turgot history of economic thought boise state university fall 2015 prof. d. allen dalton
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TurgotHistory of Economic Thought
Boise State UniversityFall 2015
Prof. D. Allen Dalton
Vincent de Gournay (1712-1759)• wealthy merchant; government service as intendant
of commerce (1751-1758)• central influential figure among reformers• central principle: “in general every man knows his
own interest better than another to whom it is of no concern”
• originator of "Laissez faire, laissez passer," meaning to "let things alone, let them pass"
• unlike physiocrats, regarded industry and commerce (as well as agriculture) to be important sources of wealth
A.R.J. Turgot (1727-1781)– prosperous merchant family– studies at Sorbonne– works at Paris parlement (1751-60)
• comes under influence of Gournay– intendant of commerce (1761-1774)
• Abbé Morellet, Condorcet, Smith– Minister of Finance, reform cabinet of
Maurepas, Louis XVI (1774-1776)• 1775; lifts internal controls on grain• 1776: Six Edicts; dissolves guild system and
replaces corvée with l’impôt unique
The Contributions of Turgot• In Praise of Gournay (1759)• Reflections on the Formation and
Distribution of Wealth (1766)• Observations on a Paper by Saint-Peravy
(1767)• Value and Money (1769)• Paper on Lending at Interest (1770)
The Contributions of Turgot• In Praise of Gournay (1759)– reciprocal nature of exchange– indispensable particular knowledge of
entrepreneurs– superiority of natural order to regulated economy
The Contributions of Turgot• Reflections on the Formation and Distribution
of Wealth (1766)– saving source of capital– capital may be lent, purchase land, or be
employed as advances to factors in industry– capital is source of interest, rent, and profit– therefore, commerce and manufacturing are also
sources of produit net
The Contributions of Turgot• Reflections… (1766)– competition equalizes returns to interest, rent,
and profit subject to differing risks– all prices, rents, interest determined by supply
and demand– wealth is the present value of the net revenue
from land plus the value of the stock of movable goods
– invested capital must earn same return across industries or dislocations of production will occur
The Contributions of Turgot• Observations on a Paper by Saint-Peravy
(1767)– introduction of variable input proportions in
analysis of production– conceives of diminishing marginal productivity of
factor inputs
The Contributions of Turgot• Value and Money (1769)– well-developed subjective value theory of
exchange value (relative price)– mutually beneficial nature of exchange– presents account of how an increase in number of
traders reduces indeterminancy of exchange
The Contributions of Turgot• Paper on Lending at Interest (1770)– interest is compensation for difference in value
between present money and the assurance of the same amount of money at a future date
– clear presentation of capitalization concept