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Turgot, Graslin and Sensationist political
economy
Gilbert Faccarello∗
Compared to the term “physiocracy”, “sensationist political economy”1is a
recent appellation (Faccarello 1990, 1992). “Sensationism” refers to the empir-
ical philosophy of John Locke, presented in his 1689 Essay Concerning Human
Understanding, and his statement that there are no innate ideas: in a nutshell,
our ideas and knowledge come from our senses in contact with the external
world (experience) and by reflection (the operations of our mind, a kind of
internal sense). This approach was well-known in France in the eighteenth
century2and, in a sense, its acceptance had already been prepared by the Essay
de logique (1678) of the physicist and philosopher Edme Mariotte (1620–1684).
The first part of this Essay is composed of 100 propositions called “the first
principles of Sciences”.3There, Mariotte insists on the role of the senses in
∗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. 117–55.
1The present chapter deals with some of the main themes addressed by sensationist
authors: additional developments will be found below in Chapter 8, “The spirit of geometry.
Quantification and formalisation”.
2See for example Yolton (1991), Hutchison (1991) and Schøsler (1997, 2001).
3Locke knew the French publications and controversies well – he even started to translate
into English some of Pierre Nicole’s texts from his Essais de morale. He travelled extensively
1
Turgot, Graslin and Sensationist political economy 2
the elaboration of knowledge – “nothing is more certain than the knowledge
based on our senses” (1678, § XV) – and of the sensations of pleasure and pain
(or good and evil) in moral philosophy (§§ LIII–LVI). He finally lists a series
of “first moral truths” or “maxims of politics”, a kind of accountancy of goods
and evils showing how to maximise goods (or pleasures) and minimise evils
(or pains) (§§ LXXXIII–C).
Locke’s Essay, translated by Pierre Coste as early as 1700, had many edi-
tions, and its fundamental ideas were developed not only by one of the major
French philosophers of the time, Étienne Bonnot de Condillac (1714–1780)
in his Essai sur l’origine des connaissances humaines, 1746, and Traité des
sentations, 1754, but also, in various directions, by scientists like Pierre Louis
Moreau de Maupertuis (1698–1759) in his Essai de philosophie morale (1749)
and Lettres sur divers sujets (1753) or Charles Bonnet (1720–1793) in his Essai
de psychologie (1755) and Essai analytique sur les facultés de l’âme (1760).
1Sensationist political economy defined
This general approach pervaded the new “sciences morales et politiques” (moral
and political sciences) in the second half of the eighteenth century, from
François Quesnay (1694–1774) and Anne-Robert-Jacques Turgot (1727–1981)
to M.-J.-A.-N. Caritat de Condorcet (1743–1794), Claude-Adrien Helvétius
(1715–1771) and Paul Henri Thiry d’Holbach (1723–1789). Turgot himself
wrote an essay following this line of thought: the entry “Existence”, published
in 1756 in Encyclopédie, ou Dictionnaire raisonné des sciences, des arts et
des métiers, one of the flagships of the French Enlightenment edited by Denis
Diderot and Jean Le Rond d’Alembert.
Locke . . . the first, proved that all our ideas come from the senses, and
that there is not any notion in the human mind at which we arrived but
starting only from sensations, he showed us the real point from which
men started, and from which we have to start again in order to follow
the generation of all our ideas. (Turgot 1756, 518)
In the economic field, this approach was most strikingly developed by a
group of authors who, starting from sensationist premisses, based their state-
in France, where he bought Mariotte’s Essay de logique in 1678 (Lough 1953; Harrison and
Laslett 1965).
Turgot, Graslin and Sensationist political economy 3
ments on a calculus of pleasure/utility and pain/disutility, in which individ-
uals seek to maximise the former and minimise the latter. Turgot was the
“founding father” and most well-known author of this group, which also in-
cluded his disciple Condorcet, a younger follower, Pierre-Louis Rœderer (1754–
1835), and some friends like André Morellet (1727–1819). Echoes can also be
found in a late work by Condillac himself, Le commerce et le gouvernement
considérés relativement l’un à l’autre (1776).4Helvétius and d’Holbach did
not deal with political economy proper, and Quesnay’s developments followed
a different route. This first group of authors were for a long time wrongly
assimilated with the physiocrats.
However, the notion of a sensationist political economy can also be
understood in a broader sense. It not only encompasses Turgot and his
followers, but also a second group of authors who rejected the entire phys-
iocratic doctrine. Jean-Joseph-Louis Graslin (1727–1790) was certainly the
most important of them. A fierce critic of the physiocrats – the “Tableau
économique” is called by him the “Tableau hiéroglyphique” (hieroglyphic
table) (Graslin 1767, 82) – and a follower of Jean-Jacques Rousseau, he fol-
lowed the sensationist approach of Maupertuis and Bonnet. Achilles-Nicolas
Isnard (1748–1803),5another critic of the physiocrats, followed the same route,
although more discreetly. Charles François de Bicquilley (1738–1814) and
Nicolas-François Canard (1750–1833), at the turn of the nineteenth century,
tried to formalise and develop some basic propositions of this current of thought.
Minor authors can also be added to the list, such as Alexandre Vandermonde
(1735–1796). It is finally interesting to note that Condorcet, Vandermonde,
and Canard were mathematicians, Isnard an engineer6and Bicquilley a soldier
trained in mathematics.
4Turgot helped Condillac to publish some of his work, and Condillac’s last paragraph,
in Le commerce et le gouvernment, expresses clear support for Turgot’s policy (Condillac
1776, 586).
5It is unusual to see Isnard included in the sensationist movement. This is to forget
that, four years after his Traité des richesses, he published a Catéchisme social, in which
the analysis of the behaviour of individuals is based on their reactions to pleasure and pain:
“pleasure and pain are the motives not only for instinct, sentiments and passions, but also
for the will . . . [T]hese secondary motives themselves receive their first impetus from the
sensations; their initial motives are thus pleasure and pain” (Isnard 1784, 80). “[T]he soul
gets ideas only from the senses. Ideas are internal representations of sensations, that is,
impressions received from the senses” (1784, 16).
6The tradition of engineer-economists, initiated during the Enlightenment, also charac-
terised French classical political economy, with the prominent figure of Jules Dupuit, while
Turgot, Graslin and Sensationist political economy 4
Sensationist political economy and physiocracy
What are the links between the first group of sensationist authors and
Quesnay and his disciples, with whom they have usually been confused?
Turgot and Condorcet were critical of the physiocrats. They rejected the no-
tions of “tutelary authority” and “legal despotism”, adopted a natural human
rights approach based on liberty, security and property (while stressing the
concept of utility, they were not utilitarians) and developed a distinct political
economy mostly focused on the decisions of individuals. At the political level,
they praised Rousseau’s 1762 Du contrat social, ou Principe du droit politique.
Rousseau, Turgot wrote,
is one of those authors who best serve morals and humanity. Far from
criticizing him for diverging from common ideas on this topic, I believe
instead that he remained respectful of too many prejudices; but we have
to follow his road if we are to attain his goal, which is to bring men closer
to equality, justice and happiness. (Turgot 1913–23, II, 659–60)
The Contrat social “distinguishes precisely between Sovereign and
Government; and this distinction presents a genuinely illuminating truth which
. . . resolves forever the idea of the inalienability of the sovereignty of the
people under any form of government.” (1913–23, II, 660). Condorcet later
endeavoured to give a precise meaning to Rousseau’s concept of “general will”,
especially in his celebrated 1785 treatise, Essai sur l’application de l’analyse à
la probabilité des décisions rendues à la pluralité des voix.
However, at the same time, the most important sensationist economists,
like Turgot, accepted the basis of the Tableau économique, that is, the theory
of the exclusive productivity of agriculture, and this created some confusion.
Turgot was usually depicted as a physiocrat or a “dissenting” or “heterodox”
disciple of Quesnay, meaning with these epithets that the differences were
ultimately of trifling importance, which is certainly not the case. What also
caused some confusion was the attitude of Pierre-Samuel Dupont de Nemours
(1739–1817). When he published Turgot’s main theoretical work (the 1766
Réflexions sur la formation et la distribution des richesses) in three instalments
the use of mathematics in economics was developed at the same time by the mathematician
Antoine Augustin Cournot.
Turgot, Graslin and Sensationist political economy 5
in the Éphémérides du citoyen,7he “corrected” some passages to bring them
more in line with the physiocratic dogmas and added some notes. Turgot
protested and asked Dupont to publish offprints of the original text (to Dupont,
2 February 1770, in Turgot 1913–23, III, 373–4). This is what Dupont did in
1770, and there was also another edition of the text of the offprint in 1788.8
But when, in 1808–11, he published the Œuvres de M. Turgot, the text of
the Réflexions that he included in this edition was, with minor differences,
that of the Éphémérides and not that of the offprint. In 1844, when Eugène
Daire and Hippolyte Dussard edited the Œuvres de Turgot in the “Collection
des principaux économistes” published by Gilbert-Urbain Guillaumin, it was
the text of the Dupont 1808-11 edition which was reprinted, not that of the
offprint. Turgot’s original text was finally republished by Gustave Schelle in
his 1913–23 edition of the Œuvres de Turgot et documents le concernant (II,
533–601),9a five-volume publication which is still considered today as the most
faithful and complete edition of Turgot’s writings.10
Finally, another reason for confusion was proposed by Jean-Baptiste Say.
“One did Turgot a disservice in presenting him as a coryphaeus of the sect of
the Économistes”, he stated in his Traité d’économie politique.
7Éphémérides du citoyen, ou Bibliothèque raisonnée des sciences morales et politiques,
November and December 1769 and January 1770. While the Réflexions were only published
in 1769–70, they were written in 1766 and circulated as a manuscript that Turgot planned
to expand. That is why it is usual to keep the date of 1766 as the reference for this work.
The same convention applies for his other writings, for example his manuscripts “Valeurs et
monnaies” (1769) and Mémoires sur les prêts d’argent (1770).
8Unfortunately, in the 1788 edition there is a mistake in the numbering of the sections:
there are two sections XLVI, and thus the numbering of the following sections is faulty.
9As if there were not enough confusion about the Réflexions, another problem arose
with the Schelle edition. Turgot’s manuscript had 101 sections. But, in the developments
concerning the rate of interest, section LXXV, “Réponse à une objection” (Answer to an ob-
jection) was omitted in the Éphémérides edition, at Turgot’s request. But Dupont included
it in the offprint. Schelle, considering that Turgot wanted this section to be removed from
the text (its substance is to be found in the 1770 Mémoire sur les prêts d’argent), omitted
it in his edition. This is the reason why Schelle’s version of the Réflexions, while being that
of the offprint, only contains 100 sections instead of 101.
