Essai sur la Nature du Commerce in Général (Essay on the Nature of Trade in General)
By Richard Cantillon
Intrigue, murder, posthumous plagiarism, citations by Adam Smith, rediscovery by William Stanley Jevons a century later, and a stunning work on entrepreneurial risk, money, foreign exchange, and banking from the 1700s–what more could one ask for from an 18th century economist? Richard Cantillon offers fascination for historians and economists as much in death as he did in life.Richard Cantillon, Irish born but living in Paris as a young man, from circumstances became a banker/broker there, and moved in influential, educated social circles. Enriched but embarrassed by speculation in John Law’s scheme, he removed to London (perhaps in flight or to protect his assets). Somewhere along the line he wrote this influential work,
Essai sur la Nature du Commerce in Général (
Essay on the Nature of Trade in General). Probably first written between 1730 and 1734, the first surviving copies are in French, from 1755-56. Whether it was first drafted or circulated in English or in French is unclear; also unclear is what Smith may have seen of it. That Smith was familiar with Cantillon in some form is documented in Smith’s own rare citations. Other contemporary economists were also familiar with the work, even to the point of plagiarizing from the unpublished version.Despite the multiple plagiarizations and the disappearance of early originals, there is general agreement now that Richard Cantillon did indeed write the work; and it did indeed influence Smith and many other contemporaneous economists–the very same the French and English economists whose work became the basis of modern economic thought. Beyond that, though, all we have are the extant 1755-56 French versions and a few translations, of which Higgs’s translation is the only thorough edition. Econlib is pleased to present the full translation of this remarkable work. We also bring you Higgs’s side-by-side French/English edition for download as a pdf file, as well as our formatted searchable online edition.Higgs’s book also contains these other recommended readings:1. William Stanley Jevons’s famous 1881 essay rediscovering Cantillon’s work,
“Richard Cantillon and the Nationality of Political Economy,” an article rich with warranted enthusiasm and detailed research. It also contains a heartwarming surprise ending–a final paragraph that will make you smile.
2. Higgs’s annotated bibliography
“The Life and Work of Richard Cantillon” at the end of the book, an excellent survey of developments following Jevons’s rediscovery.Additional recommendations and summaries:3. We’ve left Higgs’s translation intact; but note that his arcane translations of some words like “Undertaker” for “entrepreneur” obscured Cantillon’s apparent coining of the word “entrepreneur”–see Mark Casson’s article,
Entrepreneurship, in the
Concise Encyclopedia of Economics for more on this.
4. Friedrich A. Hayek,
“Richard Cantillon,” 1931; translated by Micheál Ó Súilleabháin for the
Journal of Libertarian Studies, vol. 7, no. 2, Fall 1985 (republished on Econlib with permission). Other interesting essays in that conference volume on Cantillon include those by Hebert (a discussion of economic ground held in common between Cantillon and the Austrians) and Liggio (a brief history of France and England before and during the period Cantillon was writing). The conference volume is available online in pdf format through the Mises Institute.
5. Joseph Spengler, “Richard Cantillon: First of the Moderns,”
Journal of Political Economy, LXII, August-October 1954.Lauren F. Landsburg
Editor, Library of Economics and Liberty
May, 2002
Translator/Editor
Henry Higgs, ed. and trans.
First Pub. Date
1730
Publisher
London: Frank Cass and Co., Ltd.
Pub. Date
1959
Comments
First extant partial edition is in French: 1755. Includes "Richard Cantillon and the Nationality of Political Economy," by W. Stanley Jevons (1881).
Copyright
The text of this edition is copyright ©: 1959, Frank Cass and Co. Republished with permission. Originally published 1931 by Macmillan & Co., Ltd. For the Royal Economic Society.
- Introduction, by Henry Higgs
- Previous Editions, by Henry Higgs
- I.I Of Wealth
- I.II Of Human Societies
- I.III Of Villages
- I.IV Of Market Towns
- I.V Of Cities
- I.VI Of Capital Cities
- I.VII The Labour of the Husbandman is of less Value than that of the Handicrafts-Man
- I.VIII Some Handicrafts-Men earn more, others less, according to the different Cases and Circumstances
- I.IX The Number of Labourers, Handicraftsmen and others, who work in a State is naturally proportioned to the Demand for them
- I.X The Price and Intrinsic Value of a Thing in general is the measure of the Land and Labour which enter into its Production
- I.XI Of the Par or Relation between the Value of Land and Labour
- I.XII All Classes and Individuals in a State subsist or are enriched at the Expense of the Proprietors of Land
- I.XIII The circulation and exchange of goods and merchandise as well as their production are carried on in Europe by Undertakers, and at a risk
- I.XIV The Fancies, the Fashions, and the Modes of Living of the Prince, and especially of the Landowners, determine the use to which Land is put
- I.XV The Increase and Decrease of the Number of People in a State chiefly depend on the taste, the fashions, and the modes of living of the proprietors of land
- I.XVI The more Labour there is in a State the more naturally rich the State is esteemed
- I.XVII Of Metals and Money, and especially of Gold and Silver
- II.I Of Barter
- II.II Of Market Prices
- II.III Of the Circulation of Money
- II.IV Further Reflection on the Rapidity or Slowness of the Circulation of Money in Exchange
- II.V Of the inequality of the circulation of hard money in a State
- II.VI Of the increase and decrease in the quantity of hard money in a State
- II.VII Continuation of the same subject
- II.VIII Further Reflection on the same subject
- II.IX Of the Interest of Money and its Causes
- II.X Of the Causes of the Increase and Decrease of the Interest of Money in a State
- III.I Of Foreign Trade
- III.II Of the Exchanges and their Nature
- III.III Further explanations of the nature of the Exchanges
- III.IV Of the variations in the proportion of values with regard to the Metals which serve as Money
- III.V Of the augmentation and diminution of coin in denomination
- III.VI Of Banks and their Credit
- III.VII Further explanations and enquiries as to the utility of a National Bank
- III.VIII Of the Refinements of Credit of General Banks
- Richard Cantillon and the Nationality of Political Economy, by W. Stanley Jevons
- Life and Work of Richard Cantillon, by Henry Higgs
- Appendix A
- Appendix B, Bibliography
Of Banks and their Credit
Part III, Chapter VI
If a hundred economical gentlemen or Proprietors of Land, who put by every year money from their savings to buy Land on occasion, deposit each one 10,000 ounces of silver with a Goldsmith or Banker in London, to avoid the trouble of keeping this money in their houses and the thefts which might be made of it, they will take from them notes payable on demand. Often they will leave their money there a long time, and even when they have made some purchase they will give notice to the Banker some time in advance to have their money ready when the formalities and legal documents are complete.
