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• Introduction, By Henry Higgs
• Previous Editions, By Henry Higgs
• Essay On the Nature of Trade In General
• Part One
• Part I, Chapter I: Of Wealth
• Part I, Chapter II: Of Human Societies
• Part I, Chapter III: Of Villages
• Part I, Chapter IV: Of Market Towns
• Part I, Chapter V: Of Cities
• Part I, Chapter VI: Of Capital Cities
• Part I, Chapter VII: The Labour of the Husbandman Is of Less Value Than That of the Handicrafts-man
• Part I, Chapter VIII: Some Handicrafts-men Earn More, Others Less, According to the Different Cases and Circumstances
• Part I, Chapter IX: The Number of Labourers, Handicraftsmen and Others, Who Work In a State Is Naturally Proportioned to the Demand For Them
• Part I, Chapter X: The Price and Intrinsic Value of a Thing In General Is the Measure of the Land and Labour Which Enter Into Its Production
• Part I, Chapter XI: Of the Par Or Relation Between the Value of Land and Labour
• Part I, Chapter XII: All Classes and Individuals In a State Subsist Or Are Enriched At the Expense of the Proprietors of Land
• Part I, Chapter XIII: The Circulation and Exchange of Goods and Merchandise As Well As Their Production Are Carried On In Europe By Undertakers, and At a Risk
• Part I, Chapter XIV: The Fancies, the Fashions, and the Modes of Living of the Prince, and Especially of the Landowners, Determine the Use to Which Land Is Put In a State and Cause the Variations In the Market-prices of All Things
• Part I, Chapter XV: The Increase and Decrease of the Number of People In a State Chiefly Depend On the Taste, the Fashions, and the Modes of Living of the Proprietors of Land
• Part I, Chapter XVI: The More Labour There Is In a State the More Naturally Rich the State Is Esteemed
• Part I, Chapter XVII: Of Metals and Money, and Especially of Gold and Silver
• Part Two
• Part Ii, Chapter I: Of Barter
• Part Ii, Chapter II: Of Market Prices
• Part Ii, Chapter III: Of the Circulation of Money
• Part Ii, Chapter IV: Of Further Reflection On the Rapidity Or Slowness of the Circulation of Money In Exchange
• Part Ii, Chapter V: Of the Inequality of the Circulation of Hard Money In a State
• Part Ii, Chapter VI: Of the Increase and Decrease In the Quantity of Hard Money In a State
• Part Ii, Chapter VII: Continuation of the Same Subject
• Part Ii, Chapter VIII: Further Reflection On the Same Subject
• Part Ii, Chapter IX: Of the Interest of Money and Its Causes
• Part Ii, Chapter X: Of the Causes of the Increase and Decrease of the Interest of Money In a State
• Part Three
• Part Iii, Chapter I: Of Foreign Trade
• Part Iii, Chapter II: Of the Exchanges and Their Nature
• Part Iii, Chapter III: Further Explanations of the Nature of the Exchanges
• Part Iii, Chapter IV: Of the Variations In the Proportion of Values With Regard to the Metals Which Serve As Money
• Part Iii, Chapter V: Of the Augmentation and Diminution of Coin In Denomination
• Part Iii, Chapter VI: Of Banks and Their Credit
• Part Iii, Chapter VII: Further Explanations and Enquiries As to the Utility of a National Bank
• Part Iii, Chapter VIII: Of the Refinements of Credit of General Banks
• Richard Cantillon and the Nationality of Political Economy, By W. Stanley Jevons
• Life and Work of Richard Cantillon, By Henry Higgs
• Appendix a
• Appendix B: Bibliography

PART THREE

Part III, Chapter I

Of Foreign Trade

When a State exchanges a small product of Land for a larger in Foreign Trade, it seems to have the advantage; and if current money is more abundant there than abroad it will always exchange a smaller product of Land for a greater.

When the State exchanges its Labour for the produce of foreign land it seems to have the advantage, since its inhabitants are fed at the Foreigner's expense.

When a State exchanges its Produce conjointly with its Labour, for a larger Produce of the Foreigner conjointly with equal or greater labour, it seems again to have the advantage.

If the ladies of quality of Paris consume yearly Brussels lace to the value of 100,000 ounces of silver, a quarter of an acre of land in Brabant, which will grow 150 pounds weight of flax, to be made into fine lace in Brussels, will answer this value. This will require the yearly labour of about 2000 people in Brabant for the several parts of the work from the sowing of the flax to the final perfection of the lace. The lace merchant or undertaker at Brussels will advance the capital. He will directly or indirectly pay all the spinners and lace-women and the proportion of the labour of those who make their tools. All those who have taken part in the work will buy, directly or indirectly, their maintenance from the Farmer in Brabant who pays in part the Rent of his Landlord. If in this oeconomy the produce of the Land attributed to these 2000 persons be put at 3 acres per head as well for the maintenance of themselves as for that of their families who subsist in part upon it, there will be 6000 acres of land in Brabant employed for the support of those who have worked on the lace, at the expense of the ladies of Paris who will pay for and wear the lace.

The ladies of Paris will pay the 100,000 ounces of silver, each according to the amount she has bought. All this silver must be sent to Brussels in specie, less only the cost of remittance, and the Undertaker at Brussels must find in it not only payment of all his advances and the interest of the money which he has perhaps borrowed, but also a profit on his undertaking for the maintenance of his family. If the price which the ladies pay for the lace does not cover all the costs and profits there will be no encouragement for this Manufacture, and the Undertakers will cease to carry it on or become bankrupt; but as we have supposed this Manufacture is continued, it is necessary that all costs be covered by the prices paid by the Ladies of Paris, and the 100,000 ounces of silver sent to Brussels if the people of Brabant take no commodity from France to compensate this debt.

But if the inhabitants of Brabant are fond of Champagne wine and consume thereof annually the value of 100,000 ounces of silver, the heading under Wine will answer that under Lace, and the Balance of Trade with regard to these two branches will be level. The compensation and circulation will be effected through the agency of Dealers and Bankers taking a hand in it on each side.

The ladies of Paris will pay 100,000 ounces to him who sells and delivers to them the lace; he will pay them to the Banker who will give him one or more Bills of Exchange on his Brussels correspondent. The Banker will remit the money to the Wine merchants in Champagne who have 100,000 ounces of silver at Brussels and who will give him their Bills of Exchange of the same value drawn upon him by his Brussels correspondent. Thus the 100,000 ounces paid for the Champagne wine at Brussels will balance the 100,000 ounces paid for the lace at Paris, and in this way the trouble of sending to Brussels the money received at Brussels will be avoided. This balance is effected by Bills of Exchange, the nature of which I will try to explain in the next chapter.

Meanwhile this example shews that the 100,000 ounces which the Ladies of Paris pay for the lace, come into the hands of the Merchants who send Champagne wine to Brussels; and that the 100,000 ounces which the consumers of the Champagne pay for this wine at Brussels fall into the hands of the Undertakers or Lace merchants. The Undertakers on each side distribute this money to those whose Labour they employ, either on the wines or on the lace.

It is clear from this that the Ladies of Paris support and maintain all those who work on the lace in Brabant and cause money to circulate there, and equally that the consumers of Champagne wine at Brussels support and maintain in Champagne not only the Vineyard keepers and others who take part in the production of the Wine, the Cartwrights, Farriers, Carters, etc. who take part in the transport, and the Horses engaged in it, but that they also pay the value of the produce of the Land for the Wine, and cause a circulation of money in Champagne.

Nevertheless this circulation or trade in Champagne, which makes so great a stir, which maintains the Keeper of the Vineyard, the Farmer, the Cartwright, the Farrier, the Carter, etc. and which pays precisely as well the Rent of the owner of the Vineyard as that of the Owner of the pastures which serve to feed the Carthorses, is in the present case a burdensome and unprofitable trade to France in its results.

If the muid of wine sells at Brussels for 60 ounces of silver and if we suppose one acre of vine-land produces 4 muids there must be sent to Brussels the produce of 4166½ acres of land to correspond to 100,000 ounces of silver, and about 2000 acres of pasture and arable for the hay and oats consumed by the cart horses if they are solely employed on this work all the year round. And so there will be about 6000 acres of land abstracted from the maintenance of Frenchmen, and that of the people of Brabant increased by over 4000 acres of produce, since the Champagne wine which they drink saves more than 4000 acres which they would probably use to produce beer for their drink if they did not drink wine. However the lace with which all that is paid for costs the people of Brabant only one quarter of an acre of flax. Thus with one acre of produce allied to their Labour, the people of Brabant pay for more than 16,000 acres to the French, their conjoined labour being less. They obtain an increase of subsistence and give only an article of luxury which brings no real advantage to France, since the lace is worn and consumed there and cannot then be exchanged for anything useful. Following the rule of intrinsic values, the land used in Champagne for the production of the wine, the maintenance of the Vineyard-keepers, the Coopers, the Cartwrights, Farriers, Carters, Carthorses, etc., ought to be equal to the Land used in Brabant for the production of the Flax, the support of the spinners and lace makers, and all those who have taken part in the manufacture of this lace.

But if money is more abundant in circulation in Brabant than in Champagne Land and Labour will be dearer there and consequently, valuing in silver both sides, the French will lose still more considerably.

This is an example of a branch of trade which strengthens the Foreigner, lessens the number of inhabitants of the State, and without causing any circulating money to leave it weakens the same State. I have chosen it to shew more strikingly how one State may be the dupe of another in Trade, and the method of judging the advantages and disadvantages of Foreign trade.

It is by examining the results of each branch of commerce singly that Foreign TRADE can be usefully regulated. It cannot be distinctly apprehended by abstract reasons. It will always be found by examining particular cases that the exportation of all Manufactured articles is advantageous to the State, because in this case the Foreigner always pays and supports Workmen useful to the State: that the best returns or payments imported are specie, and in default of specie the produce of Foreign land into which there enters the least labour. By these methods of trading States which have very little raw produce are often seen to support inhabitants in great numbers at the expense of Foreigners, and large States maintain their inhabitants in greater ease and abundance.

But as great States have no need to increase the number of their inhabitants it is enough to make those who are in it live there on the raw produce of the State with more comfort and ease and to increase the strength of the State for its defence and security. To do so by foreign trade it is needful to encourage as much as possible the export of goods and manufactures of the State in exchange so far as may be for gold and silver in kind. If by abundant harvests it happened that there was in the State much produce over and above the ordinary annual consumption it would be profitable to encourage the exportation of it in return for its value in gold and silver. These metals do not corrupt and disappear like the produce of the Land, and with gold and silver one can always import into the State what is lacking there.

It would not however be profitable to put the State into the annual custom of sending abroad large quantities of its raw produce in return for foreign manufactures. It would be to weaken and diminish the inhabitants and the strength of the State at both ends.

But I have no intention of entering into detail as to the branches of trade which should be encouraged for the good of the State. Enough to say that it should always be endeavoured to import as much silver as possible.

The increase in the quantity of silver circulating in a State gives it great advantages in foreign trade so long as this abundance of money lasts. The State then exchanges a small quantity of produce and labour for greater. It raises its taxes more easily and finds no difficulty in obtaining money in case of public need.

It is true that the continued increase of money will at length by it abundance cause a dearness of Land and Labour in the State. The goods and manufactures will in the long run cost so much that the Foreigner will gradually cease to buy them, and will accustom himself to get them cheaper elsewhere, and this will by imperceptible degrees ruin the work and manufactures of the State. The same cause which will raise the rents of Landlords (which is the abundance of money) will draw them into the habit of importing many articles from foreign countries where they can be had cheap. Such are the natural consequences. The Wealth acquired by a State through Trade, Labour and Oeconomy will plunge it gradually into luxury. States who rise by trade do not fail to sink afterwards. There are steps which might be, but are not, taken to arrest this decline. But it is always true that when the State is in actual possession of a Balance of Trade and abundant money it seems powerful, and it is so in reality so long as this abundance continues.

Infinite inductions might be added to justify these ideas of Foreign Trade and the advantages of abundant money. It is astonishing to observe the disproportion in the circulation of money in England and in China. The Manufactures of the Indies, like silks and printed calicoes, muslins, etc. in spite of a sea voyage of 18 months, are at a very low price in England, which would pay for them with the thirtieth part of her articles and manufactures if the Indians would buy them. But they are not so foolish as to pay extravagant prices for our work while work is done better and infinitely cheaper in their own country. So they sell us their Manufactures only for ready cash, which we carry to them annually to increase their wealth and diminish our own. The Indian manufactures consumed in Europe only diminish our money and the work of our own Manufactures.

An American who sells beaver skins to a European is rightly astonished to learn that woollen hats are as serviceable as those made of beaver, and that all the difference, which causes so long a sea journey, is in the fancy of those who think beaver hats lighter and more agreeable to the eye and the touch. However as these beaver skins are ordinarily paid for to the American in articles of iron, steel, etc. and not in silver, it is a trade which is not injurious to Europe, especially since it supports workmen and particularly Sailors, who in the needs of the State are very useful, whilst the trade with the Manufactures of the East Indies carries off the money and diminishes the workmen of Europe.

It must be admitted that the East India trade is profitable to the Dutch Republic and that she makes the loss of it fall on the rest of Europe by selling the spices and manufactures in Germany, Italy, Spain and the New World, which return to her all the money which she sends to the Indies and much more. It is even useful to Holland to clothe her women and other folk with the Manufactures of India rather than with English or French fabrics. It suits the Dutch better to enrich the Indians than their neighbours who might profit by it to oppress them. Moreover they sell to the other peoples of Europe the cloths and small Manufactures of their own raw produce much dearer than they sell the Indian manufactures at home where they are consumed.

England and France would be mistaken to imitate the Dutch in this respect. These kingdoms have at home the means of clothing their women with their own raw material, and though their fabrics are dearer than those of Indian manufacture they should prevent their people from wearing the foreign material. They ought not to permit the falling off of their own articles and manufactures nor become dependent on the foreigner, still less allow their money to be taken away for that purpose.

But as the Dutch find means to sell Indian merchandise in the other States of Europe, the English and French should do the same, whether to diminish the naval power of Holland or to increase their own, and above all to do without the aid of Holland in the branches of consumption which a bad habit has rendered necessary in these kKingdoms. It is an evident disadvantage to allow the wearing of Indian fabrics in the kingdoms of Europe which have wherewith to clothe their people with their own products.

Just as it is disadvantageous to a State to encourage foreign manufactures so it is to encourage foreign navigation. When a State sends abroad its articles and manufactures it derives the full advantage if it sends them in its own ships. It then maintains a good number of sailors who are as useful to the State as workmen. But if it leaves the carriage of them to foreign vessels it strengthens the foreign shipping and weakens its own.

Navigation is an essential point in foreign trade. In the whole of Europe the Dutch are those who build ships the cheapest. Timber is floated down to them by river, and the proximity of the North supplies them at less expense with masts, wood, pitch, rope, etc. Their Windmills for sawing wood facilitate the working of it. Also they navigate with smaller crews and their sailors live very cheaply. One of their Windmills for sawing wood saves the labour of 80 men a day.

Owing to these advantages they would be the only sea-carriers in Europe if cheapness only were followed. And if they had enough of their own raw material to form an extensive commerce they would doubtless have the most flourishing maritime service in Europe. But the greater number of their seamen does not suffice without the interior strength of the State, for the superiority of their naval power. They would never arm warships nor sailors if the State had large revenues to build the ships and pay the men: they would profit in everything from extended markets.

England, in order to prevent the Dutch from increasing at her expense their advantage on the Sea by this cheapness, has forbidden any nation from bringing into England other merchandise than that of their own growth. In this way, the Dutch being unable to serve as Carriers for England, the English have strengthened their own shipping. And though they sail at greater costs than the Dutch the wealth of their overseas cargoes renders these costs less considerable.

France and Spain are maritime States which have rich produce sent to the North, whence goods and merchandise are brought to them. It is not surprising that their shipping is inconsiderable in proportion to their produce and the extent of their seaboard, since they leave it to foreign vessels to bring them all they receive from the North and to take away from them the goods which the States of the North receive from them.

These States, France and Spain, do not take into account in their policy the consideration of Trade in the way in which it would be advantageous. Most Merchants in France and Spain who have to do with the foreigner are rather Agents or Clerks of foreign merchants than Adventurers carrying on the trade on their own account.

It is true that the States of the North are, by their situation and the vicinity of countries which produce all that is needed for building ships, in a position to carry everything cheaper than France and Spain could do. But if these two kingdoms took steps to strengthen their shipping, this obstacle would not prevent them. England has long since partly shewn them the example. They have at home and in their Colonies all that is needed for the construction of ships, or at least it would not be difficult to get them produced there, and there is an infinity of methods that might be used to make such a policy successful if the legislature or the ministry would concur in it. My subject does not allow me in this Essay to examine these methods in detail. I will limit myself to saying that in countries where trade does not regularly support a considerable number of ships and sailors it is almost impossible for the Prince to maintain a flourishing navy without such expense as would be capable by itself of ruining the treasure of his State.

I will conclude then by observing that the trade most essential to a State for the increase or decrease of its power is foreign trade, that the home trade is not of equally great importance politically, that foreign trade is only half supported when no care is taken to increase and maintain large merchants who are natives of the country, ships, sailors, workmen and manufacturers, and above all that care must always be taken to maintain the balance against the foreigner.

Part III, Chapter II

Of the Exchanges and their Nature

Inside the City of Paris the carriage of money from one house to another usually costs 5 sols per bag of 1000 livres. If it were necessary to carry it from the Fauxbourg St Antoine to the Invalides it would cost more than twice as much, and if there were not generally trustworthy porters of money it would cost still more. If there were often robbers on the road the money would be sent in large amounts, with an escort, at greater cost, and if some one charged himself with the transport at his own cost and risks he would require payment for it in proportion to these costs and risks. So it is that the expense of transport from Rouen to Paris and from Paris to Rouen amounts generally to 50 sols per bag of 1000 livres which in Bank language is ¼ percent. The Bankers generally send the money in strong kegs which robbers can hardly carry off because of the iron and the weight, and as there are always mail coaches on this route the Costs are not considerable on the large sums sent between these two places.

If the City of Châlons sur Marne every year pays the Receiver of the King's taxes, 10,000 ounces of silver on the one hand, and on the other the wine Merchants of Châlons and its neighbourhood sell to Paris, through their agents, Champagne wine of the value of 10,000 ounces of silver, if the ounce of silver in France passes in trade for 5 livres, the total of the 10,000 ounces in question will be 50,000 livres both in Paris and in Châlons.

The Receiver of Taxes in this example has 50,000 livres to send to Paris, and the agents of the Châlons Wine-merchants have 50,000 livres to send to Châlons. This double transaction or transport may be avoided by a set-off or as they are called bills of exchange, if the parties get together and arrange it.

Let the agents of the Châlons wine-merchants take (each his own part) the 50,000 livres to the cashier of the Tax Office at Paris. Let him give them one or more cheques or bills of exchange on the Receiver of Taxes at Châlons, payable to their order. Let them endorse or transfer their order to the Châlons wine-merchants and these will obtain from the Receiver at Châlons the 50,000 livres. In this way the 50,000 livres at Paris will be paid to the Cashier of the Tax department at Paris and the 50,000 livres at Châlons will be paid to the wine-merchants of that City, and by exchange or set-off there will be saved the trouble of sending this money from one city to the other. Or else let the wine-merchants at Châlons, who have 50,000 livres at Paris, go and offer their bills of exchange to the Receiver of Taxes, who will endorse them to the Cashier of the Tax Office at Paris who will collect the amount there, and let the Receiver at Châlons pay the merchants for their bills of exchange the 50,000 livres which he has at Châlons. Whichever way this set-off is effected, whether the bills of exchange be drawn from Paris on Châlons or from Châlons on Paris, as in this example ounce for ounce is paid, and 50,000 livres for 50,000 livres, the exchange is said to be at par.

The same method might be adopted between these wine-merchants at Châlons and the Agents of the Nobility in Paris who have land in the Châlons district, and the Wine Merchants or other Merchants at Châlons who have sent goods or merchandise to Paris and have money there and other merchants who have drawn merchandise from Paris and sold it at Châlons. If there is a large trade between these two cities Bankers will set up at Paris and Châlons who will enter into relations with the interested parties on both sides and will be the agents or intermediaries for the payments which would have to be sent from one of these cities to the other. Now if all the wine and other goods and merchandise which have been sent from Châlons to Paris and have actually been sold there for ready money exceed in value the total receipts of the taxes at Châlons, and the Rents which the nobility of Paris have in the Châlons district as well as the value of the goods and merchandise sent from Paris to Châlons and sold there for ready money, by 5000 ounces of silver or 25,000 livres it will be necessary for the Banker in Paris to send this amount to Châlons in money. This will be the excess or balance of trade between these two cities. It will, I say, be of necessity sent to Châlons in specie, and this operation will be carried out in the following way or in some similar fashion.

The Agents or correspondents of the Wine merchants of Châlons and of others who have sent goods or merchandise from Châlons to Paris have the money for these sales in hand at Paris. They are ordered to remit it to Châlons. They are not accustomed to risk it by carriage, they will apply to the Cashier to the Tax Office who will give them cheques or bills of exchange on the Receiver of Taxes at Châlons up to the amount which he has at Châlons, and generally at par. But as they need to send further sums to Châlons they will apply to the Banker who will have at his disposal the Rents of the Paris nobility who have lands in that district. This Banker will furnish them, like the Cashier of the Tax Office, with bills of exchange on his correspondent at Châlons up to the amount of the funds which he has at his disposal at Châlons and had been ordered to bring to Paris. This set-off will also be made at par, unless the Banker tries to make some little profit out of it for his trouble, as well from the Agents who apply to him to send their money to Châlons as from the nobility who have charged him with the transmission of their money from Châlons to Paris. If the Banker has also at his disposal at Châlons the value of the merchandise sent thither from Paris and sold there for ready money he will also furnish letters of exchange for this value.

