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Richard Cantillon
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Richard Cantillon (1680-1734), acknowledged by many historians as the first great economic "theorist", is an obscure character. This much is known: he was an Irishman with a Spanish name who lived in France most of his life. He is said to have speculated profitably in Compagnie Perpetuelle des Indes shares, unlike so many others, during the John Law adventures, making a fortune of some twenty million livres before moving to England.
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Richard Cantillon (1680-1734), acknowledged by many historians as the first great economic "theorist", is an obscure character. This much is known: he was an Irishman with a Spanish name who lived in France most of his life. He is said to have speculated profitably in Compagnie Perpetuelle des Indes shares, unlike so many others, during the John Law adventures, making a fortune of some twenty million livres before moving to England. He died in a fire, allegedly set by his discharged cook, in his London home.
Cantillon's entire reputation rests on his one remarkable treatise, Essai Sur la Nature du Commerce en Général, that was written in French circa 1732 and published anonymously in England some twenty years after his death (though some claim it was only a French translation of a lost English original). Although his work was well-known to the Physiocrats and the French school, Cantillon fell into obscurity in the English-speaking world until resurrected and popularized by William Stanley Jevons in the 1880s.
Cantillon was perhaps the first to define long-run equilibrium as the balance of flows of income, thus setting the foundations both for Physiocracy as well as Classical Political Economy. Cantillon's system was clear and simple and absolutely path-breaking. He developed a two-sector general equilibrium system from which he obtained a theory of price (determined by costs of production) and a theory of output (determined by factor inputs and technology). His work is quoted by Adam Smith in his Wealth of Nations. According to Nobel laureate Friedrich Hayek, Jevons was scarcely exaggerating when he entitled Cantillon's work as the "Cradle of Political Economy".
He followed up on William Petty's conjecture about the par of labour and land, thereby enabling him to reduce labor to the amount of necessities needed to sustain it and thus making both labor supply and output a function of the land absorption necessary to produce the necessities to feed labor and the luxuries to feed landlords. By demonstrating that relative prices are reducible to land-absorption rates, Cantillon can be said to have derived a fully-working "land theory of value".
Cantillon's careful description of a supply-and-demand mechanism for the determination of short-run market price (albeit not long-run natural price) also stand him as a progenitor of the Marginalist Revolution. In particular, his insightful notes on entrepreneurship (as a type of arbitrage) have made him a darling of the modern Austrian School. Cantillon was also one of the first (and among the clearest) articulators of the Quantity Theory of Money and attempted to provide much of the reasoning behind it.
Finally, one of the consequences of his theory was that he arrived at a quasi-Mercantilist policy conclusion for a favorable balance of trade but with a twist: Cantillon recommended the importation of "land-based products" and the exporting of "non-land-based" products as a way of increasing national wealth.
Cantillon was born in the town of Ballyheigue, County Kerry, Ireland, lived a considerable portion of his life in France, and died in London.
Sources
- Jevons, Stanley W. (1881), "Richard Cantillon and the Nationality of Political Economy," Contemporary Review 39, January 1881, reprinted in The Principles of Economics. A Fragment of a Treatise on the Industrial Mechanism of Society and other Papers with a Preface by Henry Higgs, (London, 1905). pp. 155-83.
- Hutchison, Terence W. (1988), Before Adam Smith: the emergence of political economy, Oxford.
- Murphy, Antoin E. (1986), Richard Cantillon: Entrepreneur and Economist, Oxford.
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