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Richard Cantillon was an Irish banker and economist who emigrated to Paris, where he profited from the financial scheme known as John Law’s Mississippi bubble (1720). His lone surviving book, Essai sur la nature du commerce en général (Essay on the Nature of Commerce in General) was written around 1730 and circulated in manuscript form for a quarter century in France until it was published anonymously in 1755. Legend has it that Cantillon was murdered in London, although his biographer, Antoin Murphy, convincingly hypothesizes that he staged his murder and left the country to avoid impending legal battles.
Cantillon’s Essai is often considered a product of his financial exploits because it contains a defense of usury that justifies charging illegally high rates of interest. It also contains an analysis and condemnation of what caused the Mississippi bubble. But it is much more than a mere position paper. Brevity notwithstanding, its scope and probity raise the Essai to the level of a theoretical treatise.
When the economist William Stanley Jevons (1835–1882) rediscovered Cantillon’s Essai in 1880, he called it the “cradle of political economy” and “the first treatise on economics.” The English translator of the Essai, Henry Higgs (1864–1940), wrote that Cantillon was “the economist’s economist.” Joseph Schumpeter (1883–1950) labeled the Essai the first “bird’s-eye view of economic life” Schumpeter (1954, p. 222), and Murray Rothbard (1926–1995) dubbed Cantillon “the founding father of modern economics.” Antoin Murphy concluded that the Essai has “stood the test of time and is of increasing interest to modern-day economists.”
Cantillon’s contributions to economics include critical aspects of methodology, such as the use of ceteris paribus, price and wage determination, the crucial role of the entrepreneur, the circular-flow nature of the economy, the price-specie flow mechanism, the function of money, and the problems of inflation. He showed that wealth was determined not by money but by the ability to consume, and that the source of wealth was land and productive labor. He demonstrated that saving and investment were critical to productivity and higher wages, and he maintained that in the absence of government intervention, markets—including the market for loans—would be regulated by competition. He also analyzed the forces that cause business cycles and stock market bubbles. It has been asserted that Cantillon’s puzzling use of the term intrinsic value now represents the discovery, 140 years prior to its conventional dating, of the concept of opportunity cost, by means of which the economist analyzes not just the ticket price of a good, but the full cost to the decision maker, including his or her time.
Despite its relative obscurity, Cantillon’s Essai was very influential. It provided a major stimulus to the founding of the physiocrat school in 1757. There is now strong evidence that it influenced David Hume’s (1711–1776) economics. Adam Smith (1723–1790) referred to Cantillon in the Wealth of Nations (1776), where even the invisible hand is evocative of Cantillon. There are also strong parallels between Cantillon and Charles Louis Montesquieu (1689–1755), Étienne Bonnot de Condillac (1715–1780), Anne Robert Jacques Turgot (1721–1781), and Jean-Baptiste Say (1767– 1832). Thus, Cantillon foreshadowed the physiocrat and classical schools of economics and the economics of the French Enlightenment.
- Cantillon, Richard.  1959. Essai sur la nature du commerce en general, ed. and trans. Henry Higgs. London: Cass.
- Murphy, Antoin E. 1986. Richard Cantillon: Entrepreneur and Economist. New York: Oxford University Press.
- Schumpeter, Joseph A. 1954. History of Economic Analysis. New York: Oxford University Press.
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