But in our case supposed the Agents of the Châlons merchants have still in hand at Paris 25,000 livres which they are ordered to remit to Châlons above all the sums mentioned above. If they offer this money to the Cashier of the Tax Office he will reply that he has no more funds at Châlons, and cannot supply them with bills of exchange or cheques on that city. If they offer the money to the Banker he will tell them that he has no more funds at Châlons and has no need to draw, but if they will pay him 3 per cent. for exchange he will provide cheques. They will offer one or two per cent. and at last 2½, not being able to do better. At this price the Banker will decide to give them bills of exchange, that is if they pay to him at Paris 2 livres 10 sols he will supply a bill of exchange for 100 livres on his Châlons correspondent, payable at 10 or 15 days, so as to put his correspondent in a position to make the payment of the 25,000 livres for which he draws upon him. At this rate of exchange he will send him the money by mail or carriage in specie, gold or, in default of gold, silver. He will pay 10 livres for each bag of 1000 livres, or in Bank parlance 1 per cent. He will pay his Châlons correspondent as commission 5 livres per bag of 1000 livres or ½ per cent., and will keep one per cent. for his own profit. On this footing the exchange at Paris for Châlons is at 2½ per cent. above par, because one pays 2 livres 10 sols for each 100 livres as the commission on exchange.

It is somewhat in this way that the balance of trade is transported from one city to the other through Bankers, and generally on a large scale. All those who bear the name of Bankers are not accustomed to these transactions and many of them deal only in commissions and bank speculations. I will include among Bankers only those who remit money. It is they who always fix the exchange, the charge for which follows the cost and risks of the carriage of specie in the different cases.

The charge of exchange between Paris and Châlons is rarely fixed at more than 2½ or 3 per cent. over or under par. But from Paris to Amsterdam the charge will amount to 5 or 6 per cent. when specie has to be sent. The journey is longer, the risk is greater, more Correspondents and Commission agents are involved. From India to England the charge for carriage will be 10 to 12 per cent. From London to Amsterdam it will hardly exceed 2 per cent. in peace time.

In our present example it will be said that the exchange at Paris for Châlons will be 2½ per cent. above par, and at Châlons it will be said that the exchange for Paris is 2½ per cent. below par, because in these circumstances he who will give money at Châlons for a letter of exchange for Paris will give only 97 livres 10 sols to receive 100 livres at Paris. And it is evident that the City or Place where exchange is above par is in debt to that where it is below par so long as the exchange continues on this basis. Exchange at Paris is 2½ per cent. above par for Châlons only because Paris is indebted to Châlons and that the money for this debt must be carried from Paris to Châlons. This is why when exchange is commonly seen to be below par in one city as compared with another it may be concluded that this first city owes a balance of trade to the other, and that when the exchange at Madrid or Lisbon is above par for all other countries it shows that these two Capitals must send specie to other countries.

In all Places and Cities which use the same money and the same gold and silver specie like Paris and Châlons sur Marne, London and Bristol, the charge for exchange is known and expressed by giving and taking so much per cent. above or below par. When 98 livres are paid in one place to receive 100 livres in another it is said that exchange is about 2 per cent. below par; when 102 livres are paid in one place to receive only 100 livres in another it is said that the exchange is exactly 2 per cent. above par, when 100 livres are given in one place for 100 livres in another it is said that the exchange is at par. There is no difficulty or mystery in all this.

But when exchange is regulated between two Cities or Places where the money is quite different, where the coins are of different size, fineness, make, and names, the nature of exchange seems at first more difficult to explain, though at bottom this exchange differs from that between Paris and Châlons only in the jargon of Bankers. At Paris one speaks of the Dutch exchange by reckoning the écu of three livres against so many deniers de gros of Holland, but the parity of exchange between Paris and Amsterdam is always 100 ounces of gold or silver against 100 ounces of gold or silver of the same weight and fineness. 102 ounces paid at Paris to receive 100 ounces at Amsterdam always comes to 2 per cent. above par. The Banker who effects the remittance of the balance of trade must always know how to calculate parity. But in the language of Foreign exchange the price of exchange at London with Amsterdam is made by giving a pound sterling in London to receive 35 Dutch escalins at the bank: with Paris in giving at London 30 deniers or pence sterling to receive at Paris one écu or three livres tournois. These methods of speech do not say whether exchange is above or below par, but the Banker who remits the balance of trade reckons it up well and knows how much foreign money he will receive for the money of his own Country which he despatches.

Whether we fix the exchange at London for English silver in Muscovy roubles, in Mark Lubs of Hamburg, in Rixdollars of Germany, in Livres of Flanders, in Ducats of Venice, in Piastres of Genoa or Leghorn, in Millreis or Crusadoes of Portugal, in Pieces of Eight of Spain, or Pistoles, etc. the parity of exchange for all these countries will be always 100 ounces of gold or silver against 100 ounces; and if in the language of exchange it happens that one gives more or less than this parity, it comes to the same in effect as if exchange is said to be so much above or below par, and we shall always know whether or not England owes a balance to the place with which the exchange is settled just as in our example of Paris and Châlons.

Part III, Chapter III

Further explanations of the nature of the Exchanges

We have seen that the exchanges are regulated by the intrinsic value of specie, that is at par, and their variation arises from the costs and risks of transport from one place to another when the balance of trade has to be sent in specie. Argument is unnecessary in a matter which we see in fact and practice. Bankers sometimes introduce refinements into this practice.

If England owes France 100,000 ounces of silver for the balance of trade, if France owes 100,000 ounces to Holland, and Holland 100,000 to England, all these three amounts may be set off by bills of exchange between the respective Bankers of these three States without any need of sending silver on either side.

If Holland sends to England in January merchandise of the value of 100,000 ounces of silver and England only sends to Holland in the same month merchandise to the value of 50,000 ounces (I suppose the sale and payment made in January on both sides) there will be due to Holland in this month a balance of trade of 50,000 ounces, and the exchange on Amsterdam will be in London in January 2 or 3 per cent. above par, or in the language of exchange, the exchange on Holland which was in December at par or at 35 escalins to the pound sterling in London will rise there in January to about 36 escalins. But when the Bankers have sent this balance of 50,000 ounces to Holland the exchange on Amsterdam will naturally fall back to par or 35 escalins in London.

But if an English Banker foresees in January, owing to the sending into Holland of an unusual quantity of merchandise, that at the time of payments and sales in March Holland will be indebted considerably to England, he may instead of sending the 50,000 écus or ounces due in January to Holland, furnish in that month bills of exchange on his Amsterdam correspondent payable at double usance or two months, the amount of the value to be paid on maturity, and by this method profit on the exchange which in January was above par and in March will be below par, and so gain doubly without sending a sol to Holland.

This is what Bankers call speculation, which often causes variations in the exchanges for a short period independently of the balance of trade; but in the long run we must get back to this balance which fixes the constant and uniform rule of exchange. And though the speculations and credits of Bankers may sometimes delay the transport of the sums which one City or State owes to another, in the end it is always necessary to pay the debt and send the balance of trade in specie to the place where it is due.

If England gains regularly a balance of trade with Portugal and always loses a balance with Holland the rates of exchange with Holland and Portugal will make this evident: it will be seen that at London the exchange on Lisbon is below par and that Portugal is indebted to England. It will be seen also that the exchange on Amsterdam is above par and that England is indebted to Holland. But the quantity of the debt cannot be seen from the exchanges. It will not be seen whether the balance of silver drawn from Portugal will be greater or less than what has to be sent to Holland.

There is however one thing which will always shew at London whether England gains or loses the general balance of her trade (by general balance is understood the difference of the individual balances with all the foreign states which trade with England), and that is the price of gold and silver metal but especially of gold (now that the proportion between gold and silver in coined money differs from the market rate, as will be explained in the next Chapter). If the price of gold metal in the London market, which is the centre of English trade, is lower than the price at the Tower where guineas or gold coins are minted, or at the same price as these coins intrinsically, and if gold metal is taken to the Tower in exchange for their value in guineas or minted coins, it is a certain proof that England is a gainer in the general balance of her trade. It proves that the gold taken from Portugal suffices not only to pay the balance which England sends into Holland, Sweden, Muscovy, and the other States where she is indebted, but that there remains some of the gold to be sent to the Mint, and the quantity or sum of this general balance of trade is known from that of the specie coined at the Tower of London.

But if the gold metal is sold in the London market above the Tower price, which is usually £3.18.0 an ounce, the metal will no longer be taken to the Mint, and this is a certain sign that so much gold is not drawn from abroad (from Portugal for instance) as must be sent into the other countries where England is indebted. It is a proof that the general balance of trade is against England. This would not be known but for the prohibition in England to send gold coin out of the country. But this prohibition is the reason why the timid London bankers prefer to buy gold metal (which they are allowed to send abroad) at £3.18.0 up to £4 an ounce for export rather than send out guineas or gold coins at £3.18.0 against the law and at the risk of confiscation. Some of them take this risk, others melt the gold coins to send them out as bullion, and it is impossible to judge how much gold England loses when the general balance of trade is against her.

In France the cost of minting is deducted, usually 1½ per cent., i.e. the price for coin is always higher than for uncoined metal. To know whether France loses in the general balance of her trade, it will suffice to know whether the Bankers send French coins abroad. If they do so it is a proof that they do not find bullion to buy for export, since the bullion though at a lower price than coined money in France, is of greater value than these coins in foreign countries by at least 1½ per cent.

Though the exchanges rarely vary apart from the balance of trade between one country and others, and though this balance is naturally the mere difference in value of the goods and merchandise which the State sends to other countries and receives from them, yet there are often circumstances and accidental causes which cause considerable sums to be conveyed from one State to another without any question of merchandise or trade, and these causes affect the exchanges just as the balance of trade would do.

Such are the sums of money which one State sends into another for its secret services and political aims, for subsidies to allies, for the upkeep of troops, Ambassadors, noblemen who travel, etc., Capital which the inhabitants of one State send to another to invest in public or private funds, the interest which these inhabitants receive annually from such investments, etc. The exchanges vary with all these accidental causes and follow the rule of the transport of silver required. In considering the balance of trade matters of this kind are not separated, and indeed it would be very difficult to separate them. They have very certainly an influence on the increase and decrease of circulating money in a State and on its comparative strength and power.

My subject does not allow me to enlarge on the effects of these accidental causes: I confine myself always to the simple views of commerce lest I should complicate my subject, which is too much encumbered by the multiplicity of the facts which relate to it.

Exchanges rise more or less above par in proportion to the great or small costs and risks of the transport of money and this being granted they naturally rise much more above par in the cities or States where it is forbidden to export money than in those where its export is free.

Suppose that Portugal consumes regularly every year considerable quantities of woollen and other Manufactures of England, as well for its own people as for those of Brazil, that it pays for them partly in wine, oils, etc., but for the surplus payment there is a regular balance of trade remitted from Lisbon to London. If the King of Portugal rigorously prohibits under penalty not only of confiscation but of life the transport of any gold or silver metal out of his States, the terror of this prohibition will in the first place stop the Bankers from meddling about sending the balance. The price of the English manufactures will be kept in hand at Lisbon. The English merchants unable to receive their funds from Lisbon will send no more cloth thither. The result will be that cloth will become extraordinarily dear. Though their price has not gone up in England they cease to be sent to Lisbon because their value cannot be recovered. To have these cloths the Portuguese nobility and others who cannot do without them will offer twice the usual price, but as they cannot get enough of them without sending money out of Portugal, the increased price of cloth will become the profit of any one who in spite of the prohibition will export gold or silver. This will encourage various Jews and others to take gold and silver to English vessels in the port of Lisbon, even at the risk of their lives. They will gain at first 100 or 50 per cent. in this traffic and this profit is paid by the Portuguese in the high price they give for the cloth. They will gradually familiarise themselves with this manœuvre after having often practised it successfully, and at length money will be seen to be put on board English ships for a payment of 2 or 1 per cent.

The King of Portugal lays down the law or prohibition. His subjects, even his courtiers, pay the cost of the risk run to circumvent and elude it. No advantage then is gained by such a law, on the contrary it causes a real loss to Portugal since it causes more money of the State to go abroad than if there were no such law.

For those who gain by this manœuvre, whether Jews or others, send their profits abroad, and when they have enough of them or when they take fright they often themselves follow their money.

If some of these lawbreakers were taken in the act, their goods confiscated and their lives forfeited, this circumstance and execution instead of stopping the export of money would only increase it, because those who formerly were satisfied with 1 or 2 per cent. for exporting money will ask 20 or 50 per cent., and so the export must always go on to pay the balance.

I do not know whether I have succeeded in making these reasons clear to those who have no idea of trade. I know that for those who have practical knowledge of it nothing is easier to understand, and that they are rightly astonished that those who govern States and administer the Finances of great kingdoms have so little knowledge of the nature of exchanges as to forbid the export of bullion and specie of gold and silver.

The only way to keep them in a State is so to conduct foreign trade that the balance is not adverse to the State.

Part III, Chapter IV

Of the variations in the proportion of values with regard to the Metals which serve as Money

If Metals were as easily found as water commonly is everybody would take what he wanted of them and they would have hardly any value. The Metals which are most plentiful and cost the least trouble to produce are also the cheapest. Iron seems the most necessary, but as it is commonly found in Europe with less trouble and labour than copper it is much cheaper.

Copper, Silver, and Gold are the three metals in general use for money. Copper mines are the most abundant and cost less in Land and Labour to work. The richest copper Mines today are in Sweden. 80 ounces of copper are needed there to pay for an ounce of silver. It is also to be observed that the copper extracted from some mines is more perfect and lustrous than what is obtained from others. The copper of Japan and Sweden is brighter than that of England. That of Spain was, in the time of the Romans, better than that of Cyprus. But gold and silver, from whatever Mine extracted, are always of the same perfection when refined.

The value of copper, as of everything else, is proportionable to the Land and Labour which enter into its production. Beside the ordinary uses to which it is put, like pots and pans, kitchen utensils, locks, etc. it is in nearly all States used as money in small purchases. In Sweden it is used even in large payments when silver is scarce there. During the first five centuries of Rome it was the only money. Silver only began to be employed in exchange in the year 484. The ratio of copper to silver was then rated in the mints at 72 to 1: in the coinage of 512 at 80 to 1: in 537, 64 to 1: in 586 at 48 to 1; in 663 by Drusus and 672 by Sulla at 53 1/3 to 1: in 712 by Marcus Antonius and 724 by Augustus 56 to 1: in A.D. 54 under Nero 60 to 1: in 160 A.D. under Antoninus 64 to 1; in the time of Constantine A.D. 330, 120 and 125 to 1: in the age of Justinian about A.D. 550 at 100 to 1. Since then it has always varied below the ratio of 100 to 1 in the European mints.

Today when copper money is only used in small dealings, whether alloyed with calamine to make yellow copper as in England, or with a small portion of silver as in France and Germany, it is generally rated in the, proportion of 40 to 1, though the market price of copper is ordinarily to that of silver as 80 or 100 to 1. The reason is that the cost of coining is generally deducted from the weight of the copper. When there is not too much of this small money for effecting the petty exchanges in the State, coins of copper or copper and alloy pass without difficulty in spite of their defect in intrinsic value. But when it is attempted to pass them in a foreign country they will only be taken at the weight of the copper and the silver alloy. Even in States where through the avarice or ignorance of the governors, currency is given to too great a quantity of this small cash for the transaction of small dealings, and it is ordered that it should be received up to a certain limit in large payments it is unwillingly accepted and small cash is at a discount in silver coin, as in the token money and Ardites in Spain in large payments. Yet small coins always pass without difficulty in small purchases, the value of the payments being usually small in themselves the loss is still less. This is why they are accepted without difficulty, and that copper is exchanged for small silver coins above the weight and intrinsic value of copper in the State itself, but not in other States, each State having wherewith to carry on its small dealings with its own copper coins.

Gold and silver, like copper, have a value proportionable to the Land and Labour necessary for their production; and if the public assumes the cost of minting these metals their value in bars and in coin is identical, their market value and their Mint value is the same, their Value in the State and in foreign countries is always alike, depending on the weight and fineness, that is on weight alone if the metals are pure and without alloy.

Silver mines have always been found more abundant than those of gold, but not equally in all countries or at all times. Several ounces of silver have always been needed to buy one ounce of gold, sometimes more sometimes less according to the abundance of these metals and the demand for them. In the year A.U.C. 310, 13 ounces of silver were needed in Greece to buy an ounce of gold, i.e. gold was to silver as 1 to 13: A.U.C. 400 or thereabouts 1 to 12, A.U.C. 460 1 to 10 in Greece, Italy and the whole of Europe. This ratio of 1 to 10 seems to have persisted for 3 centuries to the death of Augustus, A.U.C. 767 or A.D. 14. Under Tiberius gold became scarce or silver more plentiful, and the ratio gradually rose to 1 to 12, 12½, and 13. Under Constantine A.D. 330 and Justinian A.D. 550 it was 1 to 14 2/3. Later history is more obscure. Some authors think it was 1 to 18 under certain French kings. In A.D. 840 under Charles the Bald gold and silver coins were struck at 1 to 12. Under St Louis, who died in 1270 the ratio was 1 to 10: in 1361, 1 to 12: in 1421 over 1 to 11: in 1500 under 1 to 12: about 1600, 1 to 12: in 1641, 1 to 14: in 1700, 1 to 15: in 1730, 1 to 14½.

The quantity of gold and silver brought from Mexico and Peru in the last century has not only made these metals more plentiful but has increased the value of gold compared with silver which has been more abundant, so that in the Spanish mints, following the market prices, the ratio is fixed at 1 to 16. The other States of Europe have followed pretty closely the Spanish price in their Mints, some at 1 to 15 7/8, others at 15¾, 15 5/8, etc. following the ideas and views of the Directors of the Mints. But since Portugal has drawn great quantities of gold from Brazil the ratio has commenced to fall again if not in the Mints at least in the Markets, and this gives a greater value to silver than in the past. Moreover a good deal of gold is often brought from the East Indies in exchange for the silver taken thither from Europe, because the ratio is much lower in India.

In Japan where there are a good many silver mines the ratio of gold to silver is today 1 to 8: in China 1 to 10: in the other countries of the Indies on this side 1 to 11, 1 to 12, 1 to 13, and 1 to 14 as we get nearer to the West and to Europe. But if the mines of Brazil continue to supply so much gold the ratio may probably fall eventually to 1 to 10 even in Europe which seems to me the most natural if anything but chance is the guide to the ratio. It is quite certain that when all the gold and silver mines in Europe, Asia and Africa were the most exploited for the Roman republic the ratio of 1 to 10 was the most constant.

If all the gold mines regularly produced a tenth part of what the Silver mines produce, it could not be determined that for that reason the ratio between these two metals would be as 1 to 10. The ratio would always depend on the demand and on the market price. Possibly rich people might prefer to carry gold money in their pockets rather than silver and might develope a taste for gildings and gold ornaments rather than silver, thus increasing the market price of gold.

Neither could the ratio between these metals be arrived at by considering the quantity of them found in a State. Suppose the ratio 1 to 10 in England and that the quantity of gold and silver in circulation there were 20 million ounces of silver and 2 million ounces of gold, that would be equal to 40 million ounces of silver, and suppose that 1 million ounces of gold be exported from England out of the 2 millions, and 10 million ounces of silver brought in in exchange, there would then be 30 million ounces of silver and only 1 million ounces of gold, still equivalent in all to 40 million ounces of silver. If the quantity of ounces be considered there are 30 millions of silver and 1 million of gold, and therefore if the quantity of the two metals decided the ratio it would be as 1 to 30, but that is impossible. The ratio in the neighbouring countries is 1 to 10, and it would therefore cost only 10 million ounces of silver with a trifle for the cost of carriage to bring back to the State 1 million ounces of gold in exchange for 10 million ounces of silver.

To judge then of the ratio between gold and silver the Market price is alone decisive: the number of those who need one metal in exchange for the other, and of those who are willing to make such an exchange, determines the ratio. It often depends on the humour of men: the bargaining is done roughly and not geometrically. Still I do not think that one can imagine any rule but this to arrive at it. At least we know that in practice it is the one which decides, as in the price and value of everything else. Foreign markets affect the price of gold and silver more than they do the price of any other goods or merchandise because nothing is transported with greater ease and less injury. If there were a free and regular trade between England and Japan, if a number of ships were regularly employed in this trade and the balance of trade were in all respects equal, i.e. if as much merchandise were always sent from England to Japan, having regard to price and value, as was imported from Japan, it would end in drawing at last all the gold from Japan in exchange for silver, and the ratio between gold and silver in Japan would be made the same as it is in England, subject only to the risks of navigation; for in our hypothesis the costs of the voyage would be supported by the trade in merchandise.

Taking the ratio at 1 to 15 in England and 1 to 8 in Japan there would be more than 87 per cent. to gain by carrying silver from England to Japan and bringing back gold. But this difference is not enough in the ordinary course to pay the costs of so long and difficult a voyage. It pays better to bring back merchandise from Japan rather than gold in exchange for silver. It is only the costs and risks of the transport of gold and silver which can leave a difference in the ratio between these metals in different States: in the nearest State the ratio will differ very little, there will be a difference from one State to another of 1, 2 or 3 per cent. and from England to Japan the total of all these differences of ratio will amount to more than 87 per cent.