10 There is a misprint in the 1769 paper “Valeurs et monnaies”: in an example of an
exchange of two commodities between two agents, Schelle inverted the terms of trade – this
misprint does not exist in Dupont’s edition (Van den Berg 2014). In the following pages,
however, the references refer to the Schelle edition. In English, the most comprehensive
collection of Turgot’s writing is The Turgot Collection (Turgot 2011). The translations it
presented are occasionally used here, with modifications.
Turgot, Graslin and Sensationist political economy 6
Turgot was too good a citizen not to sincerely esteem such good citizens
as the Économistes: and, when he was in power, he believed it useful
to support them. The latter, in turn, benefitted from portraying such a
knowledgeable man and a Ministre d’État as one of their disciples. (Say
1803–41, 31)
The diffusion of sensationist political economy
A last point concerns the diffusion of sensationist economic writings. Most of
them of course came out as books and pamphlets – two important manuscripts
of Turgot being an exception: the 1769 article “Valeurs et monnaies” and
the 1770 Mémoire sur les prêts d’argent, not to mention his “Lettres” to the
Comptroller General Joseph Marie Terray on the grain trade. But, at that
time, especially in the case of prominent authors, the circulation and influence
of writings did not necessarily depend on the fact that they were printed or not:
copies of the manuscripts circulated within intellectual networks. Finally, the
substance of some of Turgot’s manuscripts was published under other authors’
names. The article “Valeurs et monnaies”, for example, was intended for a
Dictionnaire du Commerce in five volumes that Morellet planned to publish
and that he described in detail in his Prospectus d’un nouveau Dictionnaire de
commerce (Morellet 1769). The Dictionnaire was never completed but Morel-
let made use of Turgot’s manuscript in the composition of a long “Digression
pour servir à l’intelligence de la partie du plan du nouveau Dictionnaire, rela-
tive aux monnaies” (Morellet 1769, 98–183) included in the Prospectus – this
may have been a source of inspiration for Condillac (who could also have known
the manuscript) some years later and for Isnard’s 1781 Traité des Richesses
(where the Prospectus is referred to). For his part, Pierre Rullié, in his
Théorie de l’intérêt de l’argent, tirée des vrais principes du droit naturel, de la
théologie et de la politique, contre l’abus de l’imputation d’usure (1780), drew
on the 1766 Réflexions, but also and above all on Turgot’s Mémoire sur les
prêts d’argent, from which he quoted extensively. The work prompted some
polemical exchanges and a second enlarged edition was published in 1782. Fi-
nally, Turgot’s Mémoire was published in 1789, in Mémoires sur le prêt à
intérêt et sur le commerce des fers (Turgot 1789).
Turgot, Graslin and Sensationist political economy 7
2Turgot and the development
of a subjective theory of value and prices
Human beings know the external world through sensations and the feelings of
pleasure and pain: they consequently seek pleasure and try to avoid pain.
The objects, whose distance and movements around our body we observe,
are of interest to us . . . through the sensations of pleasure and pain
that these movements are likely to give us . . . The ease with which
we can change the distance of our body to the other stationary objects
. . . helps in seeking the objects whose approach gives us pleasure, and
in avoiding those whose approach generates pain. The presence of these
objects becomes the source of our desires and fears, and the cause of the
movement of our body. (Turgot 1756, 522)
This places the concept of need at the centre of the analysis. A need is a
pain, and its satisfaction causes the cessation of the pain, that is, a pleasure.
Moreover, this attitude generates a maximising behaviour of the agents who
try to minimise pain and maximise pleasure. This is an important point to
note. Liberal political economy was founded by Boisguilbert, who placed the
maximising behaviour of agents in markets at the centre of the analysis: but
he based this selfish attitude on a Christian theological scheme – the doctrine
of original sin and the Fall – as understood by the Jansenist tradition. Now,
sensationist philosophy explains this attitude in a different and “empirical”
way, thus getting rid of theology. Moreover, if all knowledge derives from the
sensations, this means that we cannot know any hypothetical ultimate “nature
of things” but only the relationships existing between them: any science is a
science of signs. The notion of “substance” of value, for example, is meaning-
less, only the proportions between different values can be dealt with, that is,
relative values or prices.
From this general framework, two different approaches to the determination
of values and prices were proposed almost at the same time during the 1760s.
The first, by Turgot, is connected to a long tradition followed by French au-
thors from Jean Bodin to Pierre de Boisguilbert, who stressed the role of the
interaction of demand and supply in the determination of prices. This tradi-
tion was also lively in scholastic thought, old and new, especially when dealing
with problems of justice – a tradition that Turgot knew very well: he studied
at the Sorbonne and had serious theological training. The second approach to
Turgot, Graslin and Sensationist political economy 8
value and prices also came from a reflection on problems of justice, but from a
different point of view. Graslin proposed it, referring to some statements and
methods found in Rousseau’s Contrat social.
The foundations of a subjective theory of value
A person is “merely a bundle of needs”, Turgot wrote in his “Plan d’un
mémoire sur les impositions” (1763, 297). Satisfying these needs brings about
utility and the effort spent in this direction generates pain. Individual agents
act accordingly and try to minimise pain and maximise utility. In this
respect, Turgot, like many other authors during the Enlightenment, thought
that economic problems could be solved by a “maximis et minimis” approach
– sometimes understood in a broad and metaphorical sense – proposed by the
seventeenth-century French mathematician Pierre de Fermat and developed by
Isaac Newton and Gottfried Wilhelm Leibniz (see below, Chapter 8).
Some developments on value can be found in Turgot’s 1766 Reflexions, but
an extensive analysis is presented in the 1769 draft “Valeurs et monnaies”. To
uncover the nature of value, Turgot first imagines a man alone facing nature.
This man is free and endowed with reason. As Locke stressed, he has the power
to suspend his desires and to calculate the best way to achieve happiness.
Whatever necessity determines to the pursuit of real bliss, the same
necessity with the same force establishes suspense,deliberation, and
scrutiny of each successive desire, whether the satisfaction of it does
not interfere with our true happiness and mislead us from it. This
. . . is the great privilege of finite intellectual beings; and I desire
it may be well considered, whether the great inlet and exercise of all the
liberty men have . . . does not lie in this, that they can suspend their
desires, and stop them from determining their wills to any action, till
they have duly and fairly examined the good and evil of it . . . For since
the will supposes knowledge to guide its choice, all that we can do is to
hold our wills undetermined, till we have examined the good and evil of
what we desire. (Locke 1690, I, 220)
In order to act, that is to say, to produce the goods necessary to satisfy his
needs, Turgot’s Robinson first determines the value each of these goods has for
him. This is what Turgot calls the “valeur estimative” (esteem value), that is,
the subjective “degree of esteem which he attaches to the different objects of
his desires” (1769, 87) – their “degree of utility” as Turgot puts it in Mémoire
Turgot, Graslin and Sensationist political economy 9
sur les prêts d’argent (1770a, 175). The isolated individual thus establishes
a preference-ordering – a “ranking of utility” (1769, 86, 97) – on all of the
goods, taking into account (1) the ability of each object to satisfy a kind of
need, (2) the temporal element generated by foresight (some provisions are to
be made for a bad season), and (3) the scarcity of the desired object. As a
result of his calculation, he attributes a certain “esteem value” to the quantity
of each object he needs: this expresses the proportion of his “faculties” which
he is prepared to devote to obtaining it, all other things being equal. He
also distributes his faculties in such a way as to procure the different goods
“according to their importance for . . . his well-being” (1769, 87), that is, by
searching for the greatest possible well-being. It should be noted that Turgot
opts for a purely relative measure of values. The reason for this is that the
unity – the “faculties” – to which the values refer cannot be evaluated.11
Turgot then supposes that there are two agents, two goods, and no
production. Each agent has an initial endowment of one good which exceeds
his needs and requires some of the good owned by the other agent: the situa-
tion is thus a bilateral monopoly in a pure exchange economy. The two agents
engage in bargaining under the following assumptions: (1) each agent deter-
mines for himself the “esteem values” he attributes to the different amounts of
the endowment he wishes to exchange, as well as to the amounts of the other
agent’s endowment which he could receive in exchange; (2) the agents do not
reveal their preferences; (3) on this basis, each agent determines his state of
indifference, in other words, the reservation price from which the exchange is
possible; (4) each of them follows a maximising behaviour, that is, is animated
by “the interest to keep the largest quantity possible of his own good and to
acquire in exchange the largest quantity of the other’s good” (1769, 90).
In order for a transaction to take place, each agent must attribute a higher
esteem value (say λ) to the quantity of the object received than he attributes
to the quantity of the good given in exchange (λ∗), that is, λ > λ∗: “each
would stay as he is unless he finds an interest, a personal profit, to exchange;
unless he values more what he receives than what he gives” (1769, 91). Or, as
Turgot sums up in his Mémoire sur les prêts d’argent :
11 However, despite this, the text sometimes presupposes this measurement, that is, car-
dinality, as it is the case in the determination of the equilibrium price.
Turgot, Graslin and Sensationist political economy 10
The exchange, being free on both sides, can only be motivated by the
preference of each of the contracting parties for the thing he receives
over the thing he gives. This preference presumes that each attributes
a greater value to the thing he acquires than to the thing he gives up,
relative to his personal utility and to the satisfaction of his needs and
desires . . . This value only depends on the opinion of the two contracting
parties as regards the degree of utility of the things exchanged. (1770a,
174-5)
The gains from exchange are clear: (1) the total utility of each agent
increases; (2) whenever production is possible, exchange also allows a
division of labour and results in an increase in the quantities of goods available
to the agents (1769, 93). It is assumed that the bargaining process converges
towards a price on which both agents agree, somewhere between the reservation
prices of the two agents. This equilibrium price, which Turgot called “valeur
appréciative” (appreciative value), is unique and determined simultaneously
with the quantities exchanged. The final agreement is defined as a situation in
which the difference between the esteem value of the good received and that
of the good given in exchange is equal for both parties (1769, 92; 1770a, 174).
This can be symbolised, for two agents iand j, by:
λi−λi
∗
=λj−λj
∗
This is the reason why this equilibrium price is termed “average esteem value”
(1769, 92). This solution is not satisfactory because, as we know today, there
is a priori no unique solution in the case of a bilateral monopoly. But this
approach is nevertheless remarkable for the time and for its originality and
rigour.12 However, the explanation given by Turgot remains questionable:
this “valeur appréciative” is necessarily attained because, he notes, should the
differences λi−λi
∗and λj−λj
∗differ between agents, it would be in the interest
of one of the two agents to continue the bargaining process. But how could the
agents know each other’s differences when preferences are not revealed, and
moreover utilities are not comparable?
12 It was probably inspired by the celebrated pages on justice and exchange in Aristotle’s
Nicomachean Ethics (which can find an interpretation in terms of cooperative games: see
Dos Santos Ferreira 2002).
