Economic Equilibrium and “Laissez-Faire”

If we consider the activities of the productive class, we are faced with an intricate network of purchases and sales. Yet, it is possible to discover an order by concentrating on the motivations of the agents, which are the same everywhere and the systematic application of men’s self-love to transactions, generating a maximizing economic behaviour: “each man thinks of achieving the greatest degree of individual interest with the greatest ease possible” (Boisguilbert 1691-1714: 749).

What is the main characteristic of a state of wealth or plenty (“equilibre” or “etat d’opulence”)? Applying here some notions derived from Cartesian physics, Boisguilbert defines this equilibrium as a situation in which economic agents are allowed to realize freely their natural inclinations, that is, to buy and sell, trying to get the most they can out of the various situations they encounter. As each agent is only connected with the other agents by means of markets and of prices, it is not surprising to see Boisguilbert defining a state of equilibrium or plenty as a situation in which a specific price system occurs: the “proportion prices” (“prix de proportion”) defined as those prices that gener­ate a “reciprocal utility” or a “shared profit” - in seventeenth-century French language “utility” and “profit” are quite synonymous and are understood in a general way - and make each producer “off loss”. This implies that, in each market, demand must equal supply. This condition can be deduced, in particular, from the recurrent passages in which the “tacit condition of exchanges” (“condition tacite des echanges”) is referred to. To keep the economy in equilibrium, Boisguilbert insists, each member of the productive class only buys someone else’s commodity under the implicit assumption that someone else, directly or indirectly, buys the commodity he sells.

The question, however, lies in the very possibility of the realization of such a struc­ture of relative prices.

All this may sound strange today, but the reader should not be misled by this kind of vocabulary. Evoking a “superior and general authority” does not mean a regulatory intervention of the State: Boisguilbert was explicitly against this kind of policy. Nor does the word “Providence” mean “miracle” or represent a rationally unexplainable state of affairs: in seventeenth-century French language, “Providence” refers in the first place to “secondary causes”, that is, to the objective laws God installed when creating the world, and which can be discovered through scientific investigation. In Boisguilbert’s writings, “Providence” simply refers to the rules of free competition. Competition is the “coercive power” - as K. Marx was to put it later - the “general authority” which governs markets. Each seller, Boisguilbert stresses, wants to be free to sell everywhere to anybody he or she wishes and to face the greatest possible number of buyers. As for the buyer, it is in his or her interest to be able to buy from everyone, in any place, and to face a great number of sellers. As maximizing agents wish to sell a commodity at the highest price, or to have it “for nothing”, Boisguilbert asserts, then free competition must prevail throughout the economy in order to balance the opposite forces and to oblige people to be reason­able.

[T]he merchant said that there was a very certain and easy method to put into practice, which was that if he and his ilk stop interfering in it [in trade] then everything would go perfectly well because the desire to earn is so natural that no motive other than personal interest is needed to induce action. (Boisguilbert 1691-1714: 795)

Also, restating Nicole’s example of the innkeeper, Boisguilbert noted:

All the commerce of the land, both wholesale and retail... [is] governed by nothing other than the self-interest of the entrepreneurs, who have never considered rendering service... ; and any innkeeper who sells wine to passers-by never intended to be useful to them, nor did the passers-by who stop with him ever travel for fear that his provisions would be wasted. (Boisguilbert 1691-1714: 748-9)

This is the greatest innovative feature: the basic proposition of liberal political economy unambiguously and powerfully emerges from it. Most of the Jansenist social theory of Nicole and Domat is now obsolete. Man - at least if he is a member of the produc­tive class - has not even to be enlightened; self-love is not destabilizing if embedded in an economic environment of free competition. Society is conceived as market based, and economic transactions form the basic social indirect link between otherwise independent economic agents. In Boisguilbert’s words, the realm is just a “general market of all sorts of commodities” (1691-1714: 683). But if Nicole’s and Domat’s political order disap­pears, this is not to say that the State has no part to play: its role is to make sure that the rules of free competition actually prevail and, in that respect, it has to “ensure protection and prevent violence” (Boisguilbert 1691-1714: 892).