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Pierre de Boisguilbert and the
foundations of laissez-faire
Gilbert Faccarello∗
“Philosophie économique”, which was to radically change the way of thinking
about economic matters during the French Enlightenment and give rise to
modern political economy, was born at the end of the seventeenth century, in
France, in the writings of Pierre Le Pesant de Boisguilbert. This happened in a
very specific context dominated by continuous religious controversies, following
the sixteenth century Wars of Religion, and recurrent periods of political unrest
which lasted until the reign of Louis XIV.
Pierre de Boisguilbert (1646–1714) was a contemporary of Louis XIV (1638–
1715) and a member of an aristocratic family which obtained its rank from
holding certain judicial or administrative positions. First educated by the
Jesuits in Rouen, he then attended the Jansenist Petites Écoles at Port-
Royal near Paris. A lawyer, he held various positions in Normandy in the
Ancien Régime administration of justice and police where he acquired the
well-deserved reputation of being a passionate and bad-tempered person. Like
many contemporaries, he was struck by the lasting economic and social dis-
tress characterising the second half of the reign of Louis XIV and, like so many
∗Forthcoming in Gilbert Faccarello and Claire Silvant (eds), A History of Economic
Thought in France, volume 1, The Age of Enlightenment, London and New York: Routledge,
2023, pp. 31–44.
1
Pierre de Boisguilbert and the foundations of laissez-faire 2
pamphleteers of the age, he tried to remedy the situation and proposed his so-
lutions to various finance ministers (Hecht 1966). However, his attempts were
unsuccessful, as were those, for example, of Charles Hurault de l’Hôpital de
Belesbat (d. 1706) – whose Mémoires présentés au Roi towards the end of the
seventeenth century circulated as manuscripts (Schatz and Caillemer 1906) –
or Marshal Sébastien Le Prestre de Vauban (1633–1707), whose Projet d’une
Dixme royale (1707) caused his disgrace and eventually his death.
The precise dating of Boisguilbert’s writings is uncertain. While his
Détail de la France was published anonymously in 1695 but probably composed
some years earlier, his other main works — the Dissertation de la nature des
richesses, de l’argent et des tributs, the Traité de la nature, culture, commerce
et intérêt des grains, the first and the second Factum de la France – were pub-
lished together in 1707 with a reprint of the Détail. To escape royal censorship,
this two-volume edition was also published anonymously under various titles,
one of which being particularly misleading: Testament politique de Monsieur
de Vauban – thus generating a lasting confusion between his ideas and those
of Vauban published the same year. Some important unpublished manuscripts
and correspondence were discovered later and included in the only reliable
collection of Boisguilbert’s works (Boiguilbert 1691–1714) edited by Jacque-
line Hecht. However, Boisguilbert’s style and language do not facilitate the
reader’s task and gave rise to divergent interpretations (Faccarello 1986).
1The context: Jansenism
and the discourse on the passions
From the second half of the sixteenth century, the Wars of Religion and
episodes of political unrest provoked important discussions over the nature and
role of the passions in society and how to neutralise them. The main fields
of knowledge were concerned by these developments: religion, morals, philos-
ophy, politics, but also physics, medicine and even art with Charles Le Brun’s
Expression des passions de l’âme.1Many publications ensued like De l’usage
des passions (1641) by the Oratorian Jean-François Senault (1599–1672), some
1A famous lecture made in 1668 at the Académie Royale de Peinture et de Sculpture.
Le Brun (1619–1690) was the “First Painter” of Louis XIV and director of the Académie.
Pierre de Boisguilbert and the foundations of laissez-faire 3
of them being still considered today as important philosophical works: such is
Les passions de l’âme (1649) by René Descartes (1596–1650).
Jansenism and the “siècle du Moi Soleil”
Towards the middle of the seventeenth century, one line of thought was to
prove of utmost importance for the development of economic thought: the
Jansenist theology and its moral and political philosophy. The substantive
“Jansenism” is derived from the name of the Flemish theologian Cornelius
Jansen (1585–1638) – Jansenius in Latin – a Catholic bishop of Ypres, whose
magnum opus, Augustinus seu doctrina sancti, was published posthumously
in 1641. Jansenius and his disciples developed a dark theological vision based
on the fundamental “fact” of Original Sin. It was a very pessimistic version of
Augustinian thought, which, on some points, looked close to some Protestant
doctrine, and which, for this reason, was persecuted by the French monar-
chy and condemned by Rome. The Jansenist approach to morals and society
nevertheless greatly influenced the intellectual life of the Grand Siècle.2
What are some of the main points at issue? In a nutshell, the main assertion
is that, as a result of “Adam’s sin” and the Fall, the nature of men is totally
corrupted. In their hearts, men replaced the love of God with an exclusive
love for themselves – that is, with “amour-propre” (“self-love”) or selfishness.