Turgot, Graslin and Sensationist political economy 11
Some developments
Having established his argument for two contracting parties, Turgot intended
to generalise it to a large number of agents and goods. Unfortunately, “Valeurs
et monnaies” concludes after only considering a larger number of agents in a
two-good context: Turgot assumes that, as a result of competitive arbitrages,
a single price will be established. The general situation (many agents and
many goods) is, however, mentioned incidentally in Mémoire sur les prêts
d’argent (1770a) and his letters to Terray (1770b). Turgot simply asserts that
a general equilibrium will materialise. Nevertheless, two remarks made on
these occasions are of interest.
(1) The process by which an equilibrium is achieved is described as a process
of “tâtonnement”: an actual “tâtonnement”, however, since exchanges are made
outside equilibrium. “The debate between each buyer and each seller is a kind
of tâtonnement which lets each of them know with certainty the true price
of things” (1770b, 326). No one’s interest, however, would really be damaged
– at least statistically – since, given that the price variations are made by
“imperceptible degrees”, the “losses” and “gains” are supposed to compensate
for each other in the end but, “if somebody were harmed, this damage being
the unavoidable effect of the course of things, it would be accepted as we accept
the evils that we can only ascribe to necessity” (1770b, 326).
(2) In the second place, while prices are actually determined on a subjective
basis, they acquire a misleadingly objective appearance in markets: “each seller
and each buyer in particular plays so small a part in the formation of this
general opinion and the resulting current evaluation, that this evaluation can
be seen as an independent fact” (1770a, 175). It is this illusion, Turgot stresses,
which has given rise to a belief in the existence of an “intrinsic value” or “real
value”: a thing “strictly speaking, has no real and intrinsic value” and usage
alone “allows us to call this current value the real value of a thing” (1770a,
176).
[T]hrough comparison of the total supplies and the total demands,
a current value establishes itself, which only differs from that established
in the exchange between two isolated men, in that it is the mean [“le mi-
lieu”] of the different values which would have resulted from the haggling
between the contracting parties in each separated exchange. But this
mean or current value does not acquire any reality independent from the
Turgot, Graslin and Sensationist political economy 12
opinion and the comparison of the reciprocal needs and does not cease
to be continuously variable. (1770a, 175)
It will be seen how this line of reasoning is also implemented to deal with the
concepts of money and interest rate and in public economics. After Turgot, the
approach was developed in various directions. Condorcet (1793), for example,
used it to determine the optimal amount of public expenditure and taxes for a
given period (below). Some echoes are also to be found in Morellet’s Prospectus
(1769) and Condillac’s Le commerce et le gouvernement (1776) and, later, in
authors like Isnard, Canard and Bicquilley (see Chapter 8, this volume). This
kind of approach is also to be found in the press. The Journal encyclopédique
ou universel, for example, published on 1 and 15 October 1776 an anonymous
review of Smith’s Wealth of Nations. The author notes that for Smith, “the
word value has a dual meaning; it expresses both the quality of a particular
object, and the faculty that enables this object to be used as a means for
the purchase of others”, but remarks that this distinction “appears to us to
have greater subtlety than importance, for it is always utility, the real merit or
opinion, which makes this object the price of another” (1 October 1776, 8–9).
3Graslin and the foundation
of the theory of natural prices
Another view of value and prices is presented by Graslin in his Essai
analytique sur la richesse et sur l’impôt (1767) and Dissertation sur la
Question proposée par la Société économique de St. Pétersbourg (1768),13 some
points being clarified in the course of his controversy with Nicolas Baudeau
(Graslin 1767–68).14 Graslin’s approach is not easy to understand because of
the very peculiar theoretical vocabulary he invented and was the only one to
use: this certainly impeded the reception of his work.
13 Graslin’s developments in the Dissertation have some similarities with the basic model
of an economy presented by Auxiron (1766). On Auxiron, see van den Berg (2004).
14 See Faccarello (2008, 2009). For an alternative view, see Orain (2006).
Turgot, Graslin and Sensationist political economy 13
Supply and demand, free goods, complementary and sub-
stitutable goods
At first sight, it seems that Graslin’s developments on the subject are close to
Turgot’s. Following the sensationist approach, he insisted on the role of needs,
demand and supply in the determination of prices.
A first kind of value is what he calls “relative value”: this is the relative price
of a commodity in terms of another good. The “fundamental principle”, Graslin
writes, is that “need is the only cause of the value of things, which is their
quality as wealth” (1767, 115; see also 1767–68, 25). Relative values depend
on the interaction of supply and demand. They result “from the comparison of
the different degrees of need in themselves, and of the more or less important
difficulty in meeting them on account of the scarcity or abundance of the thing
which is the object of each need” (1767, 13).
Graslin, however, introduces a second concept: “absolute value”, because
of the existence of “objects of needs” such as air, water and light, which are
not produced, not scarce and consequently do not have any market or relative
value. They are free goods: “these things . . . are always in excess quantity
with respect to the extent of the general need: the value of any individual
portion is so modest that it is almost nothing” (1767, 36n). The quality of
being a free good also depends on the circumstances: “in a boat on the open
sea, or in deserts”, water will have a relative value because it is then scarce
(1767, 37). Nevertheless, free goods are also, by extension, elements of wealth
(1767, 136) because they are useful: they have an “absolute value”, the “well-
being” generated by the satisfaction of the need. The quality of having an
absolute value is, however, not limited to non-produced objects: it is in fact
a property of any element of wealth – this is what Graslin also calls “direct
value” (1767, 37n).
Beyond the definition of free goods, another theoretical innovation is worth
noting: the concepts of complementary and substitutable goods (1767, 42ff).
We must distinguish things which are of different species, the collection
of which makes one single object of need . . . (such as the stone, the
lime, the wood and the slate, etc., which go into the building of a house;
such are also . . . the raw material and the industry of the labourer);
from the things which, although of different nature, are only related to
Turgot, Graslin and Sensationist political economy 14
one part of the need, since they have one and the same use in fulfilling
the need: such as the slate, the tile, the thatch, etc. (1767, 42)
Things “which are different but relate to the same portion of a need”, that is to
say, which can satisfy the same need, are what are today called substitutable
goods: “the value of the one necessarily influences that of the other, just as a
part – great or small – that we subtract from the whole influences the size of
the remaining part” (1767, 44). In the case of complementary goods, that is
to say, things “which are the objects of different parts of the same need”, their
quantities vary in the same way and “the value of the one cannot have any
influence on the value of the other” (1767, 44).
The foundation of the natural prices approach
Besides these innovations, some other striking theoretical developments are to
be found in Graslin’s writings, especially in the Dissertation which forms an
essential complement to the understanding of the Essai and was unfortunately
neglected by commentators. In it, we realise that the interaction of supply and
demand refers in fact to market prices, and what we call natural prices today
are determined in a different way.
Starting from a “state of nature” in which men are isolated from each
other, form no kind of society and have to produce the objects of their needs,
allocating their labour in consequence, Graslin develops a model which depicts
three different stages of society proper: the “perfect order of society”, the “state
of relationships” and the “inverted order of society”. Society emerges as soon
as there is a division of labour, and the evolution from the first simple state,
the “perfect state”, to the most developed, the “inverted order”, is irreversible.
The “full and perfect order of society” (Graslin 1768, 118) is seen as the
extension of the state of nature after the division of labour and results from a
conscious collaboration between men. It is a kind of planned society in which
“a general and unanimous convention” fixes the amount of the different goods
that the members have to produce to satisfy the needs of all. In this context,
Graslin defines what he calls a “class” of workers – production being directed to
the satisfaction of final needs, each of them generates a class, which is nothing
other than what we call today a vertically integrated sector: “one necessarily
must gather in the same class men – either cultivators or labourers [craftsmen]
– who are directly or indirectly involved in the production of the object of each
Turgot, Graslin and Sensationist political economy 15
need” (1768, 136). If the activity of a man directly or indirectly contributes to
the production of several final consumption goods, this activity is divided in
proportion and each fraction is attributed accordingly to the different classes
defined by these goods (1768, 140–41).
This state of society is difficult to maintain as the population grows and
needs and commodities multiply. It evolves into the second stage, the “state of
relationships between men” or “commercial universe”, that is, a market econ-
omy in which the social connection between men is indirect through exchanges
in markets. Like the “perfect order”, this commercial society is, however, not
a capitalist society but rather a society of independent producers, what Marx
later called “simple commodity production”. In spite of some ambiguities,
and contrary to Turgot’s developments (below), there is no space in Graslin’s
schemes for a capital/wage labour relationship.15 But neither is the “commer-
cial universe” an a priori harmonious society, because now the interests of the
members are different and driven by a maximising attitude: “the interest of
each in particular being that of receiving more and giving less, the interest of
any one is certainly not the same as the interest of any other” (1768, 142).
The nation . . . is the collection of many different and even opposed
interests because he who is an owner has to give something to the other
who needs it. The wealth of the former lying in a greater scarcity of
this thing, and that of the latter in its greater abundance, the wealth of
a State can only be in the equilibrium of these two sums of wealth, in
other words in the conciliation of these two opposed interests. In order to
have greater wealth in the State, the thing must be in a quantity exactly
proportionate to the extent of the need. (1767, 64)
The third stage of society is more complex: the “inverted order” is still
a market-based society, but it is characterised by the emergence of a leisure
class of rentiers who do not work but nevertheless have a right to a share of
the society’s production – hence the appellation “inverted” because the natural
right of property based on labour is no longer respected. Therefore, contrary
to the other kinds of society, it is not “just”.
15 Wage earners are equated with craftsmen. As for entrepreneurs, Graslin sees them as a
kind of intermediary case between the rentiers, who do not work and only have “privileges”,
and the “labourers” who work and do not have any “privileges”. Only one portion of the
revenue of entrepreneurs originates in their activity and, in this respect, they are “labourers”
– the other portion results from “privileges” (Graslin 1767–68, 55).
Turgot, Graslin and Sensationist political economy 16
Now the main question is: what is the price mechanism that makes the last
two systems efficient and ensures the emergence of an equilibrium? For the
sake of simplicity, only the second stage of society – “the state of relationships”
or “commercial universe” – is examined here.
Graslin’s reasoning is first made at the macro level, and the natural
exchange ratios are determined on this basis. Suppose that, in the natural
order, each isolated cultivator devoted 3/4 of his labour time to cultivation,
and 1/4 to the production of “ploughing implements”.16 After the division of
labour between cultivators and craftsmen, the entire population is divided17
between the two activities: 3/4 of them remain in agriculture and devote their
time to cultivation, and 1/4 work in the craft industry; the two goods, corn and
“ploughing implements”, are produced in the same total quantities as before –
needs are the same – but the working time of each producer is now reduced
owing to the beneficial effects of the division of labour.
