignation, but as what he himself, if he had known all the

connections and dependencies of things, ought sincerely and devoutly to have wished for.80

Section III. Self-Command: The wise and virtuous man directs his principal attention to the

first standard; the idea of exact propriety and perfection. There exists in the mind of every man,

an idea of this kind gradually formed from his observations upon the character and conduct both

of himself and of other people. It is the slow, gradual, and progressive work of the great demi-god

within the breast, the great judge and arbiter of conduct. In the wise and virtuous man, they have

been made with the most acute and delicate sensibility, and the utmost care and attention have

been employed in making them. 81 Conclusion of Part VI: Concern for our own happiness

recommends to us the virtue of prudence; concern for that of other people, the virtues of justice

and beneficence; of which, the one restrains us from hurting, the other prompts us to promote that

happiness. Though the virtues of prudence, justice, and beneficence, may, upon different occasions,

be recommended to us almost equally by two different principles; those of self-command are upon

most occasions, principally and almost entirely recommended to us by one; by the sense of

propriety, by regard to the sentiments of the supposed impartial spectator. Without the restraint

which this principle imposes, every passion would, upon most occasions, rush headlong to its own

gratification. In our approbation of the virtues of self-command, complacency with their effects

sometimes constitutes no part, and frequently but a small part, of that approbation. Those effects

may sometimes be agreeable, and sometimes disagreeable; and though our approbation is no doubt

stronger in the former case, it is by means altogether destroyed in the latter.82



PART VII. Systems of Moral Philosophy: Section III, Chapter I. Those systems deducing the

Principles of Approbation from Self-Love: (i) According to Hobbes, society becomes necessary

to him, and whatever tends to its support and welfare, he considers as having a remote tendency

to his own interest; and, on the contrary, whatever is likely to disturb or destroy it, he regards as

in some measure hurtful or pernicious to himself. Virtue is the great support, and vice the great

disturber, of human society. The former is agreeable, the latter offensive, to every man; as from

the one he foresees the prosperity, and from the other the ruin and disorder, of what is so necessary

for the comfort and security of his existence. (ii) Sympathy cannot be regarded as a selfish

principle. When I sympathize with your sorrow or your indignation, it may be pretended, that my

emotion is founded in self-love, because it arises from bringing your case home to myself, from

putting myself in your situation, thence conceiving what I should feel in the like circumstances.83

Chapter II. Those systems making Reason the Principles of Approbation: (i) According to

Hobbes, a state of nature is a state of war; and that antecedent to the institution of civil government,

there could be no safe or peaceable society among men. Therefore, to preserve society was to

support civil government, and to destroy civil government was the same thing as to put an end to

society. But the existence of civil government depends upon the obedience that is paid to the

supreme magistrate. The moment he loses his authority, all government is at an end. As self-

preservation, therefore, teaches men to applaud whatever tends to promote the welfare of society,

and to blame whatever is likely to hurt it; so the same principle ought to teach them to applaud,

upon all occasions, obedience to the civil magistrate, and to blame all disobedience and rebellion.

(ii) That virtue consists in conformity to reason, is true in some respects; and this faculty may very

justly be considered as, in some sense, the source and principle of approbation and disapprobation,

and of all solid judgments concerning right and wrong. It is by reason that we discover those

general rules of justice by which we ought to regulate our actions; and it is by the same faculty

that we form those more vague and indeterminate ideas of what is prudent, of what is decent, of

what is generous or noble, which we carry constantly abut with us, and according to which we

endeavor, as well as we can, to model the tenor of our conduct. The general maxims of morality

are formed, like all other general maxims, from experience and induction.84

Section IV. The Manner treating of the Practical Rules of Morality: The rules of justice are

the only rules of morality which are precise and accurate, while all the other virtues are loose,

vague, and indeterminate. (i) Among all the ancient moralists, the first have contented themselves

with describing, in a general manner, the different vices and virtues, and with pointing out the

deformity and misery of the one disposition, we well as the propriety and happiness of the other,

but have not affected to lay down many precise rules, that are to hold good unexceptionably in all

particular cases. (ii) The second set of moralists, among whom we may count all the casuist of

the middle and latter ages of the Christian church, as well as all those who, in this and in the

preceding century, have treated of what is called natural jurisprudence, do not content themselves

with characterizing, in this general manner, that tenor of conduct which they would recommend

to us, but endeavor to lay down exact and precise rules for the direction of every circumstance of

our behavior. As justice is the only virtue with regard to which such exact rules can properly be

given, it is this virtue that has chiefly fallen under the consideration of those two different sets of

writers. They treat of it, however, in a very different manner. (iii) The breaches of moral duty

were chiefly of three different kinds. First, breaches of the rules of justice: the violation of them

is naturally attended with the consciousness of deserving, and the dread of suffering, punishment

both from God and man. Secondly, breaches of the rules of charity are real breaches of the rules

of justice. Thirdly, breaches of the rules of veracity are the violation of truth: the vice of common

lying may frequently do hurt to nobody; no claim of vengeance can be imposed to the persons.85



An Inquiry into the Nature and Causes of the Wealth of Nations (1776): It consists of five

books. BOOK I. Production and Distribution: Chapter I. The Division of Labor: The greatest

improvement in the productive powers of labor, and the greater part of the skill, dexterity, and

judgment with which it is anywhere directed, or applied, seem to have been the effects of the

division of labor. The effects of the division of labor, in the general business of society, will be

more easily understood, by considering in what manner it operates in some particular manu-

factures. By taking an example of pin-making, with a great increase of the quantity of work, Smith

considers three beneficial effects of the division of labor: improvement of worker’s skill and

dexterity; saving of time lost in passing from one sort of work to another; and invention of

machinery which facilitates and abridges labor. The specialization brings the great multiplication

of productions in firms and industries. Chapter II. The Principle giving Occupation to the Division

of Labor: The division of labor arises originally from the slow and gradual consequence of a

propensity in human nature, the propensity to truck, barter, and exchange one things for another,

and it is limited by the extent of the market. The greater part of occasional wants are supplied by

treaty, by barter, and by purchase. The certainty of being able to exchange all that surplus part of

the produce of his own labor, which is over and above his own consumption, for such parts of the

produce of other men’s labor as he may have occasion for, encourages every man to apply himself

to a particular occupation and to cultivate and bring to perfection whatever talent of genius he may

possess for that particular business. The difference of natural talents in different men is much less

than we are aware of; and the very different genius which appears to distinguish men of different

professions, is not upon many occasion so much the cause, as the effect of the division of labor.

Among men, the most dissimilar geniuses are of use to one another; the different produces of their

respective talents, by the general disposition to truck, barter, and exchange, being brought into a

common stock, where every man may purchase whatever part of the produce of other’s talents.86

Chapter III. The Division of Labor is Limited by the extent of the market: As it is the power

of exchanging that gives occasion to the division of labor, so the extent of this division must

always be limited by the extent of that power, or, in other words, by the extent of the market.

When the market is very small, no person can have any encouragement to dedicate himself entirely

to one employment, for want of the power to exchange all that surplus part of the produce of his

own labor, which is over and above his own consumption, for such part of the produce of other

men’s labor as he has occasion for.87 Chapter IV. The Origin and Use of Money: When the

division of labor has been once thoroughly established, it is but a very small part of a man’s wants

which the produce of his own labor can supply. He supplies the far greater part of them by

exchanging that surplus part of the produce of his own labor, which is over and above his own

consumption, for such parts of the produce of other men’s labor as he has occasion for. Every

man thus lives by exchanging, or becomes a merchant, and the society itself grows to be a

commercial society. Therefore, the common instrument of commerce was necessary for exchange,

and precious metals became favorable. Those metals seem originally to have been made use of

for this purpose in rude bars, without any stamp or coinage. But to prevent abuses, to facilitate

exchanges, and thereby to encourage all sorts of industry and commerce; it has been necessary in

all countries to affix a public stamp upon certain quantities of such particular metals, as were in

those countries commonly made use of to purchase goods. The denominations of those coins seem

originally to have expressed the weight or quantity of metal contained in them. The word value

has two different meanings: sometimes expresses the utility of some particular object – value in

use, and sometimes the power of purchasing other goods which the possession of that object

conveys – value in exchange. The real measure of exchange value, the different parts of real prices,

and the circumstances or causes hindering market prices are discussed in the following chapters.88



Chapter V. The Real and Nominal Price of Commodities: The value of any commodity to the

person who possesses it, and who means not to use or consume it himself, but to exchange it for

other commodities, is equal to the quantity of labor which it enable him to purchase or command.

Therefore, labor is the real measure of the exchangeable value of all commodities. What is bought

with money or with goods is purchased by labor, as much as what we acquire by the toil of our

own body. They contain the value of a certain quantity of labor which we exchange for what is

supposed at the time to contain the value of an equal quantity. Labor was the first price, the

original purchase-money that was paid for all things. It was not by gold or by silver, but by labor,

that all the wealth of the world was originally purchased; and its value, to those who possess it,

and who want to exchange it for some new productions, is precisely equal to the quantity of labor

which it can enable them to purchase or command. However, the exchangeable value of every

commodity is more frequently estimated by the quantity of money, than by the quantity either of

labor or of any other commodity which can be had in exchange for it. Labor alone, never varying

in its own value, is alone the ultimate and real standard by which the value of all commodities can

at all times and places be estimated and compared. It is their real price; money is their nominal

price only. Therefore, labor is the only universal, as well as the only accurate measure of value,

or the only standard by which we can compare the values of different commodities at all times and

at all places. Money is the exact measure of the real exchangeable value of all commodities, at

the same time and place only. The occasional fluctuations in the market price of gold and silver

bullion arise from the same causes as the like fluctuations in that of all other commodities. By the

money price of goods, it is to be observed, I understand always the quantity of pure gold or silver

for which they are sold, without any regard to the denomination of the coin.89

Chapter VI. The Component Parts of the Price of Commodities: In the early and rude state of

society which precedes both the accumulation of stock and the appropriation of land, the

proportion between the quantities of labor necessary for acquiring different objects seems to be

the only circumstance which can afford any rule for exchanging them for one another. As soon

as stock has accumulated in the hands of particular persons, some of them will naturally employ

it in setting to work industrious people, whom they will supply with materials and subsistence, in

order to make a profit by the sale of their work, or by what their labor adds to the value of the

materials. The value which the workmen add to the materials can be in two parts: wages and the

profits of their employers. The profits of stock, it may perhaps be thought, are only a different

name for the wages of a particular sort of labor, the labor of inspection and direction. In this

regard, the whole produce of labor does not always belong to the laborer; he must share it with the

owner of the stock which employs him. As soon as the land of any country has all become private

property, the landlords, like all other men, love to reap where they never sowed, and demand a

rent even for tis natural produce. The wood of the forest, the grass of the field, and all the natural

fruits of the earth, which, when land was in common, cost the laborer only the trouble of gathering

them, come, even to him, to have an additional price fixed upon them. The real value of all the

different component parts of price is measured by the quantity of labor which they can, each of

them, purchase or command. Labor measures the value not only of that part of price which resolve

itself into labor, but of that which resolves itself into rent, and of that which resolve itself into

profit. In every society the price of every commodity finally resolves itself into three parts: wages,

rent, and profit. For example, in the price of corn, one part pays the rent of the landlord, another

pays the wages or maintenance, and the third pays the profit of the farmer. A fourth part is

necessary for replacing the stock of the farmer, or for compensating the wear and tear of his

laboring cattle, and other instruments of husbandry. Thus, wages, profits, and rent, are the three

original sources of all revenue as well as of all exchangeable value.90



Chapter VII. The Natural and Market Price of Commodities: There is in every society or

neighborhood an ordinary or average rate both of wages and profit in every different employment

of labor and stock. This rate is naturally regulated, partly by general circumstances of the society,

their riches or poverty, their advancing, stationary, or declining condition; and partly by the

particular nature of each employment. There is likewise in every society or neighborhood an

ordinary or average rate of rent, which is regulated, partly by the general circumstances of the

society or neighborhood in which the land is situated, and partly by the natural or improved fertility

of the land. These ordinary or average rates may be called the natural rates of wages, profit, and

rent, at the time and place in which they commonly prevail. The actual price at which any

commodity is commonly sold is called its market price. It may either be above, or below, or

exactly the same with its natural price. The market price of every particular commodity is

regulated by the proportion between the quantity which actually brought to market, and the

demand of those who are willing to pay the natural price of the commodity, to the whole value of

the rent, labor, and profit, which must be paid in order to bring it thither. The quantity of every

commodity brought to market naturally suits itself to the effectual demand. If at any time it

exceeds the effectual demand, some of the component parts of its price must be paid below their

natural rate. On the contrary, the opposite would appear. Therefore, the natural price is the central

price, to which the prices of all commodities are continually gravitating. The occasional and

temporary fluctuations in the market price of any commodity fall chiefly upon those parts of its

price which resolve themselves into wages and profits. Such fluctuations affect both the value

and the rate either of wages or of profit, according as the market happens to be either over-stocked

or under-stocked with commodities or with labor; with work done, or with work to be done. A

monopoly granted wither to an individual or to a trading company has the same effect as a secret

in trade or manufactures; in which wages and profits were greatly above their natural rate.91

Chapter VIII. The Wages of Labor: What are the common wages of labor, depends every-

where upon the contract usually made between those two parties, whose interests are by no means

the same. The workmen desire to get as much, the masters to give as little as possible. The most

decisive mark of the prosperity of any country is increase of the number of its inhabitants. The

liberal reward of labor, therefore, as it is the effect, so it is the natural symptom of increasing

national wealth. In Great Britain, the wages of labor shows many plain symptoms: there is a

distinction, even in the lowest species of labor, between summer and winter wages; the wages of

labor do not fluctuate with the price of provisions; the wages of labor vary more from place to

place than the price of provisions; the variations in the price of labor not only do not correspond

either in place or time with those in the price of provisions, but they are frequently quite opposite.

The liberal reward of labor increases the industry of the common people. The wages of labor are

the encouragement of industry, which, like every other human quality, improves in proportion to

the encouragement it receives. Where wages are high, we shall always find the workmen more

active, diligent, and expeditious, than where they are low. The increase in the wages of labor

necessarily increases the price of many commodities, by increasing that part of it which resolves

itself into wages, and so far tends to diminish their consumption both at home and abroad. The

same cause, however, which raises the wages of labor, the increase of stock, tends to increase its

productive powers, and to make a smaller quantity of labor produce a greater quantity of work.

The greater their number, the more they naturally divide themselves into different classes and

subdivisions of employment. More heads are occupied in inventing the most proper machinery

for executing the work of each, and it is, therefore, more likely to be invented. There are many

commodities, which, in consequence of these improvements, come to be produced by so much

less labor than before, that the rising price is more than compensated by the falling quantity.92



Chapter IX. The Profit of Stock: The rise and fall in the profits of stock depend upon the same

causes with the rise and fall in the wages of labor, the increasing or declining state of the wealth

of the society; but those causes affect the one and the other very differently. The increase of stock,

which raises wages, tends to lower profit. When the stocks of many rich merchants are turned

into the same trade, their mutual competition naturally tends to lower its profit; and when there is

a like increase of stock in all the different trades carried on in the same society, the same

competition must produce the same effect in them all. In our North American and West Indian

colonies, not only the wages of labor, but the interest of money, and consequently the profits of

stock, are higher than in England. The acquisition of new territory, or of new branches of trade,

may sometimes raise the profits of stock, and with them the interest of money, even in a country

which is fast advancing in the acquisition of riches. The diminution of the capital stock of the

society, or of the funds destined for the maintenance of industry, however, as it lowers the wages

of labor, so it raises the profits of stock, and consequently the interest of money. The lowest

ordinary rate of profit must always be something more than what is sufficient to compensate the

occasional losses to which every employment of stock is exposed. The highest ordinary rate of

profits may be such as, in the price of the greater part of commodities, eat up the whole of what

should go to the rent of the land, and leaves only what is sufficient to pay the labor of preparing

and bringing them to market, according to the lowest rate at which labor can anywhere be paid,

the bare subsistence of the labor. The proportion which the usual market rate of interest ought to

bear to the ordinary rate of clear profit, necessarily varies as profit rises or falls. But the proportion

between interest and clear profit might not be the same in countries where the ordinary rate of

profit was either a good deal lower, or a good deal higher. In reality, high profits tend much more

to raise the price of work than high wages. The rise of profit operates like compound interest.93

Chapter X. Wages and Profit in the different employments of labor and stock: The whole of

the advantages and disadvantages of the different employments of labor and stock must, in the

same neighborhood, be either perfectly equal or continually tending to equality. In the same

neighborhood, there was any employment evidently either more or less advantageous than the rest,

so many people would crowd into it in the one case, and so many would desert it in the other; that

its advantages would soon return to the level of other employments. [Part I] Inequalities arises

from the nature of the employments themselves. First, the wages of labor vary with the ease or

hardship, the cleanliness or dirtiness, the honorableness or dishonorableness of the employment.

Secondly, the wages of labor vary with the easiness and cheapness, or the difficulty and expense

of learning the business. Thirdly, the wages of labor in different occupations vary with the

constancy or inconstancy of employment. Fourthly, the wages of labor vary according to the

small or great trust which must be reposed in the workmen. Fifthly, the wages of labor in different

employments vary according to the probability or improbability of success in them. Of the five

circumstances, varying the wages of labor, two only affect the profits of stock: the agreeableness

or disagreeableness of the business; and the risk or security with which it is attended. In reality,

they make up for a small pecuniary gain in some, and counter-balance a great one in others. In

order, however, that this equality may take place in the whole of their advantages or disadvantages,

three thing are requisite even where there is the most perfect freedom. Frist, this equality can take

place only in those employments which are well known, and have been long established in the

neighborhood. Secondly, this equality in the whole of the advantages and disadvantages of the

different employments of labor and stock, can take place only in the ordinary, or what may be

called the natural state of those employments. Third, this equality in the whole of the advantages

and disadvantages of the different employments of labor and stock, can take place only in such as

are the sole or principal employments of those who occupy them.94



[Part II] Inequalities occasioned by the policy of Europe: Such are the inequalities in the whole

of the advantages and disadvantages of the different employment of labor and stock, which the

defect of any of the three requisites above-mentioned must occasion, even where there is the most

perfect liberty. But the policy of Europe, by not leaving things as perfect liberty, occasions other

inequalities of much greater importance. It does this chiefly in the three following ways. First,

the policy of Europe occasions a very important inequality in the whole of the advantages and

disadvantages of the different employments of labor and stock, by restraining the competition in

some employments to a smaller number than might otherwise be disposed to enter into them.

Secondly, the policy of Europe, by increasing the competition in some employments beyond what

it naturally would be, occasions another inequality of an opposite kind in the whole of the

advantages and disadvantages of the different employments of labor and stock. Thirdly, the policy

of Europe, by obstructing the free circulation of labor and stock both from employment to

employment, and from place to place, occasions in some cases a very inconvenient inequality in

the whole of the advantages and disadvantages of their different employments. Finally, the

proportion between the different rates both of wages and profit in the different employments of

labor and stock, seems not to be much affected, as has already been observed, by the riches or

poverty, the advancing, stationary, or declining state of the society. Such revolutions in the public

welfare, though they affect the general rates both of wages and profit, must in the end affect them

equally in all different employments. The proportion between them, therefore, must remain the

same, and cannot well be altered, at least for any considerable time, by any such revolutions.95

Chapter XI. The Rent of Land: Every improvement in the circumstances of the society tends

either directly or indirectly to raise the real rent of land, to increase the real wealth of the landlord,

his power of purchasing the labor, or the produce of the labor of other people. The extension of

improvement and cultivation tends to raise it directly. The landlord’s share of the produce

necessarily increases with the increase of the produce. The rise in the real price of those parts of

the rude produce of land, which is the first effect of extended improvement and cultivation, and

afterwards the cause of their being still further extended, the rise in the price of cattle, for example,

tend to raise the rent of land directly. The real value of the landlord’s share, his real command of

the labor of other people, not only rises with the real value of the produce, but the proportion of

his share to the whole produce rises with it. All improvements in the productive powers of labor,

which tend directly to reduce the real price of manufactures, tend indirectly to raise the real rent

of land. The landlord exchanges that part of his rude produce. Every increase in the real wealth

of the society, every increase in the quantity of useful labor employed within it, tends indirectly

to raise the real rent of land. A certain proportion of this labor naturally goes to the land. A greater

number of men and cattle are employed in its cultivation, the produce increases with the increase

of the stock which is thus employed in raising it, and the rent increases with the produce. The

contrary circumstances, the neglect of cultivation and improvement, the fall in the real price of

any part of the rude produce of land; the rise in the real price of manufactures from the decay of

manufacturing art and industry, the declension of the real wealth of the society, all tend, on the

other hand, to lower the real rent of land, to reduce the real wealth of the landlord, to diminish his

power of purchasing either the labor, or the produce of the labor of other people. The whole annual

produce of the land and labor of every country, or what comes to the same thing, the whole price

of that annual produce, naturally divides itself, it has already been observed, into three parts: the

rent of land, the wages of labor, and the profits of stock; and constitutes a revenue to three different

orders of people; to those who live by rent, to those who live by wages, and to those who live by

profit. These are the three great, original and constituent orders of every civilized society, from

whose revenue that of every other order is ultimately derived.96



The whole annual produce of the land and labor of every country naturally divides itself into

three parts: the rent of land, the wages of labor, and the profits of stock. The interest of the first of

those three great orders, it is strictly and inseparably connected with the general interest of the

society. Whatever either promotes or obstructs the one, necessarily promotes or obstruct the other.

When the public deliberates concerning any regulation of commerce or police, the proprietor of

land never can misled it, with a view to promote the interest of their own particular order, at least,

if they have any tolerable knowledge of that interest. They are the only one of the three orders

whose revenue costs them neither labor nor care, but comes to them, as it were, of its own accord,

and independent of any plan or project of their own. The interest of the second order, that of those

who live by wages, is as strictly connected with the interest of the society as that of the first. The

wages of the laborer are never so high as when the demand for labor is continually rising, or when

the quantity employed is every year increasing considerably. When this real wealth of the society

becomes stationary, his wages are soon reduced to what is barely enough to enable him to bring

up a family, or to continue the race of laborers. When the society declines, they fall even below

this. The third order lives by profit. It is the stock that is employed for the sake of profit, which

puts into motion the greater part of the useful labor of every society. The plans and projects of the

employers of stock regulate and direct all the most important operations of labor, and profit is the

end proposed by all those plans and projects. Merchants and master manufacturers are, in this

order, the two classes of people who commonly employ the largest capitals, and who by their

wealth draw to themselves the greatest share of the public consideration. To widen the market

and to narrow the competition, is always the interest of the dealers. To widen the market may

frequently be agreeable enough to the interest of the public; but to narrow the competition must

always be against it, and can serve only to enable the dealers, by raising their profits above what

they naturally would be, to levy absurd tax upon the rest of their fellow-citizens.97

BOOK II. The Nature, Accumulation, and Employment of Stock: In the rude state of society,

it is not necessary that any stock should be accumulated or stored up beforehand, in order to carry

on the business of the society. But when the division of labor has once been thoroughly introduced,

the produce of a man’s own labor can supply but a very small part of this occasional wants. The

far greater part of them are supplied by the produce of other men’s labor, which he purchases with

the produce, or, what is the same thing, with the rice of the produce of his own. As the

accumulation of stock must, in the nature of things, be previous to the division of labor, so labor

can be more and more subdivided in proportion only as stock is previously more and more

accumulated. The quantity of materials which the same number of people can work up, increases

in a great proportion as labor comes to be more and more subdivided, and as the operations of

each workman are gradually reduced to a greater degree of simplicity, a variety of new machines

come to be invested for facilitating and abridging those operations. As the division of labor

advances, therefore, in order to give constant employment to an equal number of workmen, and

equal stock of provisions, and a greater stock of materials and tools than what would have been

necessary in the ruder state of things, must be accumulated beforehand. But the number of

workmen in every branch of business generally increases with the division of labor in that branch,

or rather it is the increase of their number which enables them to class and subdivide themselves

in this manner. As the accumulation of stock is previously necessary for carrying on this great

improvement in the productive powers of labor, so that accumulation naturally leads to this

improvement. The person who employs his stock in maintaining labor, necessarily wishes to

employ it in such a manner as to produce as great a quantity of work as possible. He endeavors,

therefore, both to make among his workmen the most proper distribution of employment, and to

furnish them with the best machines which he can either invent or afford to purchase.98



Chapter I. The Division of Stock: The general stock of any country or society is the same with

that of all its inhabitants or members, and therefore naturally divides itself into the same three

portions. The first is reserved for immediate consumption, that it affords no revenue or profit. It

consists in the stock of food, clothes, household furniture, etc., which have been purchased by

their proper consumers, but which are not yet entirely consumed. The second of the three portions

into which the general stock of the society divides itself, is the fixed capital, which consists chiefly

of the four following articles: (i) of all useful machines and instruments of trade which facilitate

and abridge labor; (ii) of all those profitable building which are the means of procuring a revenue,

not only to their proprietor who lets them for a rent, but to the person who possesses them and

pays that tent for them; (iii) of the improvements of land, of what has been profitably laid out in

clearing, draining, enclosing, manuring, and reducing it into the condition most proper for tillage

and culture; and (iv) of the acquired and useful abilities of all the inhabitants or members of the

society. The acquisition of such talents, by the maintenance of the acquirer during his education,

study, or apprenticeship, always costs a real expense, which is a capital fixed and realized, as it

were, in his person. The third and last of the three portions into which the general stock of the

society naturally divides itself, is the circulating capital that is composed of four parts: (i) of the

money by means of which all the other three are circulated and distributed to their proper

consumers; (ii) of the stock of provisions which are in the possession of the butcher, the grazier,

the farmer, the corn-merchant, the brewer, etc. and from the sale of which they expect to derive a

profit; (iii) of the materials, whether altogether rude, or more or less manufactured, or clothes,

furniture and building, which are not yet made up into any of those three shapes, but which remain

in the hands of the growers, the manufacturers, the mercers, and drapers, and so on; (iv) of the

work which is made up and completed, but which is still in the hands of the merchant or

manufacturer, and not yet disposed of or distributed to the proper consumers.99

Chapter II. Money considered as a particular branch of the General Stock of the Society, or

the expense of maintaining the national capital: The whole price or exchangeable value of the

annual produce must resolve itself into the three parts, and be parceled out among the different

inhabitants of the country, either as the wages of their labor, the profits of their stock, or the rent

of their land. The gross revenue of all the inhabitants of a country, comprehends the whole annual

produce of their land and labor; the neat revenue, what remains free to them after deducting the

expense of maintaining; as noted in Chapter I including fixed capital, circulating capital; and stock

reserved for immediate consumption. Money is the only part of the circulating capital of a society,

of which the maintenance can occasion any diminution in their neat revenue. The fixed capital,

and part of the circulating capital which consists in money, so far as they affect the revenue of the

society, bear a very great resemblance to one another. First, those machines and instruments of

trade, etc., require a certain expense, which are deductions from the neat revenue of the society.

Secondly, the machines and instruments of trade, etc. composing the fixed capital, either of an

individual or of a society, make no part either of the gross or of the neat revenue of either; so

money, by means of which the whole revenue of the society is regularly distributed among all its

different members, makes itself no part of that revenue. Thirdly, and lastly, the machines and

instruments of trade, etc. composing the fixed capital bear this further resemblance to that part of

the circulating capital which consists in money; that as every saving in the expense of erecting and

supporting those machines, which does not diminish the productive powers of labor, is an

improvement of the neat revenue of the society; so every saving in the expense of collecting and

supporting that part of the circulating capital which consists in money, is an improvement of

exactly the same kind. It is sufficiently obvious, in what manner every saving in the expense of

supporting the fixed capital is an improvement of the neat revenue of the society.100



The substitution of paper in the room of gold and silver money, replaces a very expensive

instrument of commerce with one much less costly, and equally convenient. Circulation comes to

be carried on by a new wheel, which it costs less both to erect and to maintain than the old one.

There are several different sorts of paper money; but the circulating notes of banks and bankers

are the species which is best known, and which seems best adapted for this purpose. When the

people of any particular country have such confidence in the fortune, probity, and prudence of a

particular banker, as to believe that he is always ready to pay upon demand such of his promissory

notes as are likely to be at any time presented to him; those notes come to have the same currency

as gold and silver money, from the confidence that such money can at any time be had for them.