Consequently, they are obliged to act in a hostile environment and to cope with
other men’s self-love in an everlasting fight. In this context, three fundamental
questions were raised: theological, moral and political.
(1) If, in their hearts, men substituted their own self-love for the love of God,
how could they be saved? This is the theological but also very practical
problem of grace, which deeply worried, for example, the scientist and philoso-
pher Blaise Pascal (1623–1662).
(2) If men act selfishly in all circumstances, no morality can ever exist. When-
ever an action or a thought looks charitable, altruistic or benevolent from
the outside, it is considered actually to conceal strict egoistic motivations, as
powerfully illustrated in Réflexions ou sentences et maximes morales (1665) by
François de la Rochefoucauld (1613–1680) or La fausseté des vertus humaines
2A classic on this topic is Bénichou (1948).
Pierre de Boisguilbert and the foundations of laissez-faire 4
(1678) by Jacques Esprit (1611–1677). The “siècle du Roi-Soleil” is also the
“siècle du Moi Soleil”.
(3) The problem of social cohesion is also raised, and this is the most important
point for our subject: if the actions of men are only directed at meeting their
own selfish desires, how could society ever be maintained in this context?
A war of all against all necessarily ensues.
Nicole’s moment
Two friends of Blaise Pascal, the Jansenist theologian Pierre Nicole (1625–1695),
in the first volumes of his Essais de morale (published between 1670 and 1675),3
and after him the lawyer Jean Domat (1625–1696) in his Traitté des loix (1689),
tried to answer these questions, focusing especially on the third one. “For a
society to be maintained, men must love and respect each other”, Nicole wrote,
but “others’ self-love stands in the way of all the desires of our own”: all men
are thus “at battle with one another” (Nicole 1675, III, 116). The situation
seems desperate. Man’s reason is very weak after the Fall and his depravity
is too potent to allow anything other than destructive passions to direct his
behaviour. But there is a hope: the remedy lies in the ill itself. “From so
evil a cause as our self-love, and from a poison so contrary to the mutual love
which ought to be the foundation of society, God created one of the remedies
which enables it to survive” (Domat 1689, xxxix). People realise that they
cannot achieve their selfish aims if they attempt to use coercion. This is the
reason why, unable to “domesticate” their passions through reason, men in-
stead use their reason to follow their passions: they are thus willing to submit
to other men’s wishes and self-interest, but only in order to fulfil their own
desires. Nicole calls this type of conduct “amour-propre éclairé” (“enlightened
self-love”), and the best example he gives thereof is that of market activities,
driven by “cupidity”. This is the image of the innkeeper, to be found again
later in Boisguilbert and Smith:
For example, when travelling in the country, we find men ready to serve
those who pass by and who have lodgings ready to receive them almost
everywhere. We dispose of their services as we wish. We command
3Nicole’s Essais de morale is relatively forgotten today, but it was published in numerous
editions and were widely appreciated during the Ancien Régime and even at the beginning
of the nineteenth century.
Pierre de Boisguilbert and the foundations of laissez-faire 5
them; they obey . . . They never excuse themselves from rendering
us the assistance we ask from them. What could be more admirable
than these people if they were acting from charity? It is cupidity which
induces them to act. (Nicole 1670, 204)
Thanks to this intelligent self-love, a society seems to be able to endure
and develop. Oddly enough, this society, which is absolutely deprived of
love, appears to be full of charity. Passions are no longer destructive and
generate strong positive social results. As regards the production of mate-
rial wealth, they are even incomparably more efficient than charity: cupid-
ity achieves things that ordinary charity cannot (Nicole 1670, 204). All these
themes are fundamental. They were later to be picked up and developed in var-
ious ways by Boisguilbert and, to a lesser extent, by the Protestant theologian
Pierre Bayle (1647–1706) and Bernard de Mandeville (1670–1733). Bayle, for
example, wrote in his Continuation des pensées diverses, in a chapter entitled
“In what sense is Christianity able or unable to maintain societies?”:
Would you like that a nation be strong enough to resist her neighbours?