Exchanges between corn and implements are now necessary. In the planned
society, that is, the “full and perfect order”, the question is irrelevant. But in
the “commercial universe”? How is the exchange ratio fixed? Craftsmen do not
have any use for the tools they make: their whole production is destined for
the cultivators. The latter, on the other hand, only give up 1/4 of the produc-
tion of corn in exchange, keeping 3/4 of the corn produced. The equilibrium
exchange ratio between activities is thus the following: the total production of
ploughing implements = one quarter of the production of corn. This ratio is an
equilibrium price: all the needs are satisfied; there is no excess supply, neither
of the final consumption good nor of tools. This ratio is also just: it allows
everyone to obtain the same quantity of corn as before, when each citizen was
also a landowner and produced his own circulating capital (1768, 119).
Equilibrium exchange ratios between commodities are thus determined by
the global quantities of labour expended in their production: the same quan-
tity of direct and indirect labour is needed for the production of the ploughing
implements and the quantity of corn given in exchange. The ploughing imple-
ments are manufactured by 1/4 of the total labour force (the level of employ-
ment in the craft industry), with no means of production other than labour.
16 Strictly speaking, in modern terms we have to suppose that these “ploughing imple-
ments” are a kind of circulating capital (absence of fixed capital).
17 Note that in this simple example, the two activities are subdivisions of a single vertically-
integrated sector.
Turgot, Graslin and Sensationist political economy 17
The corn is produced by 3/4 of the total labour force (the level of employment
in agriculture) using the ploughing implements themselves produced by 1/4 of
the labour force. In terms of incorporated labour, the total quantity of corn is
therefore worth four times the total quantity of ploughing implements – which
gives the natural price noted earlier.
What is valid for the exchange between global equilibrium quantities is also
valid for the single elements: “the [proportional] parts of each [different] thing
must exchange against each other in this same proportion” (1768, 127) – an
assertion which means that, once the natural ratios of exchange between total
quantities are known, as well as these quantities, the natural (equilibrium)
prices of the individual commodities are also determined.
The analysis is then developed in more complex situations, for example
when the division of labour increases either by subdividing each process into
further activities (1768, 134) or by multiplying the needs and thus dealing with
classes proper (1768, 135ff) – the vertically-integrated sectors. The calculation
of natural prices leads to the same result as before: equilibrium relative prices
are determined by the direct and indirect quantities of labour.18
If one wished to fix exactly the proportion in which these exchanges of
labour, and of the fruits of labour, must take place between all classes
it would be necessary to know the proportion of all the men who form
a class to the total amount of men . . . The share of the fruits of the
labour of all others that each class must receive will be in proportion
to the number of men that it includes with respect to all men taken
together; and it would provide for each of the other classes a share of
the fruits of its own labour in proportion to the portion that each class
makes up of the mass of all men. (1768, 139)
But what happens when the effective supply of a good differs from that
which is necessary to fulfil needs? The effective individual value of the good,
its market price determined by supply and demand, will differ from its natural
price, while the value of the total amount produced remains the same. The
market price will fluctuate but, for given needs and techniques, price and quan-
tity are supposed to eventually return to their natural values. Why? Graslin
describes a process of gravitation ante litteram, operating through the mobility
18 Of course, work is of different kinds, but these differences, Gralin writes, can be dealt
with: the different kinds of labour have to be weighted according to their more or less
arduous nature (1768, 134).
Turgot, Graslin and Sensationist political economy 18
of the only factor of production, labour. The principle underlying this process
is once more the selfishness of the agents, who always move “towards the ac-
tivity which procures the greatest right to the work of others, either because
of the intensity of the need or because of the scarcity of the object” (1767,
98). Suppose that, for whatever reason, the production of various goods is
disrupted. The market prices of the commodities in excess supply fall, while
the reverse happens for those in excess demand. People engaged in producing
the former see the purchasing power of their commodity diminished in terms
of other commodities; while the opposite occurs for those producing the lat-
ter. Some labourers therefore move from the first activities into the second,
production changes and the excesses in supply and demand are reduced, thus
prompting new and inverse movements in market prices. An equilibrium is
eventually reached – a new natural equilibrium or the previous one, depending
on whether anything has changed in needs and/or techniques.
The order that I present here is not fictitious . . . This enduring liberty
for each individual to move from one class into another whenever he
anticipates therein a better situation; and the disadvantage that always
results for a class of its too great increase; would tend perpetually to
place these two classes in equilibrium. (1768, 121–2)
Needless to say, very similar developments are to be found in Smith,
Ricardo or Marx with the development of natural price theory – and in Turgot
in another context. The main difference is that these authors deal with a capi-
talist society and that the process of gravitation mainly involves the migration
of capital.
As for the physical approach implemented by Graslin in his examples, which
gave rise to the concept of “class” (a vertically integrated sector or “subsystem”
in Sraffian words, an approach particularly developed by Luigi L. Pasinetti),
they possibly inspired Isnard in his Traité des richesses (where Graslin is
mentioned), where an approach in physical terms is also presented – but in the
nowadays more familiar perspective of branches of production (with examples
recalling some classical and Sraffian schemes).
Turgot, Graslin and Sensationist political economy 19
4Money and interest
The sensationist approach is ground-breaking not only on the subject of value
and prices, but also as regards the nature of money and interest. At first sight,
however, sensationist authors just followed Boisguilbert’s statements that only
the structure of relative prices matters: the quantity of money is unimportant
and anyway cannot explain economic crises or prosperity. In addition to this,
Turgot accepted Hume’s “quantity theory”. The question is therefore, in what
sense was sensationist political economy innovative in monetary theory and as
regards the rate of interest? In developing a theory of value, Turgot emphasised
the necessary monetary form of exchanges. Moreover, his theory of value
allowed him to propose the first economic theory of the rate of interest.
The value form and money
Turgot’s theory of value shows that money is not the primary goal of exchanges:
underlying these exchanges, there is something hidden that is much more
fundamental – utility. But values and utilities cannot be expressed as such:
money is their necessary expression. Turgot thus points out the difficulty that
a theory of value has to face: the measure of value (1769, 88, 94–5). “It is
. . . impossible to express value in itself” (1769, 94). Value is a relative value,
and the value of a commodity can only be expressed in terms of a quantity of
another commodity against which it is exchanged.
The sole means of expressing value is therefore . . . to say that one thing
is equal to another in value . . . Value has . . . no other measure than
value; and one measures values by comparing values, in the same way as
one measures a length by applying another length to it; in either means
of comparison there is no fundamental unit given by nature; there is only
a conventional and arbitrary unit. (1769, 95)
In this perspective, money is necessarily a commodity, and every commodity
is money. And the “convention” Turgot mentions does not relate to some
alleged “conventional” value of money, but exclusively to the choice of the
commodity which will be considered, by all agents, as the most convenient
expression of the value of their commodities. “One can only take as a common
measure of value what has itself a value”, Turgot stresses. That is to say, an
object “accepted in trade in exchange for other values”: “the only universal
Turgot, Graslin and Sensationist political economy 20
representative token of [a given] value is another equal value. – A purely
conventional money is therefore impossible” (Turgot 1766, 558; see also 1767a,
636).
The analysis of the nature of money as the value form is developed in detail
in the Réflexions (1766, 554–62). The “appreciative value” of a commodity is
first of all expressed by each of the quantities of every other commodity against
which it can be exchanged. Then Turgot deduces from this the money-form
properly speaking. Thanks to its intrinsic qualities, related to the require-
ments of the functions of measure of values and medium of exchange, one
commodity detaches itself from the rest, and all the other commodities, by
convention, express their value in terms of this good, which therefore becomes
the unique expression of value. This analysis was to a great extent taken up
and developed by Morellet in his “Digression” on money which he included
in his 1769 Prospectus. Isnard accepted it. But another author later also
benefited from Turgot’s analysis of the value and money forms: Karl Marx,
whose analysis of the “forms of value” and the necessary monetary expression
of value systematises Turgot’s and Morellet’s developments.
Money as capital
The value form analysis deals with the functions of money as a measure of
value and medium of exchange. But money is also a store of value. Far
from seeing in that feature a potential source of crisis and an interruption in
the circulation of commodities, as Boisguilbert (but also the physiocrats) did,
Turgot saw instead this aspect of money as positive, linked to what he called
“the true idea of the circulation of money” (1766, 575). This “true idea” is
the circulation of capital, that is, of the amount of money accumulated thanks
to the “esprit d’économie” (thriftiness) and which, Turgot insisted against the
physiocrats, does not possess any negative effect on the level of activity because
it is always directly or indirectly spent in the economy.
[T]he cultivation of land, manufactures of all kinds and all branches of
commerce run on a mass of capitals or of accumulated moveable wealth
which, having first been advanced by entrepreneurs in each of the different
classes of work, must return to them each year with a constant profit
. . . It is this continual advance and return of capitals which make
up what one must call the circulation of money, this useful and fertile
circulation which animates all the works of society, which maintains life
Turgot, Graslin and Sensationist political economy 21
and movement in the political body, and for which there is good reason
to make a comparison with the circulation of blood in the animal body.
(Turgot 1766, 575)19
Dugald Stewart, in his lectures on political economy, insisted on the
relationship between money and capital, and quoted Turgot quite extensively
(1854–60, VIII, 396–7). In the manuscript of what is now known as Theories
of Surplus Value (1861–63, 29), Marx also appreciated Turgot’s statements
on the circulation of money as capital,20 which he symbolised with the cycles
M–C–M(Money – Commodity – Money) and M–C–M′(M′>M).
This is a point he advised Friedrich Engels to note in his review of the first
volume of Capital for the Fortnightly Review.21
All sorts of businessmen, says Turgot, “ont cela de commun qu’ils
achètent pour vendre . . . leurs achats sont une avance qui leur rentre”.
Buying to sell, this is in fact the transaction in which money functions
as capital, and which conditions its reflux to its point of issue , in
distinction to selling to buy, where it need only function as currency.
The differing sequence of the acts of selling and buying imposes upon
money two different circulation movements. (Marx to Engels, 23 May
1868, in 1975–2004, vol. 43, 39)
Finally, Turgot listed some additional requirements for the circulation of
money as capital. As those who save and those who invest are not necessarily
the same people, he wrote, the collection of savings and their distribution
poses the question of the role of financial intermediaries. Turgot touched on
this theme in Mémoire sur les prêts d’argent: he recognised the necessity of
such intermediaries but opposed an institutional solution which would have
conferred an official status, a monopoly, on this kind of transaction. As with
every other form of activity, this intermediation has to remain free, and must
assume any form that merchants and producers find most suited to their needs.
One possible form is of course that of a bank. Turgot paid attention to the
“transport of debts”, that is, to the circulation of “paper” (bills of exchange).
19 The second part of this passage is quoted by Marx in Volume 2 of Capital (1885, 416).
20 In the second volume of Capital, Marx also remarked that Turgot, much more often
than the physiocrats, tends to use the word “capital” instead of “avances”, “and more closely
identified the avances or capitaux of the manufacturers with those of the farmers” (Marx
1885, 436 n.3).
21 This is what Engels did, with Marx’s own words, and quoting Turgot (in Marx and
Engels, 1975–2004, vol. 20, 238).