A particular banker lends among his customers his own promissory notes, to the extent. As those

notes serve all the purposes of money, his debtors pay him the same interest as if he had lent them

so much money. This interest is the source of his gain. Though some of those notes are continually

coming back upon him for payment, part of them continue to circulate for months and years

together. When paper is substituted in the room of gold and silver, the quantity of the materials,

tools, and maintenance, which the whole circulating capital can supply, may be increased by the

whole value of gold and silver which used to be employed in purchasing them. The whole value

of the great wheel of circulation and distribution, is added to the goods which are circulated and

distributed by means of it. It is chiefly by discounting bills of exchange, that is, by advancing

money upon them before they are due, that the greater part of banks and bankers issue their

promissory notes. Moreover, they invented another method of issuing their promissory noted; by

granting, what they called cash accounts that is by giving credit to the extent of a certain sum, to

any individual who could procure two persons of undoubted credit and good landed estate to

become surety for him, that whatever money should be advanced to him, within the sum for which

the credit had been given, should be repaid upon demand, together with the legal interest.101

The whole paper money of every kind which can easily circulate in any country never can

exceed the value of the gold and silver, of which it supplies the place, or which would circulate

there, if there was no paper money. Though paper money should be pretty much confined to the

circulation between dealers and dealers, yet banks and bankers might still be able to give nearly

the same assistance to the industry and commerce of the country, as they had done when paper

money filled almost the whole circulation. The increase of paper money, it has been said, by

augmenting the quantity, and consequently diminishing the value of the whole currency,

necessarily augments the money price of commodities. But as the quantity of gold and silver,

which is taken from the currency, is always equal to the quantity of paper which is added to it,

paper money does not necessarily increase the quantity of the whole currency. A paper currency

which falls below the value of gold and silver, does not thereby sink the value of those metals, or

occasion equal quantities of them to exchange for a smaller quantity of goods of any other kind.

The proportion between the value of gold and silver and that of goods of any other kind, depends

in all cases, not upon the nature or quantity of any particular paper money, which may be current

in any particular country, but upon the richness or poverty of the mines, which happen at any

particular time to supply the treat market of the commercial world with those metals. It depends

upon the proportion between the quantity of labor which is necessary in order to bring a certain

quantity of gold and silver to market, and that which is necessary in order to bring thither a certain

quantity of any other sort of goods. If bankers are restrained from issuing any circulating bank

notes, or notes payable to the bearer, for less than a certain sum; and if they are subjected to the

obligation of an immediate and unconditional payment of such bank notes as soon as presented,

their trade may, with safety to the public, be rendered in all other respects perfectly free. This free

competition obliges all bankers to be more liberal in their dealings with their customers.102



Chapter III. The Accumulation of Capital, or Productive and Unproductive Labor: There are

two sorts of labor: productive and unproductive labor. The productive labor produces value: the

labor of a manufacturer adds to the value of the materials which he works upon, that of his own

maintenance, and of his master’s profit. On the contrary, the unproductive labor produces no

value: the labor of a menial servant adds to the value of nothing; and the sovereign, with all the

officers both of justice and war who serve under him, the whole army and navy, are unproductive

laborers. Of the produce of land, one part replaces the capital of the farmer; the other pays his

profit and the rent of the landlord; and thus constitutes a revenue both to the owner of this capital,

as the profits of his stock; and to some other persons, as the rent of his land. Thus, at present, in

the opulent countries of Europe, a very large, frequently the largest portion of the produce of the

land, is destined for replacing the capital of the rich and independent farmer; the other for paying

his profits, and the rent of the landlord. At present time, great capitals are employed in trade and

manufactures, with the interest rate of no less than ten percent, although the average rate of interest

is no-where high than six percent in the improved part of Europe. The proportion between capital

and revenue seems everywhere to regulate the proportion between industry and idleness.

Wherever capital predominates, industry prevails; wherever revenue, idleness. Every increase or

diminution of capital, therefore, naturally tends to increase or diminish the real quantity of industry,

the number of productive hands, and consequently, the exchangeable value of the annual produce

of the land and labor of the country, the real wealth and revenue of all its inhabitants. Capitals are

increased by parsimony, and diminished by prodigality and misconduct. The annual produce of

the land and labor of any nation can be increased in its value by no other means, but by increasing

either the number of its productive laborers, or the productive powers of those laborers who had

before been employed. Kings and ministers should watch over the economy of private people,

and restrain their expense, either by sumptuary laws, or by prohibiting the luxurious imports.103

Chapter IV. Stock Lent at Interest: The stock which is lent at interest is always considered as

a capital by the lender. The borrower may use it either as a capital, or as a stock reserved for

immediate consumption. As the quantity of stock to be lent at interest increases, the interest, or

the price which must be paid for the use of the stock, necessarily diminishes, not only from the

general causes which make the market price of things commonly diminish as their quantity

increases, but from other causes which are peculiar to this peculiar to this particular case. As

capitals increase in any country, the profits which can be made by employing them necessarily

diminish. There arises in consequence a competition between different capitals, the owner of one

endeavoring to get possession of that employment which is occupied by another. The increase of

the quantity of gold and silver, in consequence of the discovery of the Spanish West Indies, was

the real cause of the lowering of the rate of interest through the greater part of Europe. Any

increase in the quantity of silver, while that of the commodities circulated by means of it remained

the same, could have no other effect than to diminish the value of that metal. Any increase in the

quantity of commodities annually circulated within the country, while that of the money which

circulated them remained the same, would, on the contrary, produce many other important effect,

besides that of raising the value of money. The legal rate of interest ought not to be much above

the lowest market rate: no law can reduce the common rate of interest below the lowest ordinary

market rate at the time when that law is made. The ordinary market price of land, it is to be

observed, depends everywhere upon the ordinary market rate of interest. The person who has a

capital from which he wishes to derive a revenue, without taking the trouble to employ it himself,

deliberates whether he should buy land with it, or lend it out at interest. As interest rate sunk to

below six percent, the price of land rose to over twenty years purchase. The market rate of interest

is higher in France than in England; and the common price of land is lower in England.104



Chapters V. The Different Employment of Capitals: A capital may be employed in four

different ways: In the first way are employed the capitals of all those who undertake the

improvement or cultivation of lands, mines, or fisheries; in the second, those of all master

manufacturers; in the third, those of all wholesale merchants; and in the fourth, those of all retailers.

The persons whose capitals are employed in any of those four ways are themselves productive

laborers. The profits of the farmer, of the manufacturer, of the merchant, and retailer, are all drawn

from the price of the goods which the two first produce, and the two last buy and sell. Equal

capitals, however, employed in each of these four different quantities of productive labor, and

augment too in very different proportions the value of the annual produce of the land and labor of

the society to which they belong. Nor equal capital puts into motion a greater quantity of

productive labor than that of the farmer. The capital of the manufacturer must no doubt reside

where the manufacture is carried on; but where this shall be is not always necessarily determined.

Whether the merchant whose capital exports the surplus produce of any society be a native or a

foreigner, is of very little importance. When the capital of any country is not sufficient for all

those three purposes, in proportion as a greater share of it is employed in agriculture, the greater

will be the quantity of productive labor which it puts into motion within the country; as will

likewise be the value which its employment adds to the annual produce of the land and labor of

the society. After agriculture, the capital employed in manufactures puts into motion the greatest

quantity of productive labor, and adds the greatest value to the annual produce. That which is

employed in the trade of exportation, has the least effect of any of the three. The country, which

has not capital sufficient for all those three purpose, has not arrived at that degree of opulence for

which it seems naturally destined. The capital employed in the home-trade will give encourage-

ment and supports to a greater quantity of productive labor in that country, and increase the value

of its annual produce more than an equal capital employed in the foreign trade of consumption.105

Each of those different branches of trade, however, is not only advantageous, but necessary

and unavoidable, when the course of things, without any constraint or violence, naturally

introduces it. When the produce of any particular branch of industry exceeds what the demand of

the country requires, the surplus must be sent abroad, and exchanged for something for which

there is a demand at home. Without such exportation, a part of the productive labor of the country

must cease, and the value of its annual produce diminish. When the capital stock of any country

is increased to such a degree, that it cannot be all employed in supplying the consumption, and

supporting the productive labor of that particular country, the surplus part of it naturally disgorges

itself into the carrying trade, and is employed in performing the same offices to other countries.

The carrying trade is the natural effect and symptom of great national wealth; but it does not seem

to be the natural cause of it. Those statesmen seem to have mistaken the effect and symptom for

the cause. The extent of the home-trade and of the capital which can be employed in it, is

necessarily limited by the value of the surplus produce of all those distant places within the country

which have occasion to exchange their respective productions with one another. The consideration

of his own private profit, is the sole motive which determines the owner of any capital to employ

it either in agriculture, in manufactures, or in some particular branch of the wholesale or retail

trade. The different quantities of productive labor which it may put into notion, and the different

values which it may add to the annual produce of the land and labor of the society, according as it

is employed in one or other of those different ways, never enter into his thought. In countries,

therefore, where agriculture is the most profitable of all employments, and farming and improving

the most direct roads to a splendid fortune, the capitals of individuals will naturally be employed

in the manner most advantageous to the whole society. The profit of agriculture, however, seem

to have no superiority over those of other employments in any part of Europe.106



BOOK III. The Different Progress of Opulence in Different Nations: Chapter I. The Natural

Progress of Opulence: The great commerce of every civilized society, is that carried on between

the inhabitants of the town and those of the country. It consists in the exchange of rude for

manufactured produce, either immediately, or by the intervention of money, or of some sort of

paper which represents money. The country supplies the town with the means of subsistence, and

the materials of manufacture. The town repays this supply by sending back a part of the

manufactured produce to the inhabitants of the country. As subsistence is, in the nature of things,

prior to conveniency and luxury, so the industry which procures the former, must necessarily be

prior to that which ministers to the latter. The cultivation and improvement of the country, there-

fore, which affords subsistence, must, necessarily, be prior to the increase of the town, which

furnishes only the means of conveniency and luxury. It is the surplus produce of the country only,

or what is over and above the maintenance of the cultivators, that constitutes the subsistence of

the town, which can therefore increase only with the increase of this surplus produce. Upon equal,

or nearly equal profits, most men will choose to employ their capitals rather in the improvement

and cultivation of land, than either in manufactures or in foreign trade. In seeking for employment

to a capital, manufacture are, upon equal or nearly equal profits, naturally preferred to foreign

commerce, for the same reason that agriculture is naturally preferred to manufactures. According

to the natural course of things, therefore, the greater part of the capital of every growing society

is, first, directed to agriculture, afterwards to manufactures, and last of all to foreign commerce.107

BOOK IV. Systems of Political Economy: Political economy, considered as a branch of the

science of a statesman or legislator, proposes two distinct objects: first, to provide a plentiful

revenue or subsistence for the people, or more properly to enable them to provide such a revenue

or subsistence for themselves; and secondly, to supply the state or commonwealth with a revenue

sufficient for the public services. It proposes to enrich both the people and the sovereign. The

different progress of opulence in different ages and nations, has given occasion to two different

systems of political economy, with regard to enriching the people. The one may be called the

system of commerce, the other that of agriculture, to be discussed in the Book IV.108

Chapter I. The Principle of the Commercial or Mercantile System: Spain and Portugal have

either prohibited their exportation under the severest penalties, or subjected it to a considerable

duty. When European countries became commercial, they remonstrated against this prohibition

as hurtful to trade. First, the exportation of gold and silver in order to purchase goods did not

always diminish the quantity of those metals in the kingdom. On the contrary, it might frequently

increase that quantity; because, if the consumption of foreign goods was not thereby increased in

the country, those goods might be re-exported to foreign countries, and, being there sold for a

large profit, might bring back much more treasure than was originally sent out to purchase them.

Secondly, this prohibition could not hinder the exportation of gold and silver, which, on account

of the smallness of their bulk in proportion to their value, could easily be smuggled around. This

exportation could only be prevented by a proper attention to the balance of trade. When the

country exported to a greater value than it imported, a balance became due to it from foreign

nations, which was necessarily paid to it in gold and silver, and thereby increased the quantity of

those metals in the kingdom. But when it imported to a great value than it exported, a contrary

balance became due to foreign nations, which was necessarily paid to them in the same manner,

and thereby diminish that quantity. In this case, to prohibit the exportation of those metals could

not prevent it, but only by making it more dangerous, render it more expensive. The high price of

exchange necessarily increased the unfavorable balance of trade, or occasioned the exportation of

a greater quantity of gold and silver. It would tend, therefore, not to increase, but to diminish –

the unfavorable balance of trade – and consequently, the exportation of gold and silver.109



The quantity of every commodity which human industry can either purchase or produce,

naturally regulates itself in every country according to the effectual demand, or according to the

demand of those who are willing to pay the whole rent, labor and profits which must paid in order

to prepare and bring it to market. But no commodities regulate themselves more easily or more

exactly according to this effectual demand than gold and silver, because, on account of the small

bulk and great value of those metals, no commodities can be more easily transported from one

place to another, from the places where they are cheap, to those where they are dear, from the

places where they exceed, to those where they fall short of this effectual demand. When the

quantity of gold and silver imported into any country exceeds the effectual demand, no vigilance

of government can prevent their exportation. It is not always necessary to accumulate gold and

silver, in order to enable a country to carry on foreign wars, and to maintain fleets and armies in

distant countries. Fleets and armies are maintained, not with gold and silver, but with consumable

goods – from the annual produce of its nation. The two principles being established, that wealth

consisted in gold and silver, and that those metals could be brought into a country which had no

mines only by the balance of trade, or by exporting to a greater value than it imported; it became

the great object of political economy to diminish as much as possible the importation of foreign

goods for home consumption, and to increase as much as possible the exportation of the produce

of domestic industry. There were two engines enriching the country: restraints upon importation

and encouragements to exportation. Restraints were two kinds: first, the restraints for importation

of such foreign goods for home consumption could be produced at home from whatever country

they were imported; second, restraints upon the importation of goods from those particular

countries with which the balance of trade was supposed to be disadvantageous. They consisted in

high duties or absolute prohibitions. Encouragements had four measures: drawbacks, bounties,

advantageous treaties of commerce, and the establishment of colonies.110

Chapter II. Restraints upon the Importation: By restraining, either by high duties, or by

absolute prohibitions, the importation of such goods from foreign countries as can be produced at

home, the monopoly of the home market is more or less secured to the domestic industry employed

in producing them. The monopoly of the home-market frequently gives great encouragement to

that particular species of industry which enjoys it, and frequently turns towards that employment

a greater share of both the labor and stock of the society than would otherwise have gone to it,

cannot be doubted. First, every individual endeavors to employ his capital as near home as he can,

and consequently as much as he can in the support of domestic industry; provided always that he

can thereby obtain the ordinary, or not a great deal less than the ordinary profits of stock. Secondly,

every individual who employs his capital in the support of domestic industry, necessarily

endeavors so to direct that industry; that its produce may be of the greatest possible value. The

natural advantages which one country has over another in producing particular commodities are

sometimes so great that it is acknowledged by all the world to be in vain to struggle with them.

Merchants and manufactures are the people who derive the greatest advantage from this monopoly

of the home-market. The act of navigation forced the monopoly of the trade of Great Britain,

which was necessary for the defense of the country: foreigners are hindered either by prohibitions

or high duties from coming to sell and to buy. Were those high duties and prohibitions taken away

all at once, cheaper foreign goods might be poured so fast into the home market: the disorder might

be considerable. Nevertheless, all those manufactures, of which any part is commonly exports to

other European countries without a bounty, could be very little affected by the freest importation

of foreign goods. Moreover, though a great number of people should, by thus restoring the

freedom of trade, be thrown all at once out of their ordinary employment and common method of

subsistence, they would be deprived either of employment or subsistence.111



Chapter III. The Extraordinary Restraints upon the Importation of goods of almost all kinds,

from those countries with which the balance is supposed to be disadvantageous: [Part I] The

Unreasonableness of those Restraint even upon principles of the commercial system: To lay

extraordinary restraints upon the importation of goods of almost all kinds, from those particular

countries with which the balance of trade is supposed to be disadvantageous, is the second

expedient by which the commercial system proposes to increase the quantity of gold and silver.

First, though it were certain that in the case of a free trade between France and England, for

example, the balance could be in favor of France, it would by no means follow that such a trade

would be disadvantageous to England, or that the general balance of its whole trade would thereby

be turned more against it. Secondly, a great part of them might be re-exported to other countries,

where, being sold with profit, they might bring back a return equal in value, perhaps, to the prime

cost of the whole French goods imported. Thirdly, and lastly, there is no certain criterion by which

we can determine on which side what is called the balance between any two countries lies, or

which of them exports to the greatest value. But first, we cannot always judge of the value of

current money of different countries by the standard of their respective mints. The value of the

current coin of every country, compared with that of any other country, is in proportion not to the

quantity of pure silver which it ought to contain, but to that which it actually does contain.

Secondly, in some countries, the expense of coinage is defrayed by the government; on other, it is

defrayed by the private people who carry their bullion to the mint, and the government even

derives some revenue from the coinage. Thirdly, in some more places, as at Amsterdam, Hamburg,

Venice, etc. foreign bills of exchange are paid in what they call bank money; while in others, as

at London, Lisbon, Antwerp, Leghorn, etc., they are paid in the common currency of the country.

Bank money is always of more value than the same nominal sum of common currency.112

[Part II] The Unreasonableness of those extraordinary restraints upon other principles: A

nation that would enrich itself by foreign trade, is certainly most likely to do so when its neighbors

are all rich, industrious, and commercial nations. The modern maxims of foreign commerce, by

aiming at the impoverishment of all our neighbors, so far as they are capable of producing their

intended effect, tend to render that very commerce insignificant and contemptible. It is in

consequence of these maxims that the commerce between France and England has in both

countries been subjected to so many discouragements and restraints. If those two countries,

however, were to consider their real interest, without either mercantile jealousy or national

animosity, the commerce of France might be more advantageous to Great Britain than that of any

other country, and for the same reason that of Great Britain to France. There is another balance –

the balance of the annual produce and consumption. If the exchangeable value of the annual

produce exceeds that of the annual consumption, the capital of the society must annually increase

in proportion to this excess. The society in this case lives within its revenue, and what is annually

saved out of its revenue, is naturally added to its capital, and employed so as to increase still further

the annual produce. If the exchangeable value of the annual produce, on the contrary, fall short

of the annual consumption, the capital of the society must annually decay in proportion to its

deficiency. The expense of the society in this case exceeds its revenue, and necessarily encroaches

upon its capital. This balance of produce and consumption is entirely different from the balance

of trade. The balance of produce and consumption may be constantly in favor of a nation, though

what is called the balance of trade be generally against it. A nation may import to a greater value

than it exports for half a century, perhaps, together; the gold and silver which comes into it during

all this time may be all immediately sent out of it; its circulating coin may gradually decay,

different sort of paper money being substituted in its place, and even the debts too which it

contracts in the principal nations with whom it deals, may be gradually increasing.113



Chapter IV. Drawbacks: Merchants and manufactures are not contented with the monopoly

of the home market, but desire likewise the most extensive foreign sale for their goods. Their

country has no jurisdiction in foreign nations, and therefore can seldom procure them any

monopoly here. They are generally obliged, therefore, to content themselves with petitioning for

certain encouragements to exportation. Of these encouragements what are called Drawbacks seem

to be the most reasonable. To allow the merchant to draw back upon exportation, either the whole

or a part of whatever excise or inland duty is imposed upon domestic industry, can never occasion

the exportation of a greater quantity of goods than that would have been exported had no duty

been imposed. Drawbacks were originally granted for the encouragement of the carrying trade,

which, as the freight of the ships is frequently paid by foreigners in money, was supposed to be

peculiarly lifted for bringing gold and silver into the country. However, a drawback upon the

exportation of European goods to our American colonies, for example, will not always occasion a

greater exportation than what would have taken place without it.114

Chapter V. Bounties: Bounties upon exportation are, in Great Britain, frequently petitioned

for, and sometimes granted to the produce of particular branches of domestic industry. It often

takes form of a premium paid for the increased production or export of certain goods. By means

of them our merchants and manufacturers will be enabled to sell their goods as cheap as or cheaper

than their rivals on the foreign market. A greater quantity will thus be exported, and the balance

of trade consequently turned more in favor of our own country. The mercantile system proposes

to enrich the whole country, and to put money into all our pocket by means of the balance of trade.

By occasioning an extraordinary exportation, the bounty necessarily keeps up the price of corn in

home market. The real effect of the bounty is not so much to raise the real value of corn, for the

money price of corn regulates that of all other home-made commodities. Premiums given by the

public to artists and manufacturers are not liable to the same objection as bounties.115

Chapter VI. Advantageous Treaties of Commerce: When a nation binds itself by treaty either

to permit the entry of certain goods from one foreign country which it prohibits from all others, or

to exempt the goods of one country from duties to which is subjects those of all others, or to

exempt the goods of one country from duties to which it subjects those of all others, the country,

or at least the merchants and manufacturers of the country, whose commerce is so favored, must

necessarily derive great advantage from the treaty. Those merchants and manufacturers enjoy a

sort of monopoly in the country which is so indulgent to them. That country becomes a market

both more extensive and more advantageous for their goods; more extensive, because the goods

of other nations being either excluded or subjected to heaviest duties, it takes off a greater quantity

of theirs: more advantageous, because the merchants of the favored country, enjoying a sort of

monopoly there, will often sell their goods for a better price than if exposed to the free competition

of all other nations. But a monopoly granted to foreign nations could not last longer.116

Chapter VII. Colonies: The motive of the Spanish conquest was a project of gold and silver

mines, which was more successful by accident than expected. However, in the countries first

discovered by the Spaniards, no gold or silver mines are at present known which are supposed to

be worth the working. The first adventurers of all the other nations of Europe, who attempted to

make settlement in America, were animated by the like chimerical views; but they were not

equally successful. The first English settlers in North America, however, offered a fifth of all the

gold and silver which should be found there to the king, as a motive for granting them their patents.

In the parents to Sir Walter Raleigh, to the London and Plymouth companies, to the council of

Plymouth, etc. this fifth was accordingly reserved to the crown. To the expectation of finding gold

and silver mines, those first settlers too joined that of discovering a north-west passage to the East

Indies. They have hitherto been disappointed in both.117



Chapter VIII. Conclusion of the Mercantile System: Though the encouragement of exportation,

and the discouragement of importation, are the two great engines by which the mercantile system

proposes to enrich every country, yet with regard to some particular commodities, it seems to

follow an opposite plan: do discourage exportation and to encourage importation. Its ultimate

object is always the same, to enrich the country by an advantageous balance of trade. It discourages

the exportation of the materials of manufacture, and of the instruments of trade, in order to give

our won workmen an advantage, and to enable them to undersell those of other nations in foreign

markets; and by restraining the exportation of few commodities, of great price, it proposes to

occasion of a few commodities, of no great price, it proposes to occasion a much greater and more

valuable exportation of others. It encourages the importation of the materials of manufacture, in

order that our own people may be enabled to work them up more cheaply, and thereby prevent a

greater and more valuable importation of the manufactured commodities. The importation of the

materials of manufacture has sometimes been encouraged by an exemption from the duties, and

sometimes by bounties. In the system of laws which has been established for the management of

our American and West Indian colonies, the interest of the home-consumer has been sacrificed to

that of the producer with a more extravagant profusion than in all our other commercial regulation.

In the mercantile regulations, the interest of our manufacturers has been most peculiarly attended

to; and the interest, as that of some other sets of producer, has been sacrificed to it.118

Chapter IX. The Agricultural System: The agricultural systems of political economy will not

request so long an explanation as that which I have thought it necessary to bestow upon the

mercantile or commercial system. The continual increase of the surplus produce of their land,

would, in due time, create a greater capital than what could be employed with the ordinary rate of

profit in the improvement and cultivation of land; and the surplus part of it would naturally turn

itself to the employment of artificers and manufacturers at home. The surplus of this capital would

naturally turn itself to foreign trade, and be employed in exporting, to foreign countries, such parts

of the rude and manufactured produce of its own country, as exceeded the demand of the home

market. When a landed nation, on the contrary, oppresses either by high duties or by prohibitions

the trade of foreign nations, it necessarily hurts its own interest in two different ways. First, by

raising the price of all foreign goods and of all sorts of manufactures, it necessarily sinks the real

value of the surplus produce of its own land, with which, or, what comes to the same thing, with

the price of which, it purchases those foreign goods and manufactures. Secondly, by giving a sort

of monopoly of the home market to its own merchants, artificers and manufacturers, it raises the

rate of mercantile and manufacturing profit in proportion to that of agricultural profit, and

consequently either draws from agriculture a part of the capital which had before been employed

in it, or hinders from going to it a part of what would otherwise have gone to it. This policy

discourages agriculture in two different ways: first, by sinking the real value of its produce, and

thereby lowering the rate of its profit; and secondly, by raising the rate of profit in all other

employments. Agriculture is rendered less advantageous, and trade and manufactures more

advantageous than they otherwise would be; and every man is tempted by his own interest to turn,

as much as he can, both this capital and his industry from the former to the latter employments.

All systems either of preference or of restraint, being thus completely away, the obvious and

simple system of natural liberty establishes itself of its own accord. Every man, as long as he does

not violate the laws of justice, it left perfectly free to pursue his own interest his own way, and to

bring both his industry and capital into competition with those of any other man, or order of men.

According to the system of natural liberty, the sovereign has only three duties: protecting the

society from the violence and foreign invasion; protecting of every member of the society from

the injustice or oppression; and erecting and maintaining certain public institutions.119



BOOK V. The Revenue of the Sovereign and Commonwealth: Chapter I. The Expenses of

the Sovereign or Commonwealth: [Part I] The Expense of Defense: The first duty of the sovereign,

that of protecting the society from the violence and invasion of other independent societies, can

be performed only by means of a military force. But the expense both of preparing this military

force in time of peace, and of employing it in time of war, is very different in the different states

of society, in the different periods of improvement. This first duty grows gradually more and more

expensive, as the society advances in civilization. The great change introduced into the art of war

by the invention of fire-arms, has enhanced still further both the expense of exercising and

disciplining any particular number of soldiers in time of peace, and of war. [Part II] The second

duty of the sovereign, that of protecting, as far as possible, every member of the society from the

injustice or oppression of every other member of it, or the duty of establishing an exact

administration of justice requires too very different degrees of expense in the different periods of

the society. Justice, however, never was in reality administered gratis in any country. Lawyers

and attorneys, at least, must always be paid by the parties. A stamp-duty upon the law proceedings

of each particular court, to be levied by that court, and applied towards the maintenance of the

judges and other officers belong to it. It has been the custom in modern Europe to regulate, upon

most occasions, the payment of the attorneys and clerks of court, according to the number of pages

which they had occasion to write; the court, however, requiring that each pages should contain so

many lines, and each line so many words. [Part III] The Public Works and Institutions for

facilitating the commerce of the society: The erection and maintenance of the public works which

facilitate the commerce of any country, such as good roads, bridges, navigable canals, harbors, etc.

must require very different degree of expense in the different periods of society, is evident; which

facilitates commerce in general. The protection of trade in general has always been considered as

essential to the defense of the commonwealth; which requires the duty of the executive power.120

Chapter II. The Sources of the General or Public Revenue of the Society: The revenue which

the great body of the people derives from land is in proportion, not to the rent, but to the produce

of the land. The whole annual produce of the land of every country is either annually consumed

by the great body of the people, or exchanged for something else that is consumed by them. Public

stock and public lands, the two sources of revenue which may peculiarly belong to the sovereign

or commonwealth, being both improper and insufficient funds for defraying the necessary expense

of any great and civilized state; it remains that this expense must, the greater part of it, be defrayed

by taxes of one kind or another; the people contributing a part of their own private revenue in

order to make up a public revenue to the sovereign or commonwealth. [Article I] Taxes upon rent

of land. [Article II] Taxes upon profit or upon the revenue arising from stock. [Article III] Taxes

upon the wages of labor. [Article IV] Taxes which, it is intended, should fall indifferently upon

every different species of revenue: capital taxes, taxes upon consumable commodities.121

Chapter III. Public Debts: When the resource is exhausted, and it becomes necessary, in

order to raise money, to assign or mortgage some particular branch of the public revenue for the

payment of the debt, government has upon different occasions done this in two different ways.

