Editorial: Turgot and the Battle Against Physiocracy

Turgot’s Discourse on the Historical Progress of the Human Mind laid the foundations for late eighteenth-​century writings on the themes of progress. Turgot believed mankind’s history revealed that it must make a thousand errors to arrive at one truth. But he dissented from those eighteenth-​century writers who overemphasized immediate experience and thereby viewed history as merely the record of human folly. Progress and avoiding past errors was possible only by the action of the human will informed by wisdom culled from a profound knowledge of history. Turgot thus became a diligent student of economic history for the valuable light it shed on the folly of ignoring the interdependence of capital formation and material progress.

As representative Enlightenment thinkers, Turgot and his intellectual friend Adam Smith each planned to write a history of civilization as a narrative of the history of the human mind and its progress. Turgot was a disciple of one of the two masters of the Physiocratic School, the brilliant teacher J. C. M. Vincent de Gournay (1712–1759), in whose honor Turgot wrote his Eloge de Gournay. As a teacher, Gournay had familiarized Turgot with the economic analysis of Richard Cantillon (1680–1734). From Cantillon’s Essai sur la nature du commerce en général, Turgot derived his capital theory; the necessity of capital for entrepreneurs; the general interdependence of all sectors of economic processes; as well as the concept of development by capital accumulation and investment, crucial for the idea of progress.

Turgot was prominent in the rise of market economics and the antimercantilist critique ushered in by the Physiocrats. The most notable of the Physiocrats were François Quesnay (1694–1774), Pierre-​Paul Mercier de la Rivière (1720–1793), and Pierre Samuel Du Pont de Nemours (1739–1817). The Physiocrats derived their name from the Greek term “the rule of nature.” They endorsed the Lockean principal that property is the source of law and natural order (cf. Albert Schatz, L’Individualisme économique et sociale, Paris: Colin, 1907). In this vein, Turgot wrote in his article on Fondations:

Citizens have rights, and rights that are sacred to the very heart of society. The citizens exist independently of society and are its necessary elements. They enter society in order to put themselves, together with all their rights, under the protection of laws that assure their property and their liberty.

In his writings, Turgot displays the Physiocratic penchant for seeking a nongovernmental or spontaneous order in the economy. Turgot’s “Letter to L’Abbé de Cicé on the Replacing of Money by Paper” (April 7, 1749) was influenced by John Locke’s Some Considerations on the Consequences of the Lowering of Interest and Raising the Value of Money (1691). Turgot’s work presents an initial theory of savings, and he demonstrates that financing government by printing money creates inflation. Turgot later elaborated his economic ideas in some of the articles he wrote for the Encyclopédie.

Yet another example of Turgot’s economic liberalism is his Réflexions sur la formation et la distribution des richesses (1766). Through Richard Cantillon’s influence, Turgot developed his theory of capital, savings, and investment which contributed to Adam Smith’s Wealth of Nations (1776). For Turgot, capital received interest because of the time span of the period of production. He derived this early version of the time preference theory of interest from Cantillon’s insight that interest rates were related to the scarcity or abundance of savings. Turgot’s Réflexions also adumbrated the concept of marginal utility later worked out by Carl Menger with J. B. Say as an important intermediary. Carl Menger’s successor and pupil in the Austrian School tradition, Eugen von Böhm-​Bawerk, was indebted to Turgot for his development of modern capital theory. Böhm-​Bawerk’s Heidelberg 1876 seminar paper (now in the possession of F. A. Hayek) and his The Positive Theory of Capital (1889) show his reliance upon Turgot.

Turgot presented—in embryonic form—a subjective analysis of economic value in hisRéflexions and later, in his Value and Money (1769), developed this subjective value theory through his discussion of valeur estimative—the degree of value a person attaches to different objects he desires. Turgot, aware of the crucial innovation of subjective utility, declared it as:

one of the newest and most profound truths which the general theory of value contains. It is this truth which l’Abbé Galiani stated twenty years ago in his treatise Della Moneta with so much clarity and vigor, but almost without further development, when he stated that the common measure of all value is man.