Turgot, Graslin and Sensationist political economy 22
Paper issued by a solvent agent, and endowed with confidence, could act as
a medium of exchange. This paper, by definition “convertible”, could also
be issued by a bank, but on condition that certain rules designed to assure
the security of the enterprise be respected: merely receiving deposits without
borrowing, discounting bills as the prime activity, not exceeding the limits
of its own activity – by not engaging in trade, for instance – and possessing
no exclusive privilege, that is, remaining in a competitive situation. It was
essential to avoid John Law’s mistakes.
As a corollary to all that, the rate of interest is not for Turgot a monetary
variable. He insists that the usual phrase “price of money” is ambiguous and
misleading. It has in fact two very different meanings, depending on whether
money is bought and sold (in modern terms, its purchasing power) or is some-
thing which is loaned: the economic logic at work in these cases is not the
same. In the first case, the quantity theory is relevant. In the second case,
what is referred to is the price in a particular market, the market for loanable
funds (see, for example, 1766, 581–88). Determined in this market and being
a price like any other, the interest rate22 must be the result of free supply and
demand between agents – “it is a current price, fixed in the same way as that
of all other commodities” (1766, 581).
The rate of interest
Turgot’s assertion that interest is a price like any other ran counter to a very
long and heavy legal and scholastic tradition, the arguments of which had to
be refuted. Interest is only an economic variable, and what is relevant here
is not theology but the theory of value. Turgot’s ideas are outlined in some
sections of the Réflexions (1766, 577–86) and developed more extensively in
the 1770 Mémoire sur les prêts d’argent (Turgot 1770a), which is devoted to
this subject. On the one hand, summing up the traditional arguments for and
against usury, he shows the “frivolity” of the latter and the possibly correct,
but not truly decisive aspects of the former. On the other hand, he develops
his own reasons, the most important of which displaces the controversy.
22 A low rate of interest is desirable. On this topic Turgot follows the tradition initiated
by Thomas Culpeper and Josiah Child (see, for example, Turgot 1766, 592–93).
Turgot, Graslin and Sensationist political economy 23
One major traditional argument in favour of the prohibition of usury –
founded in Roman law – was that of the fungible and consumable character of
some objects, money included: destroyed by the use which is made of them,
they cannot be lent at interest because their transfer to the borrower neces-
sarily involves a transfer of property rights. This argument, Turgot stresses,
supposes that the transaction is about the physical object – for example a
quantity of coins, or a given weight of a precious metal or corn. However, the
transaction is about a quantity of value and involves the respective utilities of
the contracting parties: “where have our reasoners seen that the only thing to
be considered in the loan is the weight of the metal borrowed and returned,
and not its value and its utility for the lender and the borrower?” (Turgot
1770a, 177) The interest rate is a price and its determination pertains to the
theory of value. Two principles are essential here: (1) the general principle
of exchanges, seen earlier: an exchange can only be implemented if the utility
of the quantity of the commodity received is higher, for each agent, than the
utility of the quantity of the commodity given up in exchange; and (2) a second
principle introduced by Turgot in this context: time preference, that is to say,
the depreciation, in terms of “esteem value”, of a good available in the future
compared to the same good available now (1770a, 177).
At the time of the transaction, the lender compares the utility of the sum
of money he owns with the borrower’s promise of reimbursement in the future.
As the lender estimates the promise to reimburse tomorrow to be worth less
than the identical sum today, an agreement in these conditions is impossible
if no interest is stipulated, because it would involve a loss of utility for the
lender. In order for the transaction to take place, it is therefore necessary for
the promise of reimbursement in the future to be for a higher amount than
the sum which is lent, so that the “esteem value” the lender attributes to it
is higher than the value he attributes to the sum in question. If the elements
of risk and disutility are reintroduced, then this difference – the interest –
measures (1) the time preference, (2) the risks incurred and (3) the disutility
experienced because of the momentary unavailability of the amount of money.
This analysis is obviously novel and ground-breaking: the link with the theory
of value is fundamental.23
23 It should be obvious now that Marx’s assertion that “Turgot derived a justification of
interest from the existence of ground-rent” (1894, 760; see also 1861–63, 356) is inaccurate.
Condillac was also in favour of the legitimacy of a positive rate of interest, but with more
traditional arguments (1776, Part I, Chapter 18).
Turgot, Graslin and Sensationist political economy 24
Turgot, in his emphasis on time preference, could have drawn inspiration
from two theoretical sources: Mariotte and Locke. The first, in his 1678
Essay de logique, had already noted that, because the future is uncertain,
“if two goods [pleasures] are equal, one being present and the other to come,
one must prefer the present” (1678, 48, § XCVIII). The second, in An Essay on
Human Understanding (Book II, Chapter 21), examines what he calls wrong
judgements “when we compare present pleasure or pain with future”:
This is the way we usually impose on ourselves, in respect of bare pleasure
and pain or the true degrees of happiness or misery: the future loses its
just proportion, and what is present obtains the preference as the greater.
(Locke 1690, I, 227)
Turgot’s studies at the Sorbonne could also have been of some help because
a similar development had been made, at the turn of the seventeenth century,
by the Flemish Jesuit Leonard de Leys (Lessius in Latin): Lessius’s “carentia
pecuniae” already referred to a kind of time preference. However, in Lessius’s
writings this element was just an empirical fact observed in the market (van
Houdt 1998).24 Turgot instead linked it to his subjective theory of value. It
is also to be noted that reasoning in terms of time preference seems to have
been widespread among confessors and casuists during the seventeenth century
because, in 1679, Pope Innocent XI had to condemn the proposition that since
a present sum of money is “more precious” than the same sum available in the
future, “the lender may demand from the debtor something more in addition
to the loan, and on that title can be excused from usury” (quoted in Delumeau
1990, 118).
All these aspects of Turgot’s analyses naturally drew the attention of liberal
economists. The idea that the determination of the interest rate must be
totally free later contrasted with Smith’s analysis in the Wealth of Nations,
and the comparison with Jeremy Bentham’s Defence of Usury (1787) imposed
itself: their views were judged to be essentially the same. Bentham’s pamphlet
was translated into French twice in 1790,25 and a third time in 1828 by the
Saint-Simonian Saint-Amand Bazard. In his edition, Bazard added Turgot’s
24 It is also interesting to read Turgot’s analysis in contrast to the Jansenist controversies
of the time about the legitimacy of interest-bearing loans. On these controversies, see Orain
and Menuet (2017).
25 Apologie de l’usure, rédigée en forme de lettres, adressées à un ami, Paris: Lejay, and
Lettres sur la liberté du taux de l’intérêt de l’argent, Paris: Grégoire.
Turgot, Graslin and Sensationist political economy 25
Mémoire sur les prêts d’argent as an appendix to Bentham’s text (in Bentham
1828, 201–93):26
This work by Turgot is only known by the small number of people who
deal with political economy: we put it again here under the eyes of
the public, because, in our opinion, together with Bentham’s treatise, it
contains all that was said in the clearest and conclusive way on usury
until now. (Bazard in Bentham 1828, 7)
5Competition, capital
and the distribution of income
Until now, it was supposed that economic activities were performed by free
agents in the context of free trade. The concept of capital was also advanced. It
is time to analyse these fundamental features of sensationist political economy.
This side of the theory has many things in common with the physiocrats, but
the differences are material on some central issues. The 1766 Réflexions marked
a watershed. The most important paragraphs are those concerned with capital,
its definition, forms, origin and logic: “I invite persons who love the science
[of political economy] to read this little treatise . . . They will have the
satisfaction to find there that one of the best chapters in Smith’s book . . . is
entirely due to the work of M. Turgot” (Rœderer 1800–1801, 78).
Value and capital
In the line of thought initiated by Boisguilbert, Turgot shared many views with
Quesnay, notably a belief in the efficiency of free trade. He also accepted the
hypothesis of the exclusive productivity of agriculture and the fundamental
importance of the “avances” (capital) in production and trade, and started
his analysis with the usual physiocratic division of society into three classes:
landowning, productive and sterile (that he preferred to call “classe stipendiée”,
that is, stipendiary class). However, by systematically referring to the concepts
of free competition and competition among capitals, he distanced himself from
the “sect”. As he wrote to Dupont, criticising the physiocrats on this point:
26 Bazard’s edition – his introduction and Turgot’s text – is republished in 1830 in the
third volume of Œuvres de J. Bentham published in Brussels (Bentham 1830, 239–305).
Turgot, Graslin and Sensationist political economy 26
I find that . . . you do not make sufficient use of this less abstract
principle, but . . . more enlightening, more fruitful or at least forceful
for its simplicity and without exception because of its generality: the
principle of competition and of free trade. (Turgot to Dupont, 20 Febru-
ary 1766, in 1913–23, II, 507)
While insisting, like Quesnay, on the need to invest large sums of money in
agriculture, Turgot generalised this idea and applied it to all kinds of activities.
He focused on the word “capital” – defined as a quantity of value which can be
embodied in all sorts of objects and which can adopt any form (Turgot 1766,
567). This was a polemical statement against the physiocrats since it estab-
lished an equivalence between all sorts of “accumulated value”: land ownership
is only one of many forms of capital, and the landowner is a capitalist.
Every landed estate is the equivalent of a capital; consequently every
landowner is a capitalist, but not every capitalist is a landowner; and the
owner of a moveable capital may choose whether to use it in acquiring a
landed estate, or to invest it in the enterprises of the agricultural class,
or the industrial class. (Turgot 1766, 596)
Quesnay and his disciples struggled with the question of the origin of
capital. While restating the usual physiocratic arguments – its origin lies in
savings by the landowners or in a lack of competition which allows
entrepreneurs to appropriate part of the “produit net” – Turgot emphasised an
alternative explanation. Breaking with the prevailing approach which, from
Boisguilbert to Quesnay, emphasised the necessity of “expense” to maintain
prosperity, he developed an apology of savings and the “esprit d’économie” as
the main source of the accumulation of capital and wealth (1766, 567; see also
1767b, 649 ff.). He insisted on the fact that savings in no way cause a decrease
in global demand: while they are not an “expense” – that is to say, a purchase
of final goods for consumption – they are not hoarding either, but a formation
of capital. Whether they are spent directly or indirectly in purchases of means
of production, they produce beneficial effects for growth, productivity and em-
ployment. Furthermore, Turgot claimed, savings are for the greater part made
by the entrepreneurs themselves, out of their profits, and profits are earned in
all activities.