Sometimes it has made this assignment or mortgage for a short period of time only, a year, or a

few years, for example; and sometimes for perpetuity. The ordinary expense of the greater part

of modern governments in time of peace being equal or nearly equal to their ordinary revenue;

when war comes, they are both unwilling and unable to increase their revenue in proportion to the

increase of their expense. The new taxes were imposed for the sole purpose of paying the interest

of the money borrowed upon them. In the payment of the interest of the public debt, the money

does not go out of the country. Land and capital stock are the two original sources of all revenue

both private and public - the proprietors of land, and the owners of capital stock.122



Jean-Baptiste Say (1767-1832): born in Lyon to a Protestant family, “Say was intended to

follow a commercial career, and in 1785 was sent, with his brother Horace, to complete his

education in England: here he attended a private school in Croydon, and was afterwards employed

by a merchant in London. When, on the death of the latter, he returned to France in 1787, he was

employed in the office of a life assurance company.”123 In 1792 he took part as a volunteer in the

campaign of Champagne; in 1793 became secretary to Claviere, then finance minister. After the

marriage in 1793, Say edited a periodical from 1794-1800 in which he expounded the doctrines

of Adam Smith. In 1803 Say published the first edition of A Treatise on Political Economy or

The Production, Distribution and Consumption of Wealth. After the fall of Napoleon, Say was

officially sent on a mission to England to find out how far France had fallen behind in the Industrial

Revolution sweeping across England. In 1819 he became the first French academic teacher of

economics when he began teaching a course on industrial economics at the Conservatoire des Arts

et Metiers. In 1930, he was appointed the first professor of political economy at the College de

France in Paris. Say sent a copy of his book to U.S. President Thomas Jefferson, who cordially

responded to Say in 1804 with some thought on future possibilities of trade and commerce between

American and Europe. Ten years later in 1814, Say sent Jefferson a copy of the second edition of

his Treatise. An English translation was published in 1821; his book was later reprinted in many

editions, and was used at many institutions, at Harvard in 1850 and at Dartmouth in 1870. My

summary of the Say’s Treatise begin with is his Introduction as below. 124

INTRODUCTION: Experiencing the French Revolution and the Industrial Revolution in

England, Say could capture a greater part of the scientific and technological advances with very

recent origin of knowledge of the time, compared with Smith. (i) Since the time of Adam Smith,

it appears to me, these two very distinct inquires have been uniformly separated; the term political

economy being now confined to the science which treats of wealth, and that of politics, to designate

the relations existing between a government and its people, and relations of different states to each

other. In political economy, agriculture, commerce, and manufactures are considered only in

relation to the increase or diminution of wealth, and not in reference to their processes of execution.

Merchants must also understand the process of their art in the markets (seems to mean dynamics

of market activities). (ii) Say favored the inductive method in economic studies because of dangers

in the incorrect and fallacious use of statistics and mathematics. It has been applied to the conduct

of our researches in this. Facts that take place may be considered in two points of view: general

facts are the results of the nature of things in all analogous cases; and particular facts as truly result

from the nature of things, but they are the result of several operations modified by each other in a

particular case. Statistics exhibit the amount of production and of consumption of a particular

country, at a designated period; it does not indicates the origin and consequences of the facts it

has collected. General facts undoubtedly are founded upon the observation of particular facts, but

the former is more appropriate to the science of political economy. (iii) In consequence of the

authority of the feudal lords and barons declining, the intercourse between the different provinces

and states could no longer be interrupted; roads became improved, traveling more secure, and laws

less arbitrary; the enfranchised towns, becoming immediately dependent upon the crown, found

the sovereign interested in this advancement; and this enfranchisement, which the natural course

of things and the progress of civilization had extended to the country, secured to every class of

producers the fruits of their industry. In every part of Europe personal freedom became more

generally respected. The prosperity of the same countries would have been much greater, had they

been governed by a more liberal and enlightened policy. A free intercourse between nations is

reciprocally advantageous, and beneficial to individuals transacting business with foreigners. Thus

Say propagates Smith’s thought: free trade with laissez faire is reciprocally advantageous.125



Say identified and attempted to correct some errors in the Wealth of Nations. (i) The labor

theory of value: Smith viewed human labor as the sole source of value, but Say viewed that the

industry of man combines with other agents in nature and capital to produce value. Does a tax, or

any other impost, by enhancing the price of commodities, increase the amount of wealth? The

income of the producer arising from the cost of production, why is not this income impaired by a

diminution in the cost of production? (ii) A definition of wealth: By the exclusive restriction of

the term wealth to values fixed and realized in material substance, Smith has narrowed the

boundary of this science, arguing that human talents and acquired skills should also be deemed a

part of the wealth of a nation. (iii) A limited description of the nature of industrial and commercial

production. The role of the entrepreneur was not sufficiently emphasized in the Wealth of Nations.

Smith’s theory of distribution leaves much to be desired. (iv) Although the phenomena of the

consumption of wealth are but the counterpart of its production, and although Smith’s doctrine

leads to its correct examination, he did not himself develop it; which precluded him from

establishing numerous important truths. Say wrote on consumption in Book III of his Treatise.

Say concludes his introduction: Thus, habitually and naturally ascending to the source of all truth,

we shall not suffer ourselves to be imposed upon by empty sounds, or submit to the guidance of

erroneous impression. Corruption, deprived of the weapons of empiricism, will lose her principal

strength, and no longer be able to obtain triumphs, calamitous to honest men, and disastrous to

nations. In the year 1826, a professorship of political economy was formed at Oxford.126

BOOK I. Production of Wealth: Chapter I. Definition of Production: Production of wealth is

a creation of utility: the buyer of a products buys it only for the sake of its utility, of the use he can

make. Chapter II. The Different Kinds of Industry, and the mode in which they concur in

production: The industry consists of three branches: agriculture, manufacture, and commerce. The

total value of products serves to pay the profits of those occupied in production. Chapter III. The

Nature of Capital, and the mode in which it concurs in the business of production: The pre-existing

requisites are the tools and implements of the several arts, the products necessary for the

subsistence of the industrious agent, and the raw materials. The value of all these items constitutes

what is dominated productive capital, which is classed the value of all erections and improvements

upon real or landed property; money employed to facilitate the interchange of products, without

which production could never make any progress. Chapter IV. Natural Agents that assist in the

production of wealth, and specially of land: Smith has drawn the false conclusion, that all values

produced represent pre-exerted human labor or industry, either recent or remote; or, in other words,

that wealth is nothing more than labor accumulated; from which position he infers a second

consequence equally erroneous, vis. That labor is the sole measure of wealth, or of value produced.

But Say writes that values produced are referable to the agency and concurrence of industry, of

capital, and of natural agents, whereof the chief, though by no means the only one, is land capable

of cultivation; and that no other but these three sources can produce value, or add to human wealth.

Chapter V. The Mode in which Industry, Capital, and Natural Agents unite in Production: The

three sources – industry, capital, and natural agents – create products: the prices pay for the loan

of industry is called wages; that of capital is called interest, and that of land is called rent. Chapter

VI. Operations alike Common to all branches of industries: The knowledge of the man of science

is necessary for a country well to stock with intelligent merchants, manufacturers, and agricul-

tualists to attain more powerful means of attaining prosperity. Chapter VII. The Labor of Mankind,

of Nature, and of Machinery Respectively: The productive services of labor, of capital, and of

machinery are important for effective production. The multiplication of a product commonly

reduces its price, that reduction extends its consumption; and so its production, though become

more rapid, nevertheless gives employment to more hands than before.127



Chapter VIII. The Advantageous and Disadvantages resulting from Division of Labor: Since

the scientific knowledge is indispensable to develop industry, Say suggests a government to defray

the charges of scientific experiment to cover risks from invention and innovation. The division of

labor cheapens products since specialization increases productivity, which contributes to the

wealth of a nation. Chapter IX. The Different Methods of Employing Commercial Industry, and

the mode in which they concur in production: Thin internal commerce of a country is likewise

the most advantageous: both the remittances and returns of this commerce are necessarily home

products; abolition of tolls and duties on transition promotes internal circulation; which is

favorable to national wealth. Trade speculation consists in the purchase of goods at one time, to

be re-sold in the same place and condition at another time, when they are expected to be dearer.

The carrying foreign grade is beneficial not only to the merchant that practices it, but also to the

two nations between whom it is practiced. Moreover, maritime industry is influential upon

national security. Chapter X. The Transformations undergone by Capital in the progress of

productions: During the progress of production, Say shows how productive capital keeping in a

continual state of employment in three branches of industry: agriculture, manufacture, and

commerce. Chapter XI. The Formation and Multiplication of Capital: The increase of capital is

naturally slow of progress for it can never take place without actual production of value, and the

creation of value is the work of time and labor, besides other ingredients. Every saving or increase

of capital lays the groundwork of a perpetual annual profit, not only to the saver himself, but

likewise to all those whose industry is set in motion by this item of new capital. It is fortunate,

that self-interest is always on the watch to preserve the capital of individuals; and that capital can

at no time be withdrawn from productive employment, without a proportionate loss of revenue.128

Chapter XII. Unproductive Capital: Hitherto we have been considering that kind of value

only, which is capable, after its creation. But some there are, which must have reality, because

they are in high estimation, and purchased by the exchange of costly and durable products, which

nevertheless have themselves no durability, but perish the moment of their production, the can be

called immaterial products. Chapter XIII. Immaterial Products, or values consumes at the moment

of production: A physician goes to visit a sick person, observes the symptoms of disease,

prescribes a remedy, and takes his leave without depositing any product, that the invalid or his

family can transfer to a third person, or even keep for the consumption of a future day. The

Industry of a musician or an actor yields a product of the same kind: it gives one an amusement, a

pleasure on cannot possibly retain or preserve for future consumption, or as the object of barter

for other enjoyments. Thus the nature of immaterial products makes it impossible ever to

accumulate them, so as to render them a part of the national capital. Consequently, nothing is

gained on the score of public prosperity, by ingeniously creating an unnatural demand for the labor

of any of these professions; the labor diverted into that channel of production cannot be increased,

without increasing the consumption also, although immaterial products are the fruit of labor. A

public edifice, a bridge, a highway, are savings or accumulations of revenue, devoted to the

formation of a capital, whose returns are an immaterial product consumed by the public at large.

Chapter XIV. The Right of Property: Political economy recognizes the right of property solely as

the most powerful of all encouragements to the multiplication of wealth, and is satisfied with its

actual stability, without inquiring about its origin or its safeguards. Nor can property be said to

exist, where it is not matter of reality as well as of right. The sources of production, namely, land,

capital, and industry can attain their utmost degree of fecundity. Public safety sometimes requires

the sacrifice of private property; but that sacrifice is a violation, notwithstanding an indemnity

given in such cases. For the right of property implies the free disposition of one’s won; and its

sacrifice, however fully indemnified, is a forced disposition.129



Chapter XV. The Demand or Market for Products: Products would always be abundant, if

there were but a ready demand, or market for them. There is always money enough to conduct

the circulation and mutual interchange of other values, when those values really exist. (i) In every

community, the more numerous are the producers, and the more various their productions, the

more prompt, numerous, and extensive are the markets for those productions; and, by a natural

consequence, the more profitable are they to the producers; for price rises with the demand. (ii)

Each individual is interested in the general prosperity of all, and the success of one branch of

industry promotes that of all the others. (iii) It is no injury to the internal or national industry and

production to buy and import commodities from abroad; for nothing can be bought from strangers,

except with native products, which find a vent in this external traffic. (iv) The same principle

leads to the conclusion, that the encouragement of mere consumption is no benefit to commerce;

for the difficulty lies in supplying the means, not in stimulating the desire of consumption; and we

have seen that production alone, furnishes those means. Say’s Law of Markets views that supply

and demand balance in the long run in dealing with the adjustment mechanism toward an

equilibrium position in the market. It is the aim of good government to stimulate production, of

bad government to encourage consumption. For the same reason that the creation of a new product

is the opening of a new market for other products, the consumption or destruction of a product is

the stoppage of a vent for them. Indeed, if the nation be in a thriving condition, the gross national

re-production exceeds the gross consumption.130 Chapter XVI. The Benefits resulting from the

Quick Circulation of Money and Commodities: The best stimulus of useful circulation is, the

natural wish of all classes, especially the producers themselves, to incur the least possible amount

of interest upon the capital embarked in their respective undertakings. Circulation is much more

apt to be interrupted by the obstacles thrown in its way, than by the want of proper encouragement:

including wars, embargoes, oppressive duties, the dangers and difficulties of transportation.131

Chapter XVII. The Effect of Government Regulations influencing Production: [Section I]

Effect of Regulations prescribing the Nature of Products: The natural wants of society, and its

circumstances for the time being, occasion a more or less lively demand for particular kinds of

products. Consequently, in these branches of production, productive services are somewhat better

paid than in the rest; that is to say, the profit upon land, capital and labor, devoted to those branches

of production, are somewhat larger. This additional profit attracts producers, and thus the nature

of the products is always regulated by the wants of society. The most enlightened statesman is

often obliged to abandon a scheme of evident public utility, by the unavoidable defects and abuses

in the execution. Among these, one of the most frequent and prominent is, the risk of paying a

premium, or granting a favor to the pretensions, not of merit, but of importunity. [Section II] The

Effect of Regulations fixing the Manner of Production: The interference of the public authority,

with regard to the details of agricultural production, has generally been of a beneficial kind. All

governments that have pretended to the least regard for the public welfare have consequently

confined themselves to the granting of premiums and encouragements, and to the diffusion of

knowledge which has often contributed largely to the progress of this art. Much of the interference

has been directed towards limiting the number of producers, either by confining them to one trade

exclusively, or by exacting specific terms, on which they shall carry on their business. This system

gave rise to the establishment of chartered companies and incorporated trades. [Section III]

Privileged Trading Companies: A government sometimes grants to individual merchants, and

much oftener to trading companies, the exclusive privilege of buying and selling specific articles,

or trafficking with a particular country. [Section IV] Regulations affecting the Corn Trade: The

number of mankind increase, in proportion to the supply of subsistence. The abundance and

cheapness of provisions are favorable to the advance of population.132



Chapter XVIII. The Effect upon National Wealth, resulting from the productive efforts of

public authority: There are some concerns which the government must of necessity keep in its

own hands. The building of ships of war cannot safely be left to individuals; nor, perhaps, the

manufacture of gunpowder. Although the public can scarcely be itself a successful producer; it

can at any rate give a powerful stimulus to individual productive energy, by well-planned, well-

conducted, and well-supported public works, particularly roads, canals, and harbors. Facility of

communication assists production, exactly in the same way as the machinery that multiplies

manufactured product, and abridges the labor of production. It is a means of furnishing the same

product at less expense, which has exactly the same effect, as raising a greater product with the

same expense. Academies, libraries, public schools, and museums, founded by enlightened

governments, contribute to the creation of wealth. There is none so powerful as the perfect security

of person and property, especially from the aggression of arbitrary power. Monetary accession of

wealth must be a necessary condition for any state. Chapter XIX. Colonies and their Products: It

is common for nations to colonize, when their population becomes crowded in its ancient territorial

limits; and when particular classes of society are exposed to the persecution of the rest. These

appear to have been the only motives for colonization among the ancients; the moderns have been

actuated by other views. The vast improvements in navigation have opened new channels to their

enterprise, and discovered countries before unknown; they have found their way to another

hemisphere, and to the most inhospitable climates, not with the intention of these fixing

themselves and their posterity, but to obtain valuable articles of commerce, and return to their

native countries, enrich with the fruits of a forced, but yet very extensive production. It is agreed

that the labor of the salve is dearer and less productive than that of the freeman.133

Chapter XX. Temporary and Permanent Emigration, considered in reference to national

wealth: The emigration of industry, capital, and local attachment, is no less a dead and total loss

to the country thus abandoned, than it is a clear gain to the country affording an asylum. The best

mode of retaining and attracting mankind is, to treat them with justice and benevolence; to protect

everyone in the enjoyment of the rights he regards with the highest reverence; to allow the free

disposition of persons and property, the liberty of continuing or changing his residence, of

speaking, reading, and writing in perfect security. Chapter XXI. The Nature and Uses of Money:

(i) General Remarks; (ii) The material of money; (iii) The accession of value a commodity receives;

(iv) The utility of coinage; (v) Alteration of the standard of money; (vi) The reason why money is

neither a sign nor a measure; (vii) A peculiarity that should be attended to; (viii) The absence of

any fixed ratio of value between one metal and another; (ix) Money as it ought to be; (x) A copper

and base metal coinage; (xi) The preferable form of coined money; (xii) The party, on whom the

loss of the coin by wear should properly fall. Chapter XII. Signs or Representatives of Money: (i)

Bills of exchange and letters of credit: A bill of exchange, a promissory note or check, and a letter

of credit, are written obligations to pay, or cause to be paid, a sum of money, either at a future

time, or at a different place. (ii) Banks of deposit: The constant intercourse between a small state

and its neighbors occasions a perpetual influx of foreign coin. For, although the small state may

have a national coinage of its own, yet, the frequent necessity of taking the foreign instead of the

national coin in payment, requires the fixation of the ratio of their relative value, in the current

transactions of business. (iii) Banks of circulation or discount, and of bank-notes, or convertible

paper: There is another kind of bank, consisting of associated capitalists, subscribing a capital in

transferable shares, to be employed in various profitable ways, but chiefly in the discount of

promissory notes and bills of exchange. (iv) Paper money: I have reserved exclusively for those

obligations to which the ruling power may give a compulsory circulation in payment for all

purchases, and discharge all debts and contracts, stipulating a delivery of money.134



BOOK II. The Distribution of Wealth: Chapter I. The Basis of Value, and of Supply and

Demand: Whatever be the general or particular causes, that operate to determine the relative

intensity of supply and demand, it is that intensity, which is the ground-work of price on every act

of exchange; for price, it will be remembered, is merely the current value estimated in money.

The demand for all objects of pleasure, or utility, would be unlimited, did not the difficulty of

attainment, or price, limit and circumscribe the supply. On the other hand, the supply would be

infinite, were it not restricted by the same circumstance, the price or difficulty of attainment; for

there can be no doubt, that whatever is producible would then be produced in unlimited quantity,

so long as it could find purchasers at any price at all. Demand and supply are the opposite extremes

of the beams, whence depend the scales of dearness and cheapness; the price is the point of

equilibrium, where the momentum of the one ceases, and that of the other begins. When the price

of any object is legally fixed below the charges of its production, its production is discontinued,

because nobody is willing to labor for a loss. Chapter II. The Source of Revenue: Products are

raised by the productive means at the command of mankind, that is to say, by human industry,

capital, and natural power and agents. The exclusive right to dispose of revenue is a consequence

of the exclusive right, or property, in the means of production. The industrious faculties of man,

his intelligence, muscular strength, and dexterity, are peculiar to himself and inherent in his nature.

And capital, or accumulated produce, is the mere result of human frugality and forbearance to

exercise the faculty of consuming. The revenue of a nation is eth more considerable, in proportion

to the intensity of the value whereof it consists, i.e. of the value of its aggregate productive powers,

and to its high relative degree to the value of the objects of external attainment.135

Chapter III. Real and Relative Variation of Price: The price of an article is the quantity of

money it may be worth; current price, the quantity it may be sure of obtaining at the particular

place. The price obtained upon the sale of an article represent all other articles procurable with

that price. There is the difference between a real and a relative variation of price: that the former

is a change of value, arising from an alteration of the charges of production; the latter, a change,

arising from an alteration of the ratio of value of one particular commodity to other commodities.

Real variations are beneficial to buyers, without injury to sellers; and vice versa; but in relative

ones, what is gained by the seller is lost by the purchaser and vice versa. Chapter IV. Nominal

Variation of Price, and of the peculiar value of bullion and of coin: Since the discovery of the

American mines, silver, having fallen to about a fourth of its former value, has lost three-fourths

of its relative value to all other products, whose price has, meanwhile, remained stationary. But

there have been vast alterations in the denomination given, at different periods during the interim,

to the same quantity of pure metal, which should make us place very little reliance on the accuracy

of our estimate of real and relative variation. Chapter V. The Manner in which Revenue is

Distributed amongst Society: Each class receives its respective share of the total value produced;

and this chare composes its revenue: the profit of land, of capital, and of labor. The total value of

products is distributed amongst the members of the community. Chapter VI. What Branches of

Production yield the most liberal recompense to productive agency: The aggregate value of a

product refunds to its different concurring producers the amount of their advances, with the

addition in most cases, of a profit, that constitutes their revenue. But the profits of productive

agency are not of equal amount in all its branches; some yielding but a very scanty revenue for the

land, capital, or industry, embarked in them; while others give an exorbitant return. Productive

agents always endeavor to direct their agency to those employments, in which the profits are the

greatest, and thus, by their competition, have as much tendency to lower price, as demand has to

raise it; but the effects of competition cannot always so nicely proportion the supply to the demand,

as in every case to ensure an equal remuneration.136



Chapter VII. The Revenue of Industry: (i) The profit of industry in general: Industry, capital,

and land, all yield, ceteris paribus, the largest profits, when the general demand for products in

most active, affluence most expanded, profits most widely diffused, and production most vigorous

and prolific. To begin with the comparison of the relative profits of industry, to those of capital

and land, we shall find these bear the highest ratio, where abundance of capital creates a demand

for a great mass of industrious agency. In countries thus circumstanced, the condition of man is

generally the most comfortable; because those, who live in idleness upon the profits of their capital

and land, are better able to live on moderate profits, than those who live upon the profits of their

own industry only. (ii) The profits of the man of science: The superior class of knowledge will be

very ill paid; it will receive a very inadequate portion of the value of the product, to which it has

contributed. It is from a sense of injustice that every nation, sufficiently enlightened to conceive

the immense benefit of scientific pursuits, has endeavored, by special favors and flattering

distinctions, to indemnify the man of science, for the very trifling profit derivable from his

professional occupations, and from the exertion of his natural or acquired faculties. (iii) The

profits of the master-agent, or adventurer, in industry; (iv) The profits of the operative laborer; (v)

The independence accruing to the moderns from the advancement of industry: The ancients were

not nearly so far behind the moderns in agriculture as in the mechanical arts. The increasing

prosperity of manufacture and commerce has raised them in the scale of estimation. Chapter VIII.

The Revenue of Capital: (i) Loans at interest: we consider the nature and motive of the interest

paid by the borrower to the lender of capital; and that this interest is compounded of the rent of

the capital, and of the premium of insurance against the risk of its partial or total loss. (ii) The

profits of capital: This is the profit derivable from the employment of capital, whether by a

borrower or by the proprietor himself. (iii) The employment of capital most beneficial to society:

This is the return from investment through various different channels of industry.137

Chapter IX. The Revenue of Land: (i) The profit of landed property: It yields nutriment and

vegetative justice to the grain, the fruits, and vegetables, whereon we subsist; as well as to the

forests, whereof we construct our houses, ships, and furniture, and whence we derive fuel to keep

us warm – the productive service of land, and thence the profit of the proprietor originates.

Moreover, further benefits come from the stone, metal, coal, peat, and etc. The water of river and

of ocean has the power of giving motion to machinery, affords a means of navigation, and supply

of fish. The wind turns our mill, even the heat of the sum cooperates with human industry. (ii)

Rent: When a farmer takes a lease of land, he pays to the proprietor the profit accruing from its

productive agency and reserves to himself, besides the wages of his own industry. Chapter X. The

Effect of Revenue derived by one nation from another: One nation cannot take from another the

revenues of its industry. With regard to the capital lent by one nation to another, the effect upon

their respective wealth is precisely analogous to that, resulting from every loan from on individual

to another. With regard to landed property, as may belong to foreigners residing abroad, the

revenue arising from it is an item of foreign. Chapter XI. The Mode in which the Quantity of the

Product affects Population: (i) Population as connected with political economy: A man,

particularly in a forward state of civilization, a variety of products, some them in the class of what

have been denominated immaterial products, are necessaries of existence; these are multiplied in

a degree proportionate to the desire for them, respectively, because its intensity causes a

proportionate elevation of their price; and it may be laid down as a general maxim, that the

population of a state is always proportionate to the sum of its production in every kind. (ii) The

influence of the quantity of a national product upon the local distribution of the population: It is

necessary that population should be spread over it surface; for industry and commerce to flourish,

it is desirable to collect together in those spots, where arts may be exercised advantageously.138



BOOK III: The Consumption of Wealth: Chapter I. The Different Kinds of Consumption: All

products are produced solely for the purpose of consumption, and, whenever the consumption of

a product is delayed after it has reached the point of absolute maturity, it is value inert and

neutralized for the time. For as all value may be employed re-productively, and made to yield a

profit to the possessor, the withholding a product from consumption is a loss of the possible profit,

in other words, of the interest its value would have yielded, if usefully employed. The total national

consumption may be divided into the heads of public consumption and private consumption: the

former is affected by the public, or in its service; the latter by individuals or families. Either class

may be productive or unproductive. Chapter II. The Effect of Consumption in General: The

immediate effect of consumption of every kind is, the loss of value, consequently, of wealth, to

the owner of the article consumed. This is the invariable and inevitable consequence, and should

never be lost sight of in reasoning on this matter. A product consumed is a value lost to all the

world and to all eternity; but the further consequence, that may follow, will depend upon the

circumstances and nature of the consumption. Chapter III. The Effect of Productive Consumption:

The object, expended and consumed by the adventurer, is the equivalent he receives for his capital;

and that, consumed unproductively by the laborer, is the equivalent for his revenue. The

interchange of these two values by no means makes them one and the same. This double

consumption is precisely analogous to that of raw material used in the concern.139

Chapter IV. The Effect of Unproductive Consumption in General: The degree of correctness,

with which the balance of loss and gain is struck will determine whether the consumption be

judicious or otherwise; which is a point that next to the actual production of wealth, has the most

powerful influence upon the well or ill-being of families and of nations. (i) The satisfaction of

positive wants upon the existence, the health, and the contentment; being generated by refined

sensuality, price, and caprice. (ii) Such as are the most gradual, and absorb products of the best

quality. A nation or an individual, will do wisely to direct consumption chiefly to those articles

that are the longest time in wearing out, and the most frequently in use. (iii) The collective

consumption of numbers. There are some kinds of agency that need not be multiplied in proportion

to the increased consumption. (iv) On ground entirely different, those kinds of consumption are

judicious, which are consistent with moral rectitude; and on contrary, those, which infringe its

laws, generally end in public, as well as private calamity.140

Chapter V. Individual Consumption – its Motives and its Effects: The consumption of

individuals, as contrasted with that of the public or community at large, is such as is made with

the object of satisfying the wants of families and individuals. These wants chiefly consist in those

of food, raiment, lodging, and amusement. They are supplied with the necessary articles of

consumption in each department, out of the respective revenue of each family or individual,

whether derived from personal industry, from capital, or from land. The wealth of a family

advances, declines, or remains stationary, according as its consumption equals, exceeds, or falls

short of its revenue. The aggregate of the consumption of all the individuals, added to that of the

government for public purposes, forms the grand total of national consumption. Chapter VI. Public

Consumption: (i) The nature and general effect of public consumption; (ii) The principal objects

of national expenditure; (iii) The chares for military and naval; (iv) The charges of public

instruction; (v) The charges of public benevolent institutions; (vi) The charges of public edifices

and works. Chapter VII. The Actual Contributors to Public Consumption: The resources consist,

for the most part, of the produce of taxes levied upon the subjects or citizens. These taxes are

sometimes national, that is, levied upon the whole nation, and paid into the general treasury of the

state, whence the public national expenditure is defrayed; and sometimes local, or provincial, that

is, levied upon the inhabitants of a separate canton or province only.141



Chapter VIII. Taxation: (i) The effect of all kinds of taxation in general; (ii) The different

modes of assessment, and the classes they press upon respectively; (iii) Taxation in kind; (iv) The

territorial or land-tax of England. Chapter IX. National Debt: (i) The contracting debt by national

authority, and of its general effect: There is this grand distinction between an individual borrower

and a borrowing government, that, in general, the former borrows capital for the purpose of

beneficial employment, the latter for the purpose of barren consumption and expenditure. A nation

borrows, either to satisfy an unlooked-for demand, or to meet an extraordinary emergency; to

which ends, the loan may prove effectual or ineffectual; but, in either case, the whole sum

borrowed is so much value consumed and lost, and the public revenue remains burthened with the

interest upon it. (ii) Public credit, its basis, and the circumstances that endanger its solidity: Public

credit is the confidence of individuals in the engagements of the ruling power, or government.

