The Development of Economics

CHAPTER VIII

THE PERIOD FROM 1776 TO 1815

A. Economic and Social Conditions

In contrast with the comparative peacefulness of the first three quarters of the eighteenth century, the generation that lived in the period between the publication of The Wealth of Nations and that of Ricardo’s Principles of Political Economy was constantly harassed by war and its consequences. In 1776 came the revolt of the American Colonies, which was followed by the Revolutionary War, and in 1812-1814 by a second war with the new republic. In 1789 the French Revolution started. With this at first the English people sympathized, but this feeling was later followed by one of horror and antagonism on account of the atrocities committed by the revolutionists and the radical doctrines and measures they advocated. Then followed the Napoleonic wars, in which England played a leading role. During the same period the so-called industrial revolution was in progress.

This combination of events was accompanied and followed by great changes in economic, social, and political life. Among these of prime importance were a rapid growth in the volume of manufactures and an increase in their relative importance in the national economy; a spread of factories and a corresponding decay of the domestic system of industry; a migration of industry from the old towns and rural districts to new provincial centers; the rapid progress of the process of the substitution of large estates cultivated for profit by capitalist tenants and hired laborers for small farms cultivated by yeomen and their families primarily for the supply of food and clothing for themselves, who in their spare time spun and wove for the clothiers or their agents; a rapid growth and redistribution of the population and great changes in their ways and standards of living; a great increase in the public debt and in the burden of taxation; and the suspension of specie payments by the Bank of England. The period was also characterized by frequent and great fluctuations in prices, especially of corn and other food products, caused primarily by the interruptions to commerce occasioned by the wars, and by agitation for changes in the constitution of Parliament and the local governments.

Some of the problems which accompanied these changes deserve attention because of their relation to the economic thought of the period. One of them was the supply of food for the rapidly increasing population. Great progress was made during the period in the improvement of agricultural methods and in bringing into cultivation pastures and waste lands. The high prices of agricultural produce facilitated these changes by making it profitable to invest capital in this way. In spite of large investments of this nature, however, the country was unable to supply itself with food. The importation of corn and other food products became more and more urgent and, before the close of the eighteenth century, an annual necessity. This condition raised a question regarding the desirability of the maintenance of the corn-laws, a constantly growing number of people urging their repeal. This problem was constantly before Parliament from the beginning of the nineteenth century until it was settled in 1846.

Another problem was caused by the wretchedness and misery of the laboring classes and the care of the poor. The substitution of the factory for the domestic system of manufacturing moved thousands of people from country villages to crowded industrial centers. It substituted for work in the open air and in cottages work in badly lighted, badly ventilated, and in other respects unsanitary buildings; it required long hours of monotonous toil in connection with machines instead of the varied tasks of farmers and their families, who spun and wove on rainy days in winter, and at odd hours; it greatly increased the labor of women and children; and it severed old associations and friendships of people who were ill fitted to form compensating new ones. Under these conditions, too, wages were frequently far from adequate to enable people to maintain their accustomed standards of living.

Many of the people who were left behind in the country also suffered from the changes taking place. Unable to compete with the factories and the capitalist farmers, the yeomen little by little sold their small holdings and either moved to the cities and sought employment in the factories or became agricultural laborers. In either case their lot was not improved.

This shifting of employment and movement from place to place, together with the high price of food, pushed the weaker members of society over the line that marked division between self-support and pauperism and greatly increased the burden of poor-relief upon the parishes.

A third problem concerned the extension of old and the opening of new foreign markets for the increasing volume of manufactured goods, now each year becoming more and more in excess of the capacity for domestic consumption. The loss of the American Colonies aggravated this problem and demanded a change of tactics. England had now become dependent upon foreign markets not only for the disposal of her surplus manufactures but for the supplying of food, which she could no longer produce in sufficient quantities, and of a constantly increasing quantity of raw materials for her industries.