Turgot, Graslin and Sensationist political economy 27
Capital, the origin of profit
and the uniformity of the profit rate
The motive for investment and capital accumulation is “income or annual
profit”. Why would an individual invest in agricultural, industrial or commer-
cial enterprises if he does not in return receive his expenses, the amortisation
of fixed capital, a compensation for his effort and the risks incurred, and –
Turgot insists – a surplus equivalent to that which he would have received,
without work and risk, had his capital been used to buy land? The logic of the
argument is clear. The particular branch of production is of little importance:
individuals invest in it if the return is not less than the minimum expected
remuneration. If this return is higher elsewhere, movements of capital take
place: capital moves from trades in which the rate of return is relatively low
towards those activities where it is more attractive. The mobility of capital,
through its action on relative supply and demand, modifies relative prices and
the rates of return tend to be equalised throughout the economy, all things
being equal: “the products of these different employments limit each other,
and are maintained . . . in a kind of equilibrium” (Turgot 1766, 591):
as soon as the profits resulting from any employment of money increase or
decrease, capitals are withdrawn from other employments and flow into
it – or are withdrawn from it and flow to other employments – which
necessarily changes, in each of these employments, the ratio between the
capital and the annual product. (Turgot 1766, 592)
A situation of equilibrium is thus defined by an equalisation of the rates of
return, or, more precisely, by a stable hierarchy of global rates of return, if we
take into account the elements of risk proper to each activity and the specific
contribution of the entrepreneur. The lowest rate is the rate on land, that is,
the rent rate calculated on the value of the land – Turgot evidently thought
that he could thereby eliminate differences in land quality because the best
pieces of land are more expensive. The highest rates are the profit rates for
agricultural, industrial and commercial enterprises. The rate of interest lies in
between: as a result of the risk incurred by the lender, it must be higher than
the rent rate, but lower than the rates related to employments which, apart
from risk, also include work for the capital owners. It is important to note
Turgot, Graslin and Sensationist political economy 28
here that the hierarchy and levels of the rates of return are established at the
equilibrium.27
This approach was later to form the core of classical political economy. But
it also undermines physiocratic theory: the emphasis on the existence of profits
in all activities poses the problem of the compatibility of this perspective with
the dogma of the exclusive productivity of agriculture and the assertion that
the whole “produit net” is appropriated by the landowners. Turgot’s texts do
not present a clear solution. However, the answer to this question appears
clearly in the work of Pierre-Louis Rœderer, in his 1787 book, Reculement des
barrières – he repeated his analysis, first literally in his Cours d’organisation
sociale (1793), then in a paper, “De la génération des richesses. Examen de
cette question : d’où proviennent les différentes espèces de revenus et comment
s’opère leur distribution dans la société?” (1797) and finally in his Mémoires
sur quelques points d’économie publique (1800–01) (Faccarello 1991). Rœderer
(1787, 14–26) explains that the net product of the economy, while generated in
agriculture, also depends on the other sectors which, indirectly, contribute to
its creation: the size of the agricultural sector, and hence of the net product,
depends in fact on the commodities that manufactures and commerce can offer
to the landowners. Without these possibilities of consumption expenditure, the
first landowners would certainly have cultivated their land (or had it cultivated)
in a way just necessary for their own needs (and those of their servants), since
any surplus would be useless. This is the reason why “agriculture [the farmers],
manufactures and commerce have an equal, primitive and intimate right to the
products of land, and . . . this right is at the origin of their income” (1787,
23–4). Consequently, the net product, while originating in agriculture, has
to be distributed equitably (that is, in proportion to the amounts invested)
among all the capitals in the economy, whatever form they take. This is what
Rœderer calls “le droit des capitaux” (the right of capital) or “la loi du niveau”
(the law of the level). The general profit rate is thus given at the aggregate
level by the value of the “produit net” divided by the total value of the capitals
invested in all activities, including land.
It is striking that Marx later adopted a similar approach in Volume 3 of
Capital for resolving the problem of the transformation of values into pro-
27 Contrary to what Eugen von Böhm-Bawerk (1884, 65) asserted, this is not an expla-
nation of rent and profit rates in terms of the interest rate. Turgot’s explanation is not “an
explanation in a circle”.
Turgot, Graslin and Sensationist political economy 29
duction prices: in the economy, the surplus value is produced by workers in
all activities, and the amount of surplus value produced by each sector thus
depends, all things being equal, on the amount of labour spent in this sector.
The total amount of surplus value forms the total amount of profit, the uniform
rate of profit is the ratio of this amount to the total sum of capitals invested
in the economy: and this amount is redistributed in the different sectors, not
in proportion to the labour alone (variable capital) but to the total capital
invested therein.
The class structure of society
and the distribution of income
Some significant consequences must be drawn from this analysis. The first
consequence is the modification of the class structure of the economy. While
Turgot first started from the physiocratic triad of a landowning class, a produc-
tive class and a sterile class, he ended with another threefold division based on
the ownership of factors of production: land, capital and labour. As a matter
of fact, while the landowning class is homogeneous, the productive and sterile
classes are not (Turgot 1766, 569–70 and 572): each of them is divided “into
two categories of men, that of the entrepreneurs or capitalists, who make all
the advances, and that of the simple wage-earning workers” (1766, 572). As
Turgot insisted in his comments on Graslin: “These are . . . two very different
categories of men who contribute in a very different way to the grand work of
the annual reproduction of wealth” (1767a, 633). It could be asserted, how-
ever, that Turgot could also have ended with only two classes, the landowners
being only, in his view, a subgroup of the owners of capital. J.C.L. Simonde
de Sismondi was later to draw this conclusion.
A second consequence is the determination of a sort of minimal price for
each commodity – a cost of production lato sensu – beneath which the agents
decrease their production or stop producing altogether. In his comments on
Saint-Péravy (Turgot 1767b, 655–6) and in a letter to David Hume (25 March
1767, in 1913–23, II, 663) Turgot called it the “prix fondamental” (fundamental
price). Under the effect of competition and the migrations of capital, the “prix
courant” or market price, directly determined by supply and demand, tends
towards this fundamental price. This theme, at the same time developed
by Graslin in a similar context, was to be found later in classical economics
Turgot, Graslin and Sensationist political economy 30
as the gravitation of market prices around natural prices. However, as seen
previously, Turgot’s interest is almost exclusively focused on the determination
of the “prix courant” which only exists in trade (Turgot 1770a, 176). Moreover,
the component parts of the “fundamental price” are themselves determined by
supply and demand, and subject to perpetual variations (Turgot 1770a, 176).
A further consequence of this approach must also be noted: what has just
been said also applies to the labour market and the price of labour, that is,
wages. “The price of wages” is “only determined by the relation of supply
to demand” (Turgot to Hume, 25 March 1767, in 1913–23, II, 663). Section
VI of the Réflexions shows how wages are contained by competition among
workers who, not possessing any capital, are obliged to sell their “arms and
industry”. The price a worker gets for his labour depends on the state of the
labour market and the buyer pays him as little as possible whenever he can
choose among a great number of suppliers of labour. With the result that “the
wage of the worker is limited to what is necessary for his subsistence” (1766,
537). In his above-mentioned letter to Hume, Turgot is more precise, but the
conclusion is the same. The “fundamental price” of wages, he writes, is the
price of the subsistence of the worker, plus a “profit”, that is, what is necessary
for him “to deal with accidents and raise a family”: this “profit” being fixed by
competition at the lowest possible rate. When this fundamental price rises, for
example, the market price of labour must adjust. “Needs are always the same.
This kind of superfluity, from which it is always possible to cut out, is still a
necessary element for the subsistence of workers and their families” (Turgot
1913–23, II, 663).
These developments on wages and the distinction between the two classes
of workers and capitalists attracted Marx’s attention. He quoted Section VI of
Turgot’s Réflexions in his “Unpublished Chapter 6” of Capital (Marx, 1863-66,
1068n) and again in Theories of Surplus Value (1861–63, 46). On Turgot, he
wrote further in Theories of Surplus Value:
the pure gift of nature is presented as surplus labour, and on the other
hand the necessity for the labourer to yield up what there is in excess of
his necessary wage [is explained] by the separation of the labourer from
the conditions of labour, and their confronting him as the property of a
class which uses them to trade with. (Marx 1861–63, 362)
Marx agreed with his son-in-law, Charles Longuet, on the fact that the so-
called “iron law of wages” was stated by Turgot and Ricardo (Marx to his
Turgot, Graslin and Sensationist political economy 31
daughter Jenny, 6 April 1862, in 1975–2004, vol. 46, 230), not by Ferdinand
Lassalle.28
A further and important development on wages was to be made by
Condorcet and Rœderer: the theory of capital helps to explain the hierar-
chy of wages. The minimum wage is what is necessary to sustain the worker
and his family in a given socio-economic environment. Any additional amount
is just the remuneration of the capital invested in the person, through educa-
tion and training for instance. According to Rœderer, this capital, which must
yield profits like any other capital, is a “fonds d’industrie” (fund of industry,
in the sense of economic activity in general), and the person in which it is
invested is a “propriétaire d’industrie” (owner of industry). This was later to
give rise to the concept of human capital.
Finally, there is the question of rent. As seen earlier, rent is seen as the
profit of capital invested in land. But plots of land are of unequal quality:
is this compatible in the long run with the principle of the uniformity of the
profit rate? One answer is that better plots of land are more expensive than less
fertile ones, and thus, while more productive, the capital invested in purchasing
them must also be greater. Turgot’s analysis does not go further. While
acknowledging the possible different fertility of land, he did not develop a
theory of differential rent. However, he did state for the first time the so-called
law of non-proportional returns. This was in his 1767 comments on a memoir
by Guérineau de Saint-Péravy – a physiocrat and the successful competitor of
Graslin in the Limoges contest on indirect taxation for which Graslin wrote his
Essai analytique. There, Turgot criticised the physiocrats’ habit of assuming
constant returns in agriculture. He insisted on the great variety of possible
physical returns, depending on the quality of land and the quantity of capital
invested in a given plot of land.
Production requires some advances; but equal advances on plots of land
of unequal fertility yield very different products, and this is enough to
show that the products cannot be proportional to the advances; they
cannot even be proportional when [advances are] applied to a single plot
of land, and we can never assume that doubling the advances doubles
the product. (1767b, 644)
28 In the same letter, he also wrote that Lassalle’s phrase is borrowed from J.W. Goethe,
who himself adapted Sophocles
Turgot, Graslin and Sensationist political economy 32
He takes the example of a variable quantity of capital (a certain number of
units of ploughing labour) employed on a given plot of land where a certain
amount of seeds have been sown – this “land and seed” bundle being what
would later be called a fixed factor of production. He then states that, as
greater quantities of the variable factor are invested in the land, its physical
additional product initially increases, then reaches a maximum and finally
diminishes.
Seed thrown on a soil which is naturally fertile, but has not been prepared
at all, would be virtually a waste of expenditure. If the soil were tilled
once, the produce would be greater; tilling it a second or a third time
would not just double or triple, but quadruple or decuple the produce,
which will thus increase in a much larger proportion than the expenditure,
and this would be the case up to a certain point, at which the produce
would be as large as possible relative to the advances. Past this point, if
the advances are still further increased, the product will still increase, but
less so, and continuously less and less until an addition to the advances
would add nothing further to the produce, because the fertility of the soil
is exhausted and art cannot increase the product any further. (1767b,
645)
Turgot clearly distinguishes between intensive and extensive diminishing
returns and also points out the fact that it is always advantageous, in physical
terms, to go beyond the point of maximal average product until the additional
product becomes nil (Turgot 1767b, 643–5).