This credit is at the extreme point of elevation, when the pubic creditor gets no higher interest,

than he would by lending on the best private securities; which is a clear proof, that the lenders

require no premium of insurance to cover the extra risk they incur, and that in their estimation

there is no such extra risk. Public credit never reaches this elevation, except where the government

is so constituted, as to find great difficulty in breaking its engagements, and where, moreover, its

resources are known to be equal to its wants; for which latter reason, public credit is never very

high, unless where the financial accounts of the nation are subject to general publicity.142

Joseph A. Schumpeter’s View on Say: “But even his friends were taken in by that deceptive

semblance of superficiality. Even for those French historians who were ready enough to protect

his memory, he was primarily the exponent – on of them said vulgarizer – of A. Smith’s teaching.

To this merit, it is true, they added various others, of which we may take notice by anticipation:

Say cast the subject matter of economics into the schema – production, distribution, and

consumption; its methodology owes something to him; he pointed toward a utility theory of value;

he helped to establish the triad of factors – land, labor, and capital; he emphasized the figure of

the entrepreneur, using the term; and, of course, he was Say of Say’s Law of Markets. All of this,

as usually put, makes only a modest case since some of these merits are per se of minor importance

or even of doubtful value. We shall comment on all of them in due course. At present, we are

concerned with the fundamental error that vitiates appraisal of Say’s position in the history of

economics, namely with usual interpretation of his relation to A. Smith. Say’s work grew from

purely French sources, if we consider Cantillon a French economist. It is the Cantillon-Turgot

tradition, which he carried on and from which he could have developed – whatever it was he

actually did – all the main features of his analysis including, by the way, his systematic schema

and his entrepreneur. The most important of these features, and his really great contribution to

analytic economics, is his conception of economic equilibrium, hazy and imperfectly formulated

though it was: Say’s work is the most important of the links in the chain that leads from Cantillon

and Turgot to Walras.”143 Henry W. Spiegel’s View on Say: Say, being so much his junior became

to know the profound scientific and technological advances of the time. Value measures the utility

of a good, price measures the value; utility is created not only by those who produce tangible

goods but also by those who render services in trade or transportation. His own experience with

the rising industrial capitalism of his time makes him rediscover the entrepreneur, of whom

Cantillon had spoken. Say’s law proposes that “it is production which opens a demand for

products” that contains a denial of the possibility of general overproduction. “It is Say’s

incomplete treatment of the mechanism of adjustment that is stressed by those who reject the

interpretation of his law as an equality in the sense here indicated. What is left of Say’s law is a

statement of the interdependence of total supply and total demand. The demand for product

originates from the supplies of everybody else because these supplies constitutes demand.”144



Photo IV-3-1. Thomas Robert Malthus Source: https://upload.wikimedia.org/wikipedia/commons/thumb/d/d5/Thomas_Robert_Malthus

Photo IV-3-2. David Ricardo Source: http://pholleran.asp.radford.edu/408_ricardo_portrait_files/image002.jpg

https://upload.wikimedia.org/wikipedia/commons/thumb/d/d5/Thomas_Robert_Malthus

http://pholleran.asp.radford.edu/408_ricardo_portrait_files/image002.jpg



3. Neo-Classical Capitalism: Malthus and Ricardo

In his Social Perspectives in the History of Economic Theory of 1972, Everett J. Burtt, Jr. describes

that “Although Adam Smith had urged capital investment and innovation, he could not have

foreseen the magnitude and speed of the Industrial Revolution that transform British society in the

fifty years after the publication of The Wealth of Nations. The rise of the factory system, based

on new Textile machinery and the steam engine; the burgeoning cities, fed by a booking birth rate

and an influx of population driven from the countryside by enclosures of agricultural land – these

were manifestations of the revolutionary changes created by the rush of private capital to take

advantage of new methods of production. The rapid restructuring of the economic base of British

society, which upturned tradition and challenged established centers of power, set in motion a

turbulent half-century as various groups struggled to adjust and reshape British economic and

political institutions to fit the emerging economic realities. British classical economics grew out

of those political struggles. Following in broad outlines the theory and policy of Adam Smith,

classical economists argued for complete freedom for private capital. Their objective was political;

it could be achieved only if control of the machinery of government (then the landlords) shifted to

the manufacturers and merchants. Paradoxically, it seemed, a policy of laissez-faire, or

government noninterference, could be achieved only through political action.”

“The classical economists participated both in political conflicts and in the controversies over

pivotal economic issues such as free labor markets, monetary neutrality, and the abolition of the

Corn Laws (which gave tariff protection to the landlords). The classical writer Jeremy Bentham

made the reform of Britain’s legal and political institutions a lifelong goal; David Ricardo, and

later John Stuart Mill, were members of Parliament; and most of the economists of the period

supported the great Reform Act of 1832, which finally reduced the landlords’ representation in

Parliament. Although the first steps in freeing the labor market from the Combination Acts came

earlier, 1825 and 1826, most of the economists’ major political victories came after Reform Act

was passed. The denial of public assistance to the able-bodies unemployed, a goal long-sought by

Malthus, was finally achieved with the Poor Law Amendment of 1834. Ricardo’s proposal for

banking and monetary reform were incorporated in the Bank Charter Act of 1844, over a decade

after his death.” And the Corn Laws was finally toppled by the power of landlords in 1846.

“The political struggle over control of the development of industrial capitalism precipitated a

brilliant burst of theoretical analysis, probably unmatched in any other short period of time. David

Ricardo was acknowledged as the chief exponent of the economics of the new industrialism. In

the fourteen years from his first letters on economics to the Morning Chronicle to his untimely

death at the age of 51 in 1823, he rose to preeminence as an economist and gave a new direction

to the science of political economy. Ricardo was a deductive thinker who moved without

hesitation from premise to conclusion. One of the first of many model-builders, he argued with

the single-mindedness of one who knows his logic is rigorous and therefore true. He refused to

recognize any difficulties in applying analytical propositions to government policy and assumed

that failure to follow policy prescriptions resulted only from ignorance, a condition which, with

patience, could eventually be overcome. Thomas Robert Malthus was unsympathetic to the rapid

transformation of the British economy because it endangered the landlord-dominated social

structure. It challenged Ricardo on many aspects of theory and policy; yet his position was an

anomalous one, for he himself had contributed to Ricardo’s classical economics with his theory

of population and wages and his theory of rent. Nevertheless, Malthus began to find himself at

odds with his good friend Ricardo ever such doctrines as free trade, theories of value and profits,

and the ability of the competitive system to absorb without a depression.”145



Thomas Robert Malthus (1766-1834): “Malthus was born into a prosperous family. His

father, a friend of the philosopher and skeptic David Hume, was deeply influenced by Jean-

Jacques Rousseau, whose book Émile (1762) may have been the source of the elder Malthus’s

liberal ideas about educating his son. The young Malthus was educated largely at home until his

admission to Jesus College, Cambridge, in 1784. There he studied a wide range of subjects and

took prizes in Latin and Greek, graduating in 1788. He earned his Master of Arts degree in 1791,

was elected a fellow of Jesus College in 1793, and took holy orders in 1797. His unpublished

pamphlet The Crisis, written in 1796, supported the newly proposed Poor Laws, which

recommended establishing workhouses for the impoverished. This view ran somewhat counter to

the views on poverty and population that Malthus published two years later. In 1804 Malthus

married Harriet Eckersall, and in 1805 he became a professor of history and political economy at

the East India Company’s college at Haileybury, Hertfordshire. It was the first time in Great

Britain that the words political economy had been used to designate an academic office. Malthus

lived quietly at Haileybury for the remainder of his life, except for a visit to Ireland in 1817 and a

trip to the Continent in 1825. In 1811 he met and became close friends with the economist David

Ricardo. In 1819 Malthus was elected a fellow of the Royal Society; in 1821 he joined the Political

Economy Club, whose members included Ricardo and James Mill; and in 1824 he was elected

one of the 10 royal associates of the Royal Society of Literature. In 1833 he was elected to the

French Académie des Sciences Morales et Politiques and to the Royal Academy of Berlin. Malthus

was one of the cofounders, in 1834, of the Statistical Society of London.”146 Malthus published

anonymously An Essay on the Principle of Population in 1798; and Principles of Political

Economy in 1820 that challenged David Ricardo, who published Principles of Political Economy

and Taxation in 1817 producing a theory of value and analyses of taxation.

Malthus was attracted by William Godwin (1756-1836) who wrote An Enquiry Concerning

Political Justice in 1793 attacking on political institutions, and Things as They Are attacking

aristocratic privilege. “Political Justice was extremely influential in its time: after the writings of

Burke and Paine, Godwin's was the most popular written response to the French Revolution.

Godwin's work was seen by many as illuminating a middle way between the fiery extremes of

Burke and Paine.” Godwin had acknowledge that an increase in the standard of living could cause

population pressures, but saw an obvious solution to avoiding distress, to be discussed later. Since

Malthus’s father was an ardent follower of Rousseau, it can be inferred that he was possibly

attracted “by Godwin’s anarchistic vision of a perfect egalitarian society without government or

social hierarchy; and that he may also have been sympathetic to the conclusions of another work

on human perfectibility” that was the Sketch for a Historical Picture of the Progress of the Human

Spirit written by Marquis de Condorcet (1743-94). Condorcet views that the future of mankind

will be in the progress of science, so that inequality among nations will banish with the spread of

enlightenment (meaning proper education), which will bring to the underdeveloped world the

fruits of European civilizations. “As the population increases, the growth of knowledge will open

up new methods of sustaining an even larger number of people. Even if the population should

approach the limits of subsistence, this day will be far off. Long before, the growth of reason will

prevent man from peopling the world with numbers which it cannot support. However, Condorcet

was a Frenchman, and, unlike Godwin, he does not derive this conclusion from faith in man’s

ability to master his passions.”147 Malthus’s population principles stresses the immediate nature

of population pressure, which is against both Godwin and Condorcet who had noted its distant

potential catastrophic effects. The feature of Malthus’s Essay was comparatively alongside with

such great figures as “Montesquieu’s Spirit of Laws (1748), Edward Gibbon’s Decline and Fall

of the Roman Empire (1776), and Adam Smith’s Wealth of Nations (1776).”148



An Essay on the Principle of Population (1798): BOOK I. The Checks to Population in the

less civilized parts of the world, and in past time: Chapter I. Ratios of the Increase of Population

and Food: The population has this constant tendency to increase beyond the means of subsistence,

and that it is kept to its necessary level by these cause, will sufficiently appear from a review of

the different states of society in which man has existed. In the United States, the population has

been observed to double in twenty-five years. It may be safely be pronounced that population

when unchecked goes on doubling itself every twenty-five years, or increases in a geometrical

ratio. Let’s suppose that the present population of the whole earth without any emigration equal

to a thousand millions. Then, the human species would increase as the number 1, 2, 4, 8, 16, 32,

64, 128, 256; and subsistence as 1, 2, 3, 4, 5, 6, 7, 8, 9. In two centuries, the population would be

to the means of subsistence as 256 to 9; in three centuries as 4096 to 13; and in two thousand years,

the difference would be almost incalculable. In this supposition, no limits whatever are placed to

the produce of the earth. It may increase forever, and be greater than any assignable quantity; yet

still the power of population being in every period so much superior, the increase of the human

species can only be kept down to the level of the means of subsistence by the constant operation

of the strong law of necessity acting as a check upon the greater power. In the United States, the

population has been observed to double in twenty-five years. Agricultural statistics at Malthus’s

time was virtually nonexistent; and his empirical evidence for the arithmetical progression of the

food supply was weaker than that for the geometric progression of the population.149

Chapter II. The General Checks to Population, and the mode of their operation: The checks

to population, which are constantly operating with more or less force in every society, and keep

down the number to the level of the means of subsistence, may be classed under the preventive

and the positive check. The preventive checks is to prevent the birth of children to such as a degree

as a promiscuous intercourse, unnatural passions, violations of the marriage bed, irregular arts to

conceal the consequences of irregular connections; which are vice; and the restraint from marriage

may be properly termed moral restraint. The positive checks to population are extremely various,

and include every cause, whether arising from vise or misery. Under this head, therefore, may be

enumerated, all unwholesome occupations, severe labor and exposure to the seasons, extreme

poverty, bad nursing of children, great towns, excesses of all kinds, the whole train of common

diseases and epidemics, wars, pestilence, plague, and famine. [1806 version] The sum of all these

preventive and positive checks, taken together, forms the immediate check to population; and it is

evident that, in every country where the whole of the procreative power cannot be called into

action, the preventive and the positive checks must vary inversely as each other; that it, in countries

either naturally unhealthy, or subject to a great mortality, from whatever cause it may arise, the

preventive checks will prevail very little. In those countries, on the contrary, which are naturally

healthy, and where the preventive check is found to prevail with considerable force, the positive

check will prevail very little, or the mortality be very small. If the population increases before the

food supplies have expanded, food prices will rise and real wages will fall. In the ensuing distress,

population growth temporarily comes to a halt. Meanwhile, the reduction of wages encourages

the increased employment of labor on the land, food supplies rise, and eventually a new stimulus

to population growth sets in motion a renewed oscillation.150

Table IV-3-1. The Population Growth and Subsistence Level by Thomas R. Malthus

Year 1 25 50 75 100 125 150 175 200 225

Population 1 2 4 8 16 32 64 128 256 512

Subsistence 1 2 3 4 5 6 7 8 9 10 Source: Henry W. Spiegel, The Growth of Economic Thought (Durham, NC: Duke U. P., 1971), 272.



Without attempting to establish these progressive and retrograde movements in different

countries, which would evidently require more minute histories than we possess, the following

propositions are intended to be proved: (i) Population is necessarily limited by the means of

subsistence. (ii) Population invariably increases, where the means of subsistence increase, unless

prevented by some very powerful and obvious checks. (iii) These checks, and the checks which

repress the superior power of population, and keep its effects on a level with the means of

subsistence, are all into moral restraint, vice, and misery. The first of these propositions scarcely

needs illustration. The second and third will be sufficiently established by a review of the past

and present state of society. This review will be the subject of the following chapters.151

BOOK II. The Check to Population in the Different States of Modern Europe: Chapters I to

XII are omitted. Chapter VIII. General Deductions from the preceding view of Society: It has

appeared from the registers of different countries, which have already been produced, that the

progress of their population is checked by the periodical though irregular returns of plagues,

pestilences, and famines resulting in insufficient and unhealthy food. The small-pox is considered

as the most prevalent and fatal epidemic in Europe. The highest average proportion of births to

deaths in England may be considered as about 12 to 10, and that in France about 115 to 100 for

ten years ending 1780 in France. The only true criterion of a real and permanent increase in the

population of any country is the increase of the means of subsistence. In every country where the

population is not absolutely decreasing, the food must be necessarily sufficient to support and to

continue the race of laborers. War, the predominant check to the population of savage nations,

have certainly abated, even including the late unhappy revolutionary contests; and since the

prevalence of a greater degree of personal cleanliness, of better modes of clearing and building

towns, and of a more equable distribution of the products of the soil from improving knowledge

in political economy, plagues, violent diseases, and famines have been certainly mitigated, and

have become less frequent. With regard to the preventive checks to population, moral restraint

does not at present prevail much among the male part of society.152

BOOK III. The Different Systems or Expedients which have been proposed or have prevailed

in society, as they affect the evils arising from the principle of population: Chapter I. Systems of

Equality – Wallace and Condorcet: “Condorcet's Sketch for a Historical Picture of the Progress

of the Human Spirit (1795) was perhaps the most influential formulation of the idea of progress

ever written. It made the Idea of Progress a central concern of Enlightenment thought. He argued

that expanding knowledge in the natural and social sciences would lead to an ever more just world

of individual freedom, material affluence, and moral compassion. He argued for three general

propositions: that the past revealed an order that could be understood in terms of the progressive

development of human capabilities, showing that humanity's present state, and those through

which it has passed, are a necessary constitution of the moral composition of humankind; that the

progress of the natural sciences must be followed by progress in the moral and political sciences

no less certain, no less secure from political revolutions; that social evils are the result of ignorance

and error rather than an inevitable consequence of human nature.”153 Nevertheless, Malthus was

negative to the Condorcet’s proposition of the organic perfectibility of man - the number of men

shall surpass their means of subsistence by the improvement of science: A candid investigation

of these subjects accompanied with a perfect readiness to adopt any theory warranted by sound

philosophy, may have a tendency to convince them that they are contracting it; they are throwing

us back again almost into the infancy of knowledge; and weakening the foundations of that mode

of philosophizing, under the auspices of which science has of late made such rapid advances. The

late rage for wide and unrestrained speculation seems to have been a kind of mental intoxication,

arising from the unexpected discoveries in various branches of science.154



Chapter II-III. Systems of Equality – Godwin: In his Political Justice, Godwin views that

“There is a principle in human society, by which population is perfectually kept down to the level

of the means of subsistence. But where population pressure operates, it is the result of wicked

institutions rather than of an inexorable refusal of nature to yield needed supplies. Under such

institutions, agricultural production in Europe is restricted by territorial monopoly. Were it not so,

five times as many people could be maintained. Moreover, three-fourths of the inhabitable earth,

taken as a whole, is under-cultivated. With agricultural productivity on the rise, myriads of

centuries of still increasing population may pass away, and the earth be yet found sufficient for

the support of its inhabitants.”155 Malthus views against Godwin that, first, as the fertility of the

land increased, and various accidents occurred, the shares of some men might be much more than

sufficient for their support; and that, when the reign of self-love was once established, they would

not distribute their surplus produce without some compensation in return. It seems highly probable

that an administration of property would be established for the evils which were pressing on the

society. Second, the most natural and obvious check seemed to be to make every man provide for

his own children; which would operate in some respect as a measure and a guide in the increase

of population. The disgrace and inconvenience attending such a conduct would fall upon that

individual who had thus inconsiderately plunged himself and his innocent children into want and

misery. When these two fundamental laws of society, the security of property and the institution

of marriage, were once established, inequality of condition must necessarily follow. Those who

were born after the division of property would come into a world already possessed. If their parents,

from having too large a family, were unable to give them sufficient for their support, what could

they do in a world where everything was appropriated? In this regard, no reason can be assigned

why population should not increase faster than in any known instance.156

Chapter IV. Emigration: In the accounts which we have received of the peopling of new

countries, the dangers, difficulties, and hardships that the first settlers have had to struggle with,

appear to be even greater than we can well imagine that they could be exposed to in their parent

state. The endeavor to avoid that degree of unhappiness arising from the difficulty of supporting

a family might long have left the new world of America unpeopled by Europeans, if those more

powerful passions, the thirst of gain, the spirit of adventure, and religious enthusiasm, had not

directed and animated the enterprise. The passions enabled the first adventurers to triumph over

every obstacle, but in many instances in a way to make humanity shudder, and to defeat the true

end of emigration. The frequent failures in the establishment of new colonies tend strongly to

show the order of precedence between food and population. The distress arising from a too rapidly

increasing population could not allow to begin a new colony in a distant country. However, when

new colonies have been once securely established, the difficulty of emigration is very considerably

diminished. The necessary resources for transport and maintenance care frequently furnished by

individuals or private companies. If the population rose unrestrictively there, emigration is not

adequate. [1817 version] The progress of population is mainly regulated by the effective demand

for labor, but it is obvious that the number of people cannot conform itself immediately to the state

of this demand. Under this circumstances, emigration is most useful as a temporary relief; and

Great Britain find herself placed at present. Though no emigration should take place, the

population will by degrees conform itself to the state of the demand for labor, but the interval must

be marked by the most severe distress, the amount of which can scarcely be reduced by any human

effort, because, though it may be mitigated at particular periods, and as it affects particular classes,

it will be proportionally extended over a large space of time and a greater number of people. The

only real relief in such a case is emigration; and the subject at the present moment is well worthy

the attention of the government, both as a matter of humanity and policy.157



Chapter V-VII. The English Poor Laws: The English Poor Laws can be traced back as far as

1536, “when legislation was passed to deal with the impotent poor, although there is much earlier

Tudor legislation dealing with the problems caused by vagrants and beggars. The history of the

Poor Law in England and Wales is usually divided between two statutes, the Old Poor Law passed

during the reign of Elizabeth I and the New Poor Law, passed in 1834, which significantly

modified the existing system of poor relief. The later statute altered the Poor Law system from

one which was administered haphazardly at a local parish level to a highly centralized system

which encouraged the large-scale development of workhouses by Poor Law Unions.” This Poor

Law Amendment Act aimed mainly to reduce the burden on rate payers. Nevertheless, Malthus

views that the transfer of additional shillings of the rich to each laborer would not increase the

quantity of meat in the country, but would raise the price; so that a part of society must find it

difficult to support a family, which difficulty will naturally fall on the least fortunate members.

The price of labor - expressing the relation between the supply of provisions and the demand for

them; between the quantity to be consumed and the numbers of consumers - will be just sufficient

to support the present population. The poor laws tend to depress the general condition of the poor

in two ways: first is to increase population without increasing the food for its support; and second

is that the quantity of provisions consumed diminishes the shares that would otherwise belong to

more industrious and worth members. The radical defect of all systems is that of tending to

increase population, without increasing the means for its support, and by thus depressing the

condition of those that are not relieved by parishes, to create more poor. What Malthus has

proposed is the gradual and very gradual abolition of the poor laws. The improved condition of

the laboring classes in France since the revolution has been accompanied by a greatly diminished

proportion of birth, which has had its natural and necessary effect in giving to these classes a

greater share of the produce of the country; making individuals depend less upon others.158

Chapter VIII-X. Agriculture, Commerce, and Combined Systems: In agriculture of America,

a large proportion of capital stock has kept up a steady and continued demand for labor, and high

wages and profits allowed them to feed themselves better, and the progress of population became

rapid. In commerce, advantages depending exclusively upon capital and skill, and the present

possession of particular channels of commerce cannot be permanent. Even if it were possible to

exclude any formidable foreign competition, domestic competition produces almost unavoidably

the same effects. A country, which is obliged to purchase both the raw materials and the means of

subsistence from foreign countries, is almost entirely dependent, for the increase of its wealth and

its population, on the increasing wealth and trade demands of the countries. A nation, obliged to

purchase from others nearly the whole of its raw materials and the means of its subsistence, is not

only dependent entirely upon the demands of its customers, but also it is subjected to a necessary

and unavoidable diminution of demand. In both agriculture and commerce combined, (i) land is

practically almost always understocked with capital: farms are held by discouraging the transfer

of capital from commerce and manufactures. (ii) If new and superior modes of cultivation be

invented, better managed with lass labor, it is obvious that inferior land may be cultivated at higher

profits than could be obtained from richer land before, but a greater increase of capital may yield

smaller proportionate returns. (iii) Increased skill and new machinery in manufactures produce

more quantities and reduce their prices, which allows them to use less proportion of their income,

which may increase capital and extension of cultivation. (iv) If foreign commerce is prosperous,

prices of labor and domestic commodities would rise considerably, while foreign commodity

prices are advanced comparatively very little. (v) The tendency of a continually increasing capital

and extending cultivation causes a progressive fall of profits and wages; yet the causes above

enumerated are evidently sufficient to account for great and long irregularities in this progress.159



Chapter XI-XII. Corn-Laws: The British Corn Laws imposed restrictions and tariffs on

imported grain from 1815 and 1846; and they were designed to keep grain prices high in favor of

domestic producers. “The laws did indeed raise food prices and became the focus of opposition

from urban groups who had far less political power than rural Britain. The Corn Laws imposed

steep import duties, making it too expensive to import grain from abroad, even when food supplies

were short. The laws were supported by conservative landowners and opposed by industrialists

and workers. The Anti-Corn Law League was responsible for turning public and elite opinion

against the laws. It was a large, nationwide middle-class moral crusade with a Utopian vision.”160

Malthus supports the Corn Laws to avoid increasing dependency on foreign goods, to encourage

agricultural improvement, and to control expanding manufacturing with the cost of agriculture.

The concentration of urban employment is unhealthy, and employment in manufacture is

essentially unstable.161 Malthus obviously fears rapid industrialization of capitalism, disturbing

the society dominated by the landlords. (i) Bounties upon exportation: When an average excess

of corn growth for exportation had been obtained by the stimulus of a bounty, the foreign demand

for our corn had increased at the same rate as the domestic demand, then our surplus growth might

have become permanent. After the bounty had ceased to stimulate to fresh exertions, its influence

would by no means be lost. (ii) The monopoly of the colony trade, by raising the rate of mercantile

profit, discourages the improvement of the soil, and retards the natural increase of that great

original source of revenue – the rent of land. Restrictions upon the importation of foreign corn,

in a country which has great landed resource, not only tend to spread every commercial and

manufacturing advantage possessed, whether permanent or temporary, on the soil, and secure and

realize it; but also tend to prevent those great oscillations in the progress of agriculture and

commerce which are seldom unattended with evil.162

Chapter XIII. Increasing Wealth: In the natural and regular progress of a country to a state of

great wealth and population, there are considerable disadvantages; and they would be sufficient to

render the progress of riches decidedly unfavorable to the condition of the poor, if they were not

counteracted by advantages counterbalancing them. (i) It is obvious that the profits of stock are

that source of revenue from which the middle classes are chiefly maintained; and the increase of

capital, which is both the cause and effect of increasing riches, may be said to be the efficient

cause of the emancipation of the great body of society from a dependence of the landlords. The

landlords could in no other way spend their incomes than by maintaining a great number of idle

followers; and it was by the growth of capital in all the employments to which it is directed that

the pernicious power of the landlords was destroyed, and their dependent followers were turned

into merchants, manufacturers, tradesmen, farmers, and independent laborers – a change of

prodigious advantage to the great body of society, including the laboring classes. (ii) In the natural

progress of cultivation and wealth, the production of an additional quantity of corn will require

more labor, while, at the same time, from the accumulation and better distribution of capital, the

continual improvements made in machinery, and the facilities opened to foreign commerce,

manufactures and foreign commodities will be produced or purchased with less labor; and

consequently a given quantity of corn will command a much greater quantity of manufactures and

foreign commodities than while the country was poor. (iii) The lower classes of society seldom

acquire a decided taste for conveniences and comforts till they become plentiful compared with

food, which they never do till food has become in some degree scarce. If the laborer can obtain

the full support of himself and family by two or three days’ labor; and if, to furnish himself with

conveniences and comforts, he must work three or four days more, he will think the sacrifice too

great compared with the objects to be obtained, which are strictly necessary to him, and will often

prefer the luxury of idleness to the luxury of improved lodging and clothing.163



BOOK IV. Our Future Prospects respecting the removal or mitigation of the evils arising

from the principle of population: Chapter I. Moral Restraint and the foundations of our obligation

to practice this virtue: If moral restraint be the only virtuous mode of avoiding the incidental evils

arising from this principle, our obligation to practice it will evidently rest exactly upon the same

foundation as our obligation to practice any of the other virtues, the foundation of utility. Chapter

II. The Effects which would result to Society from the general practice of this virtue: The heathen

moralists never represented happiness as attainable on earth, but through the medium of virtue;

and among their virtues, prudence ranked in the first class, and by some was even considered as

including every other. The Christian religion places our present as well as future happiness in the

exercise of those virtues which tend to fit us for a state of superior enjoyment; and the subjection

of the passions to the guidance of reason, which, if not the whole, is a principal branch of prudence,

is in consequence most inculcated. Chapter III. The Effectual Mode of improving the condition of

the Poor: We are not to relax our efforts in increasing the quantity of provisions, but to combine

another effort with it; that of keeping the population, when once it has been overtaken, at such a

distance behind as to effect the relative proportion which we desire, and thus unite the two grand

desiderata, a great actual population, and a state of society in which poverty and dependence are

comparatively but little known; tow objects which are far from being compatible.

