James Steuart’s main work, An Inquiry into the Principles of Political Oeconomy of 1767, was the first full-length treatise on political economy in Britain.

It attracted a fair amount of attention when it was first published but was overshadowed by Adam Smith’s Wealth of Nations which came out less than a decade later.

Steuart was the son of a successful Edinburgh lawyer.

After graduating from Edinburgh University he was called to the bar, but spent five years on a grand tour of the Continent before starting his legal career. While in Rome in 1739, however, he met the Stuart claimant to the British (that is, Scottish and English) throne, starting an entanglement which was to affect the rest of his life. He was openly involved with the Jacobite (Stuart) rising of 1745 and had to go into exile when the rising collapsed, living variously in France, Germany and the Low Countries. Back in Scotland from 1763, he still had to be very careful until 1771 when he was formally pardoned. His Principles was published in 1767 but had been mostly constructed in exile. This unusual background meant that he had little experience of conditions in England, the most successful economy of the day.

Political economy, in Steuart’s view, exists to provide guidance to the “statesman”, his name for an idealized head of government. The aim of the statesman, and hence the aim of political economy, is “to provide food, other necessaries, and employment to every one of society” (Steuart 1767: 28). Since unregulated markets are not to be trusted, the statesman must constantly be ready to intervene in one way or another.

The book starts with population, which depends on “generation” (births) and on food supplies: “generation gives existence, food preserves it”. If food supply increases, people multiply, and food becomes scarce again (Steuart 1767: 31, 32). This is essentially the argument later popularized by Malthus - Marx famously accused Malthus of having plagiarized Steuart - but in its essentials it goes back much further.

Steuart, like Malthus after him, was expounding his own version of a well-known line of argument.

The main theme of the first two “books” (of five which make up the work) is an account of economic development or, in Steuart’s own words, of “the regular progress of mankind, from great simplicity to complicated refinement” (Steuart 1767: 28). Steuart’s analysis of development was largely based on arguments which David Hume had published a few years before (Brewer 1997) though Steuart filled in the details more fully and gave it all a rather more pessimistic slant. He divided the population into two classes: “The first is that of the farmers who produce the subsistence;... the other I shall call the free hands” (Steuart 1767: 43). Non-agricultural activities depend on a supply of food from the agricultural sector, since the “free hands” have to eat. Fortunately, agriculture can (at least potentially) produce a surplus of food over what is needed to support the farmers themselves: “One consequence of a fruitful soil, possessed by a free people, given to agriculture and inclined to industry, will be the production of a superfluous quantity of food, over and above what is necessary to feed the farmers” (Steuart 1767: 42).

This notion of a surplus should be treated with some care. It is a surplus of food potentially available to support the “free hands”. It is not the same as the physiocratic “net product” in agriculture, which is a surplus over all costs in value terms. It is not necessarily available to landlords or as tax revenue (as the physiocratic net product is) because the Hume/Steuart marketable surplus of food is normally transferred by exchange.

The key question is, why would farmers want to produce more than they can eat? Without some motive, the surplus will not be produced and population and incomes will be low. To support free hands, an increase in agricultural productivity is needed. But suppose that the agricultural producers are “lazy”, that is, that they prefer (at the margin) to work less rather than consume more, or that they live in “such simplicity of manners, as to have few wants”. In this case they will find an increased output superfluous to their needs and will, in Steuart’s words, “return to their ancient simplicity” (1767: 41) so population could not grow, or (in more moderate cases) population growth would be limited.

This was not an abstract hypothesis. Steuart considered that “no country in Europe is cultivated to the utmost” but many were not (he thought) growing. This he called a “moral incapacity” of multiplying (1767: 42).

That said, he recognized that “The great alteration in the affairs of Europe within these three centuries, by the discovery of America and the Indies, the springing up of industry and learning, the introduction of trade and the luxurious arts,... have entirely altered the plan of government every where” (Steuart 1767: 24).

A change in tastes leading to a desire for manufactured and exotic goods of all kinds gives farmers the motive to produce food to sell, starting a process of growth characterized by a growing variety of goods and a growing non-agricultural population: “[T]he human species will multiply pretty much in proportion to their industry; their industry will increase according to their wants, and these again will be diversified according to the spirit of the times....... Trade, industry, and manufactures, tend only to multiply the

numbers of men by encouraging agriculture” (Steuart 1767: 48, 50).

Steuart admitted that foreign trade could have a positive effect as a stimulus to industry but saw many opportunities for it to go wrong, especially since he did not accept Hume’s analysis of the self-correcting effects of trade deficits or surpluses through the specie-flow mechanism and the quantity theory of money, arguing that prices depend on supply and demand for individual commodities, which depend in turn on various non-monetary factors. Rich people, for example, may hoard their wealth, reducing demand. The quantity of money could multiply ten-fold without having any necessary effect on prices (Steuart 1767: 345). Overall demand and supply matter, because a deficiency of demand (caused by any of the varied factors which he thought relevant) could lead to unemployment. It was the duty of the statesman to ensure that the people are employed.

According to Steuart, a successful country gains advantages from learning by doing - “every circumstance, in short, becomes more favourable” (1767: 202), but an adept statesman is needed to keep the balance “in vibration as long as possible” (ibid.: 203). When a nation begins to lose ground, when “luxury and extravagance” take hold, “trade will decay where it flourished most” (ibid.: 205). “When a nation... finds the balance of trade against her, it is her interest to put a stop to it altogether” (ibid.: 284).

Steuart’s economics is often described as mercantilist, but it might be better to think of it as influenced by German cameralism - the state is seen as a business which needs active management by the statesman. He had no confidence in markets, which could produce varied outcomes depending on circumstances, and he emphasized the difference between different countries in the “spirit of the people”, in habits and institutions. Each case must be examined in detail in its own terms. The result, if interesting and stimulating, was often inconclusive and difficult to follow. Steuart himself viewed his own work as no more than a first approximation. It is perhaps not surprising that Smith’s confidence and optimism carried the day.

Recent years have seen a renewed scholarly interest in Steuart’s work and a growing secondary literature (see, for example, Skinner 1966; Tortajada 1999).

Anthony Brewer

James Steuart’s main work, An Inquiry into the Principles of Political Oeconomy of 1767, was the first full-length treatise on political economy in Britain.

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