During the 1760s, other authors referred to the unequal fertility of land:
Claude François Joseph d’Auxiron, for example, in his Principes de tout
gouvernement (Auxiron 1766). Graslin too, who noted that the unequal fer-
tility of land is one of the causes of the emergence of the “inverted order of
society” (1767, 80). But what is certainly most interesting is the content of a
critical review of Graslin’s Essai analytique, published anonymously29 in the
29 According to Dupont (1769, 44), who took over direction of the Éphémérides in 1769
and was not the editor in 1768, the author was the physiocrat Saint-Péravy. However, there
are several reasons for treating this statement with caution. One is advanced by van den
Berg, who nevertheless accepts Dupont’s attribution: “It is . . . surprising that the writer
[Saint-Péravy] whom Turgot criticised in 1767 for thoughtlessly assuming constant returns
in agriculture, would the next year discuss the implications of the phenomenon of (extensive)
diminishing returns for the theory of rent. Whether Turgot’s remarks inspired this change
is a matter of speculation” (Van den Berg 2000, 191).
The second reason results from the internal evidence offered by the 1768 and 1769 issues
of the Éphémérides, which reveals some serious elements of confusion. (1) The anonymous
Turgot, Graslin and Sensationist political economy 33
Éphémérides du citoyen in the tenth issue of 1768. The author of the review
remarks that the different fertility of plots of land poses a problem for the
determination of the price of an agricultural product, which must be unique.
As it is preferable that all the land be cultivated, that the population live well
and the net product and the resources of the State be at a significantly high
level, it is necessary that the most unproductive land should also be cultivated:
in consequence, the price “must be measured on the product of the least fertile
lands, provided that they are devoted to the kind of cultivation most adapted
to their quality” (Anonymous 1768, 195). Will the most fertile plots of land
be favoured by this price, because their production could in principle be sold
at a much lower price? No, because, while it is true that the first expenses
for clearance, etc., are lower on them than on less fertile land, the price of
these plots of land is well above the price of relatively unproductive land. In
consequence, the capital invested in buying land of various qualities yields ap-
proximately the same rate of “rent” (1768, 196–7): the landowners “will only
have an income proportional to the price of the capital which was spent for
the acquisition of their estate” (1768, 197). All this is very much in Turgot’s
line of thought.
6Public goods and the public good
Sensationist political economists did not limit their investigations to the
behaviour of individuals, be they consumers or producers. The State had
to be brought into the picture. Should the State interfere with private agents
in the economy? Should it produce some goods or services? What should its
resources be? How are public decisions taken?
review is signed with the letter N (a letter also attributed before to Quesnay for some of
his contributions). In 1769, Dupont declares that, by mistake, this letter N was attributed
to two different authors (Dupont 1769, 44–5 note). (2) In addition, the subtitle of the
anonymous review is “Chapitre premier. Examen des Principes généraux de l’Auteur sur
les Richesses”: but no Chapter 2 was subsequently published. (3) After publication of the
review, in issue 11 of 1768, on page 168, and issue 2 of 1769, on page 136, it is stated that
a critique of Graslin was published in the second issue of 1768 – this critique is by Dupont,
in the form of a letter to Saint-Péravy – and that Saint-Péravy also wrote a critique of his
competitor, which was to be published soon: therefore our anonymous review of 1768, issue
10, cannot be by Saint-Péravy. (4) Finally, Saint-Péravy was an “orthodox” physiocrat: the
solution proposed in the anonymous review (below) is in Turgot’s style, not really acceptable
to a physiocrat.
Turgot, Graslin and Sensationist political economy 34
The nature of public goods and the problem of the free
rider
The sensationist approach to the State is based on market failures and on the
quid pro quo approach (Faccarello 2006). What are its main features?
At the end of the seventeenth century, and against the current practice of the
time, Boisguilbert had already maintained that the State should not interfere
with economic agents in markets, and should limit its action to the fundamental
tasks of police, justice and defence. Turgot agreed: one should “reduce to
a minimum the number of tasks that a government should undertake” (to
Richard Price, 22 March 1778, in Turgot 1913–23, V, 535). The first duty of
the State is “to maintain the private property of people in the country and to
protect them against foreign attack” (Turgot 1776, 183). But in fact the role
of the State is wider, and the expenses of police, justice and defence are special
cases of a more general class of expenditures. While the public authority should
not do what people can do on a private basis and in a much more efficient way
(Turgot 1759, 602–3), it should nevertheless intervene when markets fail to
work properly – in modern words, when there is a “market failure”. These
interventions entail expenses made “in the interests of all” and could even
limit property rights. This is also what Condorcet meant when, among the
definitions he gave of the object of public finance, he always mentioned “public
prosperity”. Taxation, as he wrote, for example, in his Essai sur la constitution
et les fonctions des assemblées provinciales, “ceases to be legitimate if it exceeds
the amount necessary for the defence of the State, for the maintenance of the
peace and security of the citizens, and for those works and establishments
really useful to common prosperity” (Condorcet 1788, 279). But what are these
“works and establishments” that the State should be in charge of? Basically,
the main cause of market failures is the nature of some goods: goods whose
consumption by an individual cannot be prevented because there is no rivalry
in their consumption and no exclusion in markets if the individual does not
want to pay for it.
On the one hand comes the problem of the rivalry or non-rivalry in con-
sumption. “There are some objects”, Turgot wrote, “that . . . all people can
enjoy at the same time without harming one another. There are also other
objects which are destroyed in use or, even if they are not destroyed, can only
satisfy one man at a time”. “All the objects in nature can be classified under
Turgot, Graslin and Sensationist political economy 35
these two groups”, he added, or find themselves in an intermediary position:
“from the sky that everyone can see, to the food which can satisfy only the
hunger of a single individual, the endless variety of all beings surrounding us
compose all possible shades between these two extremes” (Turgot 1753–54,
381).
On the other hand, a criterion for exclusion was clearly stated by Condorcet
when he raised the problem of the free rider. He noted that if the principle
of justice is to be interpreted rigorously, an expense financed by taxation on
account of its general utility should only be introduced if all the taxpayers
agree to pay for it. But, he remarked, this may not always be the case:
if, at the same time, it is impossible or very difficult to prevent those
who did not wish to contribute towards this expense from benefiting
from it, we can consider as legitimate the obligation to contribute, even
independently of unanimous consent. (Condorcet 1788, 280)
A general criterion is stated explicitly:
Two conditions are therefore necessary to legitimate the devotion of tax
to useful expenses: it is necessary that the utility of these expenses
be proved, and also that they not be at the sole expense of those who
consent voluntarily to them, if they are unable to prevent others from
also benefitting from them. (1788, 280)
This is the reason why Condorcet, in his Vie de M. Turgot, listed “public works”
as an expense to be financed by taxation. “The state of society”, he writes,
“necessarily requires public works useful to all citizens or to the inhabitants of
a city, village, or district” (Condorcet 1786, 185).30 One of the main examples
of such works concerns the basic infrastructure of a country: rivers, canals and
especially a developed road network allowing easy communication between
provinces, towns and villages – for the creation and maintenance of which
private activity was judged inefficient and inappropriate. This is not only of
importance to the political and administrative organisation of the country. In
the opinion of Turgot and Condorcet, it is above all an essential condition for
the realisation of free trade.
Graslin also considered taxation as a price in the quid pro quo tradition:
it is the equivalent paid for the services of the State (Graslin 1767, 25) –
30 Public goods could be local, and thus decided by a local assembly.
Turgot, Graslin and Sensationist political economy 36
limited by Graslin to protection and justice. Why is this price imposed upon
citizens? One reason, like for Turgot and Condorcet, is that protection is a
good for which there is no rivalry in consumption, and no possible exclusion in
markets: it is thus not possible to exclude from the benefit of protection those
people who do not wish to pay the price but who at the same time feel the
need for this public good. Graslin perfectly sums up the free rider problem.
[T]his exchange cannot be free like the exchange between all other objects
of needs . . . From the moment society is formed, each member is not
free to contribute or not, nor to fix what he wants to give in exchange for
protection; because he is not free to either surrender this object of need,
or be given less of it since all people enjoy it in common and indivisibly
. . . ; and because nobody can be deprived of it when all others
are enjoying it. And, as each citizen would find it profitable to receive
without giving anything, no-one would hurry to participate passively in
the exchange, since they would always be certain to be included in it
actively. As a consequence, a law must decide the amount that everyone
has to give; and this law is taxation. (1767, 152–3)
But there is an additional reason why the price for protection must be a
tax: people have a psychological propensity to underestimate the strength of
their need for protection, and hence the price they should pay in order to
fulfil it. This is (1) because people receive the services of the protection of
the State without really knowing all the advantages they receive from such
services (1767, 154– 55) and (2) because citizens underestimate their need
for protection: people “receive in advance the element of wealth they pay
for through taxation” (1767, 173) – and this, in Graslin’s eyes, constitutes a
significant difference with respect to an ordinary exchange in markets where
one has first to pay the price in order to get the object (1767, 173). These
two reasons bring about an underestimation of the need for public goods, but
also probably the temptation to be a free rider. People “believe that they give
without receiving, they only feel the privation and they suffer from it” (1767,
155).
The total amount of public expenditure and taxation
Turgot’s and Condorcet’s analyses, however, go beyond an analysis of the
nature of public goods: some developments are also devoted to what public
economics calls “merit goods” and “externalities”, for which an intervention of
Turgot, Graslin and Sensationist political economy 37
the State also proves necessary (Faccarello 2006). Needless to say, the question
of taxation is essential for them. As a tax is the price paid for a public service
for which there is no market, the resources of the State should therefore only
consist of taxes: a modern democratic State should not have any property
and must not manipulate money. As a consequence – notably stressed by
Condorcet and Rœderer – an essential feature of this approach is that the
resources and expenses of the State are not independent from each other but
have necessarily to be determined simultaneously.
A theory of public finance, however, cannot be limited to the affirmation
that the State should not spend too much and that the normal financing of its
expenditure should be made through taxation in a quid pro quo perspective.
It is also important to determine which public goods and services should be
produced and in what quantities, because the list of the goods and services
useful to society could be long and it is generally impossible to provide them
all at once. For Condorcet, the different amounts of public expenses may be
classified according to the decreasing utility they produce: if the most useful
expenses are made first, and so on, any increase in these expenses will pro-
duce a lower and lower utility and thus public expenditure has a decreasing
additional utility. But public expenses are financed by taxes, and a tax means
a diminution of the disposable income, a disutility. As Condorcet accepted
Daniel Bernoulli’s hypothesis of a diminishing additional (marginal) utility of
income or wealth – which he could also have found in Mariotte31 – succes-
sive increases in public expenditure necessarily entail an increasing additional
disutility of taxation. For a given period, the optimal amount of the public
expenditure and taxation can thus be determined: public expenses “have a
limit: the point where the utility of the expense becomes equal to the evil
generated by the tax” (Condorcet 1793, 629). In other words, following the
logic of Condorcet’s paper, their volume is determined by the point at which
their additional utility is equal to the additional disutility of the taxes.