Chapter IV. Objections to this Mode Considered: One objection is that from which alone it

derives its value – a market rather understocked with labor. A second objection that may be made

to this plan is the relative diminution of population that it would cause. A third objection is that

by endeavoring to urge the duty of moral restraint on the poor, we may increase the quantity of

vice relating to the sex. Chapter V. The Consequences of pursuing the Opposite Mode: In a

civilized society, where a taste for the decencies and comforts of life prevails among a very large

class of people, it is not possible that the encouragements to marriage from positive institutions

and prevailing opinions should entirely obscure the light of nature and reason on this subject; but

still they contribute to make it comparatively weak and indistinct.164

Chapter VI-VII. Effect of the Knowledge of the principal cause of poverty on Civil Liberty: I

tis a truth, which I trust has been sufficiently proved in the course of this work, that under a

government constructed upon the best and purest principles, and executed by men of the highest

talents and integrity, the most squalid poverty and wretchedness might universally prevail from

the principle of population alone. Chapter VIII. Plan of the gradual abolition of the Poor Laws

proposed: If the plan which I have proposed were adopted, that poor’s rates in a few years would

begin very rapidly to decrease, and in no great length of time would be completely extinguished;

and yet, as far as it appears to me at present, no individual would be either deceived or injured,

and consequently no person could have a just right to complain. The abolition of the poor-laws is

not of itself sufficient; and the obvious answer to those who lay too much stress upon this system

is to desire them to look at the state of the poor in some other countries, where such laws do not

prevail, and to compare it with their condition in England. Chapter IX. The Mode of Correcting

the prevailing opinions on the subject of Population: In an attempt to better the condition of the

lower classes of society, our object should be to raise this standard as high as possible, by

cultivating a spirit of independence, a decent price, and a tastes for cleanliness and comfort among

the poor. These habits would be best inculcated by a system of general education and, when

strongly fixed, would be the most powerful means of preventing their marrying with the prospect

of being obliged to forfeit such advantages; and would consequently raise them nearer to the

middle classes of society. Chapter X. The Direction of our Charity: If we keep the criterion of

utility constantly in view, we may find ample room for the exercise of our benevolence without

interfering with the great purpose which we have to accomplish.165



Principles of Political Economy (1820): BOOK I. Chapter I. The Definitions of Wealth and

of Productive Labor: [Section I] The definition of wealth: I shall define wealth to be the material

objects, necessary, useful, or agreeable to man, which are voluntarily appropriated by individuals

or nations. The definition thus limited includes nearly all the objects which usually enter into our

conceptions when we speak of wealth or riches. [II] Productive labor: Malthus substitutes the

term personal services for unproductive labor of Adam Smith. Labor may then be distinguished

into two kinds: productive labor and personal service.166

Chapter II. The Nature, Causes, and Measures of Value: [Section I] The different sorts of

value: (i) Value in use, which may be defined to be the intrinsic utility of an object; (ii) Nominal

value in exchange, or price, which, unless something else is specifically referred to, may be

defined to be the value of commodities estimated in the precious metals; and (iii) Intrinsic value

in exchange, which may be defined to be the power of purchasing arising from intrinsic causes, in

which sense, the value of an object is understood when noting further is added. This definition is

precisely equivalent to the estimation in which a commodity is held, founded on the desire to

possess, and the difficulty of obtaining possession of it; and accords entirely with the definition of

the exchangeable value of a commodity; which is determined by the state of the supply compared

with the demand, and ordinarily by the elementary cost of production.167 [II] Demand and supply

as they affect exchangeable value: The prices of commodities will depend upon the relation of the

demand to the supply; or will vary as the demand directly, and the supply inversely. [III] The cost

of production as affected by the demand and supply, and on the node of representing demand: The

permanent prices of the great mass of commodities will be determined by the ordinary cost of their

production. The relation of supply to the demand is the dominant principle in the determination

of prices whether market or natural, and that the cost of production can do nothing but in

subordination to it, that is, merely as it affects the ordinary relation which the supply bears to the

demand. [IV] The labor as a measure of its exchange value: Malthus quotes from Adam Smith:

the value of any commodity is equal to the quantity of labor which it enables him to purchase or

command. Labor, therefore, is the real measure of the exchangeable value of all commodities.

[VII] The variation in the value of money: A measure must itself increase or decrease according

to quantity. The standard labor of a country which is actually employed, and in the district where

the demand is made for it, is the only object the value of which is proportioned to its quantity,

under the greatest differences both in place and time.168

Chapter III. The Rent of Land: [Section I] The nature and causes of rent: Rent is the excess

of the value of the whole produce, or if estimated in money, the excess of the price of the whole

produce, above what is necessary to pay the wages of the labor and the profits of the capital

employed in cultivation, the first object which present itself for inquiry, is, the cause or causes of

this excess of price. [II] The necessary separation of the rent of land from the profits of the

cultivator and the wages of the laborer: Rent has been traced with that general surplus from the

land, which is the result of certain qualities of the soil and its produce; and it has been found to

commence its separation from profits and wages, as soon as they begin to fall from the scarcity of

fertile land whether occasioned by the natural progress of a country towards wealth and population,

or by any premature and unnecessary monopoly of the soil. [III] The causes tending to raise rents

are four: 1st, such an accumulation of capital compared with the means of employing it, as will

lower the profits of stock; 2ndly, such an increase of population as will lower the corn wages of

labor; 3rdly, such agricultural improvements, or such increase of exertions as will diminish the

number of laborers necessary to produce a give effect; and 4thly, such an increase in the price of

agricultural produce, from increased demand, as, while it probably raises the money price of labor,

or occasions a fall in the value of money, is nevertheless, accompanied by a diminution.169



[IV] The causes tending to lower rents are in diminished capital, diminished population, an

operose system of cultivation, and a falling price of raw produce from deficiency of demand. They

are almost always indications of poverty and decline, and are necessarily connected with the

throwing of inferior land out of cultivation, and the continued deterioration of the land of a superior

quality. The necessary effects of a diminished capital and diminished population in lowering rents

are too obvious to require explanation; nor is it less clear that an operose and bad system of

cultivation might prevent the formation of rents, even on fertile land, by checking the progress of

population and demand beyond what could be supplied from the very richest qualities of soil. [V]

The dependence of the actual quantity of produce obtained from the land, upon the existing prices

of produce, and existing rents, under the same agricultural skill and the same value of money: [VI]

The connection between great comparative wealth, and a high comparative price of raw produce:

[VII] The causes which may mislead the landlord in letting his lands, to the injury both of himself

and the country: In re-renting his farms, the landlord is liable to fall into two errors, which are

almost equally prejudicial to his own interests, and to those of his country: one is that he may be

offered by farmers bidding against each other, to let his land to a tenant without sufficient capital

to cultivate it in the best way, and make the necessary improvements upon it; the other is that a

mere temporary rise of prices is for a rise of sufficient duration to warrant an increase of rents.

[VIII] The necessary connection of the interests of landlord and of the state: Ricardo says that the

interest of the landlord is always opposed to that of the consumer and the manufacturer; but

Malthus is against him. If the landlord’s income is practically found to depend chiefly upon

natural fertility of soil, improvements in agriculture, and inventions to save labor, we may still

think, with Adam Smith, that the landlord’s interest is not opposed to that of the country.170

Chapter IV. The Wages of Labor: [Section I] The wages of labor may be divided into nominal

and real: the nominal wages of labor are paid by money; the real wages of labor consist of the

necessaries, conveniences, and luxuries of life, which the money wages of the laborer enable him

to purchase. [II] The condition of the laboring classes of society must evidently depend, partly

upon the rate at which the funds for the maintenance of labor and the demand for labor are

increasing; and partly, on the habits of the people in respect to their food, clothing, and lodging.

[III] The causes influencing the demand for labor, and the increase of the population: When the

population of a country increases faster than usual for any time together, the laboring classes must

have the command of a greater quantity of food than they had before possessed, or at least than

they had before applied to the maintenance of their families. But actual application of the greater

quantity of food seems to be necessary to the increase of population; and wherever such increase

has taken place, some of these causes, by which a greater quantity of food is procured, will always

be in action, and may generally be traced. [IV] A review of corn wages of labor: The fully

employed laborers have been able to purchase a more than usual quantity of wheat. The specific

evil of the present times in regard to agricultural laborers is, that from the low price of corn as

compared with the price of labor and the other out-goings of the farmer, he is unable to farm with

spirit, and the consequence is that a considerable number of men are unemployed except by the

parish. Nothing can show more clearly that a brisk demand for laborers depends upon an increase

of the funds for their maintenance, without a proportionate fall in their value. [V] Conclusion:

Certain it is that corn was very cheap both in France and England; and labor in this country could

not possibly have risen and kept high for so long a period as between sixty and seventy years,

unless some peculiar cause or causes had restrained the supply of population, compared with the

supply of corn and the demand for labor. Therefore, we must consider the increase of the funds

specifically destined for the maintenance of labor, instead either of the increase of wealth, the

increase of capital, or the increase in the exchangeable value of the whole produce.171



Chapter V. The Profits of Capital: [Section I] The nature of profits: It has been usual in

speaking of that portion of the national revenue which goes to the capitalist in return for the

employment of his capital, to call it by the name of the profit of stock. The profits of capital

consist of the difference between the value of a commodity produced, and the value of the

advances necessary to produce it, and these advances consist of accumulations generally made up

of wages, rents, taxes, interest, and profits. [II] The limiting principle of profits: The productive

powers of labor as applied to the cultivation of land must gradually diminish; and as a given

quantity of labor would yield a smaller and smaller return, there would evidently be a less and less

produce to be divided between labor and profits. In the progress of improvement, as poorer and

poorer land is taken into cultivation, the general rate of profits must be limited by the powers of

the soil last cultivated. If the last land taken into cultivation will only yield a certain excess of

value above the lowest value of the capital necessary to produce, it is obvious that profits, generally

cannot possibly be higher than this excess will allow. [III] The regulating principle of profits: The

varying value of the produce of the same quantity of labor on the same value of capital, determined

by the state of the demand and supply. As capital and produce increased faster than labor, the

profits of capital would fall, and if a progressive increase of capital and produce were to take place,

while the population were prevented from keeping pace with it, notwithstanding the fertility of the

soil and the plenty of food, then profits would be gradually reduced, until, by successive reductions,

the power and will to accumulate had ceased to operate. [IV] Profits affected by causes: poor land

into cultivation; an increase of personal exertion among the laboring classes; the unequal rise of

some parts of the farmer’s capital; a fall in the prices of some important manufactures, as compared

with corn. [V] Ricardo’s theory of profits: Profits depend upon the quantity of labor requisite to

provide necessaries for the laborers on that land, or with that capital yielding no rent.172

Chapter VI. Distinction between Wealth and Value: The wealth of a country depends partly

upon the quantity of produce obtained by its labor, and partly upon such an adaptation of this

quantity to the wants and powers of the existing population as is calculated to give it value. The

value set upon commodities – it is the sacrifice of labor or of labors worth which people are willing

to make in order to obtain them, that in the actual state of things may be said to be almost the sole

cause of the existence of wealth. Wealth has nothing to do with exchangeable value.173

BOOK II. Chapter I. The Progress of Wealth: [Section II] The increase of population

considered as a stimulus to the continued increase of wealth: an increase of population is the sole

stimulus necessary to the increase of wealth, because population, being the great source of

consumption, must in their opinion necessarily keep up demand for an increase of produce, which

will naturally be followed by a continued increase of supply. [III] Accumulation or the saving

from revenue to add to capital: No permanent and continued increase of wealth can take place

without a continued increase of capital. [IV] The fertility of the soil is a stimulus to the continued

increase of wealth. [V] Inventions to save labor: The three great causes most favorable to

production are accumulation of capital, fertility of soil, and inventions to save labor. They all act

in the same direction and as they all tend to facilitate supply, without reference to demand, it is

not probable that they should either separately or conjointly afford an adequate stimulus to the

continued increased of wealth. [VI] The necessity of a union of the powers of production with the

means of distribution in order to ensure a continued increase of wealth: In general, an increase of

produce and an increase of value go on together; and this is that natural and healthy state of things,

which is most favorable to the progress of wealth. An increase in the quantity of produce depends

chiefly upon the power of production, and an increase in the value of produce upon its distribution.

Production and distribution are the two grand elements of wealth, which, combined in their due

proportions, are capable of carrying the riches and population of the earth.174



[VII] The distribution occasioned by the division of landed property: The main causes

favorable to that increase of values which depends upon distribution are, 1st, the division of landed

property; 2ndly, internal and external commerce; and 3rdly, the maintenance of an adequate

proportion of the society employed in personal services, or otherwise entitled to make a demand

for material products without contributing directly to their supply. The first main course is the

division of landed property such as in the settlement of colonization. Without a facility of

obtaining land in small portions by those who have accumulated small capitals, and of new

proprietors settling upon the soil, as new families branch off from the parent stocks, no adequate

effect can be given to the principle of population.175

[VIII] The distribution occasioned by internal and external commerce is considered as the

second main cause favorable to that increase of exchangeable value. Every exchange which takes

place in a country, effects a distribution of its produce better adapted to the wants of the society.

It is with regard to both parties concerned, an exchange of what is wanted less for what is wanted

more, and must therefore raise the value of both the products. If two districts, one of which

possessed a rich copper mine, and the other a rich tin mine, had always been separated by an

impassable river or mountain, there can be no doubt that on eh opening of a communication, a

greater demand would take place, and a greater price be given both for tin and copper; and this

greater price of both metals, though it might only be temporary, would alone go a great way

towards furnishing the additional capital wanted to supply the additional demand; and the capitals

of both districts, and the products of both mines, would be increased both in quantity and value to

a degree which could not have taken place without this new distribution of the produce, or some

event equivalent to it. Similarly, foreign trade increases national income.

[IX] The distribution occasioned by personal services and unproductive consumers, is the

third main cause to increase the exchangeable value of produce. Under a rapid accumulation of

capital, or a rapid conversion of persons engaged in personal service into productive laborers, the

demand, compared with the supply of material products, would prematurely fail, and the motive

to further accumulation be checked, before it was checked by the exhaustion of the land. It follows

that, without supposing the productive classes to consume much more than they are found to do

by experience, particularly when they are rapidly saving from revenue to add to their capitals, it

is necessary that a country with great powers of production should possess a body of consumer

who are not themselves engaged in production. Malthus concerns about a lack of effective demand

coming from under-consumption or over-saving: the excessive saving destroys the motive to

production, but the excessive consumption reduces saving and investment, which cuts down

production. An optimum propensity to consume is essential to balance the demand and supply in

both long and short run: his population doctrine was a matter of long run, but his theory on

effective demand was a matter of short run. “National saving, therefore, considered as the means

of increased production, is confined within much narrower limit than individual saving. While

some individuals continue to spend, other individuals may continue to save to a very great extent;

but the national saving, in reference to the whole mass of producers and consumers, must

necessarily be limited by the amount which can be advantageously employed in supplying the

demand for produce; and to create this demand, there must be an adequate and effective

consumption either among the producers themselves, or other classes of consumers.”176

[X] The capital of the country does not bear an adequate proportion to the population; the

capital and revenue together do not bear so great a proportion as they did before 1815; and such a

disproportion will at once account for very great distress among the laboring classes. But it is

very different thing to allow that the capital is deficient compared with the population; deficient

compared with the demand for it; and the demand for the commodities procured by it.177



David Ricardo (1772-1823) “Ricardo was the third son born to a family of Sephardic Jews

who had emigrated from the Netherlands to England. At the age of 14 he entered into business

with his father, who had made a fortune on the London Stock Exchange. By the time he was 21,

however, he had broken with his father over religion, become a Unitarian, and married a Quaker.

He continued as a member of the stock exchange, where his talents and character won him the

support of an eminent banking house. He did so well that in a few years he acquired a fortune,

which allowed him to pursue interests in literature and science, particularly in the fields of

mathematics, chemistry, and geology. Ricardo’s interest in economic questions arose in 1799

when he read Adam Smith’s Wealth of Nations. For 10 years he studied economics, somewhat

offhandedly at first and then with greater concentration. His first published work was The High

Price of Bullion, a Proof of the Depreciation of Bank Notes (1810), an outgrowth of letters Ricardo

had published in the Morning Chronicle the year before. His book refueled the controversy then

surrounding the Bank of England: freed from the necessity of cash payment, both the Bank of

England and the rural banks had increased their note issues and the volume of their lending. The

directors of the Bank of England maintained that the subsequent increase in prices and the

depreciation of the pound had no relation to the increase in bank credit. Ricardo and others,

however, asserted that there indeed was a link between the volume of bank notes and the level of

prices. Furthermore, they argued that the price levels in turn affected foreign exchange rates and

the inflow or outflow of gold. It followed, then, that the bank, as custodian of the central gold

reserve of the country, had to shape its lending policy according to general economic conditions

and exercise control over the volume of money and credit.”178 Entering Parliament as a member

in 1819, Ricardo not only argued for financial and monetary issues (repealing the Bank Restriction

Act) but also pursued parliamentary reform, voting rights, and old age pension.

In the preface of his Principles of Political Economy and Taxation of 1817, the produce of

the earth – all that is derived from its surface by the united application of labor, machinery, and

capital, is divided among three classes of the community, namely, the proprietor of the land, the

owner of the stock or capital necessary for its cultivation, and the laborers by whose industry it is

cultivated. But in different states of society, the proportions of the whole produce of the earth

which will be allotted to each of these classes, under the name of rent, profit, and wages, will be

essentially different; depending mainly on the actual fertility of the soil, on the accumulation of

capital and population, and the skill, ingenuity, and instruments employed in agriculture.

Chapter I. On Value: The value of a commodity depends on the relative quantity of labor that

is necessary for its production, and not on the more or less compensation paid for that labor:

Ricardo, like Smith, views the three classes of society: landowners, capitalists, and laborers who

receive rent, profit, and wage respectively. Ricardo considers two types of commodity values: use

value and exchange value. Commodities derive their exchange value having utility, scarcity, and

labor. The exchange value of a commodity depends on the relative quantity of labor, which is

necessary for its production. Ricardo’s labor theory of value differs from Smith’s standard

measure of value by considering the lack of labor homogeneity and employment of capital. The

different quality of labor causes different value per unit labor; the proportion of capital and labor

varies in different processes of production; the proportion of fixed and circulating capital varies;

and the durability of fixed capital as well as the turnover rate of circulating capital varies.179

Ricardo’s theory of value can be interpreted as a cost of production theory in present days except

his exclusion of rent in its cost. A rise in wages, from an alteration in the value of money, produces

a general effect on price, but makes no difference in the rate of profits. However, from a difficulty

of procuring the necessaries on which wages are expended, does not, except in some instances,

produce the effect of raising price, but has a great effect in lowering profits.180



Chapter II. On Rent: Rent is that portion of the produce of the earth which is paid to the

landlord for the use of the original and indestructible powers of the soil. It is often confounded

with the interest and profit of capital, and, is applied to whatever is paid by a farmer to his landlord.

On the first settling of a country in which there is an abundance of rich and fertile land, a very

small proportion of which is required to be cultivated for the support of the actual population, so

that no one would pay for the use of land. When in the progress of society, land of the second

degree of fertility is taken in cultivation, rent immediately commences on that of the first quality,

and the amount of that rent will depend on the difference in the quality of these two portions of

land. When land of the third quality is taken into cultivation, rent immediately commences on the

second, and it is regulated as before by the difference in their productive powers. At the same

time, the rent of the first quality will rise, for that must always be above the rent of the second by

the difference between the produce which they yield with a given quantity of capital and labor

(which is the difference in the costs of production between the first and second nature of land).

With every step in the progress of population, which shall oblige a country to have recourse to

land of a worse quality, to enable it to raise its supply of food, rent, on all the more fertile land,

will rise. It is true that on the best land, the same produce would still be obtained with the same

labor as before, but its value would be enhanced in consequence of the diminished returns obtained

by those who employed fresh labor and stock on the less fertile land, since more labor is required

on the inferior lands, and since it is from such land only that we are able to furnish ourselves with

the additional supply of raw produce, the comparative value of that produce will continue

permanently above its former level, and make it exchange for more commodities in the production

of which no such additional quantity of labor is required. The price of commodities produced in

this land will cover the cost of production incurred at the extensive margin of cultivation (marginal

principle). Rent is surplus that accrues to the landlord, but is no part of the cost of production.181

Chapter IV. On Natural and Market Price: In making labor the foundation of the value of

commodities, and the comparative quantity of labor which is necessary to their production, the

rule which determine the respective quantities of goods which shall be given in exchange for each

other, we must not be supposed to deny the accidental and temporary deviations of the actual or

market price of commodities from this, their primary and natural price. With the rise or fall of

price, profits are elevated above, or depressed below, their general level; and capital is either

encouraged to enter into, or is warned to depart from, the particular employment in which the

variation has taken place. A capitalist, in seeking profitable employment for his funds, will

naturally take into consideration all the advantages which one occupation possesses over another.

Let us suppose that all commodities are at their natural price, and consequently that the profits of

capital in all employments are exactly at the same rate, or differ only so much as, in the estimation

of the parties, is equivalent to any real or fancied advantage which they possess or forego. Suppose

now that a change of fashion should increase the demand for silks and lessen that for woolens;

their natural price, the quantity of labor necessary to their production, would continue unaltered,

but the market price of skills would rise and that of woolens would fall; and consequently the

profits of the silk manufacturer would be below, the general and adjusted rate of profits. Not only

the profits, but the wages of the workmen, would be affected in these employments. This increased

demand for silk would, however, soon by supplied by the transference of capital and labor from

the woolen to the silk manufacture; when the marked prices of silk and woolens would again

approach their natural prices, and then the usual profits would be obtained by the respective

manufacturers of those commodities. It is then the desire of diverting his funds from a less to a

more profitable employment that prevents the market price of commodities from continuing for

any length of time either much above or much below their natural price.182



Chapter V. On Wages: Labor has its natural and market price. The natural price of labor is

the natural rate of wages that enables the laborers to subsist and to perpetuate their race without

either increase or diminution. The natural price of labor, therefore, depends on the price of the

food, necessaries, and conveniences required for the support of the labor and his family. With a

rise in the price of food and necessaries, the natural price of labor will rise; with the fall in their

price, the natural price of labor will fall. The market price of labor is the market rate of wages that

depends on the forces of demand for and supply of laborers as well as the price of commodities.

The market price of labor deviates from its natural price, but eventually converges to the natural

wage. High wages encourage population growth, which increases supply of labor and brings down

wages, while low wages follow the opposite. The natural wage is not fixed but varies with time

and place. When the growth requires more capital and labor, the price of labor will rise if capital

accumulation is faster than labor growth; and if the deficiency of laborers were not supplied by

more populous countries, this tendency would very much raise the price of labor. In the natural

advance of society, the wages of labor will have a tendency to fall, as far as they are regulated by

supply and demand; for the supply of laborers will continue to increase at the same rate, whilst

demand for them will increase at a slower rate. If money be of an unvarying value, both rent and

wages will have a tendency to rise with the progress of wealth and population. Regarding the poor

laws, Ricardo believes that wages should be left to the fair and free competition of the market, and

should never be controlled by the interference of the legislature.183

Chapter VI. On Profits: The whole value of commodities is divided into the profits of stock,

and the wages of labor. A rise in the price of corn, which increases the money wages of the laborer,

diminishes the money value of the farmer’s profits. In every case, agricultural and manufacturing

profits are lowered by a rise in the price of raw produce, if it accompanied by a rise of wages. In

all countries and all times, profits depend on the quantity of labor requisite to provide necessaries

for the laborers on that land or with that capital which yields no rent. The effects of accumulation

will depend chiefly on the fertility of the land. When the profits approach zero, no further capital

will be supplied and population will stop to grow if no fund is available to sustain more laborers.

If the prices of all commodities could be raised, still the effect on profits would be the same, and

the value of the medium only in which prices and profits are estimated would be lowered.184

Chapter VII. On Foreign Trade: Ricardo favors free trade on the principle of comparative

advantage, which greatly contributes to the theory of international trade. He views that the rate of

profits can never be increased but by a fall in wages, and that there can be no permanent fall of

wages but in consequence of a fall of the necessaries on which wages are expended. Therefore, if

by the extension of foreign trade, or by improvements in machinery, the food and necessaries of

the labor can be brought to market, at a reduced price, profits will rise. In foreign trade, if a

country purchases goods from abroad and sells at lower prices than domestically produced goods

and if the wages fall as a result, profits will increase since profits vary only in response to change

of wages in his system. Ricardo believes that free trade by specialization based on comparative

advantage distributes labor most effectively and economically, which increases the general mass

of productions and diffuses general benefits and binds together by common tie of interest and

intercourse. Suppose that England needs 80 men-year to produce a certain quantity of cloth, and

needs 100 men-year to produce that of wine, while Portugal needs 120 and 60 men-year

correspondingly. If both countries consume the same quantities of both products, each country

produces both products at the same time, 360 men-year is needed to produce all. When England

is specialized in cloth and Portugal in wine, 280 men-year is needed to produce all. Specialization

and exchanges between English cloth and Portuguese wine can save 80 men-year in production of

both items, which is gains from trade in terms of labor without considering other costs.185



Ricardo views that a restored equilibrium in trade is parity of exchange rates by estimating

the value of the currency of one country in the currency of another, but there is no standard by

which this can be determined. When the Portuguese purchases English cloth, the English man

receives a bill of exchange with Portuguese money, and tries to sell the bill in the foreign exchange

market to get the English pound. If the profit margin of English producer by the market exchange

rate is less than the cost (production, shipment, and exchange premium), the trade will stop

immediately. On the other hand, Ricardo’s Principles discusses several chapters on taxes, which

give the idea for the foundation of public finance. Ricardo’s labor theory of value, his elaboration

of the division of incomes, and the function of wages, rent, and trade deeply influenced economic

philosophies of Karl Marx, John Stuart Mill, Alfred Marshall, and many others.

Malthus versus Ricardo: Owing to different backgrounds, Malthus supported the traditional

landed estates, while Ricardo was sympathetic to freedom from government restrictions against

capitalist enterprises. (i) On the Corn Laws: Malthus supported the Corn Laws to avoid increasing

dependency on foreign goods, to encourage agricultural improvement, and to control expanding

manufacturing with the cost of agriculture. Ricardo opposed the laws since tariffs on agricultural

products ensured that less-productive domestic land would be harvested and rents would be driven

up. Thus, profits would be directed toward landlords and away from the emerging industrial

capitalists; landlords tended to squander their wealth on luxuries, rather than invest; so that the

Corn Laws would lead the stagnation of the British economy.186 (ii) On Rent: Malthus showed

that rent will rise on the original fertile land since the price of the output will be the same no matter

where produced, and the rate of profit throughout the economy will fall until it equals the rate of

profit on the marginal land. Implicitly assuming that the demand for agricultural products was

inelastic, Ricardo argued that “technological changes would enable farmers to produce the same

output from less land; thus the value of food would fall and lead to a rise in profits as the result of

the reduction of rents. Since the free importation of grains would accomplish the same objective,

he then asked why, if landlords wished to prohibit the importation of grain, should they not also

ban all technological improvement, rather than urging technological change as Malthus had done.”

(iii) On Value: Malthus presented a demand-supply approach to value, rather than the labor

theory with its cost of production analysis. Malthus contended that the labor theory was an over-

simplification. He wrote to Ricardo: “…when you reject the consideration of demand and supply

in the price of commodities and refer only to the means of supply, you appear to me to look only

at the half of your subject. No wealth can exist unless the demand, or the estimation in which the

commodity is held exceeds the cost of production; and with regard to a vast mass of commodities

does not the demand actually determine the cost? How is the price of corn, and the quality of the

last land taken into cultivation determined but by the state of the population and the demand. How

is the price of metals determined?” Ricardo replied: “I do not dispute either the influence of

demand on the price of corn and on the price of all other things, but supply follows close at its

heels, and soon takes the power of regulating price in his own hands, and in regulating it he is

determined by the cost of production.” Ricardo was more interested in value, which depends on

abundance, but on the obstacles to production; Malthus was concerned with abundance, and

emphasized absolute prices, not relative values. (iv) Say’s Law of Markets: “Malthus believed that

unrestrained capital investment would lead to overproduction and economic stagnation. Ricardo,

on the contrary, argued that there was no inherent limitation on the ability of capital investment to

promote economic growth until a stationary state was reached. Malthus simply argued that Say’s

Law was supportable as a general proposition, because there was no long-term tendency toward

stagnation in a capitalist, competitive system. Ricardo believed that the situation, where both

capital and labor were employed at the same time, would never happen.187



4. Other Intellectual Developments in the Eighteenth Century

The intellectual advances were impeded by inertia, superstition, persecution, censorship, and

ecclesiastical control of education. “These obstacles were weaker than before, but they were still

far stronger than in an industrial civilization where the competition of individuals, groups, and

nations compels men to search for new ideas and ways, new means for old ends. Most men in the

eighteenth century moved in a slowly changing milieu where traditional responses and ideas

usually sufficed for the needs of life. When novel situations and events did not readily lend

themselves to natural explanations, the common mind ascribed them to supernatural cause, and

rested.” (i) A thousand superstitions survived side by side with the rising enlightenment. Paris

swarmed with magicians and other impostors who offered to ensure worldly success or eternal

youth. The worst superstition of all, the belief in witchcraft, disappeared in this century, except

for some local vestiges. Many Protestant states agreed with the Catholics on a necessity of

persecution against Christianity. (ii) Censorship of speech and press was generally more relaxed

in Protestant than in Catholic countries. However, the philosophes contrived a variety of ways to

elude the censorship. “They sent their manuscripts to foreign publishers, usually to Amsterdam,

The Hague, or Geneva; thence their books, in French, were imported wholesale into France; almost

every day forbidden books arrived by boat at Bordeaux or other points on the French coast or

frontier.” (iii) The control of education by the clergy was an obstacle to free thought. “All Europe

acclaimed the Jesuits as reachers of classical languages and literatures, but they were less helpful

in science. The University of Paris was dominated by priests far more conservative than the Jesuits.