It is the market price which decides the ratio of the value of gold to that of silver. The Market price is the base of this proportion in the value assigned to coins of gold and silver. If the market price varies considerably, that of the coinage must be reformed to follow the market rate. If this be not done confusion and disorder set in in the circulation, and coins of one or the other metal will be taken above the Mint value. There are an infinity of examples of this in antiquity. There is a quite recent one in England under the regulations made at the London Mint. The ounce of silver, eleven twelfths fine, is worth there 5s. 2d. sterling. Since the ratio of gold to silver (which had been fixed at 1 to 16 in imitation of Spain) has fallen to 1 to 15 and 1 to 14½, the ounce of silver sold at 5s. 6d. sterling, while the gold guinea continued to circulate at 21s. 6d. sterling, which caused the export from England of all the silver crowns, shillings and sixpences which were not worn by circulation, silver money became so scarce in 17286 (though only the most worn pieces remained) that people had to change a guinea at a loss of nearly 5 per cent. The trouble and confusion thus produced in trade and circulation obliged the Treasury to request the celebrated Sir Isaac Newton, Master, of the Tower Mint, to make a Report7 on the measures he thought most suitable to remedy this disorder.

There was nothing easier. It was only necessary to follow the market price of silver in coining silver at the Tower. And whereas the ratio of gold to silver was of old time by the laws and regulations of the Tower Mint 1 to 15¾, it was only necessary to make the silver coins lighter in the proportion of the market price which had fallen below 1 to 15; and, to anticipate the variation which the gold of Brazil brings about annually in the ratio between these two metals, it might even have been possible to fix it on the footing of 1 to 14½, as was done in 1725 in France and as they will be forced later to do in England itself.

It is true that the coinage in England might equally have been adjusted to the market price and ratio by diminishing the nominal value of gold coins. This was the policy adopted by Sir Isaac Newton in his Report, and by Parliament in consequence of this Report. But, as I shall explain, it was the least natural and the most disadvantageous policy. Firstly it was more natural to raise the price of silver coins, because the public had already done so in the market, the ounce of silver which was worth only 62d. sterling at the Mint being worth more than 65d. in the market, and all the silver money being exported except what the circulation had considerably reduced in weight. On the other hand it was less disadvantageous to the English nation to raise the silver money than to lower the gold money considering the sums which England owes the foreigner.

If it is supposed that England owes the foreigner 5 millions sterling of capital, invested in the public funds, it may be equally supposed that the Foreigner paid this amount in gold at the rate of 21s. 6d. a guinea or in silver at 65d. sterling the ounce, according to the market price.

These 5 millions have therefore cost the Foreigner at 21s. 6d. the guinea 4,651,163 guineas; but now that the guinea is reduced to 21s. the capital to be repaid is 4,761,904 guineas, a loss to England of 110,741 guineas, without counting the loss on the interest annually paid.

Newton told me in answer to this objection that according to the fundamental laws of the Kingdom silver was the true and only monetary standard and that as such it could not be altered.8

It is easy to answer that the public having altered this Law by custom and the price of the market it had ceased to be a law, that in these circumstances there was no need to adhere scrupulously to it to the detriment of the nation and to pay to Foreigners more than their due. If the gold coins were not considered true money, gold would have supported the variation, as in Holland and China where gold is looked upon rather as merchandise than money. If the silver coins had been raised to their market price without touching gold there would have been no loss to the Foreigner, and there would have been plenty of silver coins in circulation. They would have been coined at the Mint, whereas now no more will be coined until some new arrangement is made.

By reducing the value of gold (brought about by Newton's Report from 21s. 6d. to 21s.) the ounce of silver which was sold in the London market before at 65 pence and 65½ pence no longer sold in truth but at 64d. But as it was coined at the Tower the ounce was valued in the market at 64d. and if it was taken to the Tower to be coined it would be worth no more than 62d. So no more is taken. A few shillings or fifths of crowns have been struck at the expense of the South Sea Company, losing the difference of the market price; but they disappeared as soon as they were put into circulation. Today no silver coins can be seen in circulation if they are of full mint weight, only coins which are worn and do not exceed in weight the market price.

However the value of silver continues to rise imperceptibly in the market. The ounce which was worth only 64 after the reduction of which we have spoken has risen again to 65½ and 66 in the market; and in order to have silver coin in circulation and coined at the Tower, it will be necessary again to reduce the value of the gold guinea from 21s. to 20s. and to lose to the Foreigner double of what is lost already unless it is preferred to follow the natural course and to adjust silver coin to the market price. Only the market price can find the ratio of the value of gold and silver as of all other values. Newton's reduction of the guinea to 21s. was devised only to prevent the disappearance of the light and worn coins which remain in circulation, and not to fix in gold and silver coins the true ratio of their price, I mean by their true ratio that which is fixed by Market prices. This price is always the touchstone in these matters. Its variations are slow enough to allow time to regulate the mints and prevent disorders in the circulation.

In some centuries the value of silver rises slowly against gold, in others the value of gold rises against silver. This was the case in the age of Constantine who reduced all values to that of gold as the more permanent; but the value of silver is generally the more permanent and gold is more subject to variation.

Part III, Chapter V

Of the augmentation and diminution of coin in denomination

According to the principles we have established the quantity of money circulating in exchange fixes and determines the price of everything in a State taking into account the rapidity or sluggishness of circulation.

We often see however in the increases and decreases practised in France such strange variations that it might be supposed that market prices correspond rather to the nominal value of coin than to its quantity in exchange, the quantity of livres tournois in money of account rather than the quantity of marks and ounces, which seems directly opposed to our principles.

Suppose, as happened in 1714, the ounce of silver or écu is current for 5 livres and the King publishes an Arrêt which orders the lowering of the écu every month for 20 months, viz. 1 per cent. per month to reduce its nominal value to 4 livres instead of 5. Let us see will be naturally the consequences of this having regard to the spirit of the Nation.

All those who owe money will make haste to pay it during the diminutions so as not to lose by them. Undertakers and Merchants find it easy to borrow money, which decides the least able and the least accredited to increase their enterprise. They borrow money, as they fancy, without interest and load themselves with merchandise at current prices. They even raise prices by the violence of their demands. Vendors have difficulty in getting rid of their merchandise for money which must diminish in their hands in nominal value. They turn towards foreign merchandise and import considerable quantities of it for the consumption of several years. All this causes money to circulate more rapidly and raises the price of everything. Then high prices prevent the foreigner from taking merchandise from France as usual. France keeps her own merchandise and at the same time imports great quantities. This double operation is the reason why considerable amounts of specie must be sent abroad to pay the balance.

The rate of exchange never fails to shew this disadvantage. Exchange is commonly seen at 6 and 10 per cent. against France during these diminutions. Enlightened people in France hoard their money in these times. The King finds means to borrow much money on which he willingly loses the diminution, proposing to compensate himself by an augmentation at the end of the diminution.

With this object after several diminutions they begin to hoard money in the King's Treasury, to postpone the payments, pensions, and army pay. In these circumstances money becomes extremely rare at the end of the diminutions both by reason of the sums hoarded by the King and various individuals and by reason of the nominal value of the coin, which value is diminished. The amounts sent abroad also contribute greatly to the scarcity of money, and this scarcity gradually brings it about that the merchandise with which the Undertakers are loaded up is offered at 50 or 60 per cent. below the prices prevailing at the time of the first diminutions. Circulation falls into convulsions. Hardly enough money can be found to send to market. Many Undertakers and Merchants go bankrupt and their merchandise is sold at bargain prices.

Then the King augments anew the coinage, settles the new écu or ounce of silver of the new issue at 5 livres, begins with this new coinage to pay the troops and the pensions. The old coinage is demonetised and received at the Mint at a lower nominal value. The King profits by the difference.

But all the sums of new coinage which come from the Mint do not restore the abundance of money in circulation. The amounts kept hoarded by individuals and those sent abroad greatly exceed the nominal increase on the coinage which comes from the Mint.

The cheapness of merchandise in France begins to draw thither the money of the foreigner, who finding it 50 or 60 or more per cent. cheaper sends gold and silver metal to France to buy it. In this way the foreigner who sends his bullion to the Mint recoups himself easily from the tax paid there on this bullion. He finds the double advantage of the low price of the merchandise he buys, and the loss of the Mint charge falls really on the French in the sale of their merchandise to the foreigner. They have merchandise enough for several years' consumption. They resell to the Dutch, for example, the spices which they bought of them for two thirds of what they paid. All this takes place gradually, the foreigner decides to buy these merchandises from France only because of their cheapness. The balance of trade, which was against France at the time of the diminutions turns in her favour at the time of augmentation, and the King is able to profit by 20 per cent. or more on all the bullion brought into France and taken to the Mint. As Foreigners now owe a trade balance to France and have not in their country coins of the new issue they must take their bullion and coins of the old issue to the Mint to obtain new coins for payment. But this trade balance which Foreigners owe to France arises only from the merchandise which they import from it at low prices.

France is all round the dupe of these operations. She pays very high prices for foreign goods during the diminutions, sells them back at very low prices at the time of the augmentation to the same foreigners, sells her own merchandise at low prices which she had kept so high during the diminutions and so it would be difficult for all the money which left France during the diminutions to come back during the augmentation.

If coins of the new issue are counterfeited abroad, as is nearly always the case, France loses the 20 per cent. which the King has established as the Mint charge. This is so much gained for the Foreigner who profits further by the low prices of merchandise in France.

The King makes a considerable profit by the Mint tax, but it costs France three times as much to enable him to make this profit.

It is well understood that when there is a current balance of trade in favour of France against the foreigner the King is able to raise a tax of 20 per cent. or more by a new coinage and an increase in the nominal value of coins. But if the trade balance was against France at the time of this new coinage and augmentation the operation would have no success and the King would not derive a great profit from it. The reason is that in this case it is necessary to send money continually abroad. But the old écu is as good in foreign countries as the new. That being so the Jews and Bankers will give a premium or bonus in secret for the old coins and the individual who can sell them above the Mint price will not take them thither. At the Mint they give him only about 4 livres for his écu, but the Banker will give him at first 4 livres 5 sols, and then 4 livres 10, and at last 4 livres 15. And this is how it may happen that an augmentation of the coinage may lack success. It can hardly happen when the raising is made after the lowerings indicated, because then the balance naturally turns in favour of France, as we have explained.

The experience of the augmentation of 1726 may serve to confirm all this. The diminutions which had preceded this augmentation were made suddenly without warning, which prevented the ordinary operations of diminutions. This prevented the trade balance from turning strongly in favour of France at the augmentation of 1726, few people took their old coin to the Mint, and the profit of the Mint tax which was in view had to be abandoned.

It is not within my subject to explain the reasons of Ministers for lowering the coinage suddenly nor the reasons which deceived them in their project of the augmentation of 1726. I have mentioned the increases and decreases in France only because their results seem sometimes to clash with the principles I have established that abundance or scarcity of money in a State raises or lowers all prices proportionably.

After explaining the effects of lowering and raising the coinage, as practised in France, I maintain that they neither destroy nor weaken my principles, for if I am told that what cost 20 livres or 5 ounces of silver before the lowering referred to does not even cost 4 ounces or 20 livres of the new money after the augmentation, I will assent to this without departing from my principles, because there is less money in circulation than there was before the diminutions, as I have explained. The difficulties of exchange in the times and operations of which we speak cause variations in the prices of things and in that of the interest of money which cannot be taken as a rule in the ordinary principles of circulation and dealing.

The change in the nominal value of money has at all times been the effect of some disaster or scarcity in the State, or of the ambition of some Prince or individual. In the year A.U.C. 157 Solon increased the nominal value of the drachma of Athens after a sedition and abolition of debt. Between A.U.C. 490 and 512 the Roman Republic several times increased the nominal value of its copper coins, so that their as came to be worth six. The pretext was to provide for the needs of the State and to pay the debts incurred in the first Punic War. This did not fail to cause great confusion. In 663 Livius Drusus, Tribune of the people, increased the nominal value of silver coins by one eighth, lowering their fineness by that amount, and this gave occasion to introduce confusion into exchange. In A.U.C. 712 Mark Antony in his Triumvirate increased the nominal value of silver by 5 per cent., mixing iron with the silver, to meet the needs of the Triumvirate. Many Emperors subsequently debased or increased the nominal value of the coinage. The Kings of France at different times have done likewise. This is why the livre tournois, which was worth a pound weight of silver has sunk to so little value. These proceedings have never failed to cause disorder in States. It matters little or nothing what is the nominal value of coins provided it be permanent. The pistole of Spain is worth 9 livres or florins in Holland, about 18 livres in France, 37 livres 10 sols at Venice, 50 livres at Parma. In the same proportion values are exchanged between these different countries. The price of everything increases gradually when the nominal valne of coins increases, and the actual quantity in weight and fineness of the coins, taking into account the rapidity of circulation, is the base and regulator of values. A State neither gains nor loses by the raising or lowering of these coins so long as it keeps the same quantity of them, though individuals may gain or lose by the variation according to their engagements. All people are full of false prejudice and false ideas as to the nominal value of their coinage. We have shewn in the Chapter on Exchanges that the invariable rule of them is the price and fineness of the current coins of different countries, marc for marc and ounce for ounce. If a raising or lowering of the nominal value changes this rule for a time in France it is only during a crisis and difficulty in trade. A return is always made little by little to intrinsic value, to which prices are necessarily brought both in the market and in the foreign exchanges.

Part III, Chapter VI

Of Banks and their Credit

If a hundred economical gentlemen or Proprietors of Land, who put by every year money from their savings to buy Land on occasion, deposit each one 10,000 ounces of silver with a Goldsmith or Banker in London, to avoid the trouble of keeping this money in their houses and the thefts which might be made of it, they will take from them notes payable on demand. Often they will leave their money there a long time, and even when they have made some purchase they will give notice to the Banker some time in advance to have their money ready when the formalities and legal documents are complete.

In these circumstances the Banker will often be able to lend 90,000 ounces of the 100,000 he owes throughout the year and will only need to keep in hand 10,000 ounces to meet all the withdrawals. He has to do with wealthy and economical persons; as fast as one thousand ounces are demanded of him in one direction, a thousand are brought to him from another. It is enough as a rule for him to keep in hand the tenth part of his deposits. There have been examples and experiences of this in London. Instead of the individuals in question keeping in hand all the year round the greatest part of 100,000 ounces the custom of depositing it with a Banker causes 90,000 ounces of the 100,000 to be put into circulation. This is primarily the idea one can form of the utility of banks of this sort. The Bankers or Goldsmiths contribute to accelerate the circulation of money. They lend it out at interest at their own risk and peril, and yet they are or ought to be always ready to cash their notes when desired on demand.

If an individual has 1000 ounces to pay to another he will give him in payment the Banker's note for that amount. This other will perhaps not go and demand the money of the Banker. He will keep the note and give it on occasion to a third person in payment, and this note may pass through several hands in large payments without any one going for a long time to demand the money from the Banker. It will be only some one who has not complete confidence or has several small sums to pay who will demand the amount of it. In this first example the cash of a Banker is only the tenth part of his trade.

If 100 individuals or Landowners deposit with a Banker their income every six months as it is received, and then demand their money back as and when they have need to spend it, the Banker will be in a position to lend much more of the money which he owes and receives at the beginning of the half years, for a short term of some months, than he will be towards the end of these periods. And his experience of the conduct of his clients will teach him that he can hardly lend during the whole year more than about one half of the sums which he owes. Bankers of this kind will be ruined in credit if they fail for one instant to pay their notes on their first presentation, and when they are short of cash in hand they will give anything to have money at once, that is to say a much higher interest than they receive on the sums they have lent. Hence they make it a rule based on their experience to keep always in hand enough to meet demands, and rather more than less. Many Bankers of this kind (and they are the greatest number) always keep in hand half the amount deposited with them and lend the other half at interest and put it into circulation. In this second example the Banker causes his notes of 100,000 ounces or écus to circulate with 50,000 écus.

If he has a great flow of deposits and great credit this increases confidence in his notes, and makes people less eager to cash them, but only delays, his payments a few days or weeks when the notes fall into the hands of persons who are not accustomed to deal with him, and he ought always to guide himself by those who are accustomed to entrust their money to him. If his notes come into the hands of those of his own business they will have nothing more pressing than to withdraw the money from him.

If those who deposit money with the Banker are Undertakers and Merchants who pay in large sums daily and soon after draw them out it will often happen that if the Banker divert more than one third of his cash he will find himself in difficulty to meet the demands.

It is easy to understand by these examples that the sums of money which a Goldsmith or a Banker can lend at interest or divert from his cash are naturally proportionable to the practice and conduct of his clients; that while we have seen Bankers who were safe with a cash reserve of one-tenth, others can hardly keep less than one half or two-thirds, though their credit be as high as that of the first.

Some trust one Banker, some another. The most fortunate is the Banker who has for clients rich gentlemen who are always looking out for safe employment for their money without wishing to invest it at interest while they wait.

A general national bank has this advantage over the bank of a single Goldsmith that there is always more confidence in it. The largest deposits are willingly brought to it, even from the most remote quarters of the city, and it leaves generally to small Bankers only the deposit of petty sums in their neighbourhood. Even the revenues of the State are paid in to it in countries where the Prince is not absolute. And this, far from injuring credit and confidence in it, serves only to increase them.

If payments in a national bank are made by transfers or clearings there will be this advantage, that they are not subject to forgeries, but if the Bank gives notes false notes may be made and cause disorder. There will be also this disadvantage that those who are in the quarters of the city at a distance from the Bank will rather pay and receive in money than go thither, especially those in the country. But if the bank notes are dispersed they can be used far and near. In the national Banks of Venice and Amsterdam payment is made only in book credit, but in that of London it is made in credit, in notes, and in money at the choice of the individuals, and it is today the strongest Bank.

It will then be understood that all the advantage of Banks, public or private in a city, is to accelerate the circulation of money and to prevent so much of it from being hoarded as it would naturally be for several intervals.

Part III, Chapter VII

Further explanations and enquiries as to the utility of a National Bank

It is of little importance to examine why the Bank of Venice and that of Amsterdam keep their books in moneys of account different from current money, and why there is always an agio on converting these book credits into currency. It is not a point of any service for circulation. The Bank of England has not followed it in this. Its accounts, its notes and its payments are made and are kept in current coin, which seems to me more uniform and more natural and no less useful.

I have not been able to obtain exact information of the quantity of sums ordinarily brought to these Banks, nor the amount of their notes and accounts, loans, and sums kept as reserve. Some one who is better informed on these points will be better able to discuss them. As, however, I know fairly well that these sums are not so huge as commonly supposed I will not omit to give an idea of them.

If the bills and notes of the Bank of England which seems to me the most considerable, amount weekly on an average to 4,000,000 ounces of silver or about 1 million sterling, and if they are content to keep regularly in reserve a quarter or £250,000 sterling or 1 million ounces of silver in coin, the utility of this Bank to circulation corresponds to an increase of the money of the State by 3 million ounces or £750,000 sterling which is without doubt a very large sum and of very great utility for the circulation when it has need to be speeded up: for I have remarked elsewhere that there are cases where it is better for the welfare of the State to retard the circulation than to accelerate it. I have heard that the notes and bills of the Bank of England have risen in some cases to 2 millions sterling, but it seems to me this can only have been by extraordinary accident. And I think the utility of this Bank corresponds in general only to about one tenth part of all the money in circulation in England.

If the explanations given to me in round figures in 1719 on the receipts of the Bank of Venice are correct it may be said of national banks generally that their utility never corresponds to the tenth part of the current money circulating in a State. This is approximately what I ascertained there.

The revenues of the State of Venice may amount annually to 4 million ounces of silver, which must be paid in Bank money, and the Collectors set up for that purpose who receive at Bergamo and in the most distant places taxes in money, are obliged to change them into bank money when they make payment of them to the Republic.

All payments at Venice for negociations, purchases and sales above a certain modest sum must by law be made in Bank money. All the retailers who have collected current money in their dealings are compelled to buy Bank money with it to make their payments for large amounts. And those who need for their expenses or for the detail of small circulation to get back current money have to sell their Bank money to obtain it.

It is found that the sellers and buyers of the Bank money are regularly equal when the total of all the credits or inscriptions on the books of the Bank do not exceed the value of 800,000 ounces of silver or thereabout.

Time and experience (according to my informant) have given this knowledge to the Venetians. When the Bank was first set up individuals brought their money to the Bank to have credit at the Bank of the same value. This money deposited at the Bank was later spent for the needs of the Republic and yet the Bank money preserved its original value because there were as many people who had need to buy it as those who had need to sell it. Finally the State being pressed for money gave to the War Contractors credits in Bank money instead of silver and doubled the amount of its credits.

Then the number of sellers of Bank money being much greater than the buyers Bank money began to be at a discount against silver and fell 20 per cent. below. By this discredit the revenue of the Republic fell off one fifth and the only remedy found for this disorder was to pledge part of the State revenue to borrow Bank money at interest. By these borrowings of Bank money half of them were cancelled and then the sellers and buyers being about equal the Bank regained its original credit and the total of Bank money was brought back to 800,000 ounces of silver.

It is thus that it has been ascertained that the utility of the Bank of Venice as regards circulation corresponds to about 800,000 ounces of silver: and if it is supposed that all the current money in the States of that Republic amount to 8 million ounces of silver the utility of the Bank corresponds to one tenth of that silver.

A national Bank in the Capital of a great Kingdom or State must, it seems, contribute less to the utility of circulation because of the distance of its Provinces, than in a small State. And when money circulates there in greater abundance than among its neighbours a national Bank does more harm than good. An abundance of fictitious and imaginary money causes the same disadvantages as an increase of real money in circulation, by raising the price of Land and Labour, or by making works and manufactures more expensive at the risk of subsequent loss. But this furtive abundance vanishes at the first gust of discreet and precipitates disorder.

Towards the middle of the reign of Louis XIV there was more money in circulation in France than in neighbouring countries, and the King's revenue was collected there without the help of a Bank, as easily and conveniently as it is collected today in England with the help of the Bank of England.

If the clearings at Lyons in one of its four Fairs amount to 80 millions of livres, if they are begun and finished with a single million of ready money, they are doubtless of great convenience in saving the trouble of an infinity of transports of silver from one house to another. But with that exception it seems that with this same million of cash which began and ended these clearings it would be quite feasible to conduct in three months all the payments of 80 millions.

