Analytical underpinnings

Say (1828 [2010]: 1271) argued that the evolution of the ideas of the French economists in the early nineteenth century was the product of two major political events - “the revolution of North America and that of France.

the legislator as a separate being, above the rest, necessarily better and more informed than them: and filled with enthusiasm for this phantom created by his imagination, he grants him authority on the people subjected to his orders - an authority which he only thinks sometimes to limit... Pretending to extend the jurisdiction of the law on all subjects is just organising tyranny, and returning... to the state of slavery from which one hoped to be freed... The functions of the State are purely negative. (Constant 1822: 36-44)

From the first edition of his Traite, Say breaks away from his predecessors. He recognizes much to the benefit of the Physiocrats, that “all were in favour... of the freedom that men must dispose of to do as they please with their persons and their property, freedom without which social happiness and property are empty words” (Say 1803 [2006]: 30). However, he reproaches them for having considered agriculture as the sole productive activity. He also criticizes Turgot and Condorcet for not having clearly broken away from the physiocratic theses. In short, for him, there was no political economy before Smith, even if he parted company with Smith on two essential points.

The first point regards Smith’s (1776 [1976]: 10) assertion that “the annual labour of every nation is the fund which originally supplies it with all the necessaries and conven­iences of life”. However, goods are not the products of human labour alone - the latter is combined with the actions of natural agents and capitals. Say’s readers were not all convinced however. Destutt de Tracy, for example, argued that “actions subjected to our will are absolutely the only means we have to provide for our needs” (1815 [1818]: 84), and “our work is our only original wealth” (ibid.: 159). Similarly, Dunoyer regretted that Say “had assigned several causes to production and presented riches as produced not only with human industry, but with industry, capitals and natural agents” (Dunoyer 1827: 75). The idea is the same: human activity is certainly not the only force that exists in nature, but land and machines can serve human happiness only as labour forces them to produce.

Second, Say also criticizes Smith for having stated that one could speak of production in a material sense only, and for having opposed productive and unproductive labour. For Say, the labour that produces immaterial goods (“produits immateriels”) is just as productive as that which produces material goods. “Production is no creation; it is pro­duction of utility” (Say 1803 [2006]: 78, original emphasis). Dunoyer (1827: 68) criticized Say for not having drawn all the consequences from this principle: as production is a production of utility, the expenses of the state are productive.

In 1814, in the second edition of the Traite, Say asserts that the foundation of the value of a good is not the amount of labour required to produce it, but its utility, and he thus questions the Smithian distinction between the natural and the market prices of com­modities. Say admits that competition tends to bring about the equality between prices and costs of production, but as the prices of productive services themselves depend on supply and demand, calling “natural price” the cost of production seemed unnecessary to him (Say 1819 [2006]: 1132).

During the First Empire, and then the Restoration, the Liberals were opponents to the government, whose activities were closely watched by the police. The government did everything in its power to prevent the spread of their subversive ideas. When they started a newspaper - Le Censeur in 1814 and then Le Censeur Europeen in 1817 - they ran into the worst difficulties: Charles Comte was forced into exile and Charles Dunoyer was imprisoned. The reputation Say had acquired allowed him to continue to teach economics - an essential task in his eyes. From 1815 to 1819, he taught at a private institution, the Athenee. In 1820, a position in “industrial economics” was created for him at the Conservatoire National des Arts et Metiers which he held until his death in 1832.

With the revolution of 1830 the situation changed, although it did not bring the radical change the Liberals had hoped for. A new position in political economy was founded at the College de France in 1831. Say was the first to occupy the chair. Pellegrino Rossi (from 1833 to 1840) and Michel Chevalier (from 1840 to 1871) succeeded him. In 1832, the Academie des sciences morales et politiques having been restored by the minister Franςois Guizot, the Liberals dominated the section devoted to political economy. While not included in the teaching programme, political economy had somehow received some official recognition.

In 1841, the liberal economist and publisher Gilbert-Urbain Guillaumin founded the Journal des economistes with Jerome-Adolphe Blanqui becoming the editor in 1842. The following year Guillaumin was behind the creation of the Societe des economistes - the name was changed into Societe d’economie politique in 1847 - together with Eugene Daire, Joseph Garnier, Adolphe Blaise des Vosges and Pierre Bos. Finally, he started to publish works of contemporary and classical economists. The Liberals thus had a journal, a publisher and a society.

At around the same time, in the 1840s, the influence of the socialists was growing in France, especially with the publication of works by Louis Blanc and Pierre-Joseph Proudhon.

Two types of responses were developed. On the one hand, Bastiat (1850 [1851]: 1) stressed, as did Carey, that “all the interests are harmonious”. In support of his view, he had to dismiss three propositions that played a crucial role in classical theory: the Ricardian theory of rent, the Malthusian theory of population and the idea that natural resources have a value. This amounted to rewriting economic theory and only few liber­als agreed with him.

On the other hand, Molinari’s project was even more ambitious. He thought that economics suffered from an important shortcoming, that is, “the absence of a demonstration... of the general law which, establishing... a balance between the various branches of production as well as between the remunerations of the produc­tive agents, maintains order in the economic world” (Molinari 1855 [1863], vol. 1: xl). The mechanism of gravitation of classical economics assumes that the agents have perfect information, but such an assumption is not self-evident. Molinari wanted to show how the organization of the economy was evolving to solve these information problems.

In the second half of the nineteenth century, the political context changed profoundly with the fall of the Second Empire, the Paris Commune and the establishment of the Third Republic. The Free Trade treaty, which was signed in 1860 between France and Britain, was questioned. The government willingly intervened in economic affairs and sought to establish a colonial empire. Economic liberalism was unfashionable and liberal economists gradually lost some of their influence. For a long time, they retracted to aca­demic life. However, when the government introduced political economy in the faculties of law, they failed to control the selection of teachers.

During this period liberalism did not disappear, rather it evolved. The “new” liberals defended the same individualistic conception of the state as their predecessors, but they discarded the classical analysis of price and distribution. The case of Edmond Villey is typical in this respect. When dealing with the natural law or the role of the state, he developed ideas similar to those of the Liberals in the early nineteenth century. However, when he discussed the issue of wages, he clearly broke away from received ideas. He considered the “classical” theory of wages to be radically false. The natural wage is not a subsistence wage and the market wage is not determined by the wage fund. At the end of the nineteenth century, French liberals thus discarded a series of propositions that had been advocated not only by Smith and Ricardo but also by Say and Garnier. This was the end of the French classical political economy even though many economists still cherished the liberal tradition in France.

This entry cannot offer a complete overview of the ideas of the French classical econo­mists. It focuses instead on three prominent themes: price theory, income distribution and the relationship between money and business cycles.