In these circumstances the Banker will often be able to lend 90,000 ounces of the 100,000 he owes throughout the year and will only need to keep in hand 10,000 ounces to meet all the withdrawals. He has to do with wealthy and economical persons; as fast as one thousand ounces are demanded of him in one direction, a thousand are brought to him from another. It is enough as a rule for him to keep in hand the tenth part of his deposits. There have been examples and experiences of this in London. Instead of the individuals in question keeping in hand all the year round the greatest part of 100,000 ounces the custom of depositing it with a Banker causes 90,000 ounces of the 100,000 to be put into circulation. This is primarily the idea one can form of the utility of banks of this sort. The Bankers or Goldsmiths contribute to accelerate the circulation of money. They lend it out at interest at their own risk and peril, and yet they are or ought to be always ready to cash their notes when desired on demand.
If an individual has 1000 ounces to pay to another he will give him in payment the Banker’s note for that amount. This other will perhaps not go and demand the money of the Banker. He will keep the note and give it on occasion to a third person in payment, and this note may pass through several hands in large payments without any one going for a long time to demand the money from the Banker. It will be only some one who has not complete confidence or has several small sums to pay who will demand the amount of it. In this first example the cash of a Banker is only the tenth part of his trade.
If 100 individuals or Landowners deposit with a Banker their income every six months as it is received, and then demand their money back as and when they have need to spend it, the Banker will be in a position to lend much more of the money which he owes and receives at the beginning of the half years, for a short term of some months, than he will be towards the end of these periods. And his experience of the conduct of his clients will teach him that he can hardly lend during the whole year more than about one half of the sums which he owes. Bankers of this kind will be ruined in credit if they fail for one instant to pay their notes on their first presentation, and when they are short of cash in hand they will give anything to have money at once, that is to say a much higher interest than they receive on the sums they have lent. Hence they make it a rule based on their experience to keep always in hand enough to meet demands, and rather more than less. Many Bankers of this kind (and they are the greatest number) always keep in hand half the amount deposited with them and lend the other half at interest and put it into circulation. In this second example the Banker causes his notes of 100,000 ounces or écus to circulate with 50,000 écus.
If he has a great flow of deposits and great credit this increases confidence in his notes, and makes people less eager to cash them, but only delays, his payments a few days or weeks when the notes fall into the hands of persons who are not accustomed to deal with him, and he ought always to guide himself by those who are accustomed to entrust their money to him. If his notes come into the hands of those of his own business they will have nothing more pressing than to withdraw the money from him.
If those who deposit money with the Banker are Undertakers and Merchants who pay in large sums daily and soon after draw them out it will often happen that if the Banker divert more than one third of his cash he will find himself in difficulty to meet the demands.
It is easy to understand by these examples that the sums of money which a Goldsmith or a Banker can lend at interest or divert from his cash are naturally proportionable to the practice and conduct of his clients; that while we have seen Bankers who were safe with a cash reserve of one-tenth, others can hardly keep less than one half or two-thirds, though their credit be as high as that of the first.
Some trust one Banker, some another. The most fortunate is the Banker who has for clients rich gentlemen who are always looking out for safe employment for their money without wishing to invest it at interest while they wait.
A general national bank has this advantage over the bank of a single Goldsmith that there is always more confidence in it. The largest deposits are willingly brought to it, even from the most remote quarters of the city, and it leaves generally to small Bankers only the deposit of petty sums in their neighbourhood. Even the revenues of the State are paid in to it in countries where the Prince is not absolute. And this, far from injuring credit and confidence in it, serves only to increase them.
If payments in a national bank are made by transfers or clearings there will be this advantage, that they are not subject to forgeries, but if the Bank gives notes false notes may be made and cause disorder. There will be also this disadvantage that those who are in the quarters of the city at a distance from the Bank will rather pay and receive in money than go thither, especially those in the country. But if the bank notes are dispersed they can be used far and near. In the national Banks of Venice and Amsterdam payment is made only in book credit, but in that of London it is made in credit, in notes, and in money at the choice of the individuals, and it is today the strongest Bank.
It will then be understood that all the advantage of Banks, public or private in a city, is to accelerate the circulation of money and to prevent so much of it from being hoarded as it would naturally be for several intervals.
Banque of Londres.
Jevons, “The Nationality of Political Economy”
Footnotes below are by Jevons except as noted.