The Paris bankers have often observed that the same bag of money has come back to them 4 or 5 times in the same day when they had a good deal to pay out and receive.

I think pubic banks of very great utility in small States and those where silver is rather scarce, but of little service for the solid advantage of a great State.

The Emperor Tiberius, a Prince strict and economical, had saved up in the Imperial Treasury 2700 millions of sesterces, equal to 25 millions sterling or 100 million ounces of silver, an enormous sum in coin for those times and even for today. It is true that in tying up so much money he embarrassed the circulation and that silver became scarcer at Rome than it had been.

Tiberius, who attributed this scarcity to the monopoly of Contractors and Financiers who farmed the Imperial revenues, ordered by an edict that they should buy land up to at least two thirds of their capital. This Edict, instead of animating the circulation threw it completely into disorder. All the Financiers hoarded and called in their capital under the pretext of putting themselves into a position to obey the Edict by buying land, which instead of rising in value sunk to a much lower price owing to the scarcity of silver in circulation. Tiberius remedied this scarcity by lending to individuals on good security only 300 million sesterces, a ninth part of the money which he had in his Treasury.

If the ninth part of the Treasury sufficed at Rome to re-establish the circulation it would seem that the establishment of a general Bank in a great Kingdom where its utility would never correspond to the tenth part of the money in circulation when it is not hoarded, would be of no real and permanent advantage, and that considered in its intrinsic value it can only be regarded as an expedient for gaining time.

But a real increase in the quantity of circulating money is of a different nature. We have already spoken of it and the Treasure of Tiberius gives us again occasion to say a word of it here, This treasure of 2700 millions of sesterces, left at the death of Tiberius, was squandered by the Emperor Caligula his successor in less than a year. Money was never seen so abundant at Rome. What was the result? This mass of money plunged the Romans into luxury and into all sorts of crimes to pay for it. More than 60,000 pounds sterling left the Empire every year for the merchandise of the Indies, and in less than 30 years the Empire grew poor and silver became very scarce there without any dismemberment or loss of a Province.

Though I consider a general Bank is in reality of very little solid service in a great State I allow that there are circumstances in which a Bank may have effects which seem astonishing.

In a city where there are public debts for considerable amounts the facility of a Bank enables one to buy and sell capital stock in a moment for enormous sums without causing any disturbance in the circulation. If at London a person sells his South Sea stock to buy stock in the Bank or in the East India Company, or hoping that in a short time he will be able to buy at a lower price stock in the same South Sea Company, he always takes Banknotes, and generally money is not asked for in respect of these Notes but only for the interest on them. As one hardly spends one's capital there is no need to change it into coin, but one is always forced to ask the Bank for money for subsistence since cash is needed for small dealings.

If a Landowner who has 1000 ounces of silver pays 200 of them for the interest of public stock and spends 800 ounces of them himself, the thousand ounces will always require coinage. This proprietor will spend 800 and the Owners of the funds will spend 200 of them. But when these Proprietors are in the habit of speculation, selling and buying public stock, no ready silver is needed for these operations, bank notes suffice. If it were necessary to draw hard cash out of circulation to serve in these purchases and sales it would amount to a great sum and would often impede the circulation, or rather it would happen in that case that the stocks could not be sold and bought so often.

It is doubtless the origin of these capitals or money deposited in the Bank and drawn out only on rare occasions, such as when an owner of capital engages in some transaction or needs cash for small purchases, which explains why the Bank keeps in reserve only the fourth or sixth part of the silver against which it issues notes. If the Bank had not the funds of many of these capitals it would in the ordinary course of circulation find itself compelled like private banks to keep half its deposits in hand to be solvent. It is true that the Bank books and its dealings do not distinguish those capitals which pass through several hands in the sales and purchases made in Change Alley. These notes are often renewed at the Bank and changed against others in purchases. But the experience of purchases and sales of stock show clearly that the total of them is considerable, and without these purchases and sales the sums deposited at the Bank would be certainly smaller.

This means that when a State is not in debt and has no need of purchases and sales of stock the help of a Bank will be less necessary and less important.

In 1720 the capital of public stock and of Bubbles which were snares and enterprises of private companies at London, rose to the value of 800 millions sterling, yet the purchases and sales of such pestilential stocks were carried on without difficulty through the quantity of notes of all kinds which were issued, while the same paper money was accepted in payment of interest. But as soon as the idea of great fortunes induced many individuals to increase their expenses, to buy carriages, foreign linen and silk, cash was needed for all that, I mean for the expenditure of the interest, and this broke up all the systems.

This example shews that the paper and credit of public and private Banks may cause surprising results in everything which does not concern ordinary expenditure for drink and food, clothing, and other family requirements, but that in the regular course of the circulation the help of Banks and credit of this kind is much smaller and less solid than is generally supposed. Silver alone is the true sinews of circulation.

Part III, Chapter VIII

Of the Refinements of Credit of General Banks

The national Bank of London9 is composed of a large number of shareholders who make choice of Directors to govern its operations. Their primitive advantage consisted in making a yearly distribution of the profits made by interest on the money lent out of the Bank deposits. Later the public debt was incorporated with it, on which the State pays an annual interest.

In spite of such a solid foundation when the Bank had made large advances to the State and the holders of notes were apprehensive that the Bank was in difficulties, a run on the Bank has been seen and holders of notes went in crowds to the Bank to draw out money. The same thing happened on the collapse of the South Sea Company in 1720.

The refinements introduced to support the Bank and moderate its discredit were first to set up a number of clerks to count out the money to those bringing notes, to pay out large amounts in sixpences and shillings to gain time, to pay some part to individual holders who had been waiting whole days to take their turn; but the most considerable sums were paid to friends who took them away and brought them back secretly to the Bank to repeat the same manœuvre the next day. In this way the Bank saved its appearance and gained time until the panic should abate. But when that did not suffice the Bank opened a subscription engaging trusty and solvent people to join as guarantors of large amounts to maintain the credit and circulation of the Bank notes.

It was by this last refinement that the credit of the Bank was maintained in 1720 when the South Sea Company collapsed. As soon as it was publicly known that the subscription list was filled by wealthy and powerful people, the run on the Bank ceased and deposits were brought in as usual.

If a Minister of State in England, seeking to lower the rate of interest or for other reasons, forces up the price of public stock in London and if he has enough credit with the Directors of the Bank (under the obligation of indemnifying them in case of loss) to get them to issue a quantity of bank notes without backing, begging them to use these notes themselves to buy several blocks and capitals of the public stock, this stock will not fail to rise in price through these operations. And those who have sold stock, seeing the high price continue, will perhaps decide (so as not to leave their bank notes idle and thinking from the rumours spread about that the rate of interest will fall and the stock go up further in price) to buy it back at a higher price than they sold it for. If several people seeing the agents of the Banks buy this stock step in and do likewise thinking to profit like them, the public funds will increase in price to the point which the Minister wishes. And it may happen that the Bank will cleverly resell at a higher price all the stock it has purchased at the Minister's request, and will not only make a large profit on it but will retire and cancel all the extraordinary banknotes which it had issued.

If the Bank alone raises the price of public stock by buying it, it will by so much depress it when it resells to cancel its excess issue of notes. But it always happens that many people wishing to follow the Agents of the Bank in their operations help to keep up the price. Some of them get caught for want of understanding these operations, in which there enter infinite refinements or rather trickery which lie outside my subject.

It is then undoubted that a Bank with the complicity of a Minister is able to raise and support the price of public stock and to lower the rate of interest in the State at the pleasure of this Minister when the steps are taken discreetly, and thus pay off the State debt. But these refinements which open the door to making large fortunes are rarely carried out for the sole advantage of the State, and those who take part in them are generally corrupted. The excess banknotes, made and issued on these occasions, do not upset the circulation, because being used for the buying and selling of stock they do not serve for household expenses and are not changed into silver. But if some panic or unforeseen crisis drove the holders to demand silver from the Bank the bomb would burst and it would be seen that these are dangerous operations.

Richard Cantillon and the Nationality of Political Economy, by W. Stanley Jevons

Diligent readers of the Wealth of Nations will probably remember that Adam Smith once in a way quotes a certain Mr Cantillon. Hereby hangs a tale, and a tale full of errors, mysteries, and enigmas. Adam Smith quoted so few previous authors that to be mentioned in his pages ensures a kind of immortality. Nevertheless Cantillon has been very unfortunate. Not only was his life prematurely ended by fire and knife, but a series of adverse literary accidents has almost entirely obscured his name and fame.

If, wishing to know more about Cantillon, we turn to that useful but often inaccurate work, M'Culloch's Literature of Political Economy, we find (p. 52) some description of a book called "The Analysis of Trade, Commerce, Bullion, etc. By Philip Cantillon, late of the City of London, Merchant" (I vol. 8vo, London, 1759). M'Culloch goes on to remark of this book that "the author adopts several of the views of Hume, whose Political Essays were published in 1752. His principles are for the most part liberal, and some of his speculations display considerable ingenuity." Here the filiation of ideas seems to be evident. Cantillon adopted the views of Hume, whose essays, according to his biographer Burton, form the Cradle of Political Economy. "Much as that science," says Burton, "has been investigated and expounded in later times, these earliest, shortest, and simplest developments of its principles are still read with delight even by those who are masters of all the literature of this great subject." I am far from denying that "a master of all the literature of political economy," if such a wonderful creature can be imagined, might read the essays of Hume with delight, and he might also possibly agree with Professor Huxley that Hume was in political economy, as in philosophy, "an original, a daring, and a fertile innovator." But he could not possibly allow that Hume's Essays of 1752 are "the earliest, shortest, and simplest developments of its principles"; nor could he fall into M'Culloch's blunder of supposing that the Cantillon quoted by Smith owed anything to Hume.

M'Culloch is much to be blamed in this matter, for, had he examined the title-page of the so-called Analysis of Trade, he would have seen that the contents of the book purport to be "Taken chiefly from a Manuscript of a very ingenious Gentleman deceas'd, and adapted to the present Situation of our Trade and Commerce." As this book was published in 1759, and Hume's Essays in 1752, seven years hardly make a sufficient interval to enable Philip Cantillon to adopt the views of Hume, to write the manuscript, to become deceased, and after all to need adapting "to the present situation of our trade," etc. Had M'Culloch glanced into some ordinary bibliographical or biographical works of reference, he might have been saved from blundering.10 Watt's Bibliotheca Britannica, indeed, would not have done much to set him right; for it merely informs us that Philip Cantillon was "a merchant of Purden." As there does not seem to be any such place in the whole world as "Purden." I can only conclude that it is an extraordinary typographical error for "London." The great French biographical works (both the Biographie Universelle, Paris, 1843, vol. VI. p. 584, and Didot's Nouvelle Biographie Générale, vol. VIII. pp. 528-9) contain particulars of "Philip" Cantillon's life, stating that he died in 1733 (more accurately 1734). This fact of course disperses the notion that he could have borrowed from Hume. We learn also from these and other books to be presently quoted that Cantillon's work was first printed in the French language in the year 1755, under the title "Essai sur la Nature du Commerce en Général. Traduit de l'Anglois. Londres."

The briefest examination of this latter volume at once shows that the English version of 1759 is so horribly garbled as to give no idea of the merits of the original work. The so-called Analysis of Trade is a loose translation of portions of the real Essai, omitting usually the best parts of the chapters in order to allow of the insertion of extracts from Hume's Essays, rodomontades about Oliver Cromwell, and other wholly irrelevant matter. The book is said to be "Printed for the Author," but this author must have been a wretched literary hack, and in saying that the book was "taken chiefly from a manuscript of a very ingenious gentleman deceased" he diverged considerably from the line of strict veracity.

The French Essai appears to be a book of much rarity in England: I am told that there is no copy in the Cambridge University Library, nor does one appear in the printed catalogue of the Bodleian Library. A copy can, however, be consulted in the British Museum Library (press mark 1028 a. 19), where also will be found the Analysis of Trade of 1759, as well as a reprint of the French text in vol. III of the Discours Politiques of Hume, as translated and edited by De Mauvillon (Amsterdam, 1754-5).

My study of the Essai has been much facilitated by the fact that I found I had a copy of the book in my own library, accidentally bought many years ago in Paris. I have also a copy of the Analysis, purchased at the sale of the old Manchester Exchange Library, where it had probably rested since the time of its publication.

The original Essai is thus described on its title-page: "Essai sur la Nature du Commerce en Général. Traduit de l'Anglois. A Londres, chez Fletcher Gyles, dans Holborn. MDCCLV." The book consists of half-title, title, 430 pages, and 6 pages of contents; 12mo, sheets A to T ii. The date is erroneously given as 1752 in the French Dictionnaire de l'Économie Politique, and in Mr Macleod's Dictionary.

Before turning to analyse the contents of this Essai, it will be well to learn what we can about the book and its author from extrinsic sources. It appears that the so-called Philippe de Cantillon was a clever merchant, born of an Irish family towards the end of the seventeenth century. At first he carried on business as a merchant in London, but afterwards removed to Paris, and established a banking-house. "Joining to immense credit," as the Biographie Universelle says, "amiable manners and much wit, he was sought after in the best society and lived in intimacy with persons of the first distinction." He was a friend of Lord Bolingbroke, and it is even asserted that he stood well with the Princesse d'Auvergne. Such, indeed, was his success, financial and social, that the great John Law, then in the midst of his financial combinations, grew jealous of him. Summoning his fellow-countryman to his presence, there ensued a conversation which must be true because, as a French author would say, it is so simple. " 'Si nous étions en Angleterre [said Law] il faudrait traiter ensemble, et nous arranger; mais, comme nous sommes en France, je puis vous envoyer ce soir à la Bastille, si vous ne me donnez votre parole de sortir du Royaume dans les vingt-quatre heures.' Cantillon se mit à rêver un moment et lui dit: 'Tenez; je ne m'en irai pas, et je ferai réussir votre système." ' Accordingly Cantillon took from Law an immense quantity of the new-fangled paper, which through the hands of his numerous commercial friends and agents, and by the force of his immense credit, he was able to place upon the market to great advantage. He thus, if the accounts can be trusted, made a fortune of several millions in a few days, but still, distrusting Law, prudently retired to Holland, whence he subsequently removed to London. Here he was murdered by a valet-de-chambre (more correctly a cook), who then decamped with his most valuable and portable property.

The above account of Cantillon appears to be derived from certain traditions printed in or subsequent to the year 1755. Thus in Grimm's Correspondence,11 under the date Paris, Ier Juillet, 1755, we read that:

A month ago appeared a new work on Commerce intitled Essai sur to Nature du Commerce en général, in a fairly large duodecimo volume. This book has not been translated from the English, as is stated with design upon the title-page. It is a work originally composed in French by an Englishman, M. de Cantillon, a man of condition, who finished his days in Languedoc, where he had retired, and had lived many years.

In another letter, this statement is corrected (t. I. pp. 367-8) as follows: "I was ill-informed concerning the person of M. de Cantillon, when I had the honour to write to you of his excellent work on Commerce. Cantillon, an Englishman and a man of intellect, as, indeed, his book proves him to be, established a bank in the time of the Regency, in Paris, where he had immense credit."

After giving the incident with Law already described, he concludes: "It is commonly said that he perished in a fire in his house in London, in 1733. The fact is that the fire was extinguished easily enough, and that they found Cantillon stabbed. The fire appears to have been raised to conceal the crime, and this affair gave rise to many rumours at the time."

Another authority of the year 1755, namely, "L'Année Littéraire—Année 1755. Par M. Fréron. Tom. v. (Amsterdam)," p. 357, confirms these statements, and adds a few further facts, saying that the murderer was discovered arrested, and executed in London (?). "M. Cantillon had married his daughter to my Lord Bulkeley, Lieutenant-General in the French Service, Chevalier des Ordres du Roi, brother of Madame la Marêchale de Berwick. Madame Bulkeley died at Paris six or seven years ago." At p. 67 of the same volume we also find it stated that the book is not a real translation, but was written in French. "It is the English themselves who have translated it into their language from the original of M. Cantillon." This statement is clearly erroneous, however, no English version having appeared before that of 1759. The writer proceeds to add that, "It is not known by whom, nor how, this manuscript has been printed, nor why its publication was deferred more than twenty years. We are also ignorant of the reasons for which the publishers have suppressed in this impression certain very curious calculations, which several people assure me they have seen in the manuscript. However this may be, the work, such as it now appears, is regarded as one of the best which have been written on commerce."

If Cantillon were really murdered in London, the newspapers of the time would probably contain some account of the event. Without much difficulty I met with the following particulars. The County Journal, or The Craftsman, of Saturday, 18th 8th May 1734, says:

Tuesday morning about three o'clock a fire happened in the house of Mr Chantillon, a rich French merchant in Albemarle Street, which in a short space destroyed the said house, together with the Lord Viscount St John's adjoining, and also greatly damaged another house. When the flames were first discovered, Mr Chantillon's footman broke into his master's chamber (whom he had about twelve the night before left in his bedchamber reading with a candle), and found him dead in his bed, and with his head almost burnt off.

A paragraph, more important for our purposes, is contained in Read's Weekly Journal, or British Gazetteer, of Saturday, 1st June 1734, No. 480. It states that it had been represented to the King, that Richard Cantillon, Esq., was, on Tuesday, 14th May, between three and four in the morning, robbed and murdered in his house in Albemarle Street, and his said house afterwards villainously burnt to the ground. A free pardon is therefore offered by the Government to any accomplices in the deed. And, as a further encouragement, Mr Philip Cantillon, a merchant of this city, has promised a reward of £200 to any one of the criminals, excepting the actual murderer.

Further particulars of no especial importance may be gleaned, as that on the Sunday the other servants of the house were privately examined; that on Monday night the Coroner's inquest was held; that on Thursday Mr Martin, the French distiller, was admitted to bail; on Thursday the servants were examined again. In The Country Journal, or The Craftsman, of Saturday, 15th June 1734, we read:

"They write from Paris that the wife of Joseph Denier, alias Lebane, a Frenchman (who had been cook to the late Mr Cantillon, and supposed to have robb'd and murdered that gentleman), had been put under an arrest, at her house three miles from that city, and her letters seized, in order to a discovery of her husband, all which had been done at the instance of the Earl of Waldegrave, his Majesty's Ambassador at the French Court."

It does not appear that the real culprit was ever captured, but according to an entry in the Gentleman's Magazine, under the date 7th December 1734 (vol. IV. p. 702), Isaac Burridge, Roger Arnold, and Elizabeth Pembroke were tried for the murder of their master, Mr Cantillon, and for firing his house, and were found not guilty. See also the same volume, p. 273.

The important fact which we gather from the above contemporary records is that there were really two Cantillons, and that the rich French merchant was not Philip Cantillon at all, but Richard Cantillon.

It seems necessary to suppose that the real name of the great economist and financier was lost, and is only now for the first time attached to his work. As the garbled translation of 1759 speaks of Philip as late of the City of London, and the newspapers bear out this statement, while calling Richard a rich French merchant, it is impossible to suppose that Philip was the author and rival of Law, and Richard the London merchant. As a mere surmise we may suppose that Richard and Philip were brothers, and carried on their merchant's and banker's business in close correspondence. But I do not know how to explain the fact that literary reputation became attached to the name Philip Cantillon. It needs to be noticed, indeed, that, besides the Essai two other literary works are connected in bibliographical books with the name De Cantillon. Thus Barbier, in his Dictionary of Anonymous and Pseudonymous Works, speaking of the "Histoire de Stanislas, 1er Roi de Pologne, par M. D. C., Londres (Meyer), 1741," 2 vols. 12mo, says that some persons attribute this book to De Cantillon, the same probably from whom we have an "Essay on the Nature of Commerce." But in Quérard's La France Littéraire, vol. I. p. 43, vol. II. p. 188, we are referred to J. G. de Chevrières as the author. Mere erroneous interpretation of the initial letters is here no doubt the cause of Cantillon's name having been used in connection with the book. There is another book, however, which actually bears the name M. de Cantillon upon its title-page (see Quérard, vol. I. p. 43). The following is the title of the book, a copy of which, in four vols. 8vo is in the King's Library at the British Museum: "Les Délices du Brabant et de ses Campagnes, ou description des villes,... de ce Duché. Accompagnée des événemens les plus remarquables jusqu'au tems présent. Par M. de Cantillon. Ouvrage enrichi de 200 très belles figures en taille douce. Amsterdam, 1757." This book, however, is simply a bookseller's speculation, and the text is no more than a commonplace commentary on the 200 copperplate engravings, which are worthy of some commendation. Not the slightest reason can be discovered why this work should be connected with the merchant of the City of London, and I suspect that the book is pseudonymous, Cantillon's name being selected for the purpose on account of the reputation and mystery attaching to it.

I have been able to meet with few other facts relating to the personality of Cantillon. He was descended from the family of that name belonging to Ballyheige or Ballyhigue, in County Kerry, Ireland, whose armorial bearings are given in Burke's General Armoury and other works thus: "az. a lion, rampant, or, between two arrows, or, feathered and barbed, of the second." That this family had connections in France is apparent from the fact that Antoine Sylvain de Cantillon, Baron de Ballyheige, and in France Lieutenant-Colonel Chevalier of the Order of St Louis, bore the same arms. In the Gentleman's Magazine for 1743, vol. XIII. p. 389, we read that the Earl of Stafford was married to a Miss Cantillon, so that some of the aristocracy both of England and France are probably descended from the first economist.

On looking into a genealogical work, the title of which I have accidentally lost, I found this view of the matter entirely confirmed, for we there have mention of "Richard Cantillon of Paris, Banker, 1710, descended from County Kerry, whose daughter Henrietta married first, 1743, William Howard, third Earl of Stafford, and second, 1769, Robert Maxwell, first Earl of Farnham."

In the Gentleman's Magazine, vol. XXVI. p. 91, among the deaths of the year 1756 is found that of Jasper Cantillon, Esq., one of the Commissioners for the Exchequer and for wounded soldiers in King William's wars in Flanders.