Leave the maxims of Christianity to the preachers: keep all this for the
theory and bring back the practice to the laws of Nature . . . which incite
us . . . to become richer and of a better condition than our fathers.4
Preserve the vivacity of greediness and ambition, and just forbid them
robbery and fraud . . . Neither the cold nor the heat, nothing should
stop the passion of growing rich. (Bayle 1705, 600)
While necessary, however, enlightened behaviour is still not a sufficient con-
dition for a peaceful social life. Nicole and Domat stress that this attitude
and an enduring social order cannot be achieved without the help of bonds
of a different kind, the most important of which are the rules of propriety
and honour, religion and above all the “political order”, that is, a very strong
political organisation of society involving differentiated and stratified estates
(the traditional three estates of the realm) and inequality between men (on all
these points see, for example, Taveneaux 1965; Viner 1978; Faccarello (1986).
In Nicole and Domat, the basic social link is still political and moral.
4Smith also was to mention repeatedly men’s “universal, continual, and uninterrupted
effort to better their own condition” (Smith 1776, II.iii.6).
Pierre de Boisguilbert and the foundations of laissez-faire 6
2Boisguilbert’s approach
Boisguilbert picked up the main Jansenist themes and particularly the
theological hypothesis of the Fall and the ensuing corrupted and selfish
nature of men. However, focusing on economic activities, he radicalised Nicole’s
line of thought: somewhat downplaying the necessity for self-love to be
enlightened, he also removed the necessity for a strong moral and political
order and brought free market relationships to the fore. His approach com-
bines a theoretical view of the evolution of societies, based on a distinction
between a natural and a developed state of social organisation, and two levels
of analysis: (1) the first emphasises the market structure of society, allowing
him to state the conditions for an optimal economic equilibrium – which he
calls “équilibre”, “harmonie” or “état d’opulence” (“equilibrium”, “harmony” or
“state of plenty”) – and lay down the foundations of laissez-faire and (2) the
second focuses on the class structure of society and especially the gap be-
tween the productive class and the leisure class of rentiers, which allows him
to analyse the causes and the propagation of economic crises.
The distinction between a “natural state” of society – or “state of innocence”
– and a developed state of society – “état poli et magnifique” (“polished and
magnificent state”) – opened the way to the methodology of analysing the
characteristics of a developed market society, comparing it to other types of
social organisation: the latter can be purely fictitious, as in Boisguilbert, Anne-
Robert-Jacques Turgot (two men on an isolated island), Adam Smith or David
Ricardo (the “primitive” state of society supposed to precede private ownership
of land and capital accumulation), but also real, even if idealised, as in Richard
Cantillon (the big agricultural estate), François Quesnay (the Incas) or Karl
Marx (pre-capitalist societies).
Boisguilbert’s natural state of society is characterised by a simple state
of division of labour: a very low number of needs and professions prevails
– farmers and cattle breeders for example – and producers exchange their
products through barter. However, violence put an end to this peaceful state
of things, with the result that society found itself split into two distinct classes:
the productive class and the leisure class of landowners and rentiers of all de-
nominations. In turn, this fundamental social change provoked three major
consequences. (1) In the first place, needs multiplied among the leisure class,
and so also, as a consequence, did the number of professions among the produc-
Pierre de Boisguilbert and the foundations of laissez-faire 7
tive class. (2) In the second place, barter becoming more and more difficult,
money was invented to facilitate exchanges: Boisguilbert simply took up the
legend of the invention of the circulating medium that authors have repeatedly
proposed since Aristotle. (3) Finally, in this “polished and magnificent” state of
society, it is necessary to distinguish two kinds of intertwined economic flows:
that of the professions and that of incomes.
These consequences are far-reaching. Let us first focus on the last point.
The flow of professions depicts the progressive emergence of the different
trades, from the most necessary (farmers) to the most superfluous (actors).
This emergence is historical, it happened only once but, Boisguilbert stressed,
once a profession appears, its maintenance becomes necessary to the economy
because all the other trades are negatively affected whenever it suffers some
damage – any attack on any trade inevitably induces, through the diminution
of incomes and expenses, a depressing effect on all the other trades. This kind
of ratchet effect is likely to generate a progressive decline in the number of
professions, starting from the most superfluous, and plays an important role
in the propagation of crises (below).
