Optimal equilibrium and laissez-faire
The conditions for an optimal equilibrium result from what happens in the daily activities of the productive class. There, we are faced with an intricate network of purchases and sales in markets.
Beyond the apparent disorder, it is possible to discover an order by concentrating on the motivations of the agents. In the Jansenist tradition, Boisguilbert asserts that they are only driven by selfishness and adopt a maximising economic behaviour: “each man thinks of achieving the greatest degree of individual interest with the greatest ease possible” (Boisguilbert 1691-1714, 749).The condition for an optimal equilibrium
What is the main characteristic of the “harmony”? Transposing here some notions derived from Cartesian physics,[48] Boisguilbert defines this equilibrium as a situation in which economic agents are allowed to realise freely their natural inclinations, that is, to buy and sell, trying to get the most they can out of the various situations they encounter. Each agent being only connected with the other agents by means of markets and prices, Boisguilbert defines a state of equilibrium as a situation in which a specific relative price system occurs: the “prix de proportion” (“proportion prices”) defined as those prices which 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. This system of relative prices makes each producer “hors de perte” (“out of loss”). “It is... proportions which cause all wealth, because it is through them that exchange, and consequently trade, occur” (Boisguilbert 1691-1714, 891). The principle is simple: “each occupation must feed its master” (992), that is, allow him to survive and to produce again in the following period. Trade must take place at a “necessary price...
in other words at a rate which keeps the merchant out of loss, such that he can continue his occupation profitably” (986): “all things and commodities must be in constant equilibrium and preserve a proportional price in relation to themselves and the costs involved in producing them” (993).This condition is also expressed in another way: in each market, demand must equal supply. This results from the recurrent passages in which Boisguilbert refers to what can be called the “tacit condition of exchanges”. To keep the economy in equilibrium, 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 s/he sells:
nobody buys his neighbour’s product or the fruit of his work except under the necessary condition, though it is tacit and not openly expressed, that the seller will do likewise with the buyer’s product, either immediately, as sometimes happens, or through the circulation of several hands or intervening professions, which always amounts to the same.
(Boisguilbert 1691-1714, 986)
A dilemma
The main question, however, lies in the possibility of achieving such a structure of equilibrium relative prices, because of the destabilising action of self-love. In some striking passages, Boisguilbert seems to admit the necessity for each agent to be aware of the flimsiness of the state of equilibrium. Each person, he writes, can only obtain his or her own wealth from the implementation of the “etat d’opulence”; they ought not to forget the necessity of fairness and justice in trade, they must think of the common good; but, in fact, under the pressure of self-love, they act every day in precisely the opposite way. Boisguilbert eventually poses the question of reaching and maintaining equilibrium in very similar terms to those employed by Nicole when he raised the question of the social order:
while each individual works towards his own particular interest, he must never lose sight of equity and the general good.
This is because he owes his subsistence to it, and by destroying it for a moment in relation to a merchant with whom he trades, whether by common error or through corruption of the heart, while he believes that he has won everything, in fact he should expect that, were this conduct to become general,... he would pay dearly through the total destruction he builds for himself in the future.... However, the work of men, from morning until night, involves following the opposite practice. So greatly does self-interest blind men that in buying another man’s good all would be happy not only to obtain it at a loss for the seller, but also to have everything valuable in addition.(Boisguilbert 1691-1714, 830-31)
Nevertheless, despite all this, Boisguilbert is convinced that an equilibrium can be reached in such a context. And he insists on the role of “Providence”, which, he notes, keeps a watchful eye on the working of markets. He also mentions a “superior and general authority”, a “powerful authority” which ensures that the economy is working properly and maintains equilibrium “at the tip of a sword”, “not having a single moment or a single market where it does not need to act” (986). And finally, he mentions “the harmony of the Republic, that a superior power governs invisibly” (Boisguilbert 1691-1714, 621). Is all this only wishful thinking?
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 primarily to “secondary causes”, that is, to the objective laws God established when creating the world, and which can be discovered through scientific investigation.
Is there a remedy? Free trade!
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 everyone, and to face the greatest possible number of buyers. As for the buyers, it is in their interest to be able to buy from everyone, everywhere, and to face a great number of sellers. As maximising agents wish to sell a commodity at the highest price, or to obtain it “for nothing”, then free competition must prevail throughout the economy in order to balance the opposite forces and to oblige people to be reasonable. What happens, for example, in the corn market?[T]he process... occurs between the buyers and sellers of corn. Now, just as in the exchange of all other sorts of products, one would like the commodity for free, while the other wants to sell it at four times the ordinary price, and it is only the merchant’s certainty that his neighbour, whose shop is filled with similar items, will be more reasonable, that makes him reasonable. (Boisguilbert 1691-1714, 848)
[I]t is in the interest of any buyer that there be a number of merchants and many commodities, so that the competition causes them reciprocally to give a reduction on the item in order to receive the preference in the sale... on the other hand, the merchant never sells better than when, on account of the scarcity of the item, he is assured that he does not have many competitors, and that the buyer is virtually obliged to pay the price he asks. (849)
The conclusion is then straightforward: “laissez-faire”. The government should stop intervening in the economy and trying to regulate it: “it is simply necessary to stop acting with the very great violence we impose on nature, which itself always tends towards liberty and perfection” (1005). To illustrate his conviction, Boisguilbert reported the answer a merchant gave to a minister who had asked him how to get out of the depression and “re-establish trade”:
the merchant said that there was a very certain and easy method to put into practice, which was that if he [the minister] 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.
(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.
(748-9)[49]
This is the greatest innovative feature: the basic proposition of liberal political economy unambiguously emerges from it. Most of the Jansenist social theory of Nicole and Domat appears obsolete. Men - at least if they are members of the productive class - do not even have to be enlightened; self-love is not destabilising if embedded in an economic environment of free competition. Society is conceived as marketbased, and economic transactions form the basic indirect social link between independent economic agents. In Boisguilbert’s words, the realm is just a “general market of all sorts of commodities” (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 prevail and, in this perspective, it must “ensure protection and prevent violence” (892) - its tasks are police, justice and defence.
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