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Some forerunners

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)

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Some forerunners

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  1. 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

  2. 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.

  3. 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.

  4. 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.

  5. 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).

  6. 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

  7. Richard Cantillon 1697-1734

  8. 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!

  9. Cantillon’s circular flow model

  10. 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.

  11. 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.

  12. 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.

  13. Next: Adam Smith’s Wealth of Nations

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