The suspension of specie payments by the Bank of England in 1797 was caused by a run on the country banks occasioned by the fear of a French invasion and the demands made upon the government for specie for shipment abroad for the subsidization of her allies against Napoleon. The effect of this procedure upon prices and the rates of foreign exchange was a subject of speculation for a generation, and the problem of resumption of specie payments was constantly before Parliament until it was accomplished in 1821.

The solution of these and other economic problems could not be found in the pages of The Wealth of Nations, helpful though that book had been to the business men and statesmen of the preceding generation. Adam Smith’s contributions, as the name of his book suggests, had been chiefly to the theory and practice of production, as economists now define that term. The problems of the new era belonged chiefly to the field of distribution, a topic which Smith treated more or less as a side issue in connection with the explanation of prices. His observations on this subject are interesting and illuminating, but they were superseded by the theories of economists of the period under discussion.

In explanation of English economic thought of the later eighteenth and early nineteenth centuries, it is also necessary to take account of the influence of the tremendous social, political, and economic changes in France during this period, which undermined traditional ideas regarding government, society, and progress and gave a great stimulus to thought concerning these matters.

B. The Malthusian Doctrine of Population

In England one of the products of this thought-stimulus from France was the Political Justice of William Godwin, published in 1793. The author of this book was a precursor of modern anarchism. He invented the famous maxim that “All government, even the best, is an evil,” and he had sublime confidence in the capacity of the human race for progress. In this book he developed in particular the possibilities of the advancement of science and of the influence of reason upon the conduct of men. The former, he said, would so increase the productivity of human labor that all material wants could be satisfied, by a half-hour’s work per capita per day; the latter would prevent too rapid an increase of population. Indeed, he believed that reason would dominate men to such a degree that reproduction would cease and man become immortal.

A companion volume appeared in France the following year, 1794, written by Condorcet, a prisoner awaiting the guillotine. It was entitled Esquisse d’un tableau historique du progres de l’Esprit Humain and expressed the same confidence as the Political Justice in the potency of science and reason in the future affairs of men. In 1797 Godwin supplemented his Political Justice by a new work entitled The Inquirer, in which many of his former thoughts were put in a new and stronger light.

The position taken by the younger Malthus in his argument with his father and in his essay was that Godwin had overestimated the influence of reason upon the improvement of society. He expressed the conviction that, under the normal operation of a natural instinct, population tends to increase faster than the food supply, and that the misery and vice which necessarily result render impossible the realization of the visions of Godwin and Condorcet regarding the perfectibility of men and society.

He illustrated this alleged tendency of population to increase faster than the food supply by contrasting the results of a geometrical and an arithmetical progression, the former illustrating the natural rate of the increase of population and the latter that of the food supply. Suppose, for example, that population should double itself every twenty-five years, a rate of increase which had actually been realized in the United States, and that the food supply of each succeeding twenty-five-year period should increase by an amount equal to the total product at the beginning, a rate which seemed to Malthus to be the maximum that could be hoped for and more than was at all likely to be realized, the results at the end of two centuries would be represented by the following figures:

1	2	4	8	16	32	64	128	256
1	2	3	4	5	6	7	8	9

That is to say, if the relation between population and food supply at the beginning be as 1 to 1, at the end of 200 years it would be as 256 to 9. If the relation 1 to 1 represents an adequate food supply, that of 256 to 9 would represent an impossible condition, indeed that of 8 to 4, the condition at the end of seventy-five years, would represent a food supply of only one-half the amount needed.

According to this argument, the available food supply acts as a barrier against which population is constantly pressing. This pressure Malthus described under the head of “Checks to Population,” which, viewed objectively, he classified as positive and preventive, the former including “every cause, whether arising from vice or misery, which in any degree contributes to shorten the natural duration of human life,” and the latter every cause which diminishes the birth-rate. Viewed subjectively, he classified these checks in the first essay as “misery” and “vice,” the latter ultimately resulting in the former, but being distinguishable from it in the first stages of its history by the fact that its immediate effects may be happiness.