31 Mariotte (1678, 48, § XCVII) stated that, in choosing between goods and evils, one
should not stick to the quantity of things but instead “to the magnitude of the pleasure and
pain they cause to us”. In a few pages titled “Des principes des propositions morales”, he
clarified his reasoning. Imagine there is a man with a wealth of 20,000 écus. He is given
the option to bet them in a game of chance with the possibility of winning 100,000 écus:
“but 20,000 écus are sufficient for a man to live comfortably and the additional 100,000 écus
would only slightly increase his happiness, like 3 to 2 or 3 to 1: but if he loses his 20,000 écus,
he falls into destitution and total poverty, and the ratio between having sufficient wealth to
live comfortably and having nothing is almost infinite, or like 100,000 to 1” (1678, 155).
Turgot, Graslin and Sensationist political economy 38
Moreover, in a modern state, the decisions about public expenses and
taxation must be taken by elected representatives. Hence Turgot’s plan for
transforming the political regime in France and creating a system of
municipal, provincial and national assemblies. Hence also Condorcet’s attempt
to fix rules for an optimal functioning of any kind of assembly. The complex
decision-making process and the probability of reaching “just” and “true” deci-
sions through a voting procedure depending on the composition of the assembly
and the degree of enlightenment of the voters are examined at length in his
1785 Essai sur l’application de l’analyse à la probabilité des décisions rendues
à la pluralité des voix (see Chapter 8, this volume).
But how should the burden of taxation be shared between citizens? Because
of the inequality of incomes, a proportional income tax would be unfair: the
lower the income, the greater the disutility generated by the tax. Condorcet
(1793), in what would later be called an “equal absolute sacrifice” perspective,
provided a theoretical proof that only a progressive income tax complies with
justice, generating an equal absolute disutility for each citizen. Graslin, too,
with less theoretical arguments, advanced a similar conclusion, his preference
going however to progressive indirect taxes on consumption goods (Graslin
1767, 150 ff).32 The idea made its way. Progressive direct taxation was
proposed by Say’s elder brother, Horace, in an article published in 1796 in
the journal of the Idéologues, La décade philosophique, littéraire et politique.
There, he stressed that a simple proportional income tax is unjust, because
what the same given proportion takes from a modest income is “much more
painful” than what it takes from a greater income. He then states the following
rule for equitable taxation: “Taxation must be distributed in such a way that
it generates in the different classes an equal inconvenience, an equal painful
diminution” (Horace Say 1796, 315), which is nothing other than the equal
absolute sacrifice principle. Jean-Baptiste adopted this point of view in Olbie
ou essai sur les moyens de réformer les mœurs d’une nation (Say 1800, 228).
Finally, the doctrine of capitalist competition presented earlier, and
especially the uniformity of the profit rate, implies a critique of the
physiocratic doctrine of taxation. One point, much debated at that time,
was the “single tax scheme”, that is to say, the proposal that the government
levy a unique tax on landowners because they were supposed to be the sole
owners of the net product. Condorcet empirically abandoned this idea during
32 On these points, see Faccarello (2006, 2009) and Orain (2010).
Turgot, Graslin and Sensationist political economy 39
the Revolution. Rœderer could no longer accept it. As the net product is in
fact shared by all the owners of capital, throughout the economy, all sectors
included, there is no reason to levy the tax only on the landowners, who share
this net product with the other capitalists. The single tax, however, Rœderer
stated, could be provisionally maintained for the sake of convenience, when it is
difficult to tax these capitalists. But, in the end, the result would be the same:
whenever free competition prevails, the “loi du niveau”, through migrations of
capital between sectors and the consequent changes in the remuneration rates
of capital, would automatically and proportionally divide the charge of the tax
among all the co-owners of the net product (Rœderer 1791 and 1800–01).
Graslin’s alternative view
Many of these groundbreaking developments were unfortunately neglected or
forgotten. During the Revolution and the Empire, the hectic political events
showed that to think of the possibility of a rational and just organisation of the
State and of its decision-making processes was perhaps a utopian dream, and
prompted more pragmatic developments or – the two trends are sometimes
intertwined – even another utopian view: that of the State as a simple com-
petitive firm like any other, producing and selling in markets a specific service:
“security” – a view present in Say, which was to find its greatest developments
in the writings of Gustave de Molinari (Faccarello 2010). It is interesting
to note that this alternative utopian view was also in statu nascendi, some
decades before, in Graslin’s Dissertation.
For Graslin, all those who work for the State, directly or indirectly, form
a class (as defined earlier) because they all contribute to the production of a
specific good, protection, which corresponds to a need and is in demand. But,
in this respect, the public sector is not different from any other activity and
it also has its own private interest, like any other class of producers (1768,
142). Its aim is not therefore to achieve the general interest of society, even if
it contributes to its realisation in the same way as any other class does.
The protective power itself, while instituted for the safety and
peacefulness of all, has its own private interest in the order of
relationships. This interest is tied to the interest of all, in this sense
it is essential for people that this power be in a condition to perform its
function. But this can also be said of the interest of any class because,
in the same way, it is essential for all other classes that each one in
Turgot, Graslin and Sensationist political economy 40
particular be in the condition to provide the object in its charge. (1768,
142)
Similar ideas were developed by Say some decades later, when he stressed
that the State was in the hands of politicians and civil servants who each
have their own interests, which do not usually coincide with the public good.
But the situation is not dramatic: these private interests have simply to be
considered like the interests of any other profession.
An opposition of interests is . . . no quarrel, does not break peace. Are
not the individuals who form a nation in constant opposition of interests
between each other, without being at war? . . . Each time we go into
a shop and buy, do we not have an interest that is opposed to that of
the merchant? . . . Does a war necessarily ensue between those in
power and those who are governed? Not at all. These are interests to
be amicably discussed, just as are the interests of two merchants who
do business together and agree on sharing outlay and profits. (Say, n.d.,
644–5)
7Concluding remarks
The intellectual legacy of sensationist political economy is essential on many
points: the determination of value and prices, the conception of money and
the theory of the rate of interest, capitalist competition and the distribution
of income, public economics and the ethics of the public good. Sensationist
economists do not necessarily agree with each other,33 but the different paths
they took are coherent – the main gap between them being, retrospectively,
on the theory of value and the origin of the net product. However, with the
exception of the theory of the exclusive productivity of agriculture and the
related conception of the incidence of taxation, it is not clear that sensation-
ist authors felt that the differences between them were material. Turgot, for
example, appreciated Graslin’s Essai analytique, and some of its “ingenious
views”: “this book is far from being devoid of any merit nor even of depth”, he
wrote to Dupont (Turgot 1913–23, II, 665), happy to shake the physiocrats’
dogmatism (see also Goutte and Klotz 2015). In interpreting this “early” lit-
33 On the interesting case of Condillac, see Orain (2003).
Turgot, Graslin and Sensationist political economy 41
erature, scholars must thus be very cautious and avoid retrospective views.34
None of these authors can be included in the subsequent British and French
classical schools. However, it is certain that we find in them many important
theoretical elements that were later used by classical authors as building blocks
in their theoretical constructions. As a conclusion, let us briefly focus on two
additional but not minor points.
Firstly, an important subject was how to organise the transition from a
regulated economy to a free market one. It was heavily discussed among the
reformers of the time, and Turgot and Condorcet, in particular, engaged in a
polemical discussion with Ferdinando Galiani and Jacques Necker. In a nut-
shell, the main question was how to implement economic reforms to establish
free trade, and to what extent was “abstract” economic theory a useful guide
for action in those circumstances (Faccarello 1998).
Secondly, the theme of the division of labour and the benefits it generates
was well known in France. It was dealt with, as a rather obvious topic, in
many writings. We find it for example in Turgot (especially in the Réflexions)
and in Graslin:
All men being obliged . . . to work personally in order to obtain the
objects of their needs; and each of them seeking to obtain more with
less labour; they soon understood . . . that, if each of them devoted
himself to the production of one object, he would acquire more aptitude
and ability, to the advantage of all. Hence the division of productive
labour . . . This order directly derives from natural and primitive law,
because each only labours – and more profitably – for his own well-being.
(Graslin 1767, 97)
This theme is also linked to the theory of the evolution of societies in a
certain number of stages – starting from a society of hunters and arriving
at the commercial society, with intermediary steps like the shepherding and
agricultural stages. Turgot outlined such a theory very early, in 1751, in “Plan
d’un ouvrage sur la géographie politique” (1751a) and “Plan de deux discours
sur l’histoire universelle” (1751b) – a scheme also later developed in France
and in Scotland.
34 For an interpretation of Turgot as a classical economist, see Cartelier (1976), Brewer
(1987) and Ravix and Romani (1997). Groenewegen (1970, 1982) was in favour of a different
interpretation, but his opinion changed over time. Both attitudes probably result from a too
retrospective view. Groenewegen is certainly the scholar who, with Ronald L. Meek, studied
Turgot’s writings with the greatest attention (see also Groenewegen 1969, 1971, 1983, 2018).
Turgot, Graslin and Sensationist political economy 42
But another author is worth mentioning: Emmanuel Joseph Sieyès, a
political philosopher, who collaborated with Condorcet, and the author of
the celebrated pre-revolutionary pamphlet Qu’est-ce que le Tiers-État? In the
1770s, especially in his Lettres aux économistes sur leur système de politique
et de morale. Première lettre. Sur les richesses (1775), he developed some
interesting economic and political ideas. Insisting on the essential role of labour
in the economy, he saw it as the basis of society, “the social order being nothing
other than the best possible order of works”. This order is thus linked to the
division of labour.
Every man first acquires alone almost all the objects of his needs. Their
number increases with the means [of production], and, as these means
become more complicated, a division of tasks arises; the mutual benefit
requires it because the workers, less disturbed by actions of the same
nature than by tasks of different kinds, always tend to make the greatest
efforts with least means. Divisions in labour always increase by virtue of
this law . . . : to improve the effects, and to reduce the costs. (Sieyès
1775, 32–3)
But Sieyès is also laying here the foundations of his theory of representa-
tive democracy and propelling the economic theme of the division of labour
into political philosophy – just as, in a totally different context, Plato did in
Republic. Just as the division of labour has beneficial effects on productiv-
ity and wealth, Sieyès emphasised, the different political functions in a State
are all the more efficiently performed when they are executed by men who
specialise in these functions, even if they are exercised on a temporary basis.
With these assertions, Sieyès was refuting the arguments of the partisans of
direct democracy and pleading in favour of representative democracy (see, for
example, Sieyès 1789).
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