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History of Economic ThoughtBoise State University
Fall 2015Prof. D. Allen Dalton
The French Liberal School
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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”
• The Rise of Napoleon• The Restoration of 1815 (Bourbons)• The Revolution of July 1830 (Louis Philippe)• 1848 Revolution and the Second Republic
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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
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Major Figures
• 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)
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Jean-Baptiste SayJean-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
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Jean-Baptiste SayJean-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
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Jean-Baptiste SayJean-Baptiste Say (1767-1832)– Catechism of Political Economy
(1815)– Lecturer; l’Athénée Royale, 1816-
1819– 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
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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
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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
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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”
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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 (1810-1815, five volumes)
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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”)
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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”
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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
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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
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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)
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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
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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
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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 Saint-Lazare (1849)– fictional dialogue between
• Conservative (high tariffs and state monopoly privileges)• Socialist• Economist (Molinari)
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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)
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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
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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.”
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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
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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
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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)