Learned academies had sprung up in this century; learned journals stimulated the intellectual

progress; and encyclopedias took form to gather, order, and transmit the new knowledge.188

“The growth of science – of its pursuit, its methods, its findings, its successful predictions and

productions, its power, and its prestige – is the positive side of that basic modern development

whose negative side is the decline of supernatural belief. Two priesthoods came into conflict: the

one devoted to the holding of character through religion, the other to the education of the intellect

through science. It is customary to rank the eighteenth century below the seventeenth in scientific

achievements; and certainly there are no figures here that tower like Galileo or Newton, no

accomplishments commensurate with the enlargement of the known universe or the cosmic

extension of gravitation, or the formulation of calculus, or the discovery of the circulation of the

blood. And yet, what a galaxy of stars brightens the scientific scene in the eighteenth century! –

Euler and Lagrange in mathematics, Herschel and Laplace in astronomy, d’Alembert, Franklin,

Galvani, and Volta in physics, Priestley and Lavoisier in chemistry, John Hunter in anatomy,

Condillac in psychology, Jenner and Boerhaave in medicine. The multiplying academies gave

more and more of their time and funds to scientific research. The universities increasing admitted

science to their curriculums; between 1702 and 1750 Cambridge established chairs in anatomy,

astronomy, botany, chemistry, geology, and experimental philosophy – i.e. physics. Scientific

method became more rigorously experimental. The nationalistic animosity that had tarnished the

International of the Mind in the controversy between Newton and Leibniz subsided, and the new

priesthood joined hands across frontiers, theologies, and wars to explore the expanding unknown.

Recruits came from every class, from the impoverished Priestley and the foundling d’Alembert to

the titled Buffon and the millionaire Lavoisier. Kings and princes entered the quest: George III

took up botany, John V astronomy, Louis XVI physics. Amateurs like Montesquieu and Voltaire,

women like Mme. Du Chateler and the actress Mlle. Clairon labored and played in laboratories,

and Jesuit scientists like Boscovich strove to unite the old faith and the new. Not till our won

explosive times did science enjoy such popularity and honor.”189



Photo IV-4-1. Ludwig van Beethoven (1770-1827) Source: https://upload.wikimedia.org/wikipedia/commons/thumb/6/6f/Beethoven.jpg/800px-Beethoven.jpg

Photo IV-4-2. Frederick the Great (1712-86) Who founded a Prussian primary education system by a decree of 1763 - Generallandschulreglement190

Source: https://upload.wikimedia.org/wikipedia/commons/thumb/9/90/Friedrich_Zweite_Alt.jpg

https://upload.wikimedia.org/wikipedia/commons/thumb/6/6f/Beethoven.jpg/800px-Beethoven.jpg

https://upload.wikimedia.org/wikipedia/commons/thumb/9/90/Friedrich_Zweite_Alt.jpg



Writings on History: (a) The History of the Decline and Fall of the Roman Empire is written

by the English historian Edward Gibbon: Volume I was published in 1776, Volume II-II were

published in 1781, and Volume IC, V, and VI in 1788-89. “The work covers the history, from 98

to 1590, of the Roman Empire, the history of early Christianity and then of the Roman State

Church, and the history of Europe, and discusses the decline of the Roman Empire in the East and

West. Because of its relative objectivity and heavy use of primary sources, unusual at the time, its

methodology became a model for later historians. This led to Gibbon being called the first modern

historian of ancient Rome…According to Gibbon, the Roman Empire succumbed to barbarian

invasions in large part due to the gradual loss of civic virtue among its citizens. They had become

weak, outsourcing their duty to defend their empire to barbarian mercenaries, who then became

so numerous and ingrained that they were able to take over the Empire. Romans, he believed, were

unwilling to live a tougher, military lifestyle. In addition, Gibbon argued that Christianity created

a belief that a better life existed after death, which fostered an indifference to the present among

Roman citizens, thus sapping their desire to sacrifice for a larger purpose. He also believed that

Christianity's comparative pacifism tended to hamper the traditional Roman martial spirit. Finally,

like other Enlightenment thinkers and British citizens of the age steeped in institutional anti-

Catholicism, Gibbon held in contempt the Middle Ages as a priest-ridden, superstitious Dark Age.

It was not until his own era, the Age of Reason, with its emphasis on rational thought, it was

believed that human history could resume its progress. Gibbon saw the Praetorian Guard as the

primary catalyst of the empire's initial decay and eventual collapse, a seed planted by Augustus

when the empire was established. His writings cite repeated examples of the Praetorian Guard

abusing their power with calamitous results, including numerous instances of imperial

assassination and incessant demands for increased pay.”191

(b) The History of England (1754-1761) is written by David Hume, who wrote in installments

while he was librarian to the Faculty of Advocates in Edinburgh. It was published in six volumes

in 1754, 1756, 1759, and 1761. “The first publication of his History was greeted with outrage by

all political factions, but it became a best-seller, finally giving him the financial independence he

had long sought. Both the British Library and the Cambridge University Library, as well as Hume's

own library, still list him as David Hume, the historian. Hume's History spanned from the invasion

of Julius Caesar to the Revolution of 1688 and went through over 100 editions. Many considered

it the standard history of England in its day.” “He wrote of the Revolution: "By deciding many

important questions in favor of liberty, and still more, by that great precedent of deposing one

king, and establishing a new family, it gave such an ascendant to popular principles, as has put the

nature of the English Constitution beyond all controversy. Thus Hume is at odds with those who

argue that the British Constitution is entirely evolutionary, and did not emerge from a revolution,

just like the later American and French Constitutions, and the earlier Dutch Constitution.” (c)

Louis died in 1715 at the age of 75. The Age of Louis XIV was written by Voltaire who spent more

than five years, and published it in 1751. “He began work on this project in 1734 while at the

Chateau Cirey, put it aside in 1738, and resumed work on it in 1750 when he was at the Court of

Frederick the Great in Prussia. For it he read 200 books and reams of unpublished memoirs. He

consulted with scores of people who give accounts of what happened at Louis' Court, and in the

archives at Versailles, he studied the original papers of Louis' ministers, and the manuscripts left

by Louis himself. Voltaire's The Age of Louis XIV established a new way of writing history. Prior

to this work, history books were an account of political and military history. To these topics,

Voltaire added the history of the achievements of the great artists, writers, and builders of the day

in order to achieve a better understanding of the era. This new approach to writing history was

adopted by many historians who later followed Voltaire's example.”192



Literature and Art: (a) Britain: Literature was written in English by the inhabitants of the

British Isles since 1450. The Glorious Revolution established a Protestant monarchy together with

effective rule by Parliament. “The new science of the time, Newtonian physics, reinforced the

belief that everything, including human conduct, is guided by a rational order. Moderation and

common sense became intellectual values as well as standards of behavior. These values achieved

their highest literary expression in the poetry of Alexander Pope - neoclassicist, wit, and master

of the heroic couplet - was critical of human foibles but generally confident that order and

happiness in human affairs were attainable if excesses were eschewed and rational dictates heeded.

The brilliant prose satirist Jonathan Swift was not so sanguine. His savage indignation resulted in

devastating attacks on his age in A Tale of a Tub (1704), Gulliver's Travels (1726), and A Modest

Proposal (1729). Middle-class tastes were reflected in the growth of periodicals and newspapers,

the best of which were the Tatler and the Spectator produced by Joseph Addison and Sir Richard

Steele. The novels of Daniel Defoe (author of Robinson Crusoe), the first modern novels in

English, owe much to the techniques of journalism. They also illustrate the virtues of merchant

adventure vital to the rising middle class. Indeed, the novel was to become the literary form most

responsive to middle-class needs and interests. The 18th century was the age of town life with its

coffeehouses and clubs. One of the most famous of the latter was the Scriblerus Club, whose

members included Pope, Swift, and John Gay (author of The Beggar's Opera). Its purpose was to

defend and uphold high literary standards against the rising tide of middle-class values and tastes.

Letters were a popular form of polite literature. Pope, Swift, Horace Walpole, and Thomas Gray

were masters of the form, and letters make up the chief literary output of Lady Mary Wortley

Montagu and Lord Chesterfield. The novels of Samuel Richardson, including the influential

Clarissa (1747), were written in epistolary form. With the work of Richardson, Fanny Burney,

Henry Fielding, Tobias Smollett, and Laurence Sterne the English novel flourished.”193

Samuel Johnson dominated probably the most celebrated literary circle in history. “It included

Joshua Reynolds, David Garrick, Edmund Burke, Oliver Goldsmith, and James Boswell, whose

biography of Johnson is a classic of the genre. Other great master prose writers of the period were

the historian Edward Gibbon and the philosopher David Hume. Dr. Johnson, who carried the arts

of criticism and conversation to new heights, both typified and helped to form mid-18th-century

views of life, literature, and conduct. The drama of the 18th century failed to match that of the

Restoration. But Oliver Goldsmith and Richard Brinsley Sheridan rose above the prevalent

weeping comedy - whose sentimentalism infected every literary genre of the period - to achieve

polished comedy in the Restoration tradition. Among the prominent poets of the 18th century were

James Thomson, who wrote in The Seasons (1726) of nature as it reflected the Newtonian concept

of order and beauty, and Edward Young, whose Night Thoughts (1742) combined melancholy and

Christian apologetics. Anticipations of romanticism can be seen in the odes of William Collins,

the poems of Thomas Gray, and the Scots lyrics of Robert Burns. The work of William Blake, the

first great romantic poet, began late in the 18th cent. Blake is unique: poet, artist, artisan,

revolutionist, and visionary prophet. In prose fiction, departures from social realism are evident

in the Gothic romances of Horace Walpole, Anne Radcliffe, Monk Lewis, Charles Maturin, and

others. These works catered to a growing interest in medievalism, northern antiquities, ballads,

folklore, chivalry, and romance, also exploited in two masterpieces of forgery - the Ossian poems

of James Macpherson and the medieval Rowley poems of Thomas Chatterton.” One Thousand

and One Nights is a collection of Middle Eastern and South Asian stories and folk tales compiled

in Arabic during the Islamic Golden Age from the 8th to the 13th century). The first English edition

of 1706 was titled as The Arabian Nights’ Entertainment. The tales trace their roots back to ancient

and medieval Arabic, Persian, Mesopotamian, Indian, and Egyptian folklore and literature.194



(b) France: “The novel in the 18th century saw innovations in form and content which opened

the way for the modern novel, a work of fiction in prose recounting the adventures or the evolution

of one or several characters. In the 18th century the genre of the novel enjoyed a great increase in

readership, and was marked by the effort to convey feelings realistically, through such literary

devices as first-person narration, exchanges of letters, and dialogues, all trying to show, in the

spirit of the lumieres, a society which was evolving. The French novel was strongly influenced by

the English novel, through the translation of the works of Samuel Richardson, Jonathan Swift, and

Daniel Defoe. The novel of the 18th century explored all the potential devices of a novel - different

points of view, surprise twists of the plot, engaging the reader, careful psychological analysis,

realistic descriptions of the setting, imagination, and attention to form. The texts of the period are

difficult to neatly divide into categories, but they can loosely be divided into several subgenres.”195

(i) Voltaire wrote philosophical novels including Zadig (1747), Candide (1759), and I’Ingenu

(1768). (ii) Realistic novels: This subgenre combined social realism with stories about men and

women looking for love. Examples include la Vie de Marianne (1741), Le Paysan parvenu (1735)

by Marivaux, and so on. (iii) The novel of the imagination pictured life centuries in the future;

L'An 2440, rêve s'il en fut jamais (The year 2440 - dream of all dreams) by Mercier (1771); or

stories of fantasy le Diable amoureux (The Devil in Love) of Jacques Cazotte (1772). (iv) The

novel of feelings appeared in the second half of the 18th century, with the publication of Julie, or

the New Heloise, in a novel in the form of letters, written by Jean-Jacques Rousseau (1761). (v)

The novel broken apart is roughly translated Novels broken apart, “such as Jacques le fataliste et

son maître (Eng: Jacques the Fatalist and His Master) (1773) and le Neveu de Rameau (Eng: The

Nephew of Rameau) (1762) by Diderot are almost impossible to classify.”196

(c) French art was dominated by the Rococo and neoclassical movements. “In France, the

death of Louis XIV lead to a period of licentious freedom commonly called the Régence. The heir

to Louis XIV, his great grandson Louis XV of France, was only 5 years old; for the next seven

years France was ruled by the regent Philippe II of Orléans. Versailles was abandoned from 1715

to 1722. Painting turned toward fêtes galantes, theater settings and the female nude. Painters from

this period include Antoine Watteau, Nicolas Lancret and François Boucher. One of the best

places in the UK to see examples of French visual and decorative arts of the Rococo and

neoclassical periods is in the Wallace Collection, a free national gallery in London. The Louis XV

style of decoration (although already apparent at the end of the last reign) was lighter: pastels and

wood panels, smaller rooms, less gilding and fewer brocades; shells and garlands and occasional

Chinese subjects predominated. Rooms were more intimate. After the return to Versailles, many

of the baroque rooms of Louis XIV were redesigned. The official etiquette was also simplified

and the notion of privacy was expanded: the king himself retreated from the official bed at night

and conversed in private with his mistress. The latter half of the 18th century continued to see

French preeminence in Europe, particularly through the arts and sciences, and the French language

was the lingua franca of the European courts. The French academic system continued to produce

artists, but some, like Jean-Honoré Fragonard and Jean-Baptiste-Siméon Chardin, explored new

and increasingly impressionist styles of painting with thick brushwork. Although the hierarchy of

genres continued to be respected officially, genre painting, landscape, portrait and still life were

extremely fashionable. The writer Denis Diderot wrote a number of times on the annual Salons

of the Académie of painting and sculpture and his comments and criticisms are a vital document

on the arts of this period. One of Diderot's favorite painters was Jean-Baptiste Greuze. Although

often considered kitsch by today's standards, his paintings of domestic scenes reveal the

importance of Sentimentalism in the European arts of the period (as also seen in the works of Jean-

Jacques Rousseau and Samuel Richardson.)”197



Classical Music: “The Classical era, from about 1750 to 1820, established many of the norms

of composition, presentation, and style, and was also when the piano became the predominant

keyboard instrument. The basic forces required for an orchestra became somewhat standardized.

Chamber music grew to include ensembles with as many as 8 to 10 performers for serenades.

Opera continued to develop, with regional styles in Italy, France, and German-speaking lands. The

opera buffa, a form of comic opera, rose in popularity. The symphony came into its own as a

musical form, and the concerto was developed as a vehicle for displays of virtuoso playing skill.

Orchestras no longer required a harpsichord (which had been part of the traditional continuo in

the Baroque style), and were often led by the lead violinist. Wind instruments became more refined

in the Classical era. While double reeded instruments like the oboe and bassoon became somewhat

standardized in the Baroque, the clarinet family of single reeds was not widely used until Mozart

expanded its role in orchestral, chamber, and concerto settings.”198

Antonio Vivaldi (1678-1741) was “an Italian Baroque composer, virtuoso violinist, teacher

and cleric. Born in Venice, he is recognized as one of the greatest Baroque composers, and his

influence during his lifetime was widespread across Europe. He is known mainly for composing

many instrumental concertos, for the violin and a variety of other instruments, as well as sacred

choral works and more than forty operas. His best-known work is a series of violin concertos

known as The Four Seasons.” Johann Sebastian Bach (1685-1750) was “a German composer and

musician of the Baroque period. He enriched established German styles through his skill in

counterpoint, harmonic and motivic organization, and the adaptation of rhythms, forms, and

textures from abroad, particularly from Italy and France.” George Fredrick Handel (1685-1759)

was “a German, later British baroque composer who spent the bulk of his career in London,

becoming well known for his operas, oratorios, anthems, and organ concertos. Handel received

critical training in Halle, Hamburg and Italy before settling in London in 1712; he became a

naturalized British subject in 1727. He was strongly influenced both by the great composers of the

Italian Baroque and the middle-German polyphonic choral tradition.”

Wolfgang Amadeus Mozart (1756-91) was “a prolific and influential composer of the

Classical era, born in Salzburg. Mozart showed prodigious ability from his earliest childhood. He

was competent on keyboard and violin by age five, and he composed from the age of five and

performed before European royalty.” Ludwig van Beethoven (1770-1827) was “a German

composer. A crucial figure in the transition between the Classical and Romantic eras in Western

art music, he remains one of the most famous and influential of all composers. His best-known

compositions include 9 symphonies, 5 piano concertos, 1 violin concerto, 32 piano sonatas, 16

string quartets, his great Mass the Missa solemnis and an opera, Fidelio.” Gioachino Antonio

Rossini (1792-1868) was “an Italian composer who wrote 39 operas as well as sacred music,

chamber music, songs, and some instrumental and piano pieces.” Felix Mendelssohn (1809-47)

was a German composer, pianist, organist and conductor of the early Romantic period. Frederic

Shopin (1810-49) was “a Polish composer and virtuoso pianist of the Romantic era who wrote

primarily for the solo piano. He gained and has maintained renown worldwide as a leading

musician of his era, whose "poetic genius was based on a professional technique that was without

equal in his generation.” Wilhelm Richard Wagner (1813-83) was a German composer, theatre

director, polemicist, and conductor who is primarily known for his operas. Giuseppe Verdi (1813-

1901) was an Italian composer of operas. Johann Strauss II (1825-99) was an Austrian composer

of light music, particularly dance music and operas. Johannes Brahms (1833-97) was a German

composer and pianist. Pyotr Ilyich Tchaikovsky (1840-93) was a Russian composer of the late-

Romantic period, some of whose works are among the most popular music in the classical

repertoire. Antonin Leopold Dvorak (1841-1904) was a Czech composer.



Education: “The Age of Enlightenment, dominated advanced thought in Europe from about

the 1650s to the 1780s. It developed from a number of sources of new ideas, such as challenges to

the dogma and authority of the Catholic Church and by increasing interest in the ideas of science,

in scientific methods. In philosophy, it called into question traditional ways of thinking. The

Enlightenment thinkers wanted the educational system to be modernized and play a more central

role in the transmission of those ideas and ideals. The development of educational systems in

Europe continued throughout the period of the Enlightenment and into the French Revolution. The

improvements in the educational systems produced a larger reading public which resulted in

increased demand for printed material from readers across a broader span of social classes with a

wider range of interests. After 1800, as the Enlightenment gave way to Romanticism, there was

less emphasis on reason and challenge to authority and more support for emerging nationalism

and compulsory school attendance.” In educational ideas, John Locke in English and Jean Jacques

Rousseau in French authored influential works on education. “Both emphasized the importance of

shaping young minds early. By the late Enlightenment there was a rising demand for a more

universal approach to education, particularly after the American and French Revolutions.

Enlightenment children were taught to memorize facts through oral and graphic methods that

originated during the Renaissance. The predominant educational psychology from the 1750s

onward, especially in northern European countries was associationism: the notion that the mind

associates or dissociates ideas through repeated routines. It offered a practical theory of the mind

that allowed teachers to transform longstanding forms of print and manuscript culture into

effective graphic tools of learning for the lower and middle orders of society. Many of the leading

universities…were located in northern Europe, with the most renowned being the universities of

Leiden, Göttingen, Halle, Montpellier, Uppsala and Edinburgh.”199

“The Kingdom of Prussia introduced a modern public educational system designed to reach

the entire population; it was widely copied across Europe and the United States in the 19th century.

The basic foundations of the Prussian primary education system were laid out by Frederick the

Great with his Generallandschulreglement, a decree of 1763, drafted by Johann Julius Hecker. It

mandated the schooling of all young Prussians, both girls and boys, to be educated by mainly

municipality funded schools from age 5 until age 13 or 14. Prussia was among the first countries

in the world to introduce a tax-funded and generally compulsory primary education. In comparison,

compulsory schooling in France or Great Britain was not successfully enacted until the 1880s.

The Prussian system consisted of an eight-year course of primary education, called Volksschule.

It provided not only basic technical skills needed in a modernizing world (as reading and writing),

but also music (singing), religious (Christian) education in close corporation with the churches

and tried to impose a strict ethos of duty, soberness and discipline. Mathematic and calculus were

not compulsory in the start and taking such courses was requiring additional payment by parents.

Frederick the Great formalized as well further educational stages, so the Realschule and as the

highest stage the gymnasium (state funded secondary school), which was used as university-

preparatory school. The final examination, Abitur, was introduced in 1788, implemented in all

Prussian secondary schools by 1812, and extended to all of Germany in 1871 and is in place till

the present. Passing the Abitur was a pre-requisite to entering the learned professions and higher

echelons of civil service. Generations of Prussian and as well German teachers, which in the 18th

century often had no formal education and in the very beginning often were former petty officers

without pedagogic training, tried to gain more academic recognition, training and better pay and

played an important role in various protest and reform movements. The Prussian system succeeded

in reaching compulsory attendance, specific training for teachers, national testing for all students

(of all genders), national curriculum set for each grade and mandatory Kindergarten.”200



(a) Print Culture: “The explosion of the print culture, which started in the 15th century with

Johannes Gutenberg’s printing press, was both a result of and a cause of the increase in literacy.

The number of books published in the period of the Enlightenment increased dramatically due to

the increase in demand for books, which resulted from the increased literacy rates and the

declining cost and easier availability of books made possible by the printing press. There was a

shift in the percentages of books printed in various categories during the 17th century. Religious

books had comprised around 50% of all books published in Paris at that time. However, the

percentage of religious books dropped to 10% by 1790 and there was an increase in the popularity

of books such as almanacs. The scientific literature in French might have increased slightly but

mostly it remained fairly constant throughout the 18th century. However, contemporary literature

seems to have increased as the century progressed. Also, there was a change in the languages that

books were printed in. Before the 18th century, a large percentage of the books were published in

Latin. As time progressed, there was a decline in the percentage of books published in Latin.”

(b) Public Library: “During the Enlightenment period, there were changes in the public

cultural institutions, such as libraries and museums. The system of public libraries was a product

of the Enlightenment. The public libraries were funded by the state and were accessible to

everyone for free. Prior to the Enlightenment, libraries in Europe were restricted mostly to

academies and the private collections of aristocrats and other wealthy individuals. With the

beginning of state funded institutions, public libraries became places where the general public

could study topics of interest and educate themselves. During the 18th century, the prices of books

were generally too high for the average person, especially the most popular works such as an

encyclopedias. Therefore, the public libraries offered commoners a chance of reading literature

and other works that previously could only be read by the wealthier classes.”201

(c) Intellectual Exchange: “During the 18th century, the increase in social gathering places

such as coffeehouses, clubs, academies and Masonic Lodges provided alternative places where

people could read, learn and exchange ideas. In England, coffeehouses became public spaces

where political, philosophical and scientific ideas were being discussed. The first coffeehouse in

Britain was established in Oxford in 1650 and the number of coffeehouses expanded around

Oxford. The coffeehouse was a place for people to congregate, to read, to learn and to debate with

each other. Another name for the coffeehouse is the Penny University, because the coffeehouse

had a reputation as a place of informal learning. “The popularization of new ideas encouraged

further changes in the habits and beliefs of many ordinary people. Reading clubs and coffeehouses

allowed many urban artisans and businessmen to discuss the latest reform ideas.” Even though

the coffeehouses were generally accessible to everyone, most of the coffeehouses did not allow

women to participate. Clubs, academies, and Lodges, although not entirely open to the public,

established venues of intellectual exchange that functioned as de facto institutions of education.”

(d) Status of Education for Girls: “During the 17th century, there were a number of schools

dedicated to girls, but the cultural norm was for girls to be informally educated at home. During

the 18th century, there was an increase in the number of girls being educated in schools. This was

especially true for middle-class families whose rising financial status and social aspirations made

providing an aristocratic style of education for their daughters both desirable and possible…the

fact that there were schools for women did not bring about a social change because the schools

themselves did not challenge the social status quo. Women were excluded from learning subjects

such as science and politics. In October, 1795, France created a National Institute and Normal

Schools that excluded women from the professional study of Philosophy…The main issue about

female education relates to the traditional view of women’s weakness being due to nature.

However, there were people…who argue that women’s weakness was due to faulty education.”



The Scientific Advance: “The scientific revolution saw the creation of the first scientific

societies, the rise of Copernicanism, and the displacement of Aristotelian natural philosophy and

Galen’s ancient medical doctrine. By the 18th century, scientific authority began to displace

religious authority, and the disciplines of alchemy and astrology lost scientific credibility. While

the Enlightenment cannot be pigeonholed into a specific doctrine or set of dogmas, science came

to play a leading role in Enlightenment discourse and thought. Many Enlightenment writers and

thinkers had backgrounds in the sciences and associated scientific advancement with the

overthrow of religion and traditional authority in favor of the development of free speech and

thought. Broadly speaking, Enlightenment science greatly valued empiricism and rational thought,

and was embedded with the Enlightenment ideal of advancement and progress. As with most

Enlightenment views, the benefits of science were not seen universally; Jean-Jacques Rousseau

criticized the sciences for distancing man from nature and not operating to make people happier.

Science during the Enlightenment was dominated by scientific societies and academies, which had

largely replaced universities as centers of scientific research and development. Societies and

academies were also the backbone of the maturation of the scientific profession. Another

important development was the popularization of science among an increasingly literate

population. Philosophes introduced the public to many scientific theories, most notably through

the Encyclopédie and the popularization of Newtonianism by Voltaire as well as by Émilie du

Châtelet, the French translator of Newton's Principia. Some historians have marked the 18th

century as a drab period in the history of science; however, the century saw significant advance-

ments in the practice of medicine, mathematics, and physics; the development of biological

taxonomy; a new understanding of magnetism and electricity; and the maturation of chemistry as

a discipline, which established the foundations of modern chemistry.”202

(a) Mathematics: (i) Leonard Euler (1707-83) was “a Swiss mathematician, physicist,

astronomer, logician and engineer who made important and influential discoveries in many

branches of mathematics like infinitesimal calculus and graph theory while also making

pioneering contributions to several branches such as topology and analytic number theory. He also

introduced much of the modern mathematical terminology and notation, particularly for

mathematical analysis, such as the notion of a mathematical function. He is also known for his

work in mechanics, fluid dynamics, optics, astronomy, and music theory. Euler was one of the

most eminent mathematicians of the 18th century, and is held to be one of the greatest in history.

He is also widely considered to be the most prolific mathematician of all time. His collected works

fill 60 to 80 quarto volumes, more than anybody in the field. He spent most of his adult life in St.

Petersburg, Russia, and in Berlin, then the capital of Prussia.” Euler’s formula establishes the

fundamental relationship between the trigonometric function.203 (ii) Joseph Louis Lagrange (1736-

1813) was an Italian Enlightenment Era mathematician and astronomer. He made significant

contributions to the fields of analysis, number theory, and both classical and celestial mechanics.