The two hundred professions which are nowadays found in the
composition of a polished and opulent state, starting with bakers and
finishing with actors, for the most part, are initially only called upon one
after the other by voluptuous desires; but since no sooner have they been
introduced and taken root than they are then part of the substance of
a state, they cannot be disconnected or separated without immediately
altering the entire body. They are all necessary, right down . . . to
the very least, like the Emperor Augustus, of whom it was said very
correctly that he ought never to have been born, or ought never to die.
(Boisguilbert 1691–1714, 986)
The flows of incomes refer to the relationships between the two social classes
and the fact that the income of the rentiers does not result from an exchange,
contrary to the various incomes within the productive class: this is a one-way
flow received by the leisure class from the productive class, and a flow that
must constantly be renewed: it is thus necessary, Boisguilbert states, that the
rentiers spend their income in order to maintain the level of activity of the
productive class. This necessity to spend rents was to be powerfully stressed
later by Quesnay and the physiocrats but questioned and qualified by Turgot.
As for money, for Boisguilbert, it has the three usual functions of being
a measure of value, a medium of circulation and a store of value. But Bois-
Pierre de Boisguilbert and the foundations of laissez-faire 8
guilbert went beyond the traditional analysis. (1) Firstly, he stressed that,
even if money is made of precious metals, the function of circulating medium
can also be implemented by “paper”, that is, bills of exchange, which, with
the developments of exchanges, can even do most of the job. (2) Second, he
noted, as other authors from Quesnay to Marx would also note later, that the
function of store of value could be dangerous, because it could induce people
to keep money instead of spending it, interrupting the flows of exchanges and
thus disrupting the economic equilibrium.
In modern language, this led him to state that, as regards circulation, the
money supply is made up of two components: coins and bills of exchange.
But money demand is also composed of two components: money is required
for transactions, but it can also be held for precautionary motives. When
economic activities are flourishing and people are confident in the future and
in the solvability of merchants, Boisguilbert affirmed, almost all the circulation
is made by means of “paper”, more convenient to use than coins, and the
demand for precautionary motives is low. In time of crisis, on the contrary,
people no longer trust “paper”, almost all the burden of circulation falls on the
precious metals and the demand for precautionary money stocks dramatically
increases. As we will see, Boisguilbert uses this original approach in his analysis
of economic crises, to criticise the economic policies of his time.
3Optimal 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).
Pierre de Boisguilbert and the foundations of laissez-faire 9
The condition for an optimal equilibrium
What is the main characteristic of the “harmony”? Transposing here some no-
tions derived from Cartesian physics,5Boisguilbert 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 gener-
ate 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 mas-
ter” (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 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)
5Many Jansenists were close to scientists and Cartesian circles. Nicole himself used
Descartes’s image of whirlpools to depict society.
Pierre de Boisguilbert and the foundations of laissez-faire 10
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
“état 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 en-
sures 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”
Pierre de Boisguilbert and the foundations of laissez-faire 11
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 in-
terest 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”:
Pierre de Boisguilbert and the foundations of laissez-faire 12
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)6
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 mem-
bers 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 market-based, and economic transactions form the ba-
sic 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.
4Destabilising shocks and crises
To know the conditions for an optimal equilibrium is not enough: Boisguilbert
had to explain the depressed economic situation in France and thus deal with
the various possible destabilising shocks which can trigger a crisis – this also
forms an a contrario proof of the necessity of free trade. Basically, destabilis-
ing shocks originate in the class structure of society and more precisely in the
6“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect
our dinner, but from their regard to their own interest. We address ourselves, not to their
humanity but to their self-love, and never talk to them of our own necessities but of their
advantages” (Smith 1776 [1976], I.ii.2).
Pierre de Boisguilbert and the foundations of laissez-faire 13
behaviour of the members of the leisure class – be they simple rentiers or mem-
bers of the administration of the realm: the rentiers are not involved in trade,
their behaviour is not checked by competition but by some other rules dictated
by the “société de cour”. They do not know anything about the conditions of
economic life, their action must be enlightened – and to enlighten them is
precisely Boisguilbert’s task. He presents himself as “a new interpreter and ex-
traordinary ambassador of this unknown country of the people” (Boisguilbert
1691–1714, 769). The very existence of a leisure class thus potentially trans-
forms the economic structure from a stable to an unstable one. Boisguilbert’s
aim is thus to show how the destabilising shocks are caused by the behaviour
of those who “only receive” – and particularly the government through the
institution of bad forms of taxation and any regulation of economic activities.
