Online Library of Liberty

A collection of scholarly works about individual liberty and free markets. A project of Liberty Fund, Inc.

Advanced Search

Destutt de Tracy on the mutually beneficial nature of exchange (1817)

In his Treatise on Political Economy (1817) which was so admired by Thomas Jefferson, the French revolutionary politician and republican Destutt de Tracy (1754-1836) argues that both parties to a voluntary exchange benefit (i..e profit) from the same transaction:

(A)n exchange is a transaction in which the two contracting parties both gain. Whenever I make an exchange freely, and without constraint, it is because I desire the thing I receive more than that I give; and, on the contrary, he with whom I bargain desires what I offer more than that which he renders me. When I give my labour for wages it is because I esteem the wages more than what I should have been able to produce by labouring for myself; and he who pays me prizes more the services I render him than what he gives me in return.

It is equally true that an exchange is a transaction in which the two contracting parties both gain. Whenever I make an exchange freely, and without constraint, it is because I desire the thing I receive more than that I give; and, on the contrary, he with whom I bargain desires what I offer more than that which he renders me. When I give my labour for wages it is because I esteem the wages more than what I should have been able to produce by labouring for myself; and he who pays me prizes more the services I render him than what he gives me in return. When I give a measure of wheat for a measure of wine, it is because I have a superabundance of food and nothing to drink, and he with whom I treat is in the contrary case. When several of us agree to execute any labour whatsoever in common, whether to defend ourselves against an enemy, to destroy noxious animals, to preserve ourselves from the ravages of the sea, of an inundation, of a contagion, or even to make a bridge or a road, it is because each of us prefers the particular utility which will result to him from it, to what he would have been able to do for himself during the same time. We are all satisfied in all these species of exchanges, every one finds his advantage in the arrangement proposed.

In truth it is possible that, in an exchange, one of the contractors, or even both, may have been wrong to desire the bargain which they conclude.—It is possible they may give a thing, which they will soon regret, for a thing which they will soon cease to value. It is possible, also, that one of the two may not have obtained for that which he sacrifices as much as he might have asked, so that he will suffer a relative loss while the other makes an exaggerated gain. But these are particular cases which do not belong to the nature of the transaction. And it is not less true that it is the essence of free exchange to be advantageous to both parties; and that the true utility of society is to render possible amongst us a multitude of similar arrangements.

It is this innumerable crowd of small particular advantages, unceasingly arising, which composes the general good, and which produces at length the wonders of perfected society, and the immense difference we see between it and a society imperfect or almost null, such as exists amongst savages. It is not improper to direct our attention for some time to this picture, which does not sufficiently strike us because we are too much accustomed to it.

About this Quotation:

It is a fundamental argument put forward by socialists that an exchange benefits one party at the expense of the other party, in other words, that the exchange is not an equal one because “profits” are made. In the Marxist lexicon, this is the origin of the exploitation of the workers by the capitalist class through the system of wage labour. Free market economists have rejected this argument from the very beginning, but the classical school represented by Adam Smith and David Ricardo found it hard to make a convincing case because they believed two things of “equal something” were being exchanged. These “equal somethings” might be labour, utility, or something else of “value”. Another school of economic thought, the French liberal school had a different perspective where individuals valued goods and services differently, which was the reason why one individual would exchange something on which s/he placed a lower value (compared to other goods and services) for something on which s/he placed a higher value. The trick was to find another person who had the opposite set of values so an exchange might take place. This of course is one of the functions of “markets”, namely to bring these different people together so trades can take place efficiently. Tracy was one of the French school of economists who developed this insight as early as 1817, well before the Austrians and Marginalists of the 1870s revolutionised economic theory by introducing the idea of subjective rather than objective value.

More Quotations