In 1766, on the recommendation of Euler and d'Alembert, Lagrange succeeded Euler as the

director of mathematics at the Prussian Academy of Sciences in Berlin, Prussia, where he stayed

for over twenty years, producing volumes of work and winning several prizes of the French

Academy of Sciences. Lagrange's treatise on analytical mechanics, written in Berlin and first

published in 1788, offered the most comprehensive treatment of classical mechanics since Newton

and formed a basis for the development of mathematical physics in the nineteenth century. In

1787, at age 51, he moved from Berlin to Paris and became a member of the French Academy. He

remained in France until the end of his life. He was significantly involved in the decimalisation in

Revolutionary France, became the first professor of analysis at the École Polytechnique upon its

opening in 1794, founding member of the Bureau des Longitudes and Senator in 1799.”204



(b) Physics: (i) Mechanics: “In 1714, Brook Taylor derived the fundamental frequency of a

stretched vibrating string in terms of its tension and mass per unit length by solving a differential

equation. The Swiss mathematician Daniel Bernoulli (1700–1782) made important mathematical

studies of the behavior of gases, anticipating the kinetic theory of gases developed more than a

century later, and has been referred to as the first mathematical physicist. In 1733, Daniel Bernoulli

derived the fundamental frequency and harmonics of a hanging chain by solving a differential

equation. In 1734, Bernoulli solved the differential equation for the vibrations of an elastic bar

clamped at one end. Bernoulli's treatment of fluid dynamics and his examination of fluid flow was

introduced in his 1738 work Hydrodynamica. Rational mechanics dealt with the development of

elaborate mathematical treatments of observed motions, using Newtonian principles as a basis,

and emphasized improving the tractability of complex calculations and developing of legitimate

means of analytical approximation. A representative contemporary textbook was published by

Johann Baptiste Horvath. By the end of the century analytical treatments were rigorous enough to

verify the stability of the solar system solely on the basis of Newton's laws without reference to

divine intervention - even as deterministic treatments of systems as simple as the three body

problem in gravitation remained intractable. In 1705, Edmond Halley predicted the periodicity of

Halley's Comet, William Herschel discovered Uranus in 1781, and Henry Cavendish measured

the gravitational constant and determined the mass of the Earth in 1798. In 1783, John Michell

suggested that some objects might be so massive that not even light could escape from them.”

“In 1739, Leonhard Euler solved the ordinary differential equation for a forced harmonic

oscillator and noticed the resonance phenomenon. In 1742, Colin Maclaurin discovered his

uniformly rotating self-gravitating spheroids. In 1742, Benjamin Robins published his New

Principles in Gunnery, establishing the science of aerodynamics. British work, carried on by

mathematicians such as Taylor and Maclaurin, fell behind Continental developments as the

century progressed. Meanwhile, work flourished at scientific academies on the Continent, led by

such mathematicians as Bernoulli, Euler, Lagrange, Laplace, and Legendre. In 1743, Jean le Rond

d'Alembert published his Traite de Dynamique, in which he introduced the concept of generalized

forces for accelerating systems and systems with constraints, and applied the new idea of virtual

work to solve dynamical problem, now known as D'Alembert's principle, as a rival to Newton's

second law of motion. In 1747, Pierre Louis Maupertuis applied minimum principles to mechanics.

In 1759, Euler solved the partial differential equation for the vibration of a rectangular drum. In

1764, Euler examined the partial differential equation for the vibration of a circular drum and

found one of the Bessel function solutions. In 1776, John Smeaton published a paper on

experiments relating power, work, momentum and kinetic energy, and supporting the conservation

of energy. In 1788, Joseph Louis Lagrange presented Lagrange's equations of motion in

Mécanique Analytique, in which the whole of mechanics was organized around the principle of

virtual work. In 1789, Antoine Lavoisier states the law of conservation of mass. The rational

mechanics developed in the 18th century received a brilliant exposition in both Lagrange's 1788

work and the Celestial Mechanics (1799–1825) of Pierre-Simon Laplace.”205

(ii) Thermodynamics: “During the 18th century, thermodynamics was developed through the

theories of weightless imponderable fluids, such as heat (caloric), electricity, and phlogiston.

Assuming that these concepts were real fluids, their flow could be traced through a mechanical

apparatus or chemical reactions. This tradition of experimentation led to the development of new

kinds of experimental apparatus, such as the Leyden Jar; and new kinds of measuring instruments,

such as the calorimeter, and improved versions of old ones, such as the thermometer. Experiments

also produced new concepts, such as the University of Glasgow experimenter Joseph Black's

notion of latent heat and Philadelphia intellectual Benjamin Franklin's characterization of



electrical fluid as flowing between places of excess and deficit (a concept later reinterpreted in

terms of positive and negative charges). Franklin also showed that lightning is electricity in 1752.

The accepted theory of heat in the 18th century viewed it as a kind of fluid, called caloric; although

this theory was later shown to be erroneous, a number of scientists adhering to it nevertheless

made important discoveries useful in developing the modern theory, including Joseph Black

(1728–99) and Henry Cavendish (1731–1810). Opposed to this caloric theory, which had been

developed mainly by the chemists, was the less accepted theory dating from Newton's time that

heat is due to the motions of the particles of a substance. This mechanical theory gained support

in 1798 from the cannon-boring experiments of Count Rumford (Benjamin Thompson), who

found a direct relationship between heat and mechanical energy.”206

In the 18th century that finding absolute theories of electrostatic and magnetic force akin to

Newton's principles of motion would be an important achievement, but none were forthcoming.

“This impossibility only slowly disappeared as experimental practice became more widespread

and more refined in the early years of the 19th century in places such as the newly established

Royal Institution in London. Meanwhile, the analytical methods of rational mechanics began to

be applied to experimental phenomena, most influentially with the French mathematician Joseph

Fourier's analytical treatment of the flow of heat, as published in 1822. Joseph Priestley proposed

an electrical inverse-square law in 1767, and Charles-Augustin de Coulomb introduced the

inverse-square law of electrostatics in 1798. At the end of the century, the members of the French

Academy of Sciences had attained clear dominance in the field. At the same time, the

experimental tradition established by Galileo and his followers persisted. The Royal Society and

the French Academy of Sciences were major centers for the performance and reporting of

experimental work. Experiments in mechanics, optics, magnetism, static electricity, chemistry,

and physiology were not clearly distinguished from each other during the 18th century, but

significant differences in explanatory schemes and, thus, experiment design were emerging.”207

(iii) Electricity: “In 1800, Alessandro Volta invented the electric battery (known of the voltaic

pile) and thus improved the way electric currents could also be studied. A year later, Thomas

Young demonstrated the wave nature of light - which received strong experimental support from

the work of Augustin-Jean Fresnel - and the principle of interference. In 1813, Peter Ewart

supported the idea of the conservation of energy in his paper On the measure of moving force. In

1820, Hans Christian Ørsted found that a current-carrying conductor gives rise to a magnetic force

surrounding it, and within a week after Ørsted's discovery reached France, André-Marie Ampère

discovered that two parallel electric currents will exert forces on each other. In 1821, William

Hamilton began his analysis of Hamilton's characteristic function. In 1821, Michael Faraday built

an electricity-powered motor, while Georg Ohm stated his law of electrical resistance in 1826,

expressing the relationship between voltage, current, and resistance in an electric circuit. A year

later, botanist Robert Brown discovered Brownian motion: pollen grains in water undergoing

movement resulting from their bombardment by the fast-moving atoms or molecules in the liquid.

In 1829, Gaspard Coriolis introduced the terms of work (force times distance) and kinetic energy

with the meanings they have today. In 1831, Faraday (and independently Joseph Henry)

discovered the reverse effect, the production of an electric potential or current through magnetism

– known as electromagnetic induction; these two discoveries are the basis of the electric motor

and the electric generator, respectively. In 1834, Carl Jacobi discovered his uniformly rotating

self-gravitating ellipsoids. In 1834, John Russell observed a non-decaying solitary water wave

(soliton) in the Union Canal near Edinburgh and used a water tank to study the dependence of

solitary water wave velocities on wave amplitude and water depth. In 1835, William Hamilton

stated Hamilton's canonical equations of motion.”208



(c) Chemistry: (i) Development and Dismantling of Phlogiston: “In 1702, German chemist

Georg Stahl coined the name phlogiston for the substance believed to be released in the process

of burning. Around 1735, Swedish chemist Georg Brandt analyzed a dark blue pigment found in

copper ore. Brandt demonstrated that the pigment contained a new element, later named cobalt. In

1751, a Swedish chemist and pupil of Stahl's named Axel Fredrik Cronstedt, identified an impurity

in copper ore as a separate metallic element, which he named nickel. Cronstedt is one of the

founders of modern mineralogy. Cronstedt also discovered the mineral scheelite in 1751, which

he named tungsten, meaning heavy stone in Swedish. In 1754, Scottish chemist Joseph Black

isolated carbon dioxide, which he called fixed air. In 1757, Louis Claude Cadet de Gassicourt,

while investigating arsenic compounds, creates Cadet's fuming liquid, later discovered to be

cacodyl oxide, considered to be the first synthetic organometallic compound. In 1758, Joseph

Black formulated the concept of latent heat to explain the thermochemistry of phase changes. In

1766, English chemist Henry Cavendish isolated hydrogen, which he called inflammable air.

Cavendish discovered hydrogen as a colorless, odourless gas that burns and can form an explosive

mixture with air, and published a paper on the production of water by burning inflammable air

(that is, hydrogen) in dephlogisticated air (now known to be oxygen), the latter a constituent of

atmospheric air (phlogiston theory). In 1773, Swedish chemist Carl Wilhelm Scheele discovered

oxygen, which he called "fire air", but did not immediately publish his achievement. In 1774,

English chemist Joseph Priestley independently isolated oxygen in its gaseous state, calling it

dephlogisticated air, and published his work before Scheele. During his lifetime, Priestley's

considerable scientific reputation rested on his invention of soda water, his writings on electricity,

and his discovery of several airs (gases), the most famous being what Priestley dubbed

dephlogisticated air (oxygen). However, Priestley's determination to defend phlogiston theory and

to reject what would become the chemical revolution eventually left him isolated within the

scientific community. In 1781, Carl Wilhelm Scheele discovered that a new acid, tungstic acid,

could be made from Cronstedt's scheelite (tungsten). Scheele and Torbern Bergman suggested that

it might be possible to obtain a new metal by reducing this acid. In 1783, José and Fausto Elhuyar

found an acid made from wolframite that was identical to tungstic acid. Later that year, in Spain,

the brothers succeeded in isolating the metal now known as tungsten by reduction of this acid with

charcoal, and they are credited with the discovery of the element.”209

(ii) Alessandro Volta (1745-1817) was an Italian physicist, chemist, and a pioneer of

electricity and power, as the inventor of the electrical battery and the discoverer of methane.210

“Alessandro Volta constructed a device for accumulating a large charge by a series of inductions

and groundings. He investigated the 1780s discovery animal electricity by Luigi Galvani, and

found that the electric current was generated from the contact of dissimilar metals, and that the

frog leg was only acting as a detector. Volta demonstrated in 1794 that when two metals and brine-

soaked cloth or cardboard are arranged in a circuit they produce an electric current. In 1800, Volta

stacked several pairs of alternating copper (or silver) and zinc discs (electrodes) separated by cloth

or cardboard soaked in brine (electrolyte) to increase the electrolyte conductivity. When the top

and bottom contacts were connected by a wire, an electric current flowed through the voltaic pile

and the connecting wire. Thus, Volta is credited with constructed the first electrical battery to

produce electricity. Volta's method of stacking round plates of copper and zinc separated by disks

of cardboard moistened with salt solution was termed a voltaic pile. Thus, Volta is considered to

be the founder of the discipline of electrochemistry. A Galvanic cell (or voltaic cell) is an

electrochemical cell that derives electrical energy from spontaneous redox reaction taking place

within the cell. It generally consists of two different metals connected by a salt bridge, or

individual half-cells separated by a porous membrane.”211



(iii) Antoine Lavoisier (1743-94) was French chemist and the father of modern chemistry.

“Lavoisier demonstrated with careful measurements that transmutation of water to earth was not

possible, but that the sediment observed from boiling water came from the container. He burnt

phosphorus and sulfur in air, and proved that the products weighed more than the original.

Nevertheless, the weight gained was lost from the air. Thus, in 1789, he established the Law of

Conservation of Mass, which is also called Lavoisier's Law. Repeating the experiments of

Priestley, he demonstrated that air is composed of two parts, one of which combines with metals

to form calxes. In Considérations Générales sur la Nature des Acides (1778), he demonstrated

that the air responsible for combustion was also the source of acidity. The next year, he named

this portion oxygen (Greek for acid-former), and the other azote (Greek for no life). Lavoisier thus

has a claim to the discovery of oxygen along with Priestley and Scheele. He also discovered that

the "inflammable air" discovered by Cavendish - which he termed hydrogen (Greek for water-

former) - combined with oxygen to produce a dew, as Priestley had reported, which appeared to

be water. In Reflexions sur le Phlogistique (1783), Lavoisier showed the phlogiston theory of

combustion to be inconsistent.” Mikhail Lomonosov, Russian chemist, also rejected the phlogiston

theory, and anticipated the kinetic theory of gases, regarding heat as a form of motion.

“Lavoisier worked with Claude Louis Berthollet and others to devise a system of chemical

nomenclature which serves as the basis of the modern system of naming chemical compounds. In

his Methods of Chemical Nomenclature (1787), Lavoisier invented the system of naming and

classification still largely in use today, including names such as sulfuric acid, sulfates, and sulfites.

In 1785, Berthollet was the first to introduce the use of chlorine gas as a commercial bleach. In

the same year he first determined the elemental composition of the gas ammonia. Berthollet first

produced a modern bleaching liquid in 1789 by passing chlorine gas through a solution of sodium

carbonate - the result was a weak solution of sodium hypochlorite. Another strong chlorine oxidant

and bleach which he investigated and was the first to produce, potassium chlorate (KClO3), is

known as Berthollet's Salt. Berthollet is also known for his scientific contributions to theory of

chemical equilibria via the mechanism of reverse chemical reactions.”

“Lavoisier's Traité Élémentaire de Chimie (Elementary Treatise of Chemistry, 1789) was the

first modern chemical textbook, and presented a unified view of new theories of chemistry,

contained a clear statement of the Law of Conservation of Mass, and denied the existence of

phlogiston. In addition, it contained a list of elements, or substances that could not be broken down

further, which included oxygen, nitrogen, hydrogen, phosphorus, mercury, zinc, and sulfur. His

list, however, also included light, and caloric, which he believed to be material substances. In the

work, Lavoisier underscored the observational basis of his chemistry, stating ‘I have tried...to

arrive at the truth by linking up facts; to suppress as much as possible the use of reasoning, which

is often an unreliable instrument which deceives us, in order to follow as much as possible the

torch of observation and of experiment.’ Nevertheless, he believed that the real existence of atoms

was philosophically impossible. Lavoisier demonstrated that organisms disassemble and

reconstitute atmospheric air in the same manner as a burning body…Lavoisier made many

fundamental contributions to the science of chemistry. Following Lavoisier's work, chemistry

acquired a strict quantitative nature, allowing reliable predictions to be made. The revolution in

chemistry which he brought about was a result of a conscious effort to fit all experiments into the

framework of a single theory. He established the consistent use of chemical balance, used oxygen

to overthrow the phlogiston theory, and developed a new system of chemical nomenclature.

Lavoisier was beheaded during the French Revolution. In 1802, French American chemist and

industrialist Éleuthère Irénée du Pont, who learned manufacture of gunpowder and explosives

under Antoine Lavoisier, founded a gunpowder manufacturer in Delaware.”212



(d) Astronomy: “The farseeing instruments had been invented, the major discoveries had been

made; the eighteenth century undertook to improve the instruments (Graham, Hadley, Dollond),

extend the discoveries (Bradley and Herschel), apply the latest mathematics to the stars

(d’Alembert and Clairaut), and organize the results in a new system of cosmic dynamics (Laplace).”

The British and French competed ardently in studying astronomy; this was no remote or pure

science for them; it entered into the struggle for mastery of the seas, and therefore of the whole

colonial and commercial world. Germany and Russia through Euler, Italy through Boscovich,

contributed to the contest without sharing the spoils. Roger Joseph Boscovich (1711-87) was an

Italian physician and astronomer who studies and lived in Italy and France where he published

many of his works. In 1740 he was appointed professor of mathematics in the college. In 1744 he

was ordained to the Roman Catholic priesthood. “He shared in determining the general orbit of

comets, and gave the first geometric solution for finding the orbit and equator of a planet. In his

treatise De materiae divisibilitate (1748) he expounded his view of matter as composed of points,

or fields, of force, each center alternately of repulsion and attraction – a theory recalling Leibniz’s

monads and prefiguring the atomic hypotheses of our time. The versatile Jesuit organized practical

enterprises – surveying and mapping the Papal States, damming the lakes that threatened to

submerge Lucca, making plans to drain the Pontine Marshes, and helping to design the Brera

Observatory at Milan. At his urging, in 1757, Pope Benedict XIV abrogated the decree of the

Index Expurgatorius against the Copernican system. He was given membership in the Paris

Academie des Sciences and the London Royal Society. In 1861-62 he was received with honors

in France, England, Poland, and Turkey. In 1772 he accepted appointment by Louis XV as director

or optics in the French navy. He returned to Italy in 1783, and died at Milan in 1787, at the age

of seventy-six. He left behind him several volumes of poetry.”213

James Bradley (1693-1762) was an English astronomer, best known for two fundamental

discoveries in astronomy: the aberration of light (1725-28), and the nutation of the Earth’s axis

(1728-48). After taking his MA at Oxford, Bradley hurried back to Wanstead, made original

observations, reported them to the Royal Society, and was elected to its membership at the age of

twenty-six (1718). Three years later he became Savilian professor of astronomy at Oxford. When

the great Halley died, in 1742, Bradley was appointed to succeed him at Greenwich as astronomer

royal, and in that position he remained until his death. His first discovery was to determine the

annual parallax of a star – i.e., the difference in its apparent direction as seen (1) from a point on

the surface of the earth, and (2) from an imaginary point at the center of the sun. After thirteen

months of observation and calculation, Bradley was able to show an annual cycle of alternating

southward and northward deviations in the apparent position of the same star; and he explained

this alternation as due to the earth’s orbital motion. His second discovery: “the nutation – literally

the nodding - of the earth’s axis of rotation, like the axial vacillation of a spinning top. The stars

whose apparent motions had been described as performing an annual cycle, due to the revolution

of the earth around the sun, did not, in Bradley’s observations, return, after year, to precisely the

same apparent positions as before. It occurred to him that the discrepancy might be due to a slight

bending of the earth’s axis by periodic changes in the relation between the moon’s orbit around

the earth and the earth’s orbit around the sun. He studied these changes through nineteen years

(1718-47); at the end of the end of the nineteen year, he found that the stars had returned to exactly

the same apparent positions they had had at the beginning of the first year. He felt certain now

that the nutation of the earth’s axis was due to the orbital motion of the moon, and its action upon

the equatorial parts of the earth. His report of these findings was an exciting event in the

proceedings of the Royal Society for 1748. Patience has its heroes as well as war.” The aberration

of light was conclusive evidence for the correctness of the Kepler’s theories.214



Frederick William Herschel (1738-1822) was “a British astronomer and composer of German

origin, and brother of Caroline Herschel, with whom he worked. Born in the Electorate of Hanover,

Herschel followed his father into the Military Band of Hanover, before migrating to Great Britain

in 1757 at the age of nineteen. Herschel constructed his first large telescope in 1774, after which

he spent nine years carrying out sky surveys to investigate double stars. The resolving power of

the Herschel telescopes revealed that the nebulae in the Messier catalogue were clusters of stars.

Herschel published catalogues of nebulae in 1802 (2,500 objects) and in 1820 (5,000 objects). In

the course of an observation on 13 March 1781 he realized that one celestial body he had observed

was not a star, but a planet, Uranus. This was the first planet to be discovered since antiquity and

Herschel became famous overnight. As a result of this discovery, George III appointed him Court

Astronomer. He was elected as a Fellow of the Royal Society and grants were provided for the

construction of new telescopes. Herschel pioneered the use of astronomical spectrophotometry as

a diagnostic tool, using prisms and temperature measuring equipment to measure the wavelength

distribution of stellar spectra. Other work included an improved determination of the rotation

period of Mars, the discovery that the Martian polar caps vary seasonally, the discovery of Titania

and Oberon (moons of Uranus) and Enceladus and Mimas (moons of Saturn). In addition, Herschel

discovered infrared radiation. Herschel was made a Knight of the Royal Guelphic Order in 1816.

He was the first President of the Royal Astronomical Society when it was founded in 1820. He

died in August 1822, and his work was continued by his only son, John Herschel.”215

Some French Astronomers: Around the Paris Observatory, there gathered a galaxy of star-

gazers, in which the Cassini family formed through four generations a successive constellation.

In 1746-49 Euler, Clairaut, and d’Alembert worked independently to find, by the new methods of

calculus, the apogee of the moon – its moment of maximum distance from the earth. Clairaut, who

won the prize on the moon’s motion from the Academy of St. Petersburg, published his results in

Theorie de la lune (1752). Next he applied his mathematics to the perturbation of the earth due to

Venus and the moon; from these variations he estimated the mass of Venus. In 1757 the

astronomers of Europe began to look out for the return of the comet that Halley had predicted.

Pierre Simon Laplace (1749-1827) was an influential French scholar whose work contributed

to the advance of mathematics, statistics, physics, and astronomy. “He summarized and extended

the work of his predecessors in his five-volume Mécanique Céleste (Celestial Mechanics) (1799–

1825). This work translated the geometric study of classical mechanics to one based on calculus,

opening up a broader range of problems. In statistics, the Bayesian interpretation of probability

was developed mainly by Laplace. Laplace formulated Laplace's equation, and pioneered the

Laplace transform which appears in many branches of mathematical physics, a field that he took

a leading role in forming. The Laplacian differential operator, widely used in mathematics, is also

named after him. He restated and developed the nebular hypothesis of the origin of the Solar

System and was one of the first scientists to postulate the existence of black holes and the notion

of gravitational collapse.” His analytical discussion of the Solar System is given in his

Méchanique céleste published in five volumes. The first two volumes, published in 1799, contain

methods for calculating the motions of the planets, determining their figures, and resolving tidal

problems. The third and fourth volumes, published in 1802 and 1805, contain applications of these

methods, and several astronomical tables. The fifth volume, published in 1825, is mainly historical,

but it gives as appendices the results of Laplace's latest researches.” “Laplace is remembered as

one of the greatest scientists of all time. Sometimes referred to as the French Newton or Newton

of France, he has been described as possessing a phenomenal natural mathematical faculty

superior to that of any of his contemporaries. Laplace became a count of the First French Empire

in 1806 and was named a marquis in 1817, after the Bourbon Restoration.”216



(e) About the Earth: (i) Meteorology is the science of weather that used four measuring

instruments: the thermometer for temperature, the barometer for atmospheric pressure, the

anemometer for winds, the hygrometer of moisture in the air. The literature of meteorology in the

eighteenth century began with Christian von Wolff’s Aeroemtricae elementa (1709) which

summed up the known data to date, and suggested some new instruments. Jean Deluc’s

Recherches sur les modifications de l’atmosphere (1772) extended the experiments of Pascal

(1648) and Halley (1686) on the relations between altitude and atmospheric pressure.

(ii) Geodesy is to know the shape of the globe. By 1700 there was general agreement that the

earth was not quite spherical but ellipsoidal – flattened a bit at its extremities. Jean Picard

performed the first modern meridian arc measurement in 1669–1670. “The French Academy of

Sciences dispatched two expeditions – see French Geodesic Mission. One expedition under Pierre

Louis Maupertuis (1736–37) was sent to Torne Valley (as far North as possible). The second

mission under Pierre Bouguer was sent to what is modern-day Ecuador, near the equator (1735–

44). The measurements conclusively showed that the earth was oblate, with a flattening of 1:210.

Thus, the next approximation to the true figure of the Earth after the sphere became the spheroid.”

Most of the relevant theories were derived by the German geodesist Friedrich Robert Helmert in

his famous books Mathematical and Physical Theories of Higher Geodesy (1880).

(iii) Geology is to find the origin, age, and constitution of the earth, of its crust and subsurface,

of its earthquakes, volcanoes, craters, and fossils. “In 1749 the French naturalist Georges-Louis

Leclerc, Comte de Buffon published his Histoire Naturelle, in which he attacked the popular

Biblical accounts given by Whiston and other ecclesiastical theorists of the history of Earth. From

experimentation with cooling globes, he found that the age of the Earth was not only 4,000 or

5,500 years as inferred from the Bible, but rather 75,000 years. Another individual who described

the history of the Earth with reference to neither God nor the Bible was the philosopher Immanuel

Kant, who published his Universal Natural History and Theory of the Heavens in 1755…In 1741

the best-known institution in the field of natural history, the National Museum of Natural History

in France, created the first teaching position designated specifically for geology. This was an

important step in further promoting knowledge of geology as a science and in recognizing the

value of widely disseminating such knowledge.”

(iv) Geography Peter the Great commissioned Vitus Bering, a Danish captain in the Russian

navy, to explore the northeastern coast of Siberia, just before his death in 1725. As part of a war

with Spain (1740) England dispatched a fleet under George Anson to harass the Spanish

settlements in South America. In 1763 the French government sent out a similar expedition under

Louis Antoine de Bougainville, with instructions to establish a French settlement in the Falkland

Islands; their position three hundred miles east of the Strait of Magellan gave them military value

for control of the passage from the Atlantic to the Pacific. In 1746 The British government

commissioned Captain John Byron to pick up some useful territory in the South Seas. In 1768

James Cook (1728-79), captain in the Royal Navy, was chosen to lead an expedition, making three

voyages to the Pacific Ocean, during which he achieved the first recorded European contact with

the eastern coastline of Australia and the Hawaiian Islands, and the first recorded circum-

navigation of New Zealand. The French government commissioned Jean Galaup to follow up

Cook’s discoveries; he sailed in 1785 around South America and p to Alaska, crossed to Asia, and

was the first European to pass through the strait between Russian Sakhalin and Japanese Hokkaido.