The name of course is an essentially Spanish one, and it is well known that many Spanish merchants settled on the west coast of Ireland. Their houses of distinctly Spanish architecture may be seen in Galway to the present day.

Turning now to this remarkable Essai sur la Nature du Commerce en Général, we find that it purports, according to the title-page, to be published "à Londres, chez Fletcher Gyles, dans Holborn." This, however, is certainly false. There was indeed in the early part of the eighteenth century a popular bookseller of the name Fletcher Gyles, who had a shop near Middle Row in Holborn, "over against Gray's Inn." Many particulars about him may be gathered from Nichol's Literary Anecdotes (see Index, vol. VII. p. 165), and it appears that he did publish various works there mentioned. But then in 1736 the firm is given as Gyles and Wilkinson, and since Fletcher Gyles himself died of apoplexy in 1741, it is unlikely that his sole name would be put upon a title-page in 1755. Moreover no books are mentioned as published at the Holborn shop after 1737 (Lit. Anec. vol. II. p. 116). As regards type, paper, and general appearance the book is certainly not English, and was probably executed at Paris, as two bibliographical experts of the British Museum assure me. The binding of my copy is also of the contemporary French style. All these facts go to show that, although purporting to be translated from the English, and published by an English bookseller, there was really no connection with London.

The book itself is divided into three parts, containing respectively seventeen, ten, and eight chapters. The first part is to some extent a general introduction to Political Economy, beginning with a definition of wealth, and then discussing the association of people in societies, in villages, towns, cities, and capital cities; the wages of labour; the theory of value; the par between labour and land; the dependence of all classes upon landed proprietors; the multiplication of population; and the use of gold and silver. The second part takes up the subjects of barter, prices, circulation of money, interest, etc., and is a complete little treatise on currency, probably more profound than anything of the same size since published on the subject. The third part treats of foreign commerce, the foreign exchanges, banking, and "refinements of credit." Judged by the knowledge and experience of the time, this third part especially is almost beyond praise, and shows that Richard Cantillon had a sound and pretty complete comprehension of many questions about which pamphleteers are still wrangling and blundering, and perplexing themselves and other people. The Essai is far more than a mere essay or even collection of disconnected essays like those of Hume. It is a systematic and connected treatise, going over in a concise manner nearly the whole field of economics, with the exception of taxation. It is thus, more than any other book I know, the first treatise on economics. Sir William Petty's Political Arithmetic and his Treatise of Taxes and Contributions are wonderful books in their way, and at their time, but, compared with Cantillon's Essai, they are mere collections of casual hints. There were earlier English works of great merit, such as those of Vaughan, Locke, Child, Mun, etc., but these were either occasional essays and pamphlets, or else fragmentary treatises. Cantillon's essay is, more emphatically than any other single work, "the Cradle of Political Economy."

The opening sentence of the first chapter, "De la Richesse," is especially remarkable, and is as follows: "La Terre est la source ou la matière d'ou l'on tire la Richesse; le travail de l'Homme est la forme qui la produit: et la Richesse en elle-même n'est autre chose que la nourriture, les commodités et les agrémens de la vie."

This sentence strikes the keynote, or rather the leading chord of the science of economics. It reminds us at once of the phrase "land and labour of the country" upon which Adam Smith is so frequently harping. Yet it holds the balance between the elements of production more evenly than almost any subsequent treatise. Quesnay, as we shall see, attributed undue weight to some other remarks of Cantillon, and produced an entirely one-sided system of economics depending on land alone; Smith struck off rather on the other track, and took "the annual labour of every nation" as the fund which supplies it with all the necessaries and conveniences of life. Properly interpreted Cantillon's statement is probably the truest which has yet been given.

If, indeed, we are to trace out the filiation of ideas to the utmost, we get back to Sir W. Petty, who, in his Treatise of Taxes, chap. X (of Penalties), Article 10 (1st ed. 1662, p. 49), speaks of "our opinion that labour is the father and active principle of wealth, as lands are the mother." It may here be pointed out, by the way, that in the new English version of Roscher's Principles of Political Economy, translated by John J. Lalor, this remark of Petty is by a typographical error (vol. I. p. 168) merged into another sentence quoted from Harris, and written nearly a century later. Roscher refers also to a German work of Leser (Begriff des Reichthums, bei Adam Smith, 97), in which are collected together all the passages in which Adam Smith speaks of "the annual produce of land and labour."

Chapters VII and VIII are interesting because we here find the germ of Adam Smith's important doctrine concerning wages in different employments, as stated in the first part of the tenth chapter of the Wealth of Nations. Smith so greatly developed the doctrine and illustrated it so admirably as quite to make it his own; still here in this forgotten Essai are the leading ideas, as in the following extracts:

Those who employ artisans and skilled workmen must necessarily pay for their labour more highly than for that of a common labourer; and this labour will necessarily be more dear in proportion to the time lost in learning the trade, and the expense and risk which are required in perfecting the knowledge (p. 24). The arts and trades which are accompanied by risks and dangers, such as those of founders, mariners, silver miners, etc., ought to be paid in proportion to the risks. When, in addition to danger, skill is required, they ought to be still better paid, as in the case of pilots, divers, engineers, etc. When, moreover, capacity and trustworthiness are needed, labour is paid still more highly, as in the case of jewellers, bookkeepers, cashiers, and others (pp. 26-27).

It is impossible not to recognise here the agreeableness or disagreeableness, the easiness and cheapness, the difficulty and expense of learning a trade, and the small or great trust which must be reposed in those who exercise them, three out of the five circumstances enumerated by Smith as causing inequalities in wages.

In Chapter IX Cantillon argues quite in the style of a recent disciple of Ricardo that there is no use in trying to increase the number of artisans in any trade by charity schools or special methods of education. He thinks there will never be a want of artisans in a State, if there be sufficient employment for them.

Then follows in Chapter X an ingenious theory of value, superior in some respects to the theories of many recent economists. The argument given in the few small pages devoted to the subject is so closely knit, that many large pages would be needed to do justice to the theory. Cantillon's meaning, however, is that certain things, such as Brussels lace, or the balance-spring of an English watch, depend for their value upon the labour involved in their production. The hay from a meadow, the timber from a wood, on the other hand, are governed in value by the matter contained therein, or by the area of land required for its production, regard being had to the goodness of the land. The price of Seine water, as another instance, is not the price of the water itself, of which the quantity is immense, but the price of carrying it into the streets of Paris. He thus arrives at the following conclusion: "By these inductions and examples, I think we can understand that the price or the intrinsic value of a thing is the measure of the quantity of land and of labour which enter into its production, regard being had to the goodness or productiveness of the land, and to the quality of the labour."

But Cantillon at once proceeds to explain that commodities will not always sell at their "intrinsic value." If a nobleman spends much money in making a beautiful garden, and the garden be brought to the hammer, it may bring only the half of what it has cost; in other circumstances it may bring the double. Corn, again, sells above or below its intrinsic value according to the abundance of the harvests. A perpetual flux and reflux of prices arises from the impossibility of proportioning the supply to the demand. In short, these few pages contain not only the whole doctrine of market value as contrasted to cost value, or, as the late Professor Cairnes called it, normal value, but there are allusions to difficulties which Ricardo, Mill and many others have ignored.

We cannot exhaust here, however, the intricacies of the theory of value, and must pass on to Chapter XI, which is interesting, as being the one quoted by Adam Smith. It contains the curious doctrine "of the par or relation of the value of land to the value of labour." Cantillon points out that the labour of the lowest kind of adult slave, must at least equal the quantity of land that the proprietor is obliged to employ for his subsistence, together with double the quantity of land required to bring up a child to the labouring age, remembering that, according to the calculations of the celebrated Dr Halley, half the number of children die before reaching seventeen years of age. The doctrine is carefully guarded by Cantillon, with various qualifications and explanations, which we have not space to consider. Now, Smith refers to this theory in the eighth chapter of the first book of the Wealth of Nations (Thorold Rogers's edition, vol. I. p. 71), saying: "Mr Cantillon seems, upon this account, to suppose that the lowest species of common labourers must everywhere earn at least double their own maintenance, in order that, one with another, they may be enabled to bring up two children; the labour of the wife, on account of her necessary attendance on the children, being supposed no more than sufficient to provide for herself. But one-half the children born, it is computed, die before the age of manhood." I believe that Smith must have derived his quotation from the French Essai; for he adverts to the fact that the labour of the wife, on account of her necessary attendance on the children, is supposed to be no more than sufficient to provide for herself. This is a point carefully noted by Cantillon (p. 43), but missed out, like most other essential points, in the base English version, which says, vaguely and slightingly, "allowance must be made for females" (p. 24).

It is quite of a piece with the whole history of Cantillon's book, that Smith, in thus quoting Cantillon approvingly, has erred. This chapter, the only one explicitly quoted by Smith, is the only one which Cantillon explicitly assigns to a previous writer—namely, Sir William Petty. Cantillon terminates the chapter thus (pp. 54-55): "Monsieur le Chevalier Petty, in a little manuscript of the year 1685, regards this par, or (en, in original) equation of land and labour, as the most important consideration in Political Arithmetic; but the research which he has made into it in passing, is only bizarre, and remote from the rules of nature, because he is attached not to causes and principles, but only to effects; as Messieurs Locke and D'Avenant, and all the other English authors who have written anything of this matter, have done after him."

Now, in Sir W. Petty's very remarkable Treatise of Taxes and Contributions,12 of which the first edition was published in 1662, we find the following passage (p. 26):

All things ought to be valued by two natural denominations, which is land and labour; that is, we ought to say, a ship or garment is worth such a measure of land, with such another measure of labour; forasmuch as both ships and garments were the creatures of lands and men's labours thereupon. This being true, we should be glad to find out a natural Par between Land and Labour, so as we might express the value of either of them alone as well or better than by both and reduce one into the other as easily and certainly as we reduce pence into pounds.

Here is a clear forecast, both of Cantillon's theory of value, and of the doctrine of a par; but I have not been able to discover in any of the other printed tracts of Petty a further development of these ingenious ideas. From a paper read by Mr W. H. Hardinge to the Royal Irish Academy, 8th May 1865, and printed in the Transactions of the Academy, vol. XXIV, we learn that there is in the Lansdowne private collections an unpublished Essay on Ireland, of the year 1687, in addition to various other manuscripts. As Petty was clearly the originator of statistical science, and altogether a man of wonderful insight, it is much to be desired that his manuscript remains should be printed.13

Returning to Cantillon, we find in Chapter XII the germ of the Physiocratic doctrines: "Tous les ordres et tous les hommes d'un état subsistent ou s'enrichissent aux dépens des propriétaires des Terres." As we shall see further on, Quesnay himself, as well as his editors, frankly refers the origin of the great school of French Economists to this Essai, though it may be safely said that Cantillon avoids the onesidedness of Physiocracy.

Hardly do we leave the elements of Physiocracy than we fall, in Chapter XV, into an almost complete anticipation of the Malthusian theory of population. Cantillon says (p. 87)

In a word, we can multiply all sorts of animals in such numbers that we could have them even to infinity, if we could find lands to infinity proper to nourish them; and the multiplication of animals has no other bounds than the greater or less means remaining for their subsistence.

Men multiply like mice in a barn, if they have the means of subsistence without limit; and the English in the colonies become proportionally more numerous in three generations, than they would in England in thirty; because in the colonies they find new lands to cultivate, from which they drive the savages (p. 110).

There are many interesting allusions to the varying standard of living in different states of society; to the prevalence of famines in China and elsewhere; to celibacy, libertinage, and other points of the population question. The chapter is simply Malthus's celebrated Essay, condensed by anticipation into twenty-seven pages. But I am not aware that Malthus ever saw the book, and should think it very unlikely that he knew anything about it. Cantillon winds up the subject prophetically by suggesting that it is a question whether it is better for a kingdom to be filled with a multitude of very poor inhabitants, or with a less considerable number of better maintained persons. Here is a forecast of the most recent hedonic speculations of Mr F. Y. Edgeworth. It should be added that Cantillon, in treating population, refers to the calculations and statistics of Halley, Petty, D'Avenant, and King, all English authorities.

The first part of the Essay is completed by a chapter "On Metals and Money, and particularly of gold and silver," in which the author displays the most precise ideas about the need and nature of a common measure of value, the suitability of different commodities to serve in this capacity: grain, wine, cloth, precious stones, iron, lead, tin, copper, etc., are all compared as to their suitability for currency, just as in various recent works on money; and the author concludes that "gold and silver alone are of small volume, of equal goodness, easy of transport, divisible without loss, easily guarded, beautiful and brilliant, and durable almost to eternity."

We can notice only a few points in the second division of the Essay; for instance, the admirable explanation (pp. 199-203) of the fact that the prices of commodities and the cost of living are higher in cities, especially in capital cities, than in the country. This Cantillon attributes to the fact that a balance of payments is almost always due from the country to the cities, and the capital of the country; and that the commodities with which this balance is practically discharged, incur the cost and risk of conveyance. The same theory is applied (p. 209) to the relations of foreign countries, and Cantillon concludes that any State which sells manufactures to neighbouring States in such quantity as to draw a balance of specie towards itself, will eventually raise its own scale of prices. There is no taint of the Mercantile Fallacy whatever in this theory.

One of the most marvellous things in the book is the manner in which Cantillon (pp. 215-225) explains the successive effects of a discovery of gold or silver mines on the rates of wages and prices of commodities. The proprietors, undertakers, and employees of the mines first profit by the abundance and soon increase their expenditure, which increases the demand for the produce of artisans and other work people. These latter soon acquire increased rates of wages, and gradually the influence of the new money spreads from trade to trade, and from country to country. This is exactly the theory which was brought before the British Association in 1858 by the late Professor Cairnes, and which will be found beautifully expounded in his Essays in Political Economy: Theoretical and Applied, Essays I and II (Macmillan, 1873).

It is not too much to say that the subject of the foreign exchanges has never, not even in Mr Goschen's well-known book, been treated with more perspicuity and scientific accuracy than in Cantillon's Essay. It is quite astonishing, for instance, to find in the third part of the Essay (pp. 342-4) an explanation of speculations in the exchanges, which might be mistaken for an extract from Mr Goschen's admirable treatise. Cantillon says:

If an English banker foresees in January, owing to the consignment of an unusual quantity of merchandise to Holland, that Holland will be indebted considerably to England at the time of the sales and remittances in March, he can, in the month of January, instead of remitting the fifty thousand ecus or ounces that are owing in this month to Holland, furnish his bills of exchange upon his correspondent at Amsterdam, payable at two months' usance. By this means he can profit by the exchanges which were in January above par, and which will be in March below par; thus he can gain thereby without sending a single sol to Holland.

But Cantillon is careful to add (p. 343) that though the speculation and credit of bankers may sometimes retard the transport of bullion from one city or State to another, it is always necessary in the end to discharge a debt and remit the balance of commerce in specie to the place where it is due.

Condillac, who in his profound and original work, Le Commerce et le Gouvernement, hardly quotes any writers or acknowledges any obligations, goes quite out of his usual course as regards Cantillon. He states in a footnote (chap. XVI, Œuvres Complètes, t. VI, Paris, 1803, p. 141) that he has derived from the Essai the basis of his chapter on the circulation of money, besides several observations made use of in other chapters. "It is on this matter," says Condillac, "one of the best works which I know; but I do not know them all, by any means."

There is, perhaps, needed only one further proof of Cantillon's comprehension of monetary and financial questions, and that is furnished by his treatment of bi-metallism, as it has since been called by M. Cernuschi. The fourth chapter of the third part contains a luminous discussion of the subject, beginning with an historical review of the variations in the relative values of gold and silver, and ending with most interesting remarks on the motives which actuated Sir Isaac Newton in settling the English guinea at 21s. Cantillon's general argument is to the effect that the precious metals must conform in value to the course of the market (p. 371).

It is the market price which decides the proportion of the value of gold to that of silver. On this is based the proportion which we give to pieces of gold and silver money. If the market price varies considerably, it is necessary to alter the proportion of the coins. If we neglect to do this, the circulation is thrown into confusion and disorder, and people will take the pieces of one or other metal at a higher price than that fixed by the Mint. An infinite number of examples of this are to be found in antiquity, but we have a quite recent one in England in the laws made for the Tower of London. The ounce of silver, eleven ounces fine, is there worth 5s. 2d. sterling; since the proportion of gold to silver (which had been fixed in imitation of Spain as 1 to 16) is fallen to 1 to 15 or 1 to 14½, the ounce of silver sold at 5s. 6d., while the gold guinea continued to have currency always at 21s. 6d. That caused people to carry away from England all the silver crowns, shillings, and sixpences which were not worn by circulation. Silver money became so scarce in 1728 (mil sept cent vingt huit), because there remained only the most worn pieces, that people were obliged to change a guinea at a loss of nearly 5 per cent. The embarrassment and confusion which that produced in commerce and the circulation, obliged the Treasury to request the celebrated Sir Isaac Newton, Master of the Mint at the Tower, to make a report on the means which he believed to be the most suitable for remedying this disorder.

There was nothing so easy to do; it was only necessary to follow in the fabrication of silver coins at the Mint the market price of silver. In place of the proportion of gold to silver, which had for a long time been according to the laws and rules of the Mint at the Tower as 1 to 15¾, it was only necessary to make the silver pieces lighter in the proportion of the market price, which had fallen below that of 1 to 15, and to go beyond the variation which the gold of Brazil annually causes in the proportion of the two metals. They might have established the money on the footing of 1 to 14½, as was done in 1725 in France, and as it will be necessary to do in England itself sooner or later.

Here is a distinct prophecy of that which was carried into effect in 1815 at Lord Liverpool's recommendation, and which is still, and probably always will be, the fundamental point in the regulation of our metallic money. Cantillon goes on to explain that Newton took the opposite course, and Parliament followed his advice—namely, in diminishing the nominal value of the gold piece. This, he allows, equally adjusts the relative values of the pieces to the market price, but it is, notwithstanding, a less natural and advantageous method. He pointed out to Newton that by this measure England incurred a loss of £110,741 upon every £5,000,000 of capital which it owed to foreigners, and Newton's reply is given thus (p. 377): "Monsieur Newton m'a dit pour réponse à cette objection, que suivant les loix fondamentales du Roïaume, l'argent blanc étoit la vraie et seule monnoie, et que comme telle, il ne la falloit pas altérer." After giving some other refined arguments, Cantillon finally delivers his opinion against the double standard, saying (p. 380):

Il n'y a que le prix du Marché qui puisse trouver la proportion de la valeur de l'or à l'argent, de même que toutes les proportions des valeurs. La réduction de M. Newton de la guinée à vingt-un schellings n'a été calculée que pour empêcher qu'on n'enlevât les espèces d'argent foibles et usées qui restent dans la circulation; elle n'étoit pas calculée pour fixer dans les monnoies d'or et d'argent la véritable proportion de leur prix, je veux dire par leur véritable proportion, celle qui est fixée par les prix du Marché. Ce prix est toujours la pierre de touche dans ces matières; les variations en sont assez lentes, pour donner le tems de régler les monnoies et empêcher les désordres dans la circulation.

If I read this remarkable passage aright, it not only reaffirms Cantillon's opinion that it is futile to attempt to fix the proportion of gold and silver perpetually, but that Newton had himself no idea of attempting the impossibility. His reduction of the guinea was only "calculated" to prevent the removal of the worn pieces which still remained in circulation—that is, to effect a matter of immediate practical importance. The bi-metallists having quoted Newton as on their side, Mr Inglis Palgrave and other English economists have been anxious to know the real motives of Newton, which are not easy to gather from his official report. But in these remarks of Cantillon we actually seem to have the statement of an acquaintance of Newton, and a master of currency and finance, that he had discussed the subject with Newton, and that Newton's intention was "not to fix in gold and silver moneys the veritable proportion of their price." I take this to be a distinct disclaimer of bi-metallism, and recommend this passage to the attention of Mr Samuel Smith, Mr Stephen Williamson, Mr Edward Langley, Mr Horton, Dr N. P. Van den Berg, and other advocates of the bi-metallic crotchet.

I am, of course, aware that M. Cernuschi and other contemporary bi-metallists found their faith in the system upon the expected general agreement among all the nations of the world. To this it may be replied in the words of an ancient saying: " I will give thee my daughter if thou canst touch heaven." Not only bi-metallism, but a thousand other beneficent measures would become possible if all the nations of the world could agree about them. Let us learn a lesson from Cantillon, who, though he touches the depths of theory in one chapter, knows how to limit himself within the possibilities of practical life in the next.

It must not be supposed that I have at all exhausted the valuable points of his Essay. Every here and there we find a pregnant little paragraph which, when carefully studied, displays an insight into questions still novel, or but half settled after long discussion. Mr Macleod should study p. 291, where it is clearly explained that debts, including State debts, cannot be counted as part of the wealth of the country. In pp. 186, 187 there is a wonderfully clear explanation how much trade goes on between correspondents by book credit, with only occasional payment of balances. This method, which Cantillon aptly calls "troc par évaluation," is the germ of what I have described in my book on Money and the Mechanism of Exchange as the cheque and clearing system (chap. XX). I there said: "The banking organisation effects what I have heard Mr W. Langton describe as a restoration of barter." This is what Cantillon describes in the most precise manner as barter by valuation.

In spite of the undeveloped state of the art of banking at the time when Cantillon wrote, his views on this subject are sound as far as they go, and although he is said to have made a fortune of several millions in a few days by speculation in Law's paper-money, he thus summarily dispatches the currency-mongers (p. 413): "An abundance of fictitious and imaginary money causes the same disadvantages as an augmentation of the real money in circulation, by raising the price of land and labour, or by making works and manufacture more expensive at the risk of subsequent loss. But this occult abundance vanishes at the first shock to credit, and precipitates disorder."

