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 Other contemporary economists were also familiar with the work, even to the point of plagiarizing from the unpublished version.Despite the multiple plagiarizations and the disappearance of early originals, there is general agreement now that Richard Cantillon did indeed write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
Henry Higgs, ed. and trans.
First Pub. Date
London: Frank Cass and Co., Ltd.
First extant partial edition is in French: 1755. Includes "Richard Cantillon and the Nationality of Political Economy," by W. Stanley Jevons (1881).
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
Part III, Chapter VII
It is of little importance to examine why the Bank of Venice and that of Amsterdam keep their books in moneys of account different from current money, and why there is always an agio on converting these book credits into currency. It is not a point of any service for circulation. The Bank of England has not followed it in this. Its accounts, its notes and its payments are made and are kept in current coin, which seems to me more uniform and more natural and no less useful.
I have not been able to obtain exact information of the quantity of sums ordinarily brought to these Banks, nor the amount of their notes and accounts, loans, and sums kept as reserve. Some one who is better informed on these points will be better able to discuss them. As, however, I know fairly well that these sums are not so huge as commonly supposed I will not omit to give an idea of them.
If the bills and notes of the Bank of England which seems to me the most considerable, amount weekly on an average to 4,000,000 ounces of silver or about 1 million sterling, and if they are content to keep regularly in reserve a quarter or £250,000 sterling or 1 million ounces of silver in coin, the utility of this Bank to circulation corresponds to an increase of the money of the State by 3 million ounces or £750,000 sterling which is without doubt a very large sum and of very great utility for the circulation when it has need to be speeded up: for I have remarked elsewhere that there are cases where it is better for the welfare of the State to retard the circulation than to accelerate it. I have heard that the notes and bills of the Bank of England have risen in some cases to 2 millions sterling, but it seems to me this can only have been by extraordinary accident. And I think the utility of this Bank corresponds in general only to about one tenth part of all the money in circulation in England.
If the explanations given to me in round figures in 1719 on the receipts of the Bank of Venice are correct it may be said of national banks generally that their utility never corresponds to the tenth part of the current money circulating in a State. This is approximately what I ascertained there.
The revenues of the State of Venice may amount annually to 4 million ounces of silver, which must be paid in Bank money, and the Collectors set up for that purpose who receive at Bergamo and in the most distant places taxes in money, are obliged to change them into bank money when they make payment of them to the Republic.
All payments at Venice for negociations, purchases and sales above a certain modest sum must by law be made in Bank money. All the retailers who have collected current money in their dealings are compelled to buy Bank money with it to make their payments for large amounts. And those who need for their expenses or for the detail of small circulation to get back current money have to sell their Bank money to obtain it.
It is found that the sellers and buyers of the Bank money are regularly equal when the total of all the credits or inscriptions on the books of the Bank do not exceed the value of 800,000 ounces of silver or thereabout.
Time and experience (according to my informant) have given this knowledge to the Venetians. When the Bank was first set up individuals brought their money to the Bank to have credit at the Bank of the same value. This money deposited at the Bank was later spent for the needs of the Republic and yet the Bank money preserved its original value because there were as many people who had need to buy it as those who had need to sell it. Finally the State being pressed for money gave to the War Contractors credits in Bank money instead of silver and doubled the amount of its credits.
Then the number of sellers of Bank money being much greater than the buyers Bank money began to be at a discount against silver and fell 20 per cent. below. By this discredit the revenue of the Republic fell off one fifth and the only remedy found for this disorder was to pledge part of the State revenue to borrow Bank money at interest. By these borrowings of Bank money half of them were cancelled and then the sellers and buyers being about equal the Bank regained its original credit and the total of Bank money was brought back to 800,000 ounces of silver.
It is thus that it has been ascertained that the utility of the Bank of Venice as regards circulation corresponds to about 800,000 ounces of silver: and if it is supposed that all the current money in the States of that Republic amount to 8 million ounces of silver the utility of the Bank corresponds to one tenth of that silver.
A national Bank in the Capital of a great Kingdom or State must, it seems, contribute less to the utility of circulation because of the distance of its Provinces, than in a small State. And when money circulates there in greater abundance than among its neighbours a national Bank does more harm than good. An abundance of fictitious and imaginary money causes the same disadvantages as an increase of real money in circulation, by raising the price of Land and Labour, or by making works and manufactures more expensive at the risk of subsequent loss. But this furtive abundance vanishes at the first gust of discreet and precipitates disorder.
Towards the middle of the reign of Louis XIV there was more money in circulation in France than in neighbouring countries, and the King’s revenue was collected there without the help of a Bank, as easily and conveniently as it is collected today in England with the help of the Bank of England.
If the clearings at Lyons in one of its four Fairs amount to 80 millions of livres, if they are begun and finished with a single million of ready money, they are doubtless of great convenience in saving the trouble of an infinity of transports of silver from one house to another. But with that exception it seems that with this same million of cash which began and ended these clearings it would be quite feasible to conduct in three months all the payments of 80 millions.