The publication of this essay in 1798 was followed by widespread discussion and criticism, which stimulated the author to make further researches. In the prosecution of these researches he made an extended trip on the Continent. The outcome was a book on the subject, published in 1803 with the title An Essay on the Principle of Population, or A View of Its Past and Present Effects on Human Happiness with an Inquiry into Our Prospects Respecting the Future Removal or Mitigation of the Evils Which It Occasions.

The recognition of moral restraint as a check to population diminished in some degree the effectiveness of the first essay as an argument against the perfectionists, but his account in the second essay of the manner in which these checks have operated in the past and are at present operating among all classes and kinds of people, savage as well as civilized, put the burden of proof upon them and upon all those who were advocating measures which would result in the increase of population. The presumption was now in favor of restrictive measures, whereas previously the prevailing idea was that an increase of population was a good thing and should be encouraged.

The second essay was a scientific treatise and not, like the first, a polemical tract. Its chief contemporary influence was not directed so much against the perfectionists as against the poor-relief measures which were being advocated.

C. The Theory of Rent

In a pamphlet published in 1777 by James Anderson, a Scotch farmer, entitled Inquiry into the Nature of the Corn Laws with a View to the New Corn Bill for Scotland, an explanation of the rent of land is given which may be described as the differential principle. This is that the rent of a given area of land is determined by the difference between the value or price of its produce and that of the same area of poorer land on which the value or price of the produce is just sufficient to cover the cost of production. The argument is that a given area of land of superior fertility, say an acre, will yield more units of produce than the same area of land of an inferior quality, in exact proportion to its superiority, and consequently a greater monetary return to its cultivator in the same proportion; that the cost of production on the superior land will be no greater, and probably less, than on the inferior; that the surplus over the cost of production on the superior land can be collected as rent by the proprietor because the payment of that amount will just equalize for the cultivator conditions on the two pieces of land; and that the supply of the needs of the population for food and other agricultural produce will force the cultivation of lands of degrees of fertility ranging from the highest down to that on which the returns will just equal the cost of production, and no lower because cultivators could not afford or long continue to cultivate lands at a loss. Marginal land will yield no more than the cost of production, because the value of agricultural produce is determined by the cost of production on such lands.

In the above-mentioned work and in a pamphlet published the same year entitled Observations on the Means of Exciting a Spirit of National Industry Anderson states the differential principle and develops with great clarity all the phases of this argument except the one pertaining to the causal relation between value and cost of production on the margin; but he did not state and apparently did not believe the doctrine of diminishing returns in agriculture that later came to be associated with it. This latter doctrine appeared in connection with the debates in Parliament on the corn-laws that took place during the Napoleonic wars.

During these wars the price of corn increased to unprecedentedly high levels, and fluctuated greatly. To the agricultural interests they thus served as the equivalent of a high protective tariff. When the peace of Amiens was arranged and with it appeared the prospect of a cessation of the war and of the discontinuance of this artificial protection, the representatives of the agricultural interests in Parliament urged a change in the corn-law of 1791 then in force. This law imposed upon foreign wheat a duty of 24s. 3d. per quarter whenever the English price was below 50s. per quarter, one of 2s. 6d. when the English price was between 50s. and 54s. per quarter, and one of 6d. when the price in England was over 54s. per quarter. They recommended an amendment to the law which would authorize the highest duty, 24s. 3d. per quarter, whenever the English price was below 53s. In spite of considerable opposition their recommendation was incorporated in the corn-law of 1804.

The renewal of the war between England and Napoleon restored the artificial barrier of protection and postponed further agitation regarding the corn-laws until the capture of Napoleon in 1813, when the agriculturalists were again alarmed and asked that the law of 1804 be so amended as to permit the maximum duty to be levied whenever the price in England should be 80s. or below. This request was vigorously opposed by the representatives of the capitalist class and by nearly all members of Parliament who were not directly interested in agriculture or closely allied to those who were, and it inaugurated a contest which was destined to continue for more than a generation.