In spite of comparisons being odious, I should have liked, had space allowed, to institute a careful comparison between Camillon's Essai and Hume's celebrated Political Essays. As regards the value of gold and silver, Eugène Daire has made a comparison of the kind, and decides in favour of Cantillon, Hume's view being, he thinks, subject to certain errors (Physiocrates, Quesnay, etc. Paris, 1846 p. 74,). It is most instructive to compare Hume's fifth Essay, on the balance of trade, with the seventh chapter of the second part of Cantillon. Both authors imagine the money in a country to be suddenly increased or decreased; but, whereas Hume discusses the matter with vague literary elegance, Cantillon analyses the effects on prices with the scientific precision of a Cairnes or a Cournot.

It is not too much to say of this Essai in the words of M. Léonce de Lavergne, that "all the theories of (the) Economists are contained by anticipation in this book, although it has only the extent of a moderate duodecimo volume." Nor is there wanting positive evidence that Quesnay, the founder of the great school of French Economists, actually did draw his leading principle from the Essai. Eugène Daire, the editor of the collected works of the Physiocrates, than whom there can be no better authority, expressly points out that Quesnay's fundamental doctrine "la terre est l'unique source des richesses" appears to be borrowed from the opening chapter of Cantillon's Essai. The same is the case, he remarks, with the idea that the net produce of the land is the fund on which all non-agriculturists live, the subject, as already stated, of the twelfth chapter. As to this latter point we do not rest on conjecture, because in one of his earliest printed writings, the article on "Grains" in the celebrated Encyclopédie Méthodique, of Diderot and D'Alembert, Quesnay actually quotes Cantillon. After saying that land must not only nourish those who cultivate it, but must furnish to the State the greater part of the revenue, the tithes of the clergy, the income of proprietors, the profits of farmers, the gains of those who are employed in cultivation, and that it is these revenues, which are expended in payments to the other classes and all the other professions, he goes on:

An author has recognised these fundamental truths when he says that the assemblage of several rich proprietors who reside on the same spot, suffices to form what we call a city, where merchants, manufacturers, artisans, labourers, and servants assemble in proportion to the revenues which the proprietors there expend, so that the grandeur of a city is naturally proportional to the number of landed proprietors, or rather to the produce of the land belonging to them.

Quesnay adds a footnote referring to this extract as follows: "Cantillon, Essai sur le Commerce, chaps. V, VI." On referring to the original edition of the Encyclopédie (Paris, 1757, folio), I find the quotation given in this manner in the seventh volume, p. 821. Curiously enough, the quotation is not an accurate verbatim one, as the inverted commas would make us suppose, but is gathered together from different parts of the chapters named. In any case we have here the unquestionable fact that the acknowledged founder of the Physiocratic school expressly attributes in his earliest writings the fundamental point of his system to the Essai. Moreover, only two years after its publication, he joins the title of the Essai with the name of its supposed author, and no one could do this with greater authority than Quesnay.

There are not wanting some indications that English economic writers were also indebted to Cantillon, though they did not acknowledge their debt with Quesnay's candour. It is with regret that I find the earlier sections of Harris's Essay upon Money and Coins, published in London in 1757 and 1758, to be obviously borrowed from Cantillon. This work is so excellent as regards its main topic, money, that he need not have pillaged a contemporary French publication. Not only is there no reference to Cantillon, but in the Preface we are told that "in order to clear the way, and for the better settling of things upon their first and true principles, it hath been thought necessary to take a general view of wealth and commerce, which is the subject of the first chapter." But unfortunately this chapter is little more than a selection of passages from Cantillon. "Land and labour together are the sources of all wealth." There is the doctrine of three rents, from p. 56 of the Essai. There is the example of the watch-spring already alluded to. In Section 8 the theory of the par of land and labour afterwards quoted by Smith appears. The difference of wages are explained in Section 10, as depending upon risk, skill, trust required, almost in the words of Cantillon.

Another contemporary writer of some importance in his time, namely Malachy Postlethwayt, had the coolness to embody certain portions of Cantillon's Essay in his book called Great Britain's True System, etc., published in London in 1757. From p. 148 to p. 153, we find a slightly abbreviated translation of Cantillon's eleventh chapter on the par of land and labour, winding up with a reference to Sir W. Petty's MS. of the year 1685, introduced in such a way that we might suppose Postlethwayt to be quoting from it. Then follow other extracts from Cantillon, including the doctrine of three rents, the watch-spring, and water illustrations, and other matters, and Postlethwayt sums up thus his, i.e. Cantillon's, theory of value: "From these examples and explanations I believe it will appear that the price of anything intrinsically is the measure of the land and labour that enters into its production."

In the original Essai every here and there (pp. 35, 48, 93, etc.) we find reference to a certain Supplement, in which were contained various calculations of a statistical nature. This work has never appeared, it being altogether a mistake of the writer in the Nouvelle Biographie Générale, to suppose that the Analysis of Trade of 1759 contained this Supplement. The writer in Fréron's Année Littéraire says that he knew persons who had seen the manuscript of this Supplement, a statement which it is difficult to reconcile with his previous one, to the effect that no one knew how the Essai came to be printed. Grimm's Correspondence (vol. I. p. 344) says that the Supplement was in 1755 believed to be lost, in spite of all the care that had been taken to find it. But it seems doubtful whether these writers really knew anything about the matter.

There still remains the interesting question, who really did write this most remarkable Essay, the true "Cradle of Political Economy"? The antecedent probabilities are altogether against the idea that a book published in Paris in the middle of the eighteenth century was really written by the man to whom it was attributed. The despotic character of the Government seems to have given rise to a habit of falsifying title-pages to an extraordinary extent, and thus falsifying literary history. In the one year, 1755, in which the Essay was published, no less than ninety books issued in France are attributed on the title-pages to the presses of Amsterdam, London, Brussels, Venice, Berlin, Vienna, Cologne, or other cities.14

It was also the practice to conceal the authorship by various devices. Forbonnais wrote under the assumed name of Leclerc, M. du T...., etc. An author often put forward obnoxious opinions in the form of a free translation of some English work, as in the case of Forbonnais's Le Négociant Anglais, founded on King's British Merchant. John Cary's Discourse of Trade (London, 1745) was converted into an Essai sur l'État du Commerce d'Angleterre (2 vols. 8vo, Paris, 1755), which, according to M'Culloch, is in all respects a more valuable work than the original. One work issued professedly at Leyden in 1754, is falsified in a complicated way, being stated on the title-page to be Traduction de l'Anglois du Chevalier John Nickolls, the book being called Remarques sur les Avantages et les Désavantages de la France et de la Grande Bretagne, etc. In the Preface, John Nickolls, under the date "A Londres, 1752," apologises to that respectable minister of Bristol, Josiah Tucker, for adopting the title and part of the substance of his Brief Essay on the Advantages and Disadvantages which respectively attend France and Great Britain with Regard to Trade, etc., first edition, 1750. Now the fact is, there never was such a person as Sir John Nickolls. This is almost sufficiently proved by the fact that we find no entry of his name in that invaluable work of reference, Lawrence Phillip's Dictionary of Biographical Reference (Sampson Low, 1871). This is allowed, too, in an advertisement of the book appended to vol. II of the Discours Politiques (Amsterdam, 1756, p. 323). The real author is supposed to be Plumart de D'Angeul, but the matter was complicated by the fact that his ingenious adaptation of Josiah Tucker was afterwards translated into English (I vol. 12mo, London, 1754).

What then would be more probable than that this Essai sur la Nature du Commerce en Général, might be the work of some ingenious contemporary French economist, merely attributed by rumour to the popular name of Cantillon, the manière anglaise being adopted because it was then much in favour in France. The title-page is unquestionably false with regard to Fletcher Gyles and the London origin, and believed to be false as regards the asserted translation from an English original. As in the extracts given from Grimm and Fréron, all knowledge as to the existence of a real manuscript, the name of the translator or issuer, etc., is expressly disclaimed, there is ample room for doubting everything. I have tried hard to resolve the mystery, but with doubtful success.

As regards the question of translation, I am not French scholar enough to be able to discriminate between the style of a translation of an English original, and a French original written by an educated Anglo-Irishman, and it remains only to accept the opinion of all the French authorities that it is a "Traduction Supposée." The authorship might, however, possibly be inferred from intrinsic evidence to which I have given much attention. One fact which it is difficult to explain is the palpable anachronism occurring in the passage already quoted concerning Newton's report on the English currency, which is attributed to the disorder of the currency in mil sept cent vingt huit, although Newton died in 1727, and his report was made in 1717. This erroneous date can hardly be a typographical error, as it is given in words at full length, copied into numbers in the base English version. It is impossible to suppose that Richard Cantillon, writing just about the time of Newton's death, or soon after, could fall into an error of this kind, but such confusion would be possible on the part of a French author writing a quarter of a century later.

There is much too in the style of the book, here and there, which raises suspicions as to its being really the finished work of a busy financier. The opening sentence of the book has a metaphysical ring about it: "The land is the matter of riches; labour is the form which produces it." Here is the precise distinction between the material cause and the formal cause, in the Aristotelian philosophy. There is something very scholastic, again, about the footnote on p. 377, the only one in the whole volume, where, in regard to Newton's remark about silver being the true and sole money, it is added, "Ici M. Newton sacrifia le fond à la forme." Even supposing that there were in existence some manuscripts of the real Richard Cantillon, may not one of the numerous and clever economists of the period of Quesnay have worked these materials up into a consistent treatise, and put the whole off upon Cantillon and Fletcher Gyles.

There are, however, many reasons in favour of believing the Essai to be really the work of Richard Cantillon. I have not been able to discover in the book any allusion or other intrinsic evidence of any part of the book having been written later than 1725 or thereabouts,15 when Cantillon was still living. There is here and there a local colouring drawn from London life. On p. 274 we are told that the London brewers were in the habit of advancing barrels of beer to their publicans at an interest of 500 per cent. per annum, and it is said that they could grow rich even though half their publican creditors became bankrupt. On the next page some facts about the fish-women of Billingsgate (Revendeuses) are introduced. But there is also plenty of local French colouring. The authors cited are mostly English, namely Sir W. Petty, D'Avenant, Locke, Halley, Gregory King, Newton. The only French economist whom I remember as being referred to by name is Vauban, whose Projet d'une Dîme Royale, published in 1707, is condemned on p. 210. A certain M. Boizard16 is, however, referred to on p. 137, and an unnamed French author on p. 248.

The best proof, however, of the work being really written by a skilful financier, and not by a literary economist like those who issued such a multitude of small treatises in the time of Quesnay, is found in the intimate acquaintance with the working of commerce displayed throughout the Essay. It is next to impossible that the latter part of the book, especially the third part, could be supposititious. I am not quite so sure about the first part, containing the principles adopted by Quesnay. But the book is so consistent and well knit together that if it were a compound and supposititious work like that of "Sir John Nickolls," it would be difficult to admire too much the skill of the economic forger.

And now, if Cantillon's Essai be the veritable cradle of Political Economy, what is the nationality of the bantling science? "La Chimie," says M. Wurtz, "est une science française." Lavoisier's immortal "Traité Élémentaire de Chimie" was its cradle. What like conclusion can we draw as to the nationality of economic science? If my careful and laborious inquiries have led to a correct result, I should formulate it thus: The first systematic Treatise on Economics was probably written by a banker of Spanish name, born from an Irish family of the County Kerry, bred we know not where, carrying on business in Paris, but clearly murdered in Albemarle Street. The Treatise was written either in English or French, it is not known which; was first printed in Paris in the guise of a French translation, purporting to be published by Fletcher Gyles over against Gray's Inn in Holborn; was damned in England by a base garbled English retranslation, erroneously attributed to a merchant late of the City of London, perhaps the brother of the author. Except that it was once mistakenly quoted by Adam Smith, it has remained to the present day unknown or entirely misinterpreted in England, while in France it has been explicitly acknowledged to be the source of the leading ideas of the great French school. That French school is known to have formed to a considerable degree the basis of the Wealth of Nations, and may yet be destined to be recognised, in regard to many of its doctrines, as the true scientific school of economics. The reader can now readily decide in his own mind the question—What is the Nationality of Political Economy?

W. S. JEVONS

Henrietta, Countess of Stafford.

Life and Work of Richard Cantillon, by Henry Higgs

LIFE OF RICHARD CANTILLON

Half a century has elapsed since Jevons revealed his discovery of Richard Cantillon. A discovery it was, as truly as when an explorer unearths a statue silted over by the sands of time, puts it upon a fitting pedestal, and is the first to give its full, correct description. The Contemporary article did not mark the end of his interest in the Cantillon mystery. What has become of Cantillon's manuscripts? Who succeeded to his property? Is the English essay, the Supplement, the French manuscript still in existence? It was perhaps with these questions in mind that he went to Somerset House and examined the wills of Richard and Philip Cantillon.17 He must have found there that Richard Cantillon was engaged in numerous lawsuits, and Jevons was not the sort of man to leave a clue of this kind neglected. But before he could follow it up his life was ended by untimely accident on 13 August 1882.

Little more was heard of Cantillon until the formation of the Royal Economic Society. The first number of the Economic Journal appeared in 1891 and contained a learned article by Dr William Cunningham on "The Progress of Economic Doctrine in England in the Eighteenth Century," ranging over the period 1688-1776 and naming a great number of writers but making no mention of Cantillon or his work. It seemed as if Cantillon were once more forgotten and that Jevons had written in vain. One who had not forgotten either Cantillon or Jevons was Professor Foxwell. In his lectures, which I attended from 1885 to 1887, he laid stress upon the importance of the Essai and referred to Jevons's article, and it was with his encouragement and aid that I endeavoured to discover some further information about Cantillon. Researches at Somerset House, the British Museum, the Public Record Office in London, and the Archives Nationales and Bibliothèque Nationale at Paris brought to light a mass of documents which served as the basis of an article on Richard Cantillon in the first volume of the Economic Journal (pp. 262-291). This appears to have aroused more interest. Professor C. F. Dunbar of Harvard University consulted me as to a reprint of the Essai and invited me to write a prefatory note to it and an article on "Cantillon's Place in Economics" for the Harvard Quarterly Journal of Economics.18 No new facts about his life have since appeared. M. Espinas devoted serious attention to Cantillon in his Histoire des Doctrines Economiques, Paris, 1891 (pp. 179-197). M. Robert Legrand wrote a doctor's thesis on Richard Cantillon, Paris, 1900, which contains nothing original.19 In their Histoire des Doctrines Économiques, Paris, 5th ed., 1926, p. 53, Professors Gide and Rist say: "Ce Richard Cantillon, dont personne n'avait parlé pendant plus d'un siècle, est redevenu fort à la mode." The references of various writers since 1891 are too numerous to mention. The first volume of the Economic Journal is now out of print and scarce. The gist of the article of 1891 is now reproduced with some revision and additions.

Nothing supports the surmise of Jevons that the Cantillons were of Spanish origin.20

Among the manuscripts in the Bibliothèque Nationale at Paris is a draft or copy of a letter21 to our author from James Terry, Athlone Herald under James II, dated Versailles, 24 February 1724 addressed to Mr Richard Cantilon [sic], London: "I am sorry you sent to Mr Hocking for Ireland for your Genealogie, when you were sincible yt I came over with the late Deceased King, and then brought with me his records of that Kingdo. I writt to Capt. Commerford that the first of your family that Landed at the Conquest with King Henry the Second was Hugh Cantillon, and those of your family that cam in to England with William the Conqueror as also those of the same who went with Godfroy of Boulion to ye Conquest of the holly Land, the armes I past your Cosen Sir Richard are not of your family they are a branch who changed and would have a Lizard how that mistack cam I cant remember for your the chife of the name father and son for a longe continuance to this Day. I did advise Mr Commerford that you should joyne your Seconds [i.e. Wife's] Genealogie to it I meane the O Mohoneys...." Other genealogical material is abundant but conflicting. In the Revue Historique de la Noblesse, Paris, 1841, 8vo, t. III. pp. 28 seq. is a Notice historique, généalogique et biographique de la Famille de Cantillon (B.M. Press Mark PP 3822). This is a well-documented account with the family arms and was reproduced the same year (with additions from J. Burke's Heraldic Illustrations) par le chevalier O'S, Gentilhomme Irlandais, Paris, 8 pp. 8vo. We are told that the family long held Ballyhigue Castle, and the peasants shew the ancient burial place of the Cantillons on an islet visible at low water on the Kerry coast. They adhered staunchly to the Stuarts with whom they were allied. Roger, sixth baron of Ballyhigue married Elizabeth Stuart in 1536. Coming to the seventeenth century we find mention of one Richard Cantillon who went to France in the suite of James II, fought at Boyne in command of a company of dragoons, was wounded, and later was made "Chevalier de la facon du Prétendant."22 In the dossier quoted above is his receipt for 107 livres for silk supplied to Catherine Trant, daughter of James Terry, dated Paris, 11 July 1695, "att ye nine Rattes, Rue St Honoré." Later we find him busy as a banker in the Rue de l'Arbre Sec, Paris. A number of documents testify to his various activities. On his death on 5 August 1717, he was found to be insolvent, assets 68,200 livres, liabilities 310,000 livres. The trustees, as we should call them, under his bankruptcy had paid off about 25 per cent. of his debts when our Richard Cantillon enters on the scene. According to a signed statement filed by the trustees, Richard Cantillon, junior, himself one of the largest creditors, generously paid the remaining three-quarters, moved thereto only by the desire to honour the memory of one whose name he bore.23

Richard Cantillon the economist, according to the Revue historique a first cousin of the Chevalier, was probably born between 1680 and 1690. He married in 172224 Mary Anne Mahony, daughter of Daniel Mahony, a rich merchant of Paris. Her mother was Lady Clare, widow of Charles O'Brien who, but for the attainder, was Viscount Clare. He escorted the consort of James II to Paris, and died of wounds received at Ramillies. The French writers refer to Daniel as Ommani, which Mr H. R. Tedder erroneously conjectured to stand for Ommaney25 but is obviously a Gallicised form of O'Mahony. Whether or not our author was at first a banker in London, as is sometimes asserted, is doubtful. He may have acted there as agent for Sir Richard's Paris house. But on 18 May 1724 he swore an affidavit in the suit Hughes v. Moore (Chancery Proceedings, 1441, in the Record Office) in which he "admits that he is a naturall born subject of the Crown of Great Britain, and did for severall years carry on the Business of a Banker in the Citty of Paris until about the beginning of the month of August in the year 1719, and about that time left off the Trade or Business of a Banquer—and settled Mr Edmund Loftus & Company in this Defendant's house at Paris to manage the Trade and Business of Bankers there, and this Defendant was no otherwise concerned with them in the said House than as comandite thereof... And after... this Defendant went into Italy and returned from thence to Paris in... February 1720 N.S. and having reason to be dissatisfied with the management... disengaged himself from his said stipulations" and thereupon "did settle a Partnership as Bankers... between Richard Cantillon the younger, who is this Defendant's nephew, about 4 years old at that time, and John Hughes" who had "been before that time a Banker in London." Cantillon found the whole capital, 50,000 livres tournois, and was to have two-thirds of the profits, Hughes one-third and the nephew only what his uncle allowed him. The partnership was to pay Cantillon 1200 livres a year for the front of his house, Château La Samaritaine, Rue de la Monnoye, Paris, Cantillon reserving part of the back for himself. The partnership was for twenty years but might be determined at any time at Cantillon's pleasure. He was to have supreme authority, but not to be liable for any losses beyond his 50,000 livres, being only comandite "which is known to all Merchants and Traders in Foreign parts to be a person who erects and fixes a House in business which he is supposed to encourage and support without his name being concerned in the said House or being himself liable to any transactions therein, the private stipulations between the comandite and the said House being quite separate from the Credit or currency of business of the said House."

This is confirmed by a printed document forming the case of Richard Cantillon, marchand mercier à Paris, before the Parlement criminel, entitled "Mémoire pour Richard Cantillon intimé et appelant. A Paris, chez André Knapen, au bas du Pont Saint Michel, au Bon Protecteur, 1730. 18 pp. folio."26 He was attacked by the brothers Jean and Remi Carol, bankers at Paris, for having practised "l'usure la plus énorme," and taking flight to England leaving Hughes embarrassed by his creditors. They say "ce Richard Cantillon, qui se dit aujourd'hui gentilhomme irlandais, s'était dit natif de Cherbourg en Normandie, dans une lettre de marchand mercier qu'il avait prise en 1716." They accuse him of defrauding them, and on one of his visits to Paris had him arrested and imprisoned in the Châtelet on 11 November 1729. He was released the next day but on their representing that he was a foreigner and might leave the country he was again imprisoned in the Conciergerie but obtained an early discharge.27 The Mémoire for Cantillon says: "Le Sieur Cantillon, Irlandais d'origine, vint s'établir en France en 1716. Il y forma un commerce public de banque, qui en peu de temps devint assez florissant. Le fameux système qui commença à se developper en 1719, ne le seduisit pas comme beaucoup d'autres, il crut au contraire devoir se mettre à l'abri de l'orage qu'il prévoyait: c'est ce qui l'engagea à renoncer au commerce dans lequel il voyait trop de dangers. Il renferma tous ses papiers dans un coffre qu'il confia aux Benedictins Anglois et partit pour l'Italie apres avoir procuré ses correspondances à un nommé Loftus avec qui il forma une simple société en commandite le 31 juillet 1719."