The Paris bankers have often observed that the same bag of money has come back to them 4 or 5 times in the same day when they had a good deal to pay out and receive.
I think pubic banks of very great utility in small States and those where silver is rather scarce, but of little service for the solid advantage of a great State.
The Emperor Tiberius, a Prince strict and economical, had saved up in the Imperial Treasury 2700 millions of sesterces, equal to 25 millions sterling or 100 million ounces of silver, an enormous sum in coin for those times and even for today. It is true that in tying up so much money he embarrassed the circulation and that silver became scarcer at Rome than it had been.
Tiberius, who attributed this scarcity to the monopoly of Contractors and Financiers who farmed the Imperial revenues, ordered by an edict that they should buy land up to at least two thirds of their capital. This Edict, instead of animating the circulation threw it completely into disorder. All the Financiers hoarded and called in their capital under the pretext of putting themselves into a position to obey the Edict by buying land, which instead of rising in value sunk to a much lower price owing to the scarcity of silver in circulation. Tiberius remedied this scarcity by lending to individuals on good security only 300 million sesterces, a ninth part of the money which he had in his Treasury.
If the ninth part of the Treasury sufficed at Rome to re-establish the circulation it would seem that the establishment of a general Bank in a great Kingdom where its utility would never correspond to the tenth part of the money in circulation when it is not hoarded, would be of no real and permanent advantage, and that considered in its intrinsic value it can only be regarded as an expedient for gaining time.
But a real increase in the quantity of circulating money is of a different nature. We have already spoken of it and the Treasure of Tiberius gives us again occasion to say a word of it here, This treasure of 2700 millions of sesterces, left at the death of Tiberius, was squandered by the Emperor Caligula his successor in less than a year. Money was never seen so abundant at Rome. What was the result? This mass of money plunged the Romans into luxury and into all sorts of crimes to pay for it. More than 60,000 pounds sterling left the Empire every year for the merchandise of the Indies, and in less than 30 years the Empire grew poor and silver became very scarce there without any dismemberment or loss of a Province.
Though I consider a general Bank is in reality of very little solid service in a great State I allow that there are circumstances in which a Bank may have effects which seem astonishing.
In a city where there are public debts for considerable amounts the facility of a Bank enables one to buy and sell capital stock in a moment for enormous sums without causing any disturbance in the circulation. If at London a person sells his South Sea stock to buy stock in the Bank or in the East India Company, or hoping that in a short time he will be able to buy at a lower price stock in the same South Sea Company, he always takes Banknotes, and generally money is not asked for in respect of these Notes but only for the interest on them. As one hardly spends one’s capital there is no need to change it into coin, but one is always forced to ask the Bank for money for subsistence since cash is needed for small dealings.
If a Landowner who has 1000 ounces of silver pays 200 of them for the interest of public stock and spends 800 ounces of them himself, the thousand ounces will always require coinage. This proprietor will spend 800 and the Owners of the funds will spend 200 of them. But when these Proprietors are in the habit of speculation, selling and buying public stock, no ready silver is needed for these operations, bank notes suffice. If it were necessary to draw hard cash out of circulation to serve in these purchases and sales it would amount to a great sum and would often impede the circulation, or rather it would happen in that case that the stocks could not be sold and bought so often.
It is doubtless the origin of these capitals or money deposited in the Bank and drawn out only on rare occasions, such as when an owner of capital engages in some transaction or needs cash for small purchases, which explains why the Bank keeps in reserve only the fourth or sixth part of the silver against which it issues notes. If the Bank had not the funds of many of these capitals it would in the ordinary course of circulation find itself compelled like private banks to keep half its deposits in hand to be solvent. It is true that the Bank books and its dealings do not distinguish those capitals which pass through several hands in the sales and purchases made in Change Alley. These notes are often renewed at the Bank and changed against others in purchases. But the experience of purchases and sales of stock show clearly that the total of them is considerable, and without these purchases and sales the sums deposited at the Bank would be certainly smaller.
This means that when a State is not in debt and has no need of purchases and sales of stock the help of a Bank will be less necessary and less important.
In 1720 the capital of public stock and of Bubbles which were snares and enterprises of private companies at London, rose to the value of 800 millions sterling, yet the purchases and sales of such pestilential stocks were carried on without difficulty through the quantity of notes of all kinds which were issued, while the same paper money was accepted in payment of interest. But as soon as the idea of great fortunes induced many individuals to increase their expenses, to buy carriages, foreign linen and silk, cash was needed for all that, I mean for the expenditure of the interest, and this broke up all the systems.
This example shews that the paper and credit of public and private Banks may cause surprising results in everything which does not concern ordinary expenditure for drink and food, clothing, and other family requirements, but that in the regular course of the circulation the help of Banks and credit of this kind is much smaller and less solid than is generally supposed. Silver alone is the true sinews of circulation.
Banque of Londres.
Jevons, “The Nationality of Political Economy”
Footnotes below are by Jevons except as noted.