In the early stages of this controversy were raised questions concerning the effects of corn duties and farm rents on the price of corn. Some of the advocates of the increase in the corn duties argued that their ultimate effect would be to lower the price. They reasoned that temporary high prices occasioned by the proposed duties would attract capital into agriculture, improve agricultural methods, and increase the product. Competition between sellers would then force down the price. They were able to support their arguments by reference to the undoubted effects of the high prices of preceding years in extending the area and improving the method of cultivation.

The doctrine of diminishing returns is thus made by West a law of universal application. He suggests that it is not only applicable to all cultivated lands, in the sense that in a given condition of the agricultural arts the application of additional quantities of capital to land would result in a proportionately diminished return, but that the law is also true historically, and that in spite of improvements that may be made in agriculture the law of diminishing returns holds true.

The application of the doctrine of diminishing returns to the explanation of rent was made by Malthus and Ricardo. At the very time that West was preparing the pamphlet from which the above quotations were made, Malthus was writing two others, entitled respectively The Grounds of an Opinion on the Policy of Restricting the Importation of Foreign Corn; Intended as an Appendix to the Observations on the Corn Laws and An Inquiry into the Nature and Progress of Rent and the Principles by Which It Is Regulated. In the first-mentioned pamphlet he declared his adherence to the protectionist side of the corn-law controversy but gave as his reason for taking this position the necessity in his opinion that England should be independent of foreign nations in the production of her food supply. He did not, however, conceal the fact that such independence must be purchased with a price and that England could not supply herself with food without forcing cultivation down to the poorer lands and thus raising the price of corn to a point above the price current in the other countries of Europe. He tells us in the preface that he wrote the pamphlet on Nature and Progress of Rent for the purpose of combating an idea very prevalent at the time to the effect that high rents were injurious to the country. The impression to which Malthus refers was expressed by the free-traders in Parliament in the form of an argument to the effect that prices were high because rents were high. These persons suggested that if, as the advocates of protection claimed, the lowering of the price of corn would make it unprofitable for a tenant to continue to cultivate the lands of poorest quality, their difficulty could be easily removed by relieving them of the necessity of paying so high rents. If, for example, as was claimed, the cost of production on the poorest lands was 80s. per quarter, that cost without doubt included a certain amount of rent, say 20s. Now, if the price of corn should fall to 70s., clearly the cultivator could not afford to pay the necessary expenses of cultivation—in this case 60s.—and 20s. as rent, but he could pay 60s. as cultivating expenses and 10s. as rent. They therefore suggested that the rents in such a case be lowered. It was against this sort of an argument that Malthus wished to prevail in the pamphlet in question. He wished to show that the rent which the landlord paid was a necessary result of the price of corn, and that it could not be lowered by an arbitrary process such as the free-traders suggested. In other words, he attempted to prove that the rent of land is a necessary result of the cultivation of land of different degrees of fertility. In the course of his pamphlet, however, he goes at length into an exposition of the doctrine of rent under various aspects, and tries to show that inasmuch as rents are the difference between the product on the poorest and the best lands, high rents are only possible in a country in which there are very good as well as very poor lands, and consequently that the existence of high rents in any country is evidence that that country is rich, that its agricultural products are abundant, that its lands are very fertile; and low rents, he claims, would necessarily indicate the opposite state of things; hence the conclusion that high rents indicate national prosperity and low rents national decline.

D. The Doctrine that Capital Is Productive

Adam Smith emphasized the productivity of labor and assigned to capital the function of setting labor in motion. In contrast to this view is the doctrine that there are three coordinate, cooperating factors in production, viz., nature, labor, and capital, and that each of these deserves to be called productive.

