Some forerunners

• Some forerunners who provided ideas for Adam Smith and early 19C classical economics

• William Petty• Richard Cantillon• François Quesnay• Anne R. J. Turgot

William Petty 1623-87

Professor of Anatomy , Oxford 1650 (also held a Chair of Music)

Got immensely rich from Cromwell’s plunder of Ireland

Contributions to classical political economy in methods, concepts, and analysis.

Methods: Political Arithmetick• «To express myself in Terms of Number, Weight or Measure; to use only

Arguments of Sense, and to consider only such Causes, as have visible Foundations in Nature; leaving those that depend upon the mutable Minds, Opinions, Appetites and Passions of particular Men, to the Consideration of others.»

• Applying political arithmetick to measure social phenomena in a search for the characteristics of human societies and for the nature and causes of social wealth.

• Applications comprised calculations of national income and wealth, and the size of population, including ”the value of the people”.

• The methods in these and other estimates were very simple, Petty's only statistical technique was the use of simple averages.

Three other "political arithmeticians"

• John Graunt 1620-1674• Gregory King 1648-1712• Edmond Halley 1656-1742

* * *• Graunt estimated total

population and is regarded as a founder of demography and the use of census.

• King made estimates of population and wealth, the ”first economic statistician”.

• Gregory King's law (or the "King-Davenant law," is an estimate of by how much a deficiency in the supply of corn will raise the price of corn: «It is observed that but one-tenth the defect in the harvest may raise the price three-tenths.»

• Halley made a pathbreaking attempts to relate mortality and age in a population and influenced; as such, it influenced the future development of actuarial tables in life insurance.

Petty’s conceptual contributions

• On money he perceived the notion of velocity of circulation. Also argued for paper money.

• Argued for optimal taxation, had a notion of "fiscal pressure".

• A notion of ”surplus”, expressing surplus in physical term as the amount of corn exceeding required means of production, identifying surplus with rent (cf. Ricardo, Marx, Sraffa).

Petty’s analytical contributions

• Attempted to find a way of expressing labour and land on terms of each other, in an effort to express production costs.

• Worked on the distinction between ”actual” and ”natural” prices.

• Called by Marx the ”founder of Classical political economy

Richard Cantillon 1697-1734

Cantillon 1697-1734

• Born in Ireland, active in banking in Paris 1716-20.

• Got immensely rich from John Law’s scheme.

• Only one work, rediscovered and made known by Jevons.

• Greatly influenced by Petty.• Reasoning within simple models

applying ceteris paribus.• Land/labour theory of value.• Demand/supply determining

market prices.• Uniformity of profit.

• “Circular flow” model, see below• Advanced version of John Locke’s

quantity theory of money.• “Cantillon Effect”.• Developed specie-flow mechanism

foreshadowing mon. equil. theories• Wrote about the role of the

“entrepreneur” (Schumpeter)• Population growth theory.• Elements of spatial economic theory.• Major influence on Quesnay.• Embraced by the Austrians.• Murdered!

Cantillon’s circular flow model

Francois Quesnay 1694-1774• Studied to become a surgeon.

Became the physician of Mme de Pompadour, the mistress of Louis XV.

• From 1750 worked only on economics and mingled with the Encyclopediasts.

• Published first version of Tableau Économique 1763 and gathered a school of Physiocrats around him.

• By 1768 the Physiocrats’ influence was virtually over in France.

• Conceived the economy as an interrelated system.

• Agriculture the only sector producing a net surplus.

Quesnay’s Tableau Économique

• • TE depicts ideal circular-flow economy

• Free competition should rule, making markets efficient.

• TE considered as anticipating general equilibrium, Keynesian multiplier and input-output analysis.

• Main way of increasing national wealth by increased capital investment in efficient agriculture.

• All tax comes ultimately from the rent, hence single tax on agr. surplus.

Anne Robert Jacques Turgot 1727-81

• Studied theology, philosophy, reached high administrative positions, became Comptroller Général (Min. of Finance) 1774 and implemented a number of progressive reforms.

• Close to the Physiocrats but differed on theoretical points and practical matters.

• Realized decreasing return in agriculture.

• Analysis of productive use of capital in all sectors, anticipated views later developed by Adam Smith.

• Strong laissez-faire position.

Next: Adam Smith’s Wealth of Nations