We can thus observe the intellectual lineage linking those (Turgot, the Abbé Ferdinando Galiani, and the Abbé Etienne de Condillac) who anticipated the Austrian Carl Menger and the Marginal Utility Revolution of 1870. (Cf. Emil Kauder, A History of Marginal Utility Theory, Princeton University Press, 1965.)

Turgot’s economic influence is also evident on J. B. Say’s law of markets. In the “Observations on a Paper by Saint-​Péravy” (1767), Turgot exposited what later became “Say’s Law of Markets.” Turgot’s analysis of the basic issues inspired Say’s effective statement of his theory of markets. As did Say, Turgot noted the economic effects of wars, especially in causing inflation:

The deadly contrivance of borrowing derives from the mania of spending more than one owns…; the ambition of Louis XIV and other princes has no less been a cause of it [the borrowing] through their stubborn wars pushed to the point of exhaustion. (P. D. Groenewegen, ed., The Economics of A. R. J. Turgot, The Hague: Martinus Nijhoff, 1977.)

Turgot’s tenure as French controller-​general of finance (1774–1776) brought him into a losing battle over government borrowing and the deficit financing of military activities. His dismissal from office specifically involved his memo to the King opposing French military spending. Totally in sympathy with the American rebels, Turgot felt that France would benefit from England’s being permanently entrapped in overseas conflict. In any event, he emphasized that France’s worst course would be to saddle itself with increased taxation and borrowing for foreign wars. Turgot’s fall from office opened the way for France’s military intervention in the American Revolutionary War and for the massive government deficits and borrowing that he predicted. The French monarchy’s inability to support these loans brought about the French Revolution. [R. R. Palmer, “Turgot: Paragon of the Continental Enlightenment,” The Journal of Law and Economics 19 (October 1976): 607–619.]

So highly did Thomas Jefferson esteem the liberalism of Turgot that in the honored place of the entrance hall to Monticello he placed a Houdon portrait bust to this Enlightenment hero. Jefferson revered Turgot’s strong support of the American Revolution and his contributions to a major debate on constitutional principles. Turgot’s apparent approval of the more radical republican constitution of Pennsylvania provoked American and French responses. John Adams wrote his three volume Defense of the Constitutions of the United States, Against the Attack of Mr. Turgot, while Adams’s friend, the Abbé Mably, a founder of modern socialism’s denial of private property, published a work on the American constitutions which disturbed such republicans as Jefferson. [Additional aspects of the debate may be found in Joyce Appleby, “The New Republican Synthesis and the Changing Political Ideas of John Adams,” American Quarterly 25 (1973): 578–595.]

Turgot’s greatest impact, arguably, was being the teacher of Marie Jean Antoine Nicolas Caritat de Condorcet (1743–1794). Especially after the fall of Turgot, Condorcet became the hope of the liberal cause. Inspired by Turgot, Condorcet as secretary of the Academy of Sciences (1776), sought to reorganize scientific activity by giving equal emphasis to research both in the natural and in the historical sciences. From his outspoken controversial pamphlets supporting Turgot’s ideas on free trade and on the abolition of forced labor for the state, to his Vie de M. Turgot, Condorcet developed the ideas of a free society where the political system would approximate the freedom of the natural order. Continuing Turgot’s work on progress, Condorcet’s Esquisse d’un tableau historique des progrès de l’esprit humain (1793–1794) has been one of the most controversial contributions to the idea of progress. The most recent, and perhaps definitive study of Condorcet’s Esquisse is that of Keith Michael Baker, Condorcet, From Natural Philosophy to Social Mathematics, University of Chicago Press, 1975. The Esquisse is the history of progress as the cumulative ordering of ideas into more and more comprehensive combinations. Although truths were turned into errors by social or political interests, error stimulated the human mind to discover truth. “In a sense,” Baker suggests, “the Esquisse came much closer to a sociology of error than it did to a sociology of progress.” Turgot’s education of Condorcet has had the greatest influence in the progress of the social sciences, and in the recognition of the limited progress that they have made.