His analysis is multifaceted (Faccarello 1986). Let us deal here with the main
destabilising shocks caused by trade regulations.
The emergence of crises and the role of expectations
During the Ancien Régime, the market for agricultural products was basic for
two reasons. (1) It had to satisfy the important needs and consumption habits
of the population, and agriculture was by far the main source of income of the
leisure class – this is why agricultural crises lead directly to general depressions
through significant spill-over effects in different markets. (2) However, and this
is the main point, agricultural crises are due neither to climatic conditions nor
to the mere behaviour of the members of the productive class: prosperity and
depression, Boisguilbert asserts, depend on the environment of activities. The
role of expectations is crucial: the same climatic conditions and the same basic
behaviour of agents in markets can generate either stabilising or destabilising
consequences, depending on whether trade is free or regulated.
Suppose first a strong corn trade regulation such as that which prevailed
during the Ancien Régime – it was forbidden to export corn, not only from the
country but also from province to province, all corn brought to a marketplace
had to be sold there, tolls had to be paid on roads, etc. What happens in times
of bad harvest or even when future harvests are simply predicted to be meagre?
(1) On the one hand, referring to past experience, buyers expect rising prices
and demand larger amounts of corn. A crop failure, real or only predicted,
Boisguilbert stresses, is sufficient to induce strong precautionary behaviour:
buyers form precautionary stocks. (2) On the other hand, the sellers amplify
Pierre de Boisguilbert and the foundations of laissez-faire 14
the movement – to greatly benefit from the situation, they can even say that
harvests are going to be very bad, even if it is not true, thus generating an
asymmetry of information. And, as they expect a rising corn price, they do not
bring the usual quantities of corn to the market – they keep back speculative
stocks and the price movement gains momentum. Thus, with a higher demand
and a reduced supply, Boisguilbert notes, the price of corn increases to seven
or even ten times its previous value. Consumers are the losers; they are greatly
impoverished in real terms. The point to note is the stock/flow mechanism on
both sides of the market, which is linked to the expectations of the agents.
Of course, the opposite occurs in the case of a good harvest, when the
agents’ expectations induce reverse attitudes in the market. Buyers expect a
lower price and thus demand smaller quantities of corn than usual, while the
sellers, who cannot keep the corn in stock and also anticipate lower prices,
increase their supply. With a reduced demand and an increased supply, the
price falls and farmers are led to ruin. In a regulated system, plentiful years are
therefore just as catastrophic as years of shortage, the only difference being
the more or less immediately apparent or dramatic effects: “if one [a high
price] stabs, the other [a low price] poisons” (Boisguilbert 1691–1714, 847); a
low price “produces less noise and commotion than that caused by extreme
sterility; but while it is apparently less violent, its effects are more pernicious;
it is like the dagger and poison used to kill men” (846).
Not only are the two situations damaging for the economy, but they are
interlinked, and the one necessarily generates the other in an everlasting cycle.
In a regulated context, there is a direct relationship between plenty and short-
age of corn, between periods of very low and very high prices. Plenty generates
shortage. When prices are low, farmers no longer cultivate poor-quality land.
Agricultural production decreases, causing a shortage after the slightest cli-
matic variation. On the other hand, shortage generates plenty because, owing
to the high price of corn, more land is cultivated during the following period.
Agricultural crises are thus inevitably cyclical and violent, causing ruin on
each side of the market in turn.
But whenever free trade prevails, Boisguilbert stresses, the price of corn
never fluctuates greatly and there are no crises. The proof is again based on
the information available to agents. When bad crops occur, for example, the
mere possibility of buying from other places restrains the purchasers from in-
creasing their demand for corn and building up precautionary stocks; the same
Pierre de Boisguilbert and the foundations of laissez-faire 15
possibility also restrains the sellers from bringing less corn to the market and
speculating. As a result, the price does not fluctuate so much, and proportion
prices are roughly maintained. In this case also, Boisguilbert emphasises the
role of expectations; prices are stabilised, he says, even if no corn, or only a
small quantity of it, is imported from other provinces or from abroad. An
analogous development is made in the case of an overproduction of corn. In
case of plenty, buyers do not delay their purchases because they know that the
farmers have the possibility to export their corn – and farmers do not overload
the market but prefer to sell part of their production elsewhere. Prices are
thus stabilised.
