Transcript Slide 1 - College of Business and Economics

The French Liberal School
History of Economic Thought
Boise State University
Fall 2015
Prof. D. Allen Dalton
The Historical Background
• The Rise and Fall of Physiocracy
– Short-lived nature of influence; preference for
Monarchy
• Turgot and the Six Edicts
– Failed attempts at reform
• The French Revolution
– The terror and treatment of “les economistes”
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The Rise of Napoleon
The Restoration of 1815 (Bourbons)
The Revolution of July 1830 (Louis Philippe)
1848 Revolution and the Second Republic
The French Liberal School
• Tradition of Cantillon, Physiocracy,
Turgot, Condillac
• Early members distanced selves from
tradition because of republican
opposition to Ancien Regime
• Claim to write “as expositors of Smith”
while criticizing and extending Smith
• Subjective utility, entrepreneurial, radical
laissez-faire tradition
Major Figures
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Jean-Baptiste Say (1767-1832)
Destutt de Tracy (1754-1836)
Frederic Bastiat (1801-1850)
Charles Comte (1782-1837) and
Charles Dunoyer (1786-1862)
• Gustave de Molinari (1819-1912)
Jean-Baptiste Say
Jean-Baptiste Say (1767-1832)
– born Lyons, family of Huguenot
textile merchants
– early years in Geneva and London
– insurance business, 1787
– ardent Republican during
Revolution; served in French army
1792 to repel allied armies from
France
– central figure among idéologues,
editor of journal La Décade
philosophique 1794-1800
Jean-Baptiste Say
Jean-Baptiste Say (1767-1832)
– Nominated to finance section of
Tribunate, 1799
– Treatise on Political Economy
(1803)
– 1804, Napoleon ousts Say from
Tribunate; moves to Pas-de-Clais
and becomes cotton manufacturer
– 1812, retires and returns to Paris
– 1814, with fall of Napoleon,
publishes 2nd edition of Treatise
Jean-Baptiste Say
Jean-Baptiste Say (1767-1832)
– Catechism of Political Economy
(1815)
– Lecturer; l’Athénée Royale, 18161819
– 1819, Chair of Industrial Economy,
Conservatoire National des Arts et
Metiers
– Letters to Mr. Malthus (1821)
– Cours complet d’économie
politique pratique (six volumes,
1828-9)
– 1831, appointed Chair of Political
Economy, Collège de France
Jean-Baptiste Say
• Contributions of Jean-Baptiste Say
– Methodology and value-freedom of economics
• Science capable of establishing absolute truth
concerning interactions among descriptive facts
• Science is to better society; teach the public
– Utility as source of value; prices as reflections of
“degrees of estimations” of value
– Productiveness of all factors in creating
immaterial services of greater value
Jean-Baptiste Say
• Contributions of Jean-Baptiste Say
– Entrepreneur (enterpriser) center of productive
process
– Profit as return to entrepreneur, not capitalist;
interest as return to capitalist
– Production process in time
– Demand/supply theory of monetary value; hard
money (full convertibility) advocate
– Government spending as consumption; taxation
as burden on production of values
– Say’s Law of Markets
Say’s Influence
• Kept alive French tradition
• Radicalized the Smithian free-trade
position
• Advocate of Industrialism
• Treatise is leading textbook in
American universities through the Civil
War
• Focused French Liberal School on
“public education”
Antoine Louis Claude Destutt,
Comte de Tracy (1754-1836)
• Leader of idéologues
– ideology: science of ideas
and human action (on human
will and its effects)
– inspired by Condillac
(primacy of experience and
empiricism); worked closely
with biologists,
psychologists
• Éléments d’idéologie (18101815, five volumes)
Destutt de Tracy (1754-1836)
• Economic Writings
– Commentary on Montesquieu (1807)
– Fourth volume of Elements completed by 1811 Traité
de la volonté (Treatise on the Will), published in
Jefferson’s American translation as A Treatise on
Political Economy (1817)
• Jefferson encourages adoption; soon surpassed by Say’s
Treatise
• Centrality of Entrepreneur
– Saving, employment of labor, producer of utility
beyond value of original capital
– Centrality of property in one’s own faculties (faculties
central to “industry”)
Charles Comte (1782-1837) and
Charles Dunoyer (1786-1862)
• Theorie des Industrialisme
– Industrialisme (classless society)
– Liberal Class Analysis/Historical Theory
• Producers and Non-producers
– Workers, entrepreneurs, etc. versus politicians,
government officials, subsidized businessmen, and
recipients of state privileges
• Extension of free markets will eventually
dissolve ruling classes
– “replacement of government of men with the
administration of things” and “withering away of the
state”
Frederic Bastiat (1801-1850)
• Born Bayonne, southwestern
France; Son of prominent
merchant in Spanish trade
• Orphaned at age 9, entered
father’s business firm in 1818
• Upon death of grandfather in
1825, retires to become
gentleman farmer
• Studies economics; becomes