In subsequent portions of his book he uses the term productive service or services as descriptive of the work performed in production by each of these factors and considers it equally applicable to each.

He also shows how labor is saved by capital employed in domestic and foreign trade, agriculture, and “merely for the purpose of circulation” (see pp. 179-193). According to him, capital works and produces what labor might otherwise have produced, if it had not been supplanted, or what labor cannot produce. He contrasts this with Smith’s doctrine that capital merely “adds to the productive powers of labour” and notes some of the errors into which he thought Smith was led by his doctrine (see pp. 194-197).

E. Bank-Note Issues and Price Fluctuations

The suspension of specie payments by the Bank of England was followed by a rise of prices and of the rates of foreign exchange, and the connection between these phenomena and the remedy for the evils resulting from them became the subject of much speculation inside and outside of Parliament. Two theories regarding the relation between bank credit and prices were the result. One was that the suspension of specie payments caused the notes of the Bank of England to depreciate, to become a secondary standard of value and thus to raise prices and the rates of foreign exchange. The remedy for the evils in question suggested by the advocates of this theory was the resumption of specie payments, which they claimed would bring the value of the notes to a parity with gold and thus remove the cause of the trouble.

The other theory was that bank-notes affect prices through their volume only and, so long as this is not excessive (i.e., not great enough to increase the proportion between the total amount of money in circulation and the quantity of commodities to be exchanged by means of it) it cannot cause a rise of prices. These theorists did not believe that such a change in the relation between the quantity of money in circulation and of goods to be exchanged had taken place and consequently that the suspension of specie payments had caused a rise in prices. They explained the rise in the foreign exchanges by asserting that gold had appreciated. Holding these views, they did not believe that the resumption of specie payments would remedy the evils in question, and they therefore opposed it.

Footnotes

1 James Bonar, Malthus and His Work (New York: Harper & Brothers, 1885), pp. 4 and 5.

2 Quotations are from the edition published in 1890 by Ward, Lock and Co., with a biography and introduction by G. T. Bettany.

3 pp. 4 and 5.

4 Essay on Population, p. 8.

5 This essay was reprinted in A Reprint of Economic Tracts, edited by Jacob H. Hollander of Johns Hopkins University. All references are to this reprint.

6 Ibid., p. 12.

7 Ibid., p. 14.

8 C. B. Princeps’s translation of the fourth edition published in Philadelphia in 1844 under the title A Treatise on Political Economy; or the Production, Distribution, and Consumption of Wealth by Jean-Baptiste Say, p. 77.