The propagation and deepening of crises
A final question is also material: why do agricultural crises turn into gen-
eral depressions? In the context of regulated trade, the stock/flow mechanism
linked to expectations in agricultural markets amplifies price and quantity
movements considerably. A similar stock/flow mechanism, now linked to fi-
nancial expectations, causes the propagation of the crisis from agriculture to
other markets. As a matter of fact, the agricultural crisis directly affects the
income of the leisure class. The rentier is faced with a diminished income flow.7
His reaction is twofold: he spends less money because of his lower income; but
he also spends less because, due to the depressed state of affairs, he expects a
lower income in the future and he accordingly adopts a precautionary attitude
– hoarding. As a result, the crisis is propagated more rapidly and economic
movements are amplified. What Boisguilbert depicts here is a kind of negative
multiplier, by which the most superfluous professions, which were the last to
appear, are the first to decline. But all the professions are attacked, he asserts,
and the regression is general, because people working in the more superfluous
trades, facing a lower income, are also progressively obliged to stop buying
from other more fundamental trades.
A man who used to go to the theatre every day during his prosperous
period, in other words while his farmers, through the sale of their produce
7This happens of course in the event of a low corn price, when the farmers risk going
bankrupt and cannot pay rents, but also in the event of a very high price: owing to the
general distress of the people, farmers claim they also meet difficulties in order not to pay
the landowners.
Pierre de Boisguilbert and the foundations of laissez-faire 16
to the actors, paid him regularly, experiencing a decrease in his prosperity
through some violent cause . . . restricts himself to frequenting it just
three times a week, compensating the diminution in his receipts through
a decrease in his spending. As for the actor, who is affected by the
same ill-fortune, he does likewise; while he used to eat meat or even
poultry every day, he too restricts his ordinary fare, reducing it to only
half the time. Hence, apart from the reducing of the grain price, the
farmer of the man who used to go to the theatre, and who is a livestock
merchant suffers an increased difficulty in paying his master, who in his
turn has difficulty in supporting the actor . . . This process continues
until reciprocally they have both taken leave of one another, which is the
absolute destruction of the state. (Boisguilbert 1691–1714, 990)
Finally, the propagation and deepening of the crisis also takes place in
a different and noticeable way: through price rigidities, for example, in the
market for non-agricultural products where downwardly rigid prices prevail;
or in the labour market where Boisguilbert puts a particular emphasis on the
role of worker coalitions and downwardly rigid money wages.
Back to money and foreign trade
These developments allow us to understand Boisguilbert’s ideas on the usual
economic policies of the time concerning money and foreign trade.
As regards money, Boisguilbert’s twofold regime has already been noted. In
addition, his ideas on the attainment of the “state of plenty” through a sys-
tem of equilibrium relative prices, the “proportion prices”, imply that absolute
prices do not matter, and neither, therefore, does the quantity of circulating
medium: thanks to “paper”, at least when expectations are positive, circulation
naturally generates the circulating medium it needs. Criticising the many and
persistent complaints about a “lack of money” as the origin of the economic
difficulties of the realm, Boisguilbert insisted that this alleged want of circu-
lating medium is only the consequence of the crisis – through the constitution
of precautionary stocks of money by the agents and the destruction of a great
part of the commercial paper which circulated before – and by no means the
cause. The usual policies of trying to introduce more money into the economy
in order to increase the level of activity and get out of stagnation are thus
bound to fail: the additional money will simply be hoarded.
Pierre de Boisguilbert and the foundations of laissez-faire 17
As regards foreign trade, its role is essential, but in a way totally opposed
to the common wisdom of the doctrine of the balance of trade. Its importance
is not quantitative, that is, it does not lie in a positive balance because, as
just stated, it is useless to attract more precious metals to the country. Its
importance is qualitative, as it greatly influences the expectations of agents in
the grain market. Free domestic trade without free foreign trade would not be
totally efficient. It is thanks to perfect freedom of trade, both domestic and
foreign, that expectations end up being fully stabilising and crises are avoided.
The size of the flows of imports or exports are of very little significance in this
context.
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