disciple of Say, Tracy, Comte
• Proponent of Free Trade
Frederic Bastiat (1801-1850)
• Founder of French Free Trade
Association (1846), editor of
periodical Le Libre-Échange
– Influential in the formation of
free trade associations
throughout Europe – Sweden,
Prussia, Italy
• Political career
– Elected to constituent and
legislative assemblies of 1848
Revolution
– Served as vice-president of
assembly’s finance committee
– Free trade and civil liberties
Frederic Bastiat (1801-1850)
• Function of economists to inform
the public of the true principles of
wealth and commerce
• Primarily known for scathing and
humorous demolition of
protectionist and socialist ideas
• “The Influence of English and
French Tariffs” Journal des
Economistes (Oct. 1844)
• “A Petition” (Petition of the
Candlemakers) (1845)
• Economic Sophisms (1845)
• The Law (1850)
• unfinished Economic Harmonies
(1850)
Frederic Bastiat (1801-1850)
• Theoretical contributions
– All goods are valued because they
produce immaterial services
– Human wants are unlimited and
ordered hierarchically by
individuals in a scale of values
– Exchange is the mutually
beneficial transfer of services;
exchange is a transfer of unequally
valued services (people “move up”
their value scales through
exchange)
– All resources used in production
are productive and income
payments to factors are payments
for productivity
Gustave de Molinari (1819-1912)
• Born in Liège, Belgium; son
of Belgian physician – officer
in Napoleon’s army
• Paris (1840) to become
journalist
• Secretary, French Free Trade
Association at founding
(1846)
• Follows Bastiat as editor of
Journal des Economistes
(1847) and popularizer of
French Liberal School views
Gustave de Molinari (1819-1912)
• “De la production de la sécurité,” Journal
des Economistes (Feb. 1849)
– First “free-market anarchist”
– Argues that competitive market production of
security is superior to monopoly government
production
• Expanded as Les Soirées de la Rue SaintLazare (1849)
– fictional dialogue between
• Conservative (high tariffs and state monopoly
privileges)
• Socialist
• Economist (Molinari)
The “External” French School
• Francesco Ferrara (1810-1900)
– Professor of political economy,
University of Turin (Italy)
– Two-volume History of thought
(Esame storico-critico di
economisti e dottrine economiche,
1899-92) gives special place to Say,
Dunoyer, and Bastiat
– Influences Maffeo Pantaleoni (first
Italian marginalist)
The “External” French School
• Vilfredo Pareto (1848-1923)
– Co-founder with Ferrara of Adam Smith
Society in Italy
– Ideology influenced by Comte/Dunoyer
class analysis, Herbert Spencer and
Molinari’s radical laissez-faire
– Cours d’Économie Politique (1896)
– Pantaleoni converts to Pareto to
general equilibrium economics
– Successor to Leon Walras as
professor of political economy at
Lausanne
The “External” French School
• Henry Dunning Macleod (1821-1902)
– Born Edinburgh; studies mathematics at
Cambridge (1843); admitted to law, 1849
– Director of Royal Scottish Bank, 1854– Theory and Practice of Banking (1855)
• introduces term “Gresham’s Law”
• contributes analysis of deposit creation through
bank credit expansion
– Vigorous opposition to J.S. Mill’s Ricardian
revival prevents professorial career
• Views Condillac as founder of economics; wrote of
Bastiat: “the brightest genius who ever adorned the
science of Economics.”
American Followers of Bastiat
• Amasa Walker (1799-1875)
– Successful Boston shoe manufacturer and
bank director, retires at age 41; lecturer at
Oberlin and Amherst, 1853-1860; examiner in
political economy at Harvard
– The Nature and Uses of Money (1857)
– The Science of Wealth: A Manual of Political
Economy (1866)
• Laissez-faire, free banking under legal 100%
reserves; endorses Currency principle and argues
for credit-induced business cycles
• Subjective theory of value
American Followers of Bastiat
• Rev. Arthur Latham Perry (1830-1905)
– Professor of political economy and history
Williams College (Massachusetts)
– Friend of Amasa Walker who introduces him
to Bastiat
– Elements of Political Economy (1865); later,
simply Political Economy, most successful
textbook of the latter half of the 19th century
• 22 editions in 30 years to 1895
• Viewed economics as the science of exchange,
rather than the science of wealth; provided
detailed, sophisticated analysis of exchange upon
subjectivist grounds
Evaluating the French Liberals
• Focus of School on “public education”
• Popular writings come to overshadow
theoretical contributions; later historians
view contributions as minimal
– Later historians confuse clarity with shallowness; in
contrast to the convolutions of much of British Classical
economic writing – which supposedly reflects deep
understanding
– Popular support and “domination of universities”
• Leaders of a declining view (natural rights
classical liberalism v. British utilitarianism
and the Historical Schools)