9 Ibid., p. 85.

10 Ibid., pp. 85 and 86.

11 Quotations are from the second edition, published in 1819.

12 Op. cit., pp. 314 and 315.

13 Op. cit., p. 158.

14 Ibid., p. 159.

15 Ibid., pp. 160, 161.

16 For a detailed account of this controversy see Macleod’s The Theory and Practice of Banking, II, Ch. IX.

• 1Professor Schmoller found the key to the explanation of this aspect of the system in the development of the national economies of the various European states. These succeeded (in order of time) territorial, municipal, tribal, and family economies, each representative of a certain stage in the history of European civilization, and each produced by the struggle of contending forces, a higher and broader organization in each case subordinating to itself lower and narrower ones. “The essence of this system,” he says, “lies not in some doctrine of money, or of the balance of trade; not in tariff barriers, protective duties, or navigation laws, but in something far greater, namely, in the total transformation of society and its organization, as well as of the state and its institutions, in the replacing of a local and territorial economic policy by that of the national state.” More specifically he says, “The whole internal history of the seventeenth and eighteenth centuries, not only in Germany but everywhere else, is summed up in the opposition of the economic policy of the state to that of the town, the district, and the several estates; the whole foreign history is summed up in the opposition to one another of the separate interests of the newly rising states, each of which sought to obtain and retain its place in the circle of European nations, and in that foreign trade which now included America and India. What was at stake was the creation of real political economies as unified organisms, the center of which should be, not merely a state policy reaching out in all directions, but rather the living heart-beat of a united sentiment.”
• 2Professor Schmoller found the key to the explanation of this aspect of the system in the development of the national economies of the various European states. These succeeded (in order of time) territorial, municipal, tribal, and family economies, each representative of a certain stage in the history of European civilization, and each produced by the struggle of contending forces, a higher and broader organization in each case subordinating to itself lower and narrower ones. “The essence of this system,” he says, “lies not in some doctrine of money, or of the balance of trade; not in tariff barriers, protective duties, or navigation laws, but in something far greater, namely, in the total transformation of society and its organization, as well as of the state and its institutions, in the replacing of a local and territorial economic policy by that of the national state.” More specifically he says, “The whole internal history of the seventeenth and eighteenth centuries, not only in Germany but everywhere else, is summed up in the opposition of the economic policy of the state to that of the town, the district, and the several estates; the whole foreign history is summed up in the opposition to one another of the separate interests of the newly rising states, each of which sought to obtain and retain its place in the circle of European nations, and in that foreign trade which now included America and India. What was at stake was the creation of real political economies as unified organisms, the center of which should be, not merely a state policy reaching out in all directions, but rather the living heart-beat of a united sentiment.”
• 3The industrial organization of the towns was also gradually weakened by conflicts of interest between townsmen themselves and the oppression of the weaker trades by the stronger, and by the growth of domestic industries. Increasing interference of the central government in town affairs was invited by these conditions, and the power of resistance to it was weakened. The growth of a merchant class in London and some of the other large towns also contributed to the same result. The interests of this class extended beyond the boundaries of the town in which they lived and were promoted by the breaking-down of local trade barriers. The power of this class grew rapidly in and after the sixteenth century.
• 4By the seventeenth century a national commercial and industrial organization had developed, the chief organs of which were middlemen who intervened between producers and consumers and between different classes of producers. Among those of chief importance were the wool-staplers, the clothiers, the drapers, and the foreign trading companies. The wool-staplers purchased the farmers’ wool, their most important staple, and sold it to manufacturers or foreign merchants. The clothiers acted as middlemen between the carders, spinners, weavers, and other handicraftsmen engaged in transforming the wool into cloth. They purchased the wool from the staplers, delivered it to the carders and spinners, distributed the yarn among the weavers to be woven into cloth, and then placed the cloth in the hands of the “fuller,” “walker,” or “tucker” to be fulled and cleansed. The spinners, carders, weavers, and fullers were scattered throughout the hamlets and villages as well as the cities of the country, in many, perhaps most cases, doing agricultural work as a main or a side occupation. The drapers purchased the cloth and sold it to consumers or to foreign merchants; some of them were themselves connected with one of the trading companies. Foreign commerce was chiefly carried on by these latter organizations, to each of which a charter had been granted conferring the exclusive right to trade in a specified part of the world. The Eastland Company, for example, had the exclusive right to trade with Scandinavia and the Baltic region; the Russian Company, with Russia; the Merchant Adventurers, with the Netherlands; the Levant Company, with the Mediterranean region; the Guinea or African Company, with Africa; the East India Company, with the countries of Asia; and several other companies with portions of the American field. At the beginning of the seventeenth century France, Spain, and Portugal were the only countries with which trade could be carried on by an Englishman not a member of one of the companies.