Grimm's account of him in 1755, to which Jevons refers (p. 336, ante), is the basis of the article in the Biographie Générale. Its general accuracy is confirmed by references in Cantillon's correspondence28 to the Princesse d'Auvergne and to John Law. In one of his letters he says (Paris, 21 June 1730): "I find that if I had remained here from the beginning of Hughes's Partnership (which you know the Minister of the Scheme [i.e. Law] made dangerous for me to do) I never should have had any of these Lawsuits." The animosity of Law was due not only to Cantillon's outspoken distrust of his scheme and to his bearing of the Stock, but also to his Exchange operations, as Cantillon remitted largely to England and Amsterdam and profited greatly by the fluctuations in the currency, which he foresaw. Lady Mary Herbert, daughter of Earl Powis, was one of his clients and an intrepid speculator for the rise in Mississippi stock. She "pyramided" her purchases by depositing shares as cover for advances to buy more. Her brother Lord Montgomery, her husband Joseph Gage, and her aunt Viscountess Carrington followed suit, though Cantillon says he advised them all (so far as was safe and prudent for a person then to do in France) to sell out as the Actions must fall. He describes Lady Mary and Lady Carrington as his friends. Lady Carrington says Cantillon "sold out all his French India stock and other papers at a great price and remitted to England and Holland whereby he made a great Estate." The Carols, like other bankers, caught the infection. They were partly influenced in their operations by an Arrêt of 11 March 1720 which ordered a gradual revaluation of the French crown so that it should be worth about 50 pence at the end of the year.29 The Herberts say they thought the Arrêt would have its intended effect, but they produced a letter from Cantillon to Hughes dated London, 29 April 1720, which shews that he predicted the crown would not be worth more than about 28 pence, and advised an advance only of 18 pence upon its security. The main charge against him in the various lawsuits was that he had no right to sell the shares deposited with him and that the profits he made thereby were due to the depositors. His reply to this was that the shares were not numbered or earmarked and that he was always able and willing to supply shares on demand. A charge of usury "for a difference in exchange (...in a place where exchange in that very month carried about 30 per cent.) for six to eight months," he considered absurd. As to his remittances to countries outside France "there was no declaration against it" and he is "surprised Mr L. [John Law] should say they were declared enemies who remitted." The sums involved were very large. He obtained judgment in the Court of Exchequer for over £40,000 from Lord Montgomery, sued Lady Carrington upon her note of hand for £20,000, and Gage for about £10,000. He also succeeded in the suit brought by the Carols to whom he had advanced 35,000 florins on the 20th March 1720 against their bill on Amsterdam for 41,000 florins payable at eight months. He seems to have had good answers to all his opponents. How heavily the imprudent bankers suffered by the "crying up and down" of the currency may be gathered from Postlethwayt's statement30 that out of about 200 bankers in Paris in 1715 only three or four survived the "diminutions" of the crown. Their losses were probably very heavy in 1720 and much of them went into Cantillon's pocket. The passages in Part III, chapter V, of the Essai are an interesting commentary upon his actual experience.

A document31 which has recently come to light in the Record Office throws a clear light upon one of the Herbert transactions. Lady Mary Caryll (née Herbert, but now a second time a widow) suing one Strickland, in Chancery, the defendant's reply contains (though its relevance to the case is not clear) a letter from her dated Seville, 6 October 1730, which she had addressed to the Court stating that on the 20th February 1720 she borrowed of Cantillon and Hughes £10,000 on a bill for 3 months payable in London, which was discounted at the Bank of England a few days later. Hughes asked for security and she handed him 800 primes of French India actions, then worth £30,000. In May these would have fetched £22,000, in June about £12,000, but later fell almost to nothing. In April following the first loan she borrowed a further £12,000 against a bill on Lord Montgomery for £18,665, which she says is 55 per cent. interest for 9 months. She adds Cantillon might have been content with this 55 per cent. without robbing her of the other half, but as her securities were sold at once he was really lending her her own money and had besides the interest on the money so long in his hands, altogether wronging her of nearly £76,000, which "must make Cantillon appear very black." It is easy to imagine how Cantillon would have answered this. His great financial coup was made prior to his setting up the firm of Cantillon and Hughes. His cashier says he drew a profit of 2½ millions out of his business in a few days. In the single year, March 1719/20 to March 1720/21 the books of his cousin, Martin Harrold, a London banker, shew payments of over a million to his account filed in the Court by Harrold.

John Hughes died suddenly in Paris on 9 June 1723, and his widow Esther Hughes sued Cantillon for an account of the sums due to her husband as a partner in the firm. She had communicated to the Herberts some letters from Cantillon to Hughes in one of which Cantillon says: "You remember upon our first broaching these schemes you were content to stand in the Gap.... If the affair of Lady Mary was to be carried against us... there is no medium but your flying or going to Prison.... It will be your own interest to take an imprisonement of a twelve month rather than see all our schemes pulled to pieces; for, by standing the Tack, you have a maintenance secured to your Family; and if all were turned the other way you would be in an ordinary condition." After his release "the reinstating your house in Business... would be still practicable and easy." The Herberts say that "the schemes mentioned... were to lend money to severall persons upon French India Actions, and to take high premiums or advanced prices on French crowns, and to sell out such Actions, and to remit the produce thereof into Foreign countries in order to turn the same into Sterling money for their own profit, and after the bills and notes... taken from persons with whom they dealt in that manner should become payable... to oblige such persons to pay the whole money thereon, and not to disclose that they had sold the said Actions and raised anything thereby." They allege that "the said pretended Partnership between the infant Cantillon and Hughes" was "a Skreen" and established "on Pre-meditated Fraud"—Hughes, a man of straw, to go to prison if the scheme turned out badly, and so avoid the financial consequences, Cantillon senior to make a fortune if things "turned the other way."

Esther Hughes, on the contrary, pleads that there was a true partnership though Cantillon dominated it, that he entered into large transactions which he claimed to be on his private account when they were successful, notably a highly profitable purchase of copper for about 4 millions of livres from John Colebrook in 1720. When there was a bad stroke of business, such as an advance of £20,000 to Wm. Law, brother of John Law, which there seemed to be no hope of recovering, he caused the amount to be entered in the account of the partnership. Cantillon traverses these allegations and says that the partnership still owed him over £10,000. Mrs Hughes asked for a writ ne exeat regno to which Cantillon filed an answer (18 May 1724) that "for some years last past, since he had resided in London, he had gone beyond sea, whither his business or his inclination invited him and returned again to London. Necessary business called him abroad in the spring of 1724, and he had intended to take his wife with him to Naples and some other places in Italy... and return again to London to reside." Cantillon deposited in court sufficient security to meet the claim, and in 1726 (when the office of Assistant Paymaster General of the Supreme Court was created) one of the Masters in Chancery lodged with the Pay Office £3,450 in South Sea Bonds and £209. 5s. 0d. cash (apparently accrued interest) in the suit of Hughes v. Cantillon. Mrs Hughes found it difficult to press her suit, her witnesses being abroad, and on the 27th October 1726 an amount of £300 cash in respect of interest was paid out, on Cantillon's application, to his Solicitors. On the death of Mrs Hughes her son and administrator John Hughes kept the action alive until 1752 when the Countess of Stafford successfully appealed for its dismissal.32 £4,095 South Sea Annuities and £1,838 cash were ordered to be paid out to her from the accumulated fund. Cantillon appears therefore to have triumphed in the Courts over all his opponents. The evidence in this suit gives the date of the Countess's birth as October 1728.

In 1726 the family started upon its travels. Cantillon wrote frequently to his friend Garvan, who quotes several letters but refrains from putting others on the record as they "are so full of scandal." The letters are dated from Nampon, near Abbeville, Paris (his first visit to that city for nearly six years), Rotterdam, Brussels, and Cologne in 1726, Verona, Chambéry, Geneva, and Paris in 1728, Paris in 1729, 1730 and 1731, Brussels, Paris and Utrecht 1733.

The registers of St Paul's, Covent Garden, have been searched in vain for an entry relating to Cantillon, but the rate books of the City of Westminster shew that after the middle of 1721 he occupied one of four large houses forming the Piazza and continued to be so rated till 1729. The rate books from 1730 to 1732 are missing, but he no longer appears in 1733. His neighbours in the Piazza were the Earl of Orford, Sir Harry Ashurst and Mr E. Gouge (? his friend Edmund Gough). The Piazza houses were destroyed and replaced by the New Playhouse, or Covent Garden Theatre, which is rated in lieu of them in 1735. His name does not appear in the rate book for Albemarle Street. The house in which he died is rated to E. Cook, Esq., on 15 April 1734 and is marked "Empty" by the collector, probably after the fire. But it seems clear that Cantillon had only recently entered into occupation of it at the time of his death and that most of his servants were newly engaged.

On Monday, 13 May 1734, Cantillon was busy in London with his friend Francis Garvan at his chambers in the Middle Temple and others in the City. His coachman deposed that "he was out with his master at the Temple and other places all Day, and particularly at a house in Queen Square, Westminster, where he supp'd, and set him down at his own Door at 10 at Night." His valet gave evidence that "he let his Master in last Night about Eleven a clock who undrest himself in the Parlour as usual; took his Candle and Book, and went up to Bed soon after; and told this Examinant he would read." It was his usual practice to read for three hours or so in bed. About half past three on Tuesday morning his house in Albemarle Street on the east side between Viscount St John's and Mr Percival's was seen to be on fire. Lady Penelope Compton, who lived "the other side of the way," writing on 14 May, says33 "it burnt very feirce two houses intirely down before they could get any water." There were three menservants and two maids in the family but Cantillon was the only victim, and it was soon evident that he had been murdered before the house was set on fire. His body was burned to ashes. The Journals for 6 June 1734 say: "Yesterday the refiners finished their search into the ashes of the late Mr Cantillon's house, when no plate, money, or jewels had been found; an undeniable circumstance of a robbery previous to the burning of the house. His widow arrived here last night from Paris." She is said to be "near her time." The servants were arrested and tried for murder at the Old Bailey but acquitted after five hours' trial.34 The assassin appears to have been a Frenchman, one Joseph Denier, alias Lebane, who had been his cook for eleven years but was dismissed about ten days before the murder. He is said to have got into the house by a ladder at the back. He fled to Harwich, to embark for Holland, and the packet not being ready to sail gave eight guineas to a fisherman to carry him over, and so escaped capture.

Cantillon's Will dated 12 July 1732 was proved on 21 May 1735 by Francis Garvan his surviving executor.35 It was not witnessed, but on 21 January 1734/5 "appeared personally Marie Anne Cantillon of the Parish of St Paul, Covent Garden, Widow, Henry Ffurnese of the Parish of St George's Hanover Square Esquire, and Philip Cantillon of the Parish of St Peter le Poer, London, Merchant, and severally made oath that they well knew Richard Cantillon late of the Parish of St George's Hanover Square, and had often seen him write and knew his handwriting and that the will and signature were written by him." After providing for his wife he leaves legacies and annuities to his niece Catherine, his brothers Thomas and Bernard, his nephews Richard and Thomas, and his executors Francis Garvan and Joseph Lord Viscount Micklethwait, the latter of whom predeceased him. The remainder was left to his daughter Henrietta "...and that she shall be married in England by the approbation and advice of my executors... and in default of her or her issue the remainder to be divided between my nephews Richard and Thomas Cantillon moitively."

That the will was not proved earlier was due to the reluctance of Garvan to undertake its execution owing to the intricacy of the affairs and pending lawsuits. He endeavoured to get letters of administration with the will annexed granted to the widow. These efforts were frustrated by the opposition of legatees and creditors and a private Act was passed, 8 Geo. II, c. 10, empowering Garvan to settle outstanding demands upon the estate without legal proceedings.36 This however was not the end. In 1736 our ambassador in Holland, the Rt Hon. Horatio Walpole, "acquainted the Rt Hon. the Earl of Scarborough that the Governor or Resident of Surinam had thence sent advice to Holland of several papers having there been found relative to the affairs of Richard Cantillon and supposed to have been carried thither by one of the Assassins and Robbers of the said Richard Cantillon amongst which was described to be a codicillary or testamentary disposition together with an inventory of all his effects." Garvan feared this later will would render the Act of Parliament "a meer nullity," so he refused to act further (see Bill of Henrietta Cantillon by Philip Cantillon, her next friend, v. Francis Garvan). In this will dated London, 11 April 1734, Wm. Sloper and Garvan were named executors. Both renounced, and the will of 1732 was set aside and administration with the will of 1734 annexed was granted on 6 July 173737 to the widow and her second husband, the Honble Francis Bulkeley, a nephew of Lady Clare.

The will, parts of which are illegible in the original, was quoted so far as possible in the Bill of Lord Stafford (Chancery Proceedings 1714-50) filed in 1743. He had married Cantillon's daughter and on her behalf prayed for an account from the Bulkeleys. The will mentions the same legatees, substituting Win. Sloper for Lord Micklethwait, and leaves the widow a house in France, "her native country." Some details are given of Cantillon's fortune. He had large sums in the hands of bankers in London, Amsterdam, Brussels, Vienna, and Cadiz, an estate at Pinchbeck in Lincolnshire, a house in Paris, one at Asnières, an annuity of £1000 a year on the Barbados customs revenue ("cost me £17,000"), "Panama Lacos £600," an Estate in Louisiana, other annuities, and judgment debtors, among them Lady Carrington £20,000 and Wm. Law (brother of John Law) £20,000. The inventory made by him in 1734 is said to be incomplete. It shews particular items amounting to £47,810 and 136,400 livres, probably a very small part of his fortune.

The Bulkeleys left the estate unadministered and administration was granted to Lord Stafford in 1743; on his death to Henrietta, his widow in 1751; on her death to Robert Maxwell, Lord Farnham, her second husband, on 9 December 1761; and to their daughter Lady Henrietta Daly (née Maxwell), Cantillon's granddaughter, on 8 December 1783.

PHILIP CANTILLON

On 14 July 1733 Philip Cantillon married Rebecca, eldest daughter of Wm Newland of Gatton, co. Surrey. In the marriage settlement he is described as "of the City of London, merchant, eldest son and heir apparent of James Cantillon of the City of Limerick Esq." He was a director of the London Assurance Company and carried on business as early as 1725 in Warnford Court with David Cantillon. In a Bill of 1730 he and David are described as "Co-partners in the Banking business." He was made bankrupt on 13 April 1743. In another Bill of 7 May 1753 Philip Cantillon and Thomas Mannock of London are described as Policy Brokers or Insurance Office Keepers and co-partners in a suit against the London Assurance and one Fitzgerald. In a Bill by his wife to secure her separate property it is recited that he had no issue male but two daughters, Rebecca and Elizabeth (24 March 1755). According to the Revue Historique his daughter Elizabeth married the Chevalier O'Sullivan, avocat général au Conseil suprème de Brabant, whose son Baron O'Sullivan, ambassador to Austria 1844, may possibly be the O'S. of the Revue Historique.38

Philip's will, dated 18 October 1766, was proved on 5 January 1773.39 He seems to have had little to leave. After describing himself as "an unworthy member of the Catholick Church" and observing that his daughters are well provided for in their mother's settlement, he leaves a small legacy to a manservant and the rest of his effects to his executor, Mr Stephen Dillon. He desires to be buried with as little expense as is decent, and when he made his will was apparently a poor old widower without occupation.

As Philip is not included in Richard's will which provided for brothers and nephews, and is vaguely alluded to in one of the legal documents as "a near relation" of Richard, he was probably a first cousin. His acting as next friend to the daughter in her lawsuit against Garvan and his offer of £200 for the discovery of Cantillon's murderer may be due to the absence of nearer relatives in Ireland or overseas. In this action certain papers of Cantillon are claimed from Garvan, and it seemed possible that the English manuscript of the Essay might have been among them, and that Philip used this for the Analysis (see p. 333 ante). But I am now inclined to think that Philip had nothing more than the French print before him and that his title-page merely means that he had consulted this, which was "from a MS. of a very ingenious gentleman deceased." Jevons seems to have thought that the word "late" in the title of the Analysis meant that Philip was himself "the deceased gentleman," but it simply means that Philip, having become bankrupt, had for the time at least ceased to be "of the City of London, merchant."

The Analysis mutilates the Essai badly, omits large portions, alters others, and is padded with additions from Locke, Hume and other writers and with Philip's own feeble literary flights, which are totally unlike anything Richard could have written. He says (p. 85), "If these Essays have the good Fortune to merit the Approbation of the Public, I propose from a Number of Calculations by me, Collected from a Course of many years Experience, to publish a small Treatise of Arithmetic...." Possibly this passage weighed with Jevons when he said that Philip "must have been a wretched literary hack." The Record Office contains many papers relative to Philip's various lawsuits, but they are not relevant to our purpose. Collation of the Analysis with the Essai has proved unfruitful.

On p. 202 of the Analysis he writes feelingly about a decision in the Court of Common Pleas that the Drawer of a Foreign Bill of Exchange was liable to make good the amount though he had never received Notice by Proper Protests that his Bill had been dishonoured for Want of Acceptance and Payment, and although in an exactly similar case in the Court of King's Bench the Court and jury were of opinion that the Drawer of the Bill was discharged from any Obligation of reimbursing the same. This was probably a personal experience and may have conduced to his bankruptcy.

CANTILLON'S DESCENDANTS

In his affidavit of 18 May 1724 (see p. 372, ante) Cantillon says that he proposed to go to Italy and return to London to reside "where he hath a House and a Family, and a son at Nurse near London." This son must have died young. His only surviving child in 1734 was his daughter Henrietta, born 1728. She married (5 July 1743) William Mathias Howard, third Earl of Stafford, who died in 1750. On 11 October 1759 she married Robert Maxwell, Baron Farnham, at St Mary Magdalen, Old Fish Street, London,40 and died on 30 August 1761, leaving by her second husband one child, Lady Henrietta Maxwell, who married the Rt Hon. Denis Daly, 1783, and was mother of the first Lord Dunsandle. She survived till 1852. She brought into the Daly family a portrait of her grandmother, Mrs Richard Cantillon, by Largillière, the French artist, who had painted portraits of Charles II, James II, Charles Edward Stuart (in our National Portrait Gallery) and Cardinal Henry Stuart. The canvas is about 3 ft. 6 in. by 4 ft. 6 in., and is labelled Mary de Mahony (Madame de Cantillon). Writing to her sister, the Countess of Mar, in 1723, Lady Mary Wortley Montagu says, "If you please to send my nightgown to Mr Hughes, an English banquier at Paris, directed for Madame Cantillon, it will come safe to my hands; she is a new neighbour of mine, has a very handsome house in the village [? Asnières] and herself eclipses most of our London beauties; you know how fond we are of novelty, besides that she is really very pretty and does not want understanding, and I have a thousand commodities in her acquaintance."41 The recently published Letters of Montesquieu show that he was among her admirers. She appears to have spent most of her life before and after marriage in France.

Another portrait which Lady Henrietta Maxwell brought with her to Dunsandle is of Cantillon's daughter and heiress. This is by Allan Ramsay and is labelled Henrietta Diana, Countess of Stafford 1757. The canvas measures 2 ft. 5 in. by 3 ft. and represents the Countess in her twenty-ninth year, with powdered hair. Horace Walpole refers to her in his letters to Sir Horace Mann. On 25 April 1743 he says: "Lord Stafford is come over [to Paris] to marry Miss Cantillon, a vast fortune, of his own [Protestant] religion.... She is as ugly as he; but when she comes to Paris and wears a great deal of rouge, and a separate apartment, who knows but she may be a beauty!"42 His forecast seems to have been justified, as, describing a fête at Ranelagh, he writes (3 May 1749) that "Miss Evelyn, Miss Bishop, Lady Stafford, and Mrs Pitt, were in vast beauty."43 Walpole considered that Allan Ramsay excelled Reynolds as a painter of women. The first Lord Dunsandle, created Baron Dunsandle and Clanconal in the Peerage of Ireland, 1845, died in 1847 and was succeeded by his eldest son, Denis St George Daly, who died in 1892. His brother, Skeffington James Daly, the third Baron, died unmarried in 1892. The peerage became extinct when James Frederick Daly, fourth Lord Dunsandle, died unmarried in 1911. He was a son of the Hon. Robert Daly, youngest son of the first Baron.

The present owner of Dunsandle, Mr Denis Bowles Daly, by whose kind permission the portraits are reproduced, is a grandson of the second Lord Dunsandle and one of the few direct descendants of the great economist.

Before writing my article in 1891 I enquired of the Daly family but was informed that nothing more was known of the Cantillons than that a portrait of a Miss Cantillon was at Dunsandle. Mrs Bowes Daly has very kindly taken a deeper interest in the matter. Chests of old neglected documents going back to the sixteenth century have been examined by her, unfortunately without result.

The present Lord Farnham informs me that his family is very deficient of old records and that he has found nothing relating to the Cantillons. There seems therefore little hope of recovering any of Cantillon's manuscripts.

