Richard Cantillon: Entrepreneur and Economist.
Reviewed by Michael Sonenscher
If Richard Cantillon had not written the Essai sur la nature du commerce en general, he would, nonetheless, have acquired some modest fame as a successful insider dealer and occasional associate of john Law of Lauriston, one of the pioneers of the junk bond. Law's bonds were not, of course, designed to finance corporate buyouts, but rather to supply credit to the beleaguered French treasury in the aftermath of the ruinously expensive War of Spanish Succession, which ended in 1715. Yet the principle of the Mississippi scheme was not all that different from that of the junk bond. Returns from trade organized under the monopoly of Law's Mississippi Company would inflate the value of its shares, which, when converted into government stock (at rates decided by the government itself), would allow the Royal Treasury to amortize its massive debt. According to Antoin Murphy, Cantillon's judicious use of privileged information about the rates of convertibility and volume of impending share-issues allowed him to buy in and sell out before the roof fell in, and, in the process, come out with over 20 million livres.
Like many a subsequent insider dealer, however, Cantillon's success proved to be his undoing. Several of the speculators with whom he had shared information-notably the Jacobite emigres joseph Gage and his mistress Lady Mary Herbert (who, at the height of the boom, appear to have envisaged buying Poland or, failing that, Sardinia)-lost massive amounts of money by failing to sell out in time. Predictably, they sued. From 1721 until his mysterious demise in 1734, Cantillon was enmeshed in a series of lawsuits mounted by his former trading partners. The charges were more than a little unusual. He was accused not only of misusing money with which he had been entrusted, but also of seeking maliciously to prosecute his opponents for attempted murder, sodomy, and bigamy or, according to the Gage forces, of actually committing such crimes himself. The lawsuits were long, costly, and menacing. It may be, therefore, (as Murphy suggests) that the fire in the house on Albermarle Street in 1734 in which Cantillon was supposed to have died was not quite the accident that it appeared to be, and that a certain Chevalier de Louvigny who arrived in the Dutch colony of Surinam some months later was, in fact, Cantillon himself.
It can, at the least, be shown that a rather urgent need to explain and justify his actions at the time of Law's system formed the context in which Cantillon wrote his celebrated Essay. Its emphasis on the coordinating function of the entrepreneur, agreeing to pay for goods at a certain price in order to dispose of them at an uncertain price, was redolent of the world of ambiguous opportunities and rapidly changing market conditions that bad been both the making and the breaking of the system. Cantillon's genius was to transpose the relatively simple problem of identifying the optimal relationship between risk and reward inherent in the speculation on stocks and bonds to the more general problem of identifying the same optimal relationship in the more complex markets formed by goods of urban or rural provenance, by domestic and foreign trade, and by short- and long-term sources of credit.
The result of this transposition of calculations centered on the relatively esoteric world of shares to the much less esoteric world of ordinary commerce was an analytical approach to a commercial society that offered many possibilities for genuinely effective intervention by policymakers seeking to promote commercial development for the benefit of government finance. As Murphy shows, the Essay found a sympathetic readership among the circle associated with Vincent de Gournay, the French intendant de commerce between 1751 and 1758, a circle that included Clicquot-Blervache, Veron de Forbonnais, Butel-Dumont, Plumard de Danguel, and Turgot. its publication, in 1755, probably twenty-five years after its composition, was the high point of a sustained effort by de Gournay and his circle to impose a style of political and economic analysis on royal policy that, as Grimm put it, would become the basis of the superiority of the French government in world affairs.
Not the least of the merits of Murphy's fluent account of a career that, if unusual, was by no means untypical, are the number of matters addressed within its deceptively unpretentious bio-bibliographical framework. It touches upon the history of public finance and (put euphemistically) private enterprise in eighteenth-century France. It throws light on the purposes surrounding the composition of Cantillon's Essay and the interests involved in its subsequent dissemination and publication. It suggests some of the ways by which wide-ranging intellectual debates and conceptual shifts in eighteenth-century political argument were informed by quite narrow discussions of public policy involving rather specific local options and agendas. Over twenty-five years have passed since Herbert Luthy, in his great study of La Banque protestante en France, called for a genuinely well-grounded study of the institutions, personnel, and intellectual concerns of what he called the partis prenants of the eighteenth-century French monarchy: the princes, peers, prelates, and prosperous capitalists who formed the core of the relationship between Versailles and Paris, between the cour and the ville, and between that dual axis and the rest of France. Murphy's book will be a starting point in that long and difficult task of historical reconstruction. Michael Sonenscher is a fellow of King's College, Cambridge. He is the author of The Hatters of Eighteenth-Century France 987) and Work and Wages: Natural Law, Politics, and the Eighteenth-Century French Trades (1989).
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|Publication:||Business History Review|
|Article Type:||Book Review|
|Date:||Dec 22, 1988|
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