• 5The literary remains of Colbert are of the same general character as those of Sully in that they consist of letters, instructions, and memoirs. They differ from Sully’s, however, in the extent to which they reflect mercantile doctrines. Colbert was the chief executor of the mercantile policy of France, and among his letters, instructions, and other papers may be found expositions and defense of nearly every feature of it. Much more completely than the English writers he reflected the doctrines of nationalism and of the entrepreneur relation of the state to industry. To a greater extent than in any other country these doctrines were realized in the practices of France during the reign of Louis XIV, and for this fact Colbert was largely responsible. Louis XIV aspired to be not only absolute sovereign in France but the dictator of Europe, and he fully realized that foreign commerce and command of the world’s supply of the precious metals would assist in the accomplishment of his purposes.
• 6Becher was at one time a court physician and professor of medicine in Mainz, whence he went to Wurzburg, and later to Vienna. At the two latter places, he was connected with the carneræ of the reigning sovereigns. He wrote on natural science as well as Kameralwissenschaft, his chief work in the latter field appearing at Frankfurt in 1668 under the title Politische Discurs von den eigentlichen Ursachen des Auf- und Abnehmens der Städte, Lander und Republiken, in specie, wie ein Land Volkreich und Nahrhaft zu machen und in rechte Societaten civilen zu bringen. In this book he defines a city as eine volkreiche, nahrhafte Gemeine and defends the following fundamental propositions: The more populous a city, the more powerful it is; but in order to be populous, it must be supplied with an abundance of nourishment; the membership of a community consists of (a) those who serve it and are supported by it, for example, government officers, clergy, learned men, physicians, apothecaries, soldiers, etc.; and (b) those who really constitute it, namely, peasants, handicraftsmen, and merchants. These three classes are essential each to the other. In explaining their mutual relations, however, he makes the following argument: “Consumption is the soul of the three classes, the only bond which holds them together and enables them to live by each other. It is on account of consumption that the merchant class is so necessary in a community, however large the peasant class may be. . . . Since the nourishing of a community can only be accomplished through the trading [Verhandlung] and turning into money [Versilberung] of goods . . . everything which hinders these operations hinders and weakens the populousness which results from it.”
• 7Wilhelm Freiherr von Schroder was in the service of Austria as conductor of a factory according to plans outlined by Becher. He wrote several books, the most noteworthy of which was entitled Fürst-liche Schatz und Rentkammer, which was published in 1686. He was a strong advocate of absolute monarchy and admirably set forth the mercantilistic view of the relation of a sovereign to his people, in the following passage: “A Prince is like a housefather. Now a housefather must fertilize and plough his fields if he would reap a harvest therefrom. He must well stock his pond if he would have fish. He must feed his cattle if he would slaughter them, and well fodder his cows if he desires them to give much milk. Thus a Prince must first help his subjects to a good living, if he wishes to take anything from them.”
• 8In the Détail he gives a discussion of the relation between money and wealth in which he says: “As gold and silver are not and never have been wealth in themselves and are valued only in relation to other things necessary to life,—to which things they serve only as a guarantee and a measure of value,—it is a matter of indifference whether we have much or little of them, provided the same results are produced.” That the same results are produced by much or little he attempts to prove by the following: “Thus we learn from the old accounts that in 1250 a laborer in Paris, who to-day earns 40 or 50 sous a day, earned only 4 pennies a day, 12 one-hundredths part of what he earns now. Nevertheless he then lived with as much comfort as now because all things were in proportion. He satisfied his wants with his four pennies as well as one of the same trade now does with his 50 sous. It follows that a man who at that time had a thousand livres of rent was as rich as one who at present has one hundred thousand.”
• 9In other connections he says: “It is very certain that it [money] is not a good in itself and that the quantity of it does nothing for the opulence of a country in general provided there is enough of it to sustain the prices of the goods necessary to life.”
