An Essay on Economic Theory

1.14. The Desires, Fashions, and Ways of Life of the Prince, and especially of the Property Owners, Determine the Use to which Land is put in a State, and Cause the Variations in the Market Prices of all Things

An Essay on Economic Theory by Richard Cantillon
Richard Cantillon

Cantillon constructs a model of the isolated estate or closed economy where the choices of property owners determine outputs and prices, regardless if they manage the isolated estate or lease it to farmers. Mistakes of the farmers or changes in demand by the property owners cause changes in prices, profits and losses, which drive the economy back to equilibrium. The result is that the price system directs resources to the same outcome as that provided by the direct management of the estate owner, ala Adam Smith’s use of the “invisible hand” in the Wealth of Nations.

From Part 1: Production, Distribution, and Consumption. Narrated by Millian Quinteros.