THE ESSAI

The mystery surrounding the publication of the Essai is not yet completely cleared up. Professor Foxwell has a copy at the end of which are 11 pages of "Catalogue des Livres qui se trouvent chez Barrois, Quai des Augustins, Paris," and included in this is "Essai sur la Nature du Commerce, par M. de C... in 12. 2l. 10s." As this is in the original binding it seems highly probable that Barrois was the publisher, but although a dozen copies of the Essai have passed through my hands I have not found this Catalogue in any other copy. The most illuminating reference to the matter is contained in the manuscripts of the Marquis de Mirabeau in the Archives Nationales, Paris.44 He says he had read a great number of recent works on industry and trade but found them lacking in precision of principle. At last there fell into his hands a rare manuscript, the only relic of the immense works of one of the ablest men Europe has produced. This man is M. Cantillon. He erases the name and continues, "I should have named him with pleasure... but I am assured that I should annoy his family." He says the Essai is the work of one of the leading men of genius in trade of this century. "Excessively active, his profound erudition embraced everything bearing on the subject. He foresaw the complete course of the famous system of Mr Law, and, compelled by circumstances to take part in it, he quitted the theatre of this astonishing revolution leaving his correspondent with orders in advance as to the different stages of the cycle which this catastrophe would run. This fact is not lightly stated. Its details have come out before one of the leading tribunals of Europe. Men like him knew how to keep clear of the crash of this colossal and frail edifice and to make good pickings from its ruins. It was easy for him to profit from the financial crisis which broke out almost simultaneously in nearly the whole of Europe, in Venice, Amsterdam and England. But, a genius at heart as well as in mind, he always looked upon gold as a slave and made wealth subservient to his tastes and curiosity, without thinking of acquiring it till there came to him some new fancy or some occasion to follow his leaning to generosity. Given over to occasional passions like all ardent souls, his chief were always independence and liberty. Cosmopolitan, or rather equally a citizen everywhere, he had houses in seven of the principal cities of Europe and the least knowledge to acquire or calculation to verify made him cross the Continent from one end to another. One of his friends told me that he found him one day at home in Paris in his dressing gown with Livy on his desk. 'I am going,' he said, 'to make a little trip. There has always been a blunder as to the value of the coins with which the Romans ransomed their city from the Gauls. One of these coins is in the collection of the Grand Duke and I am going to verify its weight and alloy.' At this moment the horses arrived and he took leave of my friend to get into the coach. In these voyages he made certain of everything, got out of his carriage to question a labourer in the field, judged the quality of the soil, tasted it, drew up his notes, and an accountant whom he always took with him put them in order when they stopped for the night. A mass of precious manuscripts perished with him by a remarkable and deplorable catastrophe. This fragment came into my hands by a kind of theft subsequently announced by the person for whom the translation was made." Against this glowing testimony to Cantillon's character must be set a letter from George Verdon, his former cashier, dated 11 June 1727, that he is "a Tyrant whom it would be more Justice and Charity to crush than to be the least usefull to." He was no doubt exacting in driving hard bargains.

Mirabeau says he could not keep so rare a manuscript to himself and proposed to publish it. But he was held back by its imperfection, as it lacked the Supplement whose statistics throw a physical light on its principles, and because it needed revision of expression. "This work was first written in English. Mr Cantillon [the name is again struck out and replaced by "The author"] translated it himself for the use of one of his intimate friends, and postponed the translation of the Supplement, which perished with his other papers.... He never intended that the work should appear in French and only translated it for a friend whose solidity of mind was known to him, so lie paid little attention to its phrasing."45 Mirabeau says the manuscript had been in his possession for sixteen years till he was compelled to restore it to its rightful owner, and it is from this manuscript that the Essai was printed. It is vain to speculate who this rightful owner and intimate friend of Cantillon was. In 1755 his wife had been dead for five or six years (see p. 337 ante). The social circle of the Cantillons was wide and distinguished.

To Jevons's allusion to Postlethwayt's embodiment of portions of the Essai in his Great Britain's True System, 1757, must now be added the interesting fact46 that as early as 1749, six years before the Essai appeared, Postlethwayt printed some 6000 words of the Essai in "A Dissertation on the Plan, Use and Importance of the Universal Dictionary of Trade and Commerce, translated from the French of... Mons. Savary with Additions. London, 1749, 4to." Pages 41 to the end of the book follow the Essai, pp. 298 seq., so closely that Postlethwayt must have had the English original before him, and I have little doubt that in Postlethwayt's version we have Cantillon's own language with little or no variation. He begins: "If the ladies of quality of Paris, for instance, are fond of Bruxells lace and consume of it yearly to the value of 100,000 oz. of silver...." The Essai, p. 298, runs "Si les Dames de Paris consomment, année commune, des dentelles de Bruxelles pour la valeur de cent mille onces d'argent...." The only copy of the French translation was at this time in the hands of Mirabeau, and Postlethwayt cannot have used it. Moreover an English translator would have needed an exceptional talent for the fine shades of language if he translated "les Dames de Paris" by "the ladies of quality of Paris" instead of merely saying "the Paris ladies." "Ladies of quality" is distinctive contemporary English adequately translated into French by the word "Dames" in 1730 though it might now, perhaps, be "grandes Dames," since in France as in England every woman is now a "lady." There are occasionally some small deviations from the turn of a phrase when we compare the two versions, but never from the sense. And it is not at all unlikely that Cantillon translated his original English into French somewhat freely. On p. 4 of the Essai "If a Prince at the head of an Army has conquered a Country..." is in Postlethwayt's version (s.v. Labour) "If a prince at the head of an army conquered France...," and Cantillon would naturally make this change to avoid wounding the susceptibilities of his French friend. The amazing thing is that in his Universal Dictionary (London, vol. I. 1751; vol. II. 1755, fol.) Postlethwayt embodies almost the whole substance of the Essai. Dr Cannan first lighted upon the parallel in the article "Labour," but apart from scattered coincidences I find large portions of the Essai in the following articles: "Arbitration in matters of the Foreign Exchange; Ballance of Trade [repeating verbatim the long extract referred to supra from "A Dissertation on the Plan," etc.], Banking, Barter, Britain, Cash, Circulation, Coin, Interest, Labour, Manure, Mines, and Money."

The present translation has been collated with these passages and made to conform to them so far as is justified. It probably goes near to a reconstruction of the English original. For the chief parallels see Appendix A.

The late Mr Tedder, librarian of the Athenaeum Club, clung to the belief that the English original was really printed by Fletcher Gyles. In a private letter he says we know that Gyles was publishing in Cantillon's lifetime. Why this particularity on the French title-page unless it was copied from an English original? The question might be asked why the Questions importantes sur le commerce, translated from Tucker, was issued in 1755 with the same imprint, "A Londres, Chez Fletcher Gyles, dans Holborn"? This translation is said to have been made by Turgot at the instigation of Gournay, and it is possible that Gournay persuaded the owner of the manuscript of the Essai to have it printed. It is incredible that the Essai if printed in English has entirely disappeared and that no writer or reviewer should have mentioned it.

In his Great Britain's True System, 1757, p. 154, Postlethwayt gives the equation between the value of the steel and of the hairspring of a watch as 1 to 1,538,460. Dr Cannan suggested in 1897 that Postlethwayt may have taken this from the Supplement, but it appears much more probable that he worked it out up to date for himself, and that the figure in the Supplement at least 23 years earlier approached the round million and did not exceed one and a half million. The point is discussed at greater length in an editorial note in the Economic Journal, vol. VI. p. 165. After Cantillon's death diligent search was made for the Supplement, but without success. It appears to have included a rudimentary study of workmen's budgets in the different countries of Europe which would have afforded interesting comparison with Le Play's great work, Les Ouvriers Européens, Paris, 1855, fol.

The return of Cantillon's papers from Surinam aroused a hope that they might contain some of his literary remains. The assassin huddled together a number of papers including the recently executed will of 1734 and some banknotes drawn out by Cantillon on the last day of his life. A gratuity of twenty guineas was recommended by our ambassador at The Hague as probably sufficient remuneration for the clerks of the Surinam Company for making copies of the originals before transferring "the bundle of papers" to him.47 This looks as if they were fairly voluminous. They were handed over to Garvan, who probably passed them to the Bulkeleys. After the murder the assassin's breeches pockets burst open at Mr Martin's, the French distiller, and several guineas fell out, but it is unlikely that he burdened himself with literary documents, and Mirabeau was probably speaking on good authority when he declared that the whole mass of them perished in the fire. We must except the copy used by Postlethwayt. If, as Mirabeau says in 1756, Cantillon's relations would have been annoyed by mention of his name it is fair to acquit Postlethwayt of plagiarism. He is, in fact, otherwise exceptionally conscientious and precise in his references and quotations, which are generous enough to make a respectable bibliography. Harris possibly drew upon the Dictionary and not upon the Essai direct.

In the article in the Economic Journal for 189148 I wrote, "Cantillon exercised so powerful an influence upon the best intellect of the time in his own department of knowledge that he may fairly be called, prior to Adam Smith, the economist's economist." It is presumably to this passage that Dr Cannan refers49 when he says, "Someone has called Cantillon 'the economist's economist,' meaning that his influence was on the leaders of thought rather than on the rank and file. In fact the Essay had several editions printed within a few years of 1755." If this suggests that it was widely read when it first appeared it is contrary to all evidence. Gournay "fit surtout lire beaucoup l'Essai... par Cantillon, ouvrage excellent qu'on négligeait," says Morellet.50 Mirabeau says the public was tired of Essays on Trade, and that the dry character of the Essai was doubtless the cause of the indifference with which a work of such rare merit was allowed to pass unnoticed in the crowd. The pirated editions of 1756 probably fell very flat. Copies of them are difficult to find to-day. On the other hand, it was praised or quoted by the fit, though few, writers of distinction who were not repelled by its dry, didactic character. For these see Appendix B.

Mirabeau proposed to write a book based on the Essai, revising its diction and adding a commentary of his own, but before he could complete his intention the manuscript was reclaimed by its rightful owner, who seems to have thought it better to have it printed as it stood. Mirabeau's proposed work then developed into L'Ami des Hommes, which caused a sensation in France, led to a meeting between Mirabeau and Quesnay and started the association between them which resulted in the foundation of the "sect" of the Economistes.51 The references to Cantillon in Part I were first pointed out to me by Professor Foxwell.

When Jevons wrote his article the Essai was almost inaccessible to readers. Now that it is made available it is unnecessary to quote largely from it or to abridge its argument. The reader may judge for himself. The change of attitude as regards the value of Cantillon's work may be shown by a few references. Marshall, perhaps reacting against Jevons, observed in the first edition of his Principles (p. 53 n.) that Cantillon "though acute, and in some respects ahead of his time, appears to be wanting in solidity." I had the temerity to ask him which of Cantillon's predecessors or contemporaries was equally solid and he replied that he had perhaps given insufficient attention to Cantillon and would make amends in his next edition, a promise duly redeemed. Professor Oncken, jealous for the reputation of Quesnay, says in his Geschichte der National Oekonomie52 that Cantillon was "merely a business man like Child and Ricardo. An originator in economic science he certainly was not." All this appreciation or depreciation of values is now changed. Professor Monroe prefaces the lengthy translations from the Essai in his Early Economic Thought, Boston, Mass., 1924, by the statement that Cantillon was "the greatest economist before Adam Smith." In his volume on Monetary Theory before Adam Smith, Boston, Mass., 1923, he quotes largely with approval from Parts II and III of the Essai and emphasises the ability and originality of Cantillon's contribution to the subject. Dr Cannan's Review of Economic Theory, 1929, is full of references to and extracts from the work of "that extraordinary genius, Cantillon" (p. 65) and says that the praise of Jevons is not in the least overdone (p. 20).

A word may be added as to the title. In Defoe's Plan of the English Commerce, 1728 (2nd ed. 1730) the opening chapter "Of Trade in General," says, "When 'tis particular to a Place, 'tis Trade; when general 'tis Commerce; when we speak of it as the Effect of Nature, 'tis Product or Produce; when as the Effect of Labour, 'tis Manufacture." If Philip Cantillon, who had probably seen or heard of the manuscript in Cantillon's lifetime, was not using Cantillon's own title when he called his book The Analysis of Trade, he was better inspired than in the rest of his work. It is this analytical mode of approach to economic problems which is the most strikingly original characteristic of Cantillon. He brushes Ethics and Politics aside as imperiously as a referee orders the seconds out of the ring before a prize fight. The isolation of the conception of material wealth which is claimed as one of the original merits of Adam Smith, is strikingly true of Cantillon. His theory of value is ably presented and serves as a backbone to his presentation of the resultant of economic forces in distribution and circulation.

After reading well over a thousand economic writings of earlier date than 1734 I would put Cantillon's analysis of the circulation of wealth, trite as it may now appear, on the same level of priority as Harvey's study of the circulation of the blood. So eminent an authority on the history of economic thought as Professor Gide claims for J. B. Say that he "first employed the well-chosen term Entrepreneur to designate that most important economic function of the man who collects in his hands the productive forces of capital—labour and natural agents".53 And again, J. B. Say "gave economic science its present form and its definitions... (e.g. the term 'Entrepreneur' which has been borrowed by most other languages)".54 Say's Traité appeared in 1803. It is unnecessary to point out that Cantillon anticipated him completely 70 years earlier, or to enlarge here upon the fact that Cantillon's honourable place in the history of economic thought is now definitely and finally assured.55

HENRY HIGGS

Appendix A

The chief parallels between Postlethwayt's Dictionary and Cantillon's Essai are as follows:

Appendix B

Bibliography

Jevons (W. S.), art. in Contemporary Review, January 1881. Reprinted above, pp. 333-360, and in his posthumous Principles of Economics (ed. Higgs), London, 1905.

Higgs (H.), art. in Economic Journal, June 1891; Quarterly Journal of Economics, 1892; Preface to Jevons's Principles, pp. ix-xiii, 1905; The Physiocrats, London, 1897, passim.

von Sivers (F.), art. "Turgot's Stellung in den Geschichten der Nationalökonomie," Jahrb. für Nationalökonomie, Bd. XXII. Jena, 1874.

Bauer (S.), art. "Zur Entstehung der Physiokratie," Jahrb. für Nationalökonomie und Statistik, N.F. Bd. XXII, Jena 1890; art. in Quarterly Journal of Economics, October 1890.

Horton (S. Dana), Sir Isaac Newton and England's Prohibitive Tariff upon Silver Money, in an open letter to Professor Jevons in reply to his Essay on Cantillon. Cincinnati, 1881.

Dict. of Nat. Biography, s.v. "Cantillon," art. by H. R. Tedder. London, 1886.

Dict. of Political Economy (ed. Palgrave and Higgs), s.v. "Cantillon," arts. by H. Higgs, S. Bauer and F. Y. Edgeworth. London, 1925.

Monroe (A. E.), Early Economic Thought. Boston, Mass., 1924.

—— Monetary Theory before Adam Smith. Boston, Mass., 1923.

Legrand (R.), Richard Cantillon. Paris, 1900.

Effertz (Otto), Travail et Terre. 1893-4.

Kretschner (W.), Ueber den Richard Cantillon zugeschrieben "Essay sur la Nature du Commerce en général" mit besonderer Berücksichtigung der Lehren von Otto Effertz. Liesthal, 1889 [one of the Basler Dissertations].

Cannan (E.), A Review of Economic Theory. 1929 passim.

References to Cantillon are made by (among others)

Quesnay, art. "Grains" in the Encyclopédie of Diderot and D'Alembert. Paris 1757.

Mirabeau, L'Ami des Hommes, t. I, passim (especially chapters 2 and 7). Avignon, 1756.

Turgot, Œuvres, ed. Daire, t. II, p. 819. Paris, 1848.

Mably, Œuvres, t. V, p. 169; t. VI, pp. 311-328. 1789.

Condillac, Œuvres, t. VI, p. 141. 1803.

Morellet, Mémoires, t. I, p. 33. 1821.

Graslin, Essai analytigue sur la Richesse et l'Impôt, p. 365. Londres, 1767.

Smith (Adam), Wealth of Nations, Bk I, cap. 8.

Young (Arthur), Political Arithmetic, Pt 2, p. 29. 1799.

Steuart (Sir J.), Works, vol. III, p. 22. 1805.

Graumann (J. P.), Gesammelte Briefe von dem Gelde, p. 144. Berlin, 1762.

Streckeisen-Moultou, J.-J. Rousseau, ses amis et ses ennemis, t. II, pp. 338, 365-7. Paris, 1865. An important letter, dated 30 July 1767, from Mirabeau to Rousseau about Cantillon.

Lavergne (L. De), Les grands économistes français du XVIIIe siècle, pp. 167 et seq. Paris, 1870.

Daire (E.), Les Physiocrates, p. 47. Paris, 1846.

For Grimm, Fréron, Postlethwayt, Harris, etc., see Jevons's article.

[6.]See p. 358.

[7.]Newton's Report is dated Sept. 21, 1717.

[8.]Newton here sacrificed the substance to appearances. [Cantillon's footnote. All others are Higgs's footnotes.—Econlib Ed.]

[9.]The Bank of England is alluded to here and in the previous chapter as the Banque of Londres.

Footnotes below are by Jevons except as noted.

[10.]M'Culloch's erroneous account of Cantillon has been unfortunately copied by Allibone in his Dictionary of English Literature.

[11.]"Correspondance Littéraire, Philosophique et Critique, de Grimm et de Diderot, depuis 1753 jusqu'en 1790, nouv. éd. Paris, 1829," t. I. (1753-6), pp. 332-41.

[12.]"Tracts relating chiefly to Ireland. By the late Sir William Petty. Dublin, 1769," p. 31.

[13.]The Petty Papers, edited by the Marquis of Lansdowne, Lond. 2 vols. 1927, fulfil this wish. H. H.

[14.]See Émil Weller's Dictionnaire des Ouvrages Français, portant de fausses indications des lieux d'impression, Leipzig, 1864, vol. II. p. 141.

[15.]Jevons, overlooked the reference to 1730 on p. 364 of the Essai. See also pp. 391-2. His error has been copied by M. Weulersee (who says Jevons wrote "about 1880") in his short notice of Cantillon in the Cyclopaedia of Social Sciences. New York, 1929. H. H.

[16.]Traité des Monneyes, Paris, 1662, (later editions 1711, 1714, 1723). A practical little book on the working of a mint. H. H.

Footnotes below are by Higgs except as noted.

[17.]Letters and Journals of W. S. Jevons, 1886, p. 125.

[18.]Vol. VI, 1892, Boston, Mass. pp. 436-456.

[19.]His assertion that Cantillon travelled to America, India, Persia, China, Japan, etc., would be a new fact if correct, but is, as the context shows, a misreading of the passage in the Harvard article following my statement that Travel and Trade were two of Cantillon's great teachers, op. cit. p. 440.

[20.]Arthur Young mentions a parish named Cantillon near Bridgend in Glamorganshire: A Six Weeks' Tour through the Southern Counties of England and Wales 3rd edition, London, 1772, p. 164. But the family is undoubtedly of French extraction.

[21.]Dossier bleu 3889.

[22.]Marquess Townshend MSS, 11th Report Historical MSS Commission, IV. 157.

[23.]Bibl. Nat. Fm. 2740.

[24.]Marriage settlement dated 16 February 1722.

[25.]Dict. of National Biography, s.v. "Cantillon."

[26.]Bibl. Nat. Fm. 2740. This document is interesting because Cantillon drew up a memorandum on the working of the foreign exchanges as a basis for his advocate's brief.

[27.]See "Mémoire pour Jean et Remi Carol frères, banquiers à Paris, contre Richard Cantillon, marchand mercier à Paris.... Paris, 1730, chez André Knapen, 1730," 32 pp. fol. Bibl. Nat. Fm. 2838.

[28.]See for this Econ. Journ. 1891, p. 279 etc.

[29.]The coins of December 1719 were on 1 March 1720 of the value of 65 livres the marc of eight ounces of silver. By Arrêt of the 5th they were fixed at 97 l. 10 sols. By Arrêt of the 11th idem they were to shrink by degrees to 32 l. 10 sols. at the end of the year.

[30.]Dictionary, s.v. "Coin."

[31.]C 11/111/5.

[32.]See Chancery Bill 1752, folios 424-55, Hughes v. Countess of Stafford and others. Philip Cantillon, described as a bankrupt, is one of the "others". I have been guided to this reference by the aid of Mr J. A. Langley, the present Assistant Paymaster General of the Supreme Court.

[33.]Townshend MSS, cit. p. 365, ante, pp. 237-8.

An entry in the executor's accounts: "By an Undertaker for burying the Remains of the said Richard Cantillon £6. 2s. 6d.," suggests that the burial took place in London.

[34.]An account of the trial will be found in "The Proceedings at the Sessions... for the City of London... 4th to 7th December 1734, No. 1, Part II. London, Prtd for John Roberts... 1734. Price Six Pence," 4to, pp. 5-15

[35.]Somerset House Probate Registry, vol. Ducie 95, May 1735.

[36.]Copy in the Goldsmiths' Library. The Act describes Henrietta as now about six years of age.

[37.]For this will see Somerset House Probate Registry, vol. Wake 154 and vol. Cheslyn, 1761.

[38.]See p. 365 ante.

[39.]Somerset House Probate Registry, vol. Stevens, 1773.

[40.]One of Wren's steeple churches. It was burned down in 1886 and not rebuilt. Old Fish Street has now been replaced by Queen Victoria Street. See G. B. Besant, City Churches, London 1926, pp. 62-63.

[41.]Letters of Lady Mary Wortley Montagu, ed. W. Moy Thomas, London, 1861, I. 468. In 1741, writing from Rome to her brother, she says, "If you should happen to see Mrs Bulkeley, I wish you would make her some compliment," id. II. 86.

[42.]Letters, ed. Cunningham, London, 1857, 1. 241-2.

[43.]Op. cit. II. 153. See also I. 298.

[44.]M. 780. Probably circa 1750. For the original French see Econ. Journ. loc. cit.

[45.]In view of these positive statements by a man who was most likely to be curious about the author of the manuscript he was jealously guarding I am unable to understand why Dr Cannon surmises that Cantillon did not himself translate the Essay. Review of Economic Theory, 1929, pp. 19, 65.

[46.]I owe this reference to Dr Hayek.

[47.]Copies of the ambassador's letters were kindly sent to me by Mr C. F. Weston Underwood, of Somerby Hall, Brigg.

[48.]P. 262.

[49.]Review of Economic Theory, 1929, p. 19. Dr Cannan observes that the Essai soon sunk into oblivion "probably in part owing to its mongrel Franco-English character" (op. cit p. 19), but its French is quite passable. Mirabeau expressly says Cantillon knew the language perfectly. See Econ. Journ. I, p. 268.

[50.]Memoires de Morellet t. I, pp. 37-38, 1823.

[51.]See Higgs, The Physiocrats, pp. 19-25.

[52.]Leipzig, 1902, p. 279.

[53.]Palgrave's Dict. of Pol. Econ. s.v. Say, J. B.

[54.]Palgrave's Dict. of Pol. Econ. s.v. French School of Political Economy.

[55.]For a more detailed examination of this see Higgs, "Cantillon's Place in Economics," Harvard Quarterly Journal of Economics, Boston, Mass., vol. VI. pp. 436-456, 1892.