• 10Silver and gold, he says, have as competitors copper, leather, shells, and “a simple piece of paper which costs nothing but nevertheless performs all the functions of money to the amount of millions by passing from hand to hand an infinite number of times.” By way of illustration he refers to the Lyons fair in the following manner: “In a commerce consisting of purchases and sales to the amount of more than eighty millions not a ‘sou marque’ of money is seen. Everything is done by bills of exchange which after passing through an infinite number of hands, finally return to the original drawer.”
• 11In other connections he emphasized the need of an equilibrium between purchases and sales and the importance of proper adjustments of prices, especially of the prices of raw produce and manufactures.
• 12In order to secure these and other needed adjustments, he affirmed that reliance can be placed only on nature. The following words of his taken from Chapter V of the Dissertation present this doctrine clearly:
• 13In this book he refers with approval to Boisguillebert’s description of conditions, including his criticisms of the system of taxation. His own studies, he says, have revealed “conditions which correspond perfectly to what was written concerning them by the author of the Detail de la France, who developed and brought to the light of day very naturally the abuses and malpractices which are practiced in the imposition and the levy of the Tailles, the Aides and the Provincial tariffs.” In his memoir to Le Pelletier he also said: “Let his Majesty have the goodness to remember that the grandeur of kings can only be measured by the number of their subjects, that upon that depends all their grandeur, their power and their riches, and that without that they have only vain titles which are burdens to themselves and to everybody else and nothing more.” In his book he stresses the doctrine “that persons of all conditions should contribute to the public expenses in proportion to their revenue and their industry without privilege or exemption; that taxes ought to be easily collected in such a manner as not to give rise to contests or to vexations on the part of the fiscal agents; and that so far as possible the contributor should be able to pay all his taxes at one time.” The reform he proposed was the levy of what he called a dîme royale or royal tithe, which in substance was a tax to be derived from four different sources:
• 14In this book he refers with approval to Boisguillebert’s description of conditions, including his criticisms of the system of taxation. His own studies, he says, have revealed “conditions which correspond perfectly to what was written concerning them by the author of the Detail de la France, who developed and brought to the light of day very naturally the abuses and malpractices which are practiced in the imposition and the levy of the Tailles, the Aides and the Provincial tariffs.” In his memoir to Le Pelletier he also said: “Let his Majesty have the goodness to remember that the grandeur of kings can only be measured by the number of their subjects, that upon that depends all their grandeur, their power and their riches, and that without that they have only vain titles which are burdens to themselves and to everybody else and nothing more.” In his book he stresses the doctrine “that persons of all conditions should contribute to the public expenses in proportion to their revenue and their industry without privilege or exemption; that taxes ought to be easily collected in such a manner as not to give rise to contests or to vexations on the part of the fiscal agents; and that so far as possible the contributor should be able to pay all his taxes at one time.” The reform he proposed was the levy of what he called a dîme royale or royal tithe, which in substance was a tax to be derived from four different sources:
• 15In this book he refers with approval to Boisguillebert’s description of conditions, including his criticisms of the system of taxation. His own studies, he says, have revealed “conditions which correspond perfectly to what was written concerning them by the author of the Detail de la France, who developed and brought to the light of day very naturally the abuses and malpractices which are practiced in the imposition and the levy of the Tailles, the Aides and the Provincial tariffs.” In his memoir to Le Pelletier he also said: “Let his Majesty have the goodness to remember that the grandeur of kings can only be measured by the number of their subjects, that upon that depends all their grandeur, their power and their riches, and that without that they have only vain titles which are burdens to themselves and to everybody else and nothing more.” In his book he stresses the doctrine “that persons of all conditions should contribute to the public expenses in proportion to their revenue and their industry without privilege or exemption; that taxes ought to be easily collected in such a manner as not to give rise to contests or to vexations on the part of the fiscal agents; and that so far as possible the contributor should be able to pay all his taxes at one time.” The reform he proposed was the levy of what he called a dîme royale or royal tithe, which in substance was a tax to be derived from four different sources:
• 16The author, Richard Cantillon, was born in Ireland between 1650 and 1690. Soon after the death of Louis XIV he removed to Paris and engaged in the business of banking during the period in which John Law flourished. Being confident of the ultimate failure of the Mississippi scheme, Cantillon speculated on the bear side of the market and made a fortune, but incurred the enmity of Law and was obliged to leave France. He was murdered in London on May 16, 1734, by a discharged man-servant, who set fire to his house and stole some of his papers.