Turning south, he explored the coast of Australia and reached the Santa Cruz Islands. Land

exploration was also a challenge to the lust for adventure and gain. In 1716 Jesuit missionary

reached Lhasa, the Forbidden City of Tibet. Carsten Niebuhr explored Arabia, Palestine, Syria,

Asia Minor, and Persia (1761). Many more explorers continuously challenged.217



(f) Botany: “The revival of learning during the European Renaissance renewed interest in

plants. The church, feudal aristocracy and an increasingly influential merchant class that supported

science and the arts, now jostled in a world of increasing trade. Sea voyages of exploration returned

botanical treasures to the large public, private, and newly established botanic gardens, and

introduced an eager population to novel crops, drugs and spices from Asia, the East Indies and the

New World. The number of scientific publications increased. In England, for example, scientific

communication and causes were facilitated by learned societies like Royal Society (founded in

1660) and the Linnaean Society (founded in 1788): there was also the support and activities of

botanical institutions like the Jardin du Roi in Paris, Chelsea Physic Garden, Royal Botanic

Gardens Kew, and the Oxford and Cambridge Botanic Gardens, as well as the influence of

renowned private gardens and wealthy entrepreneurial nurserymen. By the early 17th century the

number of plants described in Europe had risen to about 6000. The 18th century Enlightenment

values of reason and science coupled with new voyages to distant lands instigating another phase

of encyclopaedic plant identification, nomenclature, description and illustration, flower painting

possibly at its best in this period of history. Plant trophies from distant lands decorated the gardens

of Europe's powerful and wealthy in a period of enthusiasm for natural history, especially botany

that is never likely to recur. During the 18th century botany was one of the few sciences

considered appropriate for genteel educated women. Around 1760, with the popularization of the

Linnaean system, botany became much more widespread among educated women who painted

plants, attended classes on plant classification, and collected herbarium specimens although

emphasis was on the healing properties of plants rather than plant reproduction which had

overtones of sexuality. Women began publishing on botanical topics and children's books on

botany appeared by authors like Charlotte Turner Smith.”218

(g) Zoology: “In the 17th century, the enthusiasts of the new sciences, the investigators of

nature by means of observation and experiment, banded themselves into academies or societies

for mutual support and discourse. The first founded of surviving European academies, the

Academia Naturae Curiosorum (1651) especially confined itself to the description and illustration

of the structure of plants and animals; eleven years later (1662) the Royal Society of London was

incorporated by royal charter, having existed without a name or fixed organization for seventeen

years previously (from 1645). A little later the Academy of Sciences of Paris was established by

Louis XIV, later still the Royal Society of Sciences in Uppsala was founded. Systematizing,

naming and classifying dominated zoology throughout much of the 17th and 18th centuries. Carl

Linnaeus published a basic taxonomy for the natural world in 1735, and in the 1750s introduced

scientific names for all his species. While Linnaeus conceived of species as unchanging parts of a

designed hierarchy, the other great naturalist of the 18th century, Georges-Louis Leclerc, Comte

de Buffon, treated species as artificial categories and living forms as malleable - even suggesting

the possibility of common descent. Though he was writing in an era before evolution existed,

Buffon is a key figure in the history of evolutionary thought; his transformist theory would

influence the evolutionary theories of both Jean-Baptiste Lamarck and Charles Darwin. Before

the Age of Exploration, naturalists had little idea of the sheer scale of biological diversity. The

discovery and description of new species and the collection of specimens became a passion of

scientific gentlemen and a lucrative enterprise for entrepreneurs; many naturalists traveled the

globe in search of scientific knowledge and adventure. Extending the work of Vesalius into

experiments on still living bodies (of both humans and animals), William Harvey and other natural

philosophers investigated the roles of blood, veins and arteries. Harvey's De motu cordis in 1628

was the beginning of the end for Galenic theory, and alongside Santorio Santorio's studies of

metabolism, it served as an influential model of quantitative approaches to physiology.”219



(h) Biology began to lure more and more students from the mathematics and physics that in

the seventeenth century had held most scientists in thrall. The new science was discouraged by

its initial problem: the origin of life. Many attempts were made to show that life could be generated

spontaneously from nonliving matter. The multitude of micro-organisms found by the microscope

in a drop of water gave new vigor to the old theory of abiogenesis despite Redi’s apparent disproof

of it in 1668. “In 1748 John Needham, an English Catholic priest resident on the Continent,

revived the theory by repeating Redi’s experiments with different results. He boiled some mutton

gravy in Flasks, which he immediately corked and scaled. On opening the flasks a few day later

he found them teeming with organisms. Arguing that any living germs in the broth must have

been killed by boiling, and that the flasks had been firmly sealed with mastic, Needham concluded

that new organisms had been spontaneously generated in the liquid. Buffon was impressed, but

in 1765 Spallanzani, then a professor at Modena, repeated Needham’s experiments to a contrary

conclusion. He found that boiling an infusion for two minutes did not destroy all germs, but that

boiling it for forty-five minutes did, and that in this case no organism appeared. The controversy

continued until Schwann and Pasteur apparently disposed of it in the nineteenth century…James

Logan, Charles Bonnet, and Caspar Wolff puzzled over the roles of the male and female elements

in reproduction, and asked how the combined element can contain in themselves the

predetermination of all the parts and structures in the mature form. Bonnet proposed a fantastic

theory of incapsulation: the female contains the germs of all her children, these germs contain the

germs of the grandchildren, and so on until imagination revels; science too can run to mythology.”

The idea of evolution as the natural development of new species from old ones appeared repeatedly

in eighteenth-century science and philosophy. So Bonoit de Maillet suggested in his posthumous

Telliamed (1748) “that all land animals evolved from kindred marine organisms through trans-

formation of species by the changed environment.”220

(i) Psychology: David Hartley, an English clergyman turned physician, ventured into the gap

by founding physiological psychology. Gathering data for 16 years (1730-46), he published his

Observations on Man in 1749. As Hobbes and Locke had done, Hartley applied the association

of ideas to the explanation not only of imagination and memory, but also of emotion, reason, action,

and the moral sense. Étienne Bonnot de Condillac (1714-80) was a French philosopher and

epistemologist, who studied psychology. Condillac took holy orders (1733-40) at a church in Paris,

and was appointed as Abbot of Mureau. “His first book, the Essai sur l'origine des connaissances

humaines (1746) keeps close to his English master. He accepts with some reluctance Locke's

deduction of our knowledge from two sources, sensation and reflection. He uses as his main

principle of explanation the association of ideas…By far the most important of his works is the

Traité des sensations (1754) in which Condillac treats psychology in his own characteristic way.

He questioned Locke's doctrine that the senses give us intuitive knowledge of objects, that the eye,

for example, naturally judges shapes, sizes, positions, and distances. He believed it was necessary

to study the senses separately, to distinguish precisely what ideas are owed to each sense, to

observe how the senses are trained, and how one sense aids another. He believed that the

conclusion has to be that all human faculty and knowledge are transformed sensation only, to the

exclusion of any other principle, such as reflection.” In 1767 Condillac was appointed tutor to the

future Duke of Parma. He spent the next nine years in Italy, and composed for his pupil seventeen

volumes, which were published in 1769-73 as Course of Studies. “These volumes are of a high

order, but the two on history deserve a special salute because they included the history of ideas,

manners, economic system, morals, arts, sciences, amusements, roads – altogether a fuller record

of civilization than Voltaire had given in the Essai sur les moeurs.” His influence survived for a

century, and his psychology was standard in the French educational system during 1792-95.221



Medicine: “The Renaissance brought an intense focus on scholarship to Christian Europe. A

major effort to translate the Arabic and Greek scientific works into Latin emerged. Europeans

gradually became experts not only the ancient writings of the Romans and Greeks, but in the

contemporary writings of Islamic scientists. During the later centuries of the Renaissance came an

increase in experimental investigation, particularly in the field of dissection and body examination,

thus advancing our knowledge of human anatomy. The development of modern neurology began

in the 16th century with Vesalius, who described the anatomy of the brain and other organs; he

had little knowledge of the brain's function, thinking that it resided mainly in the ventricles. Over

his lifetime he corrected over 200 of Galen's mistakes. Understanding of medical sciences and

diagnosis improved, but with little direct benefit to health care. Few effective drugs existed,

beyond opium and quinine. Folklore cures and potentially poisonous metal-based compounds

were popular treatments. Independently from Ibn al-Nafis, Michael Servetus rediscovered the

pulmonary circulation, but this discovery did not reach the public because it was written down for

the first time in the Manuscript of Paris in 1546, and later published in the theological work which

he paid with his life in 1553. Later this was perfected by Renaldus Columbus and Andrea

Cesalpino. Later William Harvey correctly described the circulatory system. The most useful

tomes in medicine used both by students and expert physicians were De Materia Medica and

Pharmacopoeia. Bacteria and protists were first observed with a microscope by Antonie van

Leeuwenhoek in 1676, initiating the scientific field of microbiology. Paracelsus (1493–1541),

was an erratic and abusive innovator who rejected Galen and bookish knowledge, calling for

experimental research, with heavy doses of mysticism, alchemy and magic mixed in.”222

University training of physicians began at Padua and Bologna in the 13th century. “The

University of Padua was founded about 1220 by walkouts from the University of Bologna, and

began teaching medicine in 1222. It played a leading role in the identification and treatment of

diseases and ailments, specializing in autopsies and the inner workings of the body. Starting in

1595, Padua's famous anatomical theatre drew artists and scientists studying the human body

during public dissections. The intensive study of Galen led to critiques of Galen modeled on his

own writing, as in the first book of Vesalius's De humani corporis fabrica. Andreas Vesalius held

the chair of Surgery and Anatomy (explicator chirurgiae) and in 1543 published his anatomical

discoveries in De Humani Corporis Fabrica. He portrayed the human body as an interdependent

system of organ groupings. The book triggered great public interest in dissections and caused

many other European cities to establish anatomical theatres. At the University of Bologna the

training of physicians began in 1219. The Italian city attracted students from across Europe.

Taddeo Alderotti built a tradition of medical education that established the characteristic features

of Italian learned medicine and was copied by medical schools elsewhere. Turisanus (d. 1320) was

his student. The curriculum was revised and strengthened in 1560–1590. A representative

professor was Julius Caesar Aranzi (Arantius) (1530–89). He became Professor of Anatomy and

Surgery at the University of Bologna in 1556, where he established anatomy as a major branch of

medicine for the first time. Aranzi combined anatomy with a description of pathological processes,

based largely on his own research, Galen, and the work of his contemporary Italians. Aranzi

discovered the 'Nodules of Aranzio' in the semilunar valves of the heart and wrote the first

description of the superior levator palpebral and the coracobrachialis muscles. His books (in Latin)

covered surgical techniques for many conditions, including hydrocephalus, nasal polyp, goitre and

tumours to phimosis, ascites, haemorrhoids, anal abscess and fistulae. Catholic women played

large roles in health and healing in medieval and early modern Europe. A life as a nun was a

prestigious role; wealthy families provided dowries for their daughters, and these funded the

convents, while the nuns provided free nursing care for the poor.”223



“During the Age of Enlightenment, the 18th-century, science was held in high esteem and

physicians upgraded their social status by becoming more scientific. The health field was crowded

with self-trained barber-surgeons, apothecaries, midwives, drug peddlers, and charlatans. Across

Europe medical schools relied primarily on lectures and readings. In the final year student would

have limited clinical experience by trailing the professor through the wards. Laboratory work was

uncommon, and dissections were rarely done because of legal restrictions on cadavers. Most

schools were small, and only Edinburgh, Scotland, with 11,000 alumni, produced large numbers

of graduates. In Britain, there were but three small hospitals after 1550. Pelling and Webster

estimate that in London in the 1580 to 1600 period, out of a population of nearly 200,000 people,

there were about 500 medical practitioners. Nurses and midwives are not included. There were

about 50 physicians, 100 licensed surgeons, 100 apothecaries, and 250 additional unlicensed

practitioners. In the last category about 25% were women.[80] All across Britain—and indeed all

of the world—the vast majority of the people in city, town or countryside depended for medical

care on local amateurs with no professional training but with a reputation as wise healers who

could diagnose problems and advise sick people what to do—and perhaps set broken bones, pull

a tooth, give some traditional herbs or brews or perform a little magic to cure what ailed them.

The London Dispensary opened in 1696, the first clinic in the British Empire to dispense

medicines to poor sick people. The innovation was slow to catch on, but new dispensaries were

open in the 1770s. In the colonies, small hospitals opened in Philadelphia in 1752, New York in

1771, and Boston (Massachusetts General Hospital) in 1811…English physician Thomas Percival

(1740–1804) wrote a comprehensive system of medical conduct, Medical Ethics (1803).”224

“In the Spanish empire, the viceregal capital of Mexico City was a site of medical training for

physicians and the creation of hospitals. Epidemic disease had decimated indigenous populations

starting with the early sixteenth-century Spanish conquest of the Aztec empire, when a black

auxiliary in the armed forces of conqueror Hernán Cortés, with an active case of smallpox, set off

a virgin land epidemic among indigenous peoples, Spanish allies and enemies alike. Aztec

emperor Cuitlahuac died of smallpox. Disease was a significant factor in the Spanish conquest

elsewhere as well. Medical education was instituted at the Royal and Pontifical University of

Mexico, and their clientele was urban elites. Male and female curanderos or lay practitioners,

attended to the ills of the popular classes. The Spanish crown began regulating the medical

profession just a few years after the conquest, setting up the Royal Tribunal of the Protomedicato,

a board for licensing medical personnel in 1527. It became more systematic after 1646, licensing

physicians, druggists, surgeons, and bleeders, and requiring a license before public practice.

Crown regulation of medical practice became more general in the Spanish empire. Elites and the

popular classes alike called on divine intervention in personal and society-wide health crises, such

as the epidemic of 1737. The intervention of the Virgin of Guadalupe was depicted in a scene of

dead and dying Indians, with elites on their knees praying for her aid. In the late eighteenth century,

the crown began implementing secularizing policies on the Iberian Peninsula and its overseas

empire that sought to control disease more systematically and scientifically…The practice of

medicine changed in the face of rapid advances in science, as well as new approaches by

physicians. Hospital doctors began much more systematic analysis of patients' symptoms in

diagnosis. Among the more powerful new techniques were anaesthesia, and the development of

both antiseptic and aseptic operating theatres. Actual cures were developed for certain endemic

infectious diseases. However the decline in many of the most lethal diseases was more due to

improvements in public health and nutrition than to medicine. Medicine was revolutionized in the

19th century and beyond by advances in chemistry and laboratory techniques and equipment, old

ideas of infectious disease epidemiology were replaced with bacteriology and virology.”225



Endnotes

1 Plato, The Republic, trans. Benjamin Jowett (Norwalk, Connecticut: The Easton Press, 1980), 232-86. 2 Aristotle, The Politics of Aristotle, trans. Peter L. Phillips Simpson (Chapel Hill, North Carolina: The

University of North Carolina Press, 1997), 40-44. 3 Saint Augustine, The City of God, trans. Marcus Dods (New York: The Modern Library, 1993), 476-7. 4 George N. Shuster, ed., Saint Thomas Aquinas: Selected from his Works (Norwalk, Connecticut: The Easton

Press, 1995), 228 and 391. 5 Ibid., 396-8; and Spiegel, The Growth of Economic Thought, 57-65. 6 Locke, Two Treatises of Government, 139; and Spiegel, The Growth of Economic Thought, 164. 7 Rousseau, The Social Contract and Discourses, 17. “the right which each individual has to his own estate

is always subordinate to the right which the community has over all.” 8 Accessed on April 4, 2016 to https://en.wikipedia.org/wiki/Mercantilism. 9 Lars G. Magnusson, “Mercantilism,” in A Companion to the History of Economic Thought, ed. Warren J.

Samuels, Jeff E. Biddle, and John B. Davis (New York: Blackwell, 2003) 52-6. 10 Henry William Spiegel, The Growth of Economic Thought (Durham, NC: Duke University Press, 1971),

120-69. 11 Accessed on April 10, 2016 to https://en.wikipedia.org/wiki/Richard_Cantillon. 12 Richard Cantillon, Essay on the Nature of Commerce in General (London, UK: Transactions Publishers,

2001), 5-21. 13 Ibid., 21-30. 14 Ibid., 30-48. 15 Ibid., 62. 16 Ibid., 63-91. 17 Ibid., 92-104. 18 Ibid., 105-15. 19 Ibid., 116-30. 20 Everett Johnson Burtt, Jr., Social Perspectives in the History of Economic Theory (New York: St.

Martin’s Press, 1972), 11-2. 21 Ibid., 12. 22 Accessed on April 10, 2016 to https://en.wikipedia.org/wiki/Physiocracy. 23 Accessed on April 15, 2016 to https://en.wikipedia.org/wiki/Fran%C3%A7ois_Quesnay. 24 Gianni Vaggi, The Economics of Francois Quesnay (Durham, NC: Duke University Press, 1987), 16-30. 25 Ibid., 34-57. 26 Ibid., 58-75. 27 Ibid., 86. 28 Ibid., 94-120. 29 Ibid., 121-37. 30 Ibid., 165-92. 31 Accessed on April 16, 2016 to https://en.wikipedia.org/wiki/Anne_Robert_Jacques_Turgot#Education. 32 Turgot, On Progress, Sociology and Economics (New York: Cambridge University Press, 1973), 8-9. 33 Ibid., 10-1. 34 Ibid., 118. 35 Anne Robert Jacques Turgot, Reflections on the Formation and the Distribution of Riches (New York:

Augustus M. Kelley Publisher, 1971), 3-12. 36 Ibid., 13-26. 37 Ibid., 27-38. 38 Ibid., 39-66. 39 Ibid., 67-99. 40 Anthony Brewer, “Pre-Classical Economics in Britain,” in A Companion to the History of Economic

Thought, ed. Warren J. Samuels, Jeff E. Biddle, and John B. Davis (Oxford, UK: Blackwell Publishing,

2003), 78-93.

https://en.wikipedia.org/wiki/Mercantilism

https://en.wikipedia.org/wiki/Richard_Cantillon

https://en.wikipedia.org/wiki/Physiocracy

https://en.wikipedia.org/wiki/Fran%C3%A7ois_Quesnay

https://en.wikipedia.org/wiki/Anne_Robert_Jacques_Turgot#Education



41 Accessed on April 19, 2016 to http://www.gutenberg.org/files/4705/4705-h/4705-h.htm. 42 Eugene Rotwein, ed. David Hume: Writings on Economics (Madison, WI: University of Wisconsin

Press, 1970), ix-xxxi. 43 Ibid., xxxii-liii. 44 Ibid., liv-xc. 45 Ibid., xci-cxi. 46 Accessed on April 19, 2016 to http://www.davidhume.org/texts/pd.html. 47 Eugene Rotwein, ed. David Hume: Writings on Economics, 3-18. 48 Ibid., 33-46. 49 Ibid., 47-59. 50 Ibid., 60-71. 51 Ibid., 72-7. 52 Ibid., 83-9. 53 Ibid., 108-45. 54 Accessed on April 22, 2016 to https://en.wikipedia.org/wiki/Cameralism. 55 Sir James Steuart, An Inquiry into the Principles of Political Oeconomy, volume one (London, UK:

Oliver & Boyd, 1966), 40-1. 56 Henry William Spiegel, The Growth of Economic Thought (Durham, NC: Duke Univ. Press, 1971), 217. 57 Ibid., 218. 58 Ibid., 426-32. 59 Ibid., 636. 60 Ibid., 692. 61 Accessed on April 24, 2016 to https://en.wikipedia.org/wiki/Capitalism. 62 Accessed on April 24, 2016 to https://en.wikipedia.org/wiki/Capitalism#Mercantilism. 63 Accessed on April 25, 2016 to https://en.wikipedia.org/wiki/Adam_Smith#Formal_education. 64 Accessed on April 27, 2016 to https://en.wikipedia.org/wiki/Francis_Hutcheson_(philosopher). 65 Accessed on April 25, 2016 to https://en.wikipedia.org/wiki/Adam_Smith#Later_years. 66 Everett Johnson Burtt, Jr., Social Perspectives in the History of Economic Theory (New York: St.

Martin’s Press, 1972), 45. 67 Herbert W. Schneider, ed., Adam Smith’s Moral and Political Philosophy (New York: Harfner Publishing

Co., Inc., 1948). 68 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Norwalk, Connecticut: The

Easton Press, 1991). 69 Spiegel, The Growth of Economic Thought, 257. 70 Herbert W. Schneider, ed., Adam Smith’s Moral and Political Philosophy, Book I, 1-7. 71 Ibid. 8-11. 72 Ibid. 12-6. 73 Ibid. 95-100. 74 Ibid. 114-22. 75 Ibid. 147-51. 76 Ibid. 214-28. 77 Ibid. 229-40 78 Ibid. 241-62. 79 Herbert W. Schneider, ed., Adam Smith’s Moral and Political Philosophy, Book II, 16-7. 80 Ibid. 61-4. 81 Ibid. 65-100. 82 Ibid. 101-4 83 Ibid. 175-8. 84 Ibid. 179-83. 85 Ibid. 194-216.. 86 Smith, The Wealth of Nations, 1-15. 87 Ibid. 16-20.

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88 Ibid. 21-7. 89 Ibid. 28-42. 90 Ibid. 43-50. 91 Ibid. 51-60. 92 Ibid. 61-85. 93 Ibid. 86-97. 94 Ibid. 98-118. 95 Ibid. 119-45. 96 Ibid. 210-1. 97 Ibid. 211-4. 98 Ibid. 215-7. 99 Ibid. 218-26. 100 Ibid. 227-33. 101 Ibid. 234-43. 102 Ibid. 244-63. 103 Ibid. 264-85. 104 Ibid. 286-95. 105 Ibid. 296-309. 106 Ibid. 310-3. 107 Ibid. 314-9. 108 Ibid. 320. 109 Ibid. 321-6. 110 Ibid. 327-43. 111 Ibid. 344-65. 112 Ibid. 366-72. 113 Ibid. 373-84. 114 Ibid. 385-7. 115 Ibid. 388-402. 116 Ibid. 403-9. 117 Ibid. 410-9. 118 Ibid. 420-41. 119 Ibid. 442-64 120 Ibid. 465-86. 121 Ibid. 487-573. 122 Ibid. 574-90. 123 Accessed on May 4, 2016 to https://en.wikipedia.org/wiki/Jean-Baptiste_Say. 124 Jean-Baptiste Say, A Treatise of Political Economy (London< UK: Transaction Publications, 2001), xii. 125 Ibid., 13-23. 126 Ibid., 40-3. 127 Ibid., 61-89. 128 Ibid., 90-118. 129 Ibid., 131. 130 Ibid., 139-40. 131 Ibid., 142. 132 Ibid., 143-98. 133 Ibid., 199-264. 134 Ibid., 265-81. 135 Ibid., 284-305. 136 Ibid., 306-23. 137 Ibid., 324-58. 138 Ibid., 359-86. 139 Ibid., 387-93.

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140 Ibid., 393-400. 141 Ibid., 401-45. 142 Ibid., 482. 143 Joseph A. Schumpeter, History of Economic Analysis (New York: Routledge, 1994), 492. 144 Henry William Spiegel, The Growth of Economic Thought, 263-4. 145 Everett Johnson Burtt, Jr., Social Perspectives in the History of Economic Theory, 71. 146 Accessed on May 8, 2016 to http://www.britannica.com/biography/Thomas-Robert-Malthus. 147 Henry William Spiegel, The Growth of Economic Thought, 270. 148 T. R. Malthus, An Essay of the Principles of Population (Norwalk, CT: The Easton Press, 1992), xxi. 149 Ibid., 13-20. 150 Ibid., 21-8. 151 Ibid., 28-9. 152 Ibid., 31-44. 153 https://en.wikipedia.org/wiki/Marquis_de_Condorcet#The_Idea_of_Progress accessed on May 13, 2016. 154 T. R. Malthus, An Essay of the Principles of Population, 45-55. 155 Malthus, An Essay of the Principle of Population, 56-80; and William H. Spiegel, The Growth of

Economic Thought, 268-9. For further, see William Godwin, Enquiry Concerning Political Justice and Its

Influence on Modern Morals and Happiness (New York: Viking Printing, 1993). 156 T. R. Malthus, An Essay of the Principles of Population, 56-67. 157 Ibid., 81-8. 158 Ibid., 89-123. 159 Ibid., 147-8. 160 Access on May 15, 2016 to https://en.wikipedia.org/wiki/Corn_Laws. 161 Ibid., 151-180. 162 Ibid., 174-5. 163 Ibid., 189-90. 164 Ibid., 217-42. 165 Ibid., 280-8. 166 Thomas R. Mallthus, Principles of Political Economy (New York: Augustus M. Kelley, 1936), 21-33. 167 Ibid., 60. 168 Ibid., 50-135. 169 Ibid., 136-72. 170 Ibid., 173-216. 171 Ibid., 217-61. 172 Ibid., 262-98. 173 Ibid., 299-308. 174 Ibid., 309-71. 175 Ibid., 372-82. 176 Ibid., 401. 177 Ibid., 413-37. 178 Accessed on May 16, 2016 to http://www.britannica.com/biography/David-Ricardo. 179 David Ricardo, Principles of Political Economy and Taxation (Amherst, New York: Prometheus Books,

1996), 17-44. 180 Ibid., 17-44. 181 Ibid., 45-56. For further, see Spiegel, The Growth of Economic Thought, 34. 182 Ibid., 63. 183 Ibid., 65-75. 184 Ibid., 88. 185 Ibid., 89-104. 186 Accessed on May 17, 2016 to

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187 Everett Johnson Burtt, Jr., Social Perspectives in the History of Economic Theory (New York: St.

Martin’s Press, 1972), 83-96. 188 Will and Ariel Durant, The Age of Voltaire (Norwalk, CT: The Easton Press, 1992), 493-509. 189 Ibid., 507-8. 190 Accessed on May 19, 2016 to https://de.wikipedia.org/wiki/Generallandschulreglement. 191 Accessed to May 17, 2016 to

https://en.wikipedia.org/wiki/The_History_of_the_Decline_and_Fall_of_the_Roman_Empire. 192 Accessed on May 17, 2016 to http://www.visitvoltaire.com/v_louis_xiv.htm. 193 Accessed on May 17, 2016 to http://www.infoplease.com/encyclopedia/entertainment/english-literature-

the-eighteenth-century.html. 194 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/One_Thousand_and_One_Nights. 195 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/18th-

century_French_literature#The_French_novel_in_the_18th_century. 196 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/18th-century_French_literature. 197 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/18th-century_French_art. 198 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Classical_music#Classical_music. 199 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Education_in_the_Age_of_Enlightenment. 200 https://en.wikipedia.org/wiki/Education_in_the_Age_of_Enlightenment#Prussian_system accessed on

May 18, 2016. 201 https://en.wikipedia.org/wiki/Education_in_the_Age_of_Enlightenment#Public_Libraries accessed on

May 18, 2016. 202 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Science_in_the_Age_of_Enlightenment. 203 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Leonhard_Euler. 204 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Joseph-Louis_Lagrange. 205 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/History_of_physics#Mechanics. 206 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/History_of_physics#Thermodynamics. 207 Ibid., the same. 208 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/History_of_physics#19th_century. 209 Accessed on May 18, 2016 to

https://en.wikipedia.org/wiki/History_of_chemistry#Development_and_dismantling_of_phlogiston. 210 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Alessandro_Volta. 211 Accessed on May 18, 2016 to

https://en.wikipedia.org/wiki/History_of_chemistry#Volta_and_the_Voltaic_Pile. 212 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/History_of_chemistry#Antoine-

Laurent_de_Lavoisier. 213 Will and Ariel Durant, The Age of Voltaire, 539. 214 Ibid., 540. 215 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/William_Herschel. 216 Accessed on May 18, 2016 to https://en.wikipedia.org/wiki/Pierre-Simon_Laplace#Celestial_mechanics. 217 Will and Ariel Durant, The Age of Voltaire, 550-60. 218https://en.wikipedia.org/wiki/History_of_botany#The_Renaissance_and_Age_of_Enlightenment_.28155

0.E2.80.931800.29 accessed on May 18, 2016. 219https://en.wikipedia.org/wiki/History_of_zoology_(through_1859)#Renaissance_and_early_modern_dev

elopments accessed on May 18, 2016. 220 Will and Ariel Durant, The Age of Voltaire, 576-8. 221 Ibid., 583. 222 https://en.wikipedia.org/wiki/History_of_medicine#Renaissance_to_Early_Modern_period_16th-

18th_century accessed on May 19, 2016. 223 Accessed on May 19, 2016 to https://en.wikipedia.org/wiki/History_of_medicine#Padua_and_Bologna. 224 Accessed on May https://en.wikipedia.org/wiki/History_of_medicine#Britain. 225 https://en.wikipedia.org/wiki/History_of_medicine#19th_century:_Rise_of_modern_medicine accessed

on May 19, 2016.

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https://en.wikipedia.org/wiki/18th-century_French_literature#The_French_novel_in_the_18th_century

https://en.wikipedia.org/wiki/18th-century_French_literature

https://en.wikipedia.org/wiki/18th-century_French_art

https://en.wikipedia.org/wiki/Classical_music#Classical_music

https://en.wikipedia.org/wiki/Education_in_the_Age_of_Enlightenment

https://en.wikipedia.org/wiki/Education_in_the_Age_of_Enlightenment#Prussian_system

https://en.wikipedia.org/wiki/Education_in_the_Age_of_Enlightenment#Public_Libraries

https://en.wikipedia.org/wiki/Science_in_the_Age_of_Enlightenment

https://en.wikipedia.org/wiki/Leonhard_Euler

https://en.wikipedia.org/wiki/Joseph-Louis_Lagrange

https://en.wikipedia.org/wiki/History_of_physics#Mechanics

https://en.wikipedia.org/wiki/History_of_physics#Thermodynamics

https://en.wikipedia.org/wiki/History_of_physics#19th_century

https://en.wikipedia.org/wiki/History_of_chemistry#Development_and_dismantling_of_phlogiston

https://en.wikipedia.org/wiki/Alessandro_Volta

https://en.wikipedia.org/wiki/History_of_chemistry#Volta_and_the_Voltaic_Pile

https://en.wikipedia.org/wiki/History_of_chemistry#Antoine-Laurent_de_Lavoisier

https://en.wikipedia.org/wiki/History_of_chemistry#Antoine-Laurent_de_Lavoisier

https://en.wikipedia.org/wiki/William_Herschel

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https://en.wikipedia.org/wiki/History_of_botany#The_Renaissance_and_Age_of_Enlightenment_.281550.E2.80.931800.29

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https://en.wikipedia.org/wiki/History_of_medicine#Renaissance_to_Early_Modern_period_16th-18th_century

https://en.wikipedia.org/wiki/History_of_medicine#Renaissance_to_Early_Modern_period_16th-18th_century

https://en.wikipedia.org/wiki/History_of_medicine#Padua_and_Bologna

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