• Emphasis on agriculture, physiocratic tendencies

“The Land is the Source or Matter from whence all Wealth is produced. The Labour of man is the Form which produces it: and Wealth in itself is nothing but the Maintenance, Conveniences, and Superfluities of Life” (p.3)

“All Classes and Individuals in a State subsist or are enriched at the Expense of the Proprietors of Land” (p.43)

“The Fancies, the Fashions and 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.” (p.71)

• Understanding of supply and demand determining equilibrium prices, wages:

“Some Handicrafts-men earn more, others less, according to the different Cases and Circumstances...The Number of Labourers, Handicrafts-men and others, who work in a State is naturally proportioned to the Demand for them” (p.21)

• Idea of natural price based on cost of production

“Intrinsic Value of a Thing”—the price around which the market price will tend to oscillate: “the Price or intrinsic value of a thing [in general] is the measure of the quantity of Land and of Labour entering into its production.” (p.20)

• A model of the market process

“Several maîtres d’hôtels [at Paris] have been told to buy green Peas when they first come in. One Master has ordered the purchase of 10 quarts for 60 livres, another 10 quarts for 50 livres, a third 10 for 40 livres and a fourth 10 for 30 livres. If these orders are to be carried out there must be 40 quarts of green Peas in the Market. Suppose there are only 20. The Vendors, seeing many Buyers, will keep up their Prices, and the Buyers will come up to the Prices prescribed to them: so that those who offer 60 livres for 10 quarts will be the first served. The Sellers, seeing later that no one will go above 50, will let the other 10 quarts go at that price. Those who had orders not to exceed 40 and 30 livres will go away empty,” (p.119-121)

“From all this I conclude that by doubling the quantity of money in a State the prices of products and merchandise are not always doubled. A River which runs and winds about in its bed will not flow with double the speed when the amount of its water is doubled,” (p.177).

• The first (for a very long time) to document how new money can affect relative prices, not just the price level
  • Money is non-neutral in the short run. Money isn’t just dropped from a helicopter
  • We call this injection or Cantillon effects, after him
  • Don’t get progress on this until the 20^th century!

“It is then 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 buy- ing 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,” (p.323).

• Reign of the Sun King Louis XIV

  • while militarily the mightiest power in Europe, and flourishing culture and arts...

• France lagging behind Britain economically

  • still remains very feudal, subsistence agriculture, little manufacturing

• Most citizens desperately poor

  • constant warfare, high and arbitrary taxation, extreme inequality (nobility are exempt from taxes), strong local lords defy the King, insane rules, regulations, and tariffs that vary town by town, manor by manor

• Natural law governing economic affairs: “you simply obey the laws of nature”

• Agriculture is the key to the economy and economic growth

  • Productive labor: labor for agriculture, an produce a net product (a surplus, “profit?”)
  • Sterile labor: manufacturing (and everything else), only able to recover cost of production

• Note the idea of “productive vs. sterile labor” will continue with Smith, Marx, etc.

• First major discussion of capital in economics

“[C]apitals in general, and the revenue of money...There is another way of being wealthy without working and without possessing land...”

• Capital comes from saving a surplus

“As soon as men are found, whose property in land assures them an annual revenue more than sufficient to satisfy all their wants, among them there are some, who, either uneasy respecting the future, or, perhaps, only provident, lay by a portion of what they gather every year, either with a view to guard against possible accidents, or to augment their enjoyments...”(p. 104 in Reader)

"Every species of labour, of cultivation, of industry, or of commerce, require advances. When people cultivate the ground, it is necessary to sow before they can reap; they must also support themselves until after the harvest. The more cultivation is brought to perfection and enlivened, the more considerable these advances are...It is only by means of considerable advances, that we obtain rich harvests, and that lands produce a large revenue. In whatever business they engage, the workman must be provided with tools, must have a sufficient quantity of such materials as the object of his labour requires; and he must subsist until the sale of his goods...The earth was ever the first and the only source of all riches; it is that which by cultivation produces all revenue; it is that which has afforded the first fund for advances, anterior to all cultivation." (p. 105 in Reader)

• Time structure of production & ownership; opportunity costs of investments; risk-bearing capitalist-entrepreneurs:

“We have seen that every rich man is necessarily a possessor either of a capital in moveable riches, or funds equivalent to a capital. Any estate in land is of equal value with a capital; consequently every proprietor is a capitalist, but not every capitalist a proprietor of a real estate; and the possessor of a moveable capital may chuse to confer it on acquiring funds, or to improve it in enterprizes of the cultivating class, or of the industrious class. The capitalist, turned an undertaker in culture or industry, [is] taken up in the continuation of their enterprizes. The capitalist who keeps to the lending money, lends it either to a proprietor or to an undertaker. If he lends it to a proprietor, he seems to belong to the class of proprietors, and he becomes co-partitioner in the property; the income of the land is destined to the payment of the interest of his trust; the value of the funds is equal to the security of his capital” (p. 117 in Reader)