A History of Economic Thought in France: The Long Nineteenth Century 0367194449, 9780367194444

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A History of Economic Thought in France

Traditionally, there has been a long and sustained interest in studying the history of economic ideas in France. Interest appeared to wane after World War II, but in recent decades, there has been a marked renaissance of interest and research in the contributions of French-speaking authors. Drawing on the flow of recent research, this book presents a new assessment of the history of political economy in France incorporating both novel presentations of some traditional subjects and topics that are not usually studied. This second volume analyses the evolution of political economy during the long nineteenth century, combining an assessment of both liberals and their opponents. Its first part covers the most outstanding contributions to political economy in the age of industry, from the founding fathers (L.-C.-C. Destutt de Tracy and J. –B. Say) until the pre-World War I period, including that of A.-A. Cournot, J. Dupuit, the French liberal economists, and L. Walras. The volume then outlines the critiques of liberal political economy, focusing on the analyses of J.-C.L.S. de Sismondi, C.-H. de Saint-Simon and his followers, and the successive generations of socialist and associationist authors, not forgetting the sociological critique. A substantial postlude concludes the volume with a survey of recent developments of French economic thought up to the present day. A History of Economic Thought in France will be invaluable reading for advanced students and researchers of the history of economic thought, political economy, intellectual history and French history. Gilbert Faccarello is Emeritus Professor at Panthéon-Assas University, France. He is a co-founder of The European Journal of the History of Economic Thought and co-editor of the Routledge Historical Resources site devoted to the History of Economic Thought. Claire Silvant is Associate Professor of Economics at the Université Lumière, France, and a member of the research centre Triangle (Centre National de la Recherche Scientifique). She also was in charge of a research programme on the history of public economics sponsored by the European Society for the History of Economic Thought.

The Routledge History of Economic Thought

A History of Australasian Economic Thought Alex Millmow A History of American Economic Thought Mainstream and Crosscurrents Samuel Barbour, James Cicarelli and J. E. King A History of Czech Economic Thought Antonie Doležalová A History of Slovak Economic Thought Julius Horváth A History of Brazilian Economic Thought From Colonial Times through the Early 21st Century Edited by Ricardo Bielschowsky, Mauro Boianovsky and Mauricio C. Coutinho A History of Colombian Economic Thought The Economic Ideas that Built Modern Colombia Edited by Andrés Álvarez and Jimena Hurtado A History of Economic Thought in France Political Economy in the Age of Enlightenment Edited by Gilbert Faccarello and Claire Silvant A History of Economic Thought in France The Long Nineteenth Century Edited by Gilbert Faccarello and Claire Silvant

For more information about this series, please visit: www.routledge.com/The-Routledge-History-of­ Economic-Thought/book-series/SE0124

A History of Economic Thought in France The Long Nineteenth Century

Edited by Gilbert Faccarello and Claire Silvant

First published 2024 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2024 selection and editorial matter, Gilbert Faccarello and Claire Silvant; individual chapters, the contributors The right of Gilbert Faccarello and Claire Silvant to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library ISBN: 978-0-367-19444-4 (hbk) ISBN: 978-1-032-56935-2 (pbk) ISBN: 978-0-429-20240-7 (ebk) DOI: 10.4324/9780429202407 Typeset in Times New Roman by Apex CoVantage, LLC

Contents

List of contributors to the two volumes Preface PART I

Political economy in the age of industry 1 Prelude I: political economy in the age of industry

vii xii

1 3

CLAIRE SILVANT

2 The “founding fathers” of the French liberal thought: A-L-C. Destutt de Tracy and Jean-Baptiste Say

12

ALAIN BÉRAUD AND GUY NUMA

3 Liberal economists after Say

40

ALAIN BÉRAUD AND CLAIRE SILVANT

4 Antoine-Augustin Cournot and the emergence of mathematical economics

78

ALAIN BÉRAUD AND GUY NUMA

5 Jules Dupuit and the “ingénieurs économistes”

105

CLAIRE SILVANT

6 Léon Walras: a trilogy of pure, applied and social economics

130

JEAN-PIERRE POTIER

7 Tradition and innovation at the turn of the twentieth century ALAIN BÉRAUD AND CLAIRE SILVANT

162

vi

Contents

PART II

Critiques of liberal political economy 8 Prelude II: introduction to the critiques of political economy

195 197

GILBERT FACCARELLO

9 Jean-Charles Léonard Simonde de Sismondi

248

PASCAL BRIDEL

10 Claude-Henri de Saint-Simon and the Saint-Simonians

263

RAGIP EGE

11 Associationists and socialists: the first debates

287

CLÉMENT COSTE AND LUDOVIC FROBERT

12 Fin-de-siècle socialisms

316

VINCENT BOURDEAU

13 The sociological critique of liberal political economy

341

PHILIPPE STEINER

14 Postlude: after World War I

360

ALAIN BÉRAUD AND CLAIRE SILVANT

Index

414

Contributors to the two volumes

Alain Béraud is Emeritus Professor at the CY Cergy Paris Université France and a member of the research centre Thema (Centre National de la Recherche Sci­ entifique). His recent publications include “Les ingénieurs économistes français et la Théorie Générale de Keynes (1945–1952)” (Revue d’histoire de la pensée économique, 2022); “Fred Manville Taylor and the Origins of the Term ‘Say’s Law’”, with Guy Numa (History of Political Economy, 2022); “A Rebuttal of James Ahiakport’s Fallacies and Misrepresentations of Jean-Baptiste Say’s Writings and Thinking”, with Guy Numa (Journal of the History of Economic Thought, Virtual Issue, 2021); “Les économistes francophones et les équilibres non-walrasiens (1970–1985)” (Œconomia, 2020); “Léon Walras’s Theory of Public Interest: Toward an Organic View of the State”, with Guy Numa (Journal of the History of Economic Thought, 2019); “Lord Keynes and Mr. Say: A Prox­ imity of Ideas”, with Guy Numa (Journal of Economic Perspectives, 2019); and “Use values and exchange values in Marx’s extended reproduction schemes”, with Carlo Benetti, Edith Klimovsky and Antoine Rebeyrol (The European Journal of the History of Economic Thought, 2018). Vincent Bourdeau is Associate Professor of Philosophy at the University of Franche-Comté (Besançon, France) and a member of the research centre Logiques de l’Agir (UR 2274). His main research areas concern political philos­ ophy, philosophy of economics, philosophy of law and history of social sciences in relation with socialist and republican ideas. He edited Quand les socialistes inventaient l’avenir. 1825–1860 (La Découverte, 2015, with Th. Bouchet, E. Castleton, L. Frobert and F. Jarrige) and Les encyclopédismes en France à l’ère des révolutions (1789–1850) (Presses Universitaires de Franche-Comté, 2019, with J.-L. Chappey and J. Vincent). Pascal Bridel is Emeritus Professor of Economics at the University of Laus­ anne and founder of the Walras-Pareto Centre. His recent publications include “Robertson’s Industrial Fluctuation (1915): An early Real Business Cycle-like Approach” (Journal of the History of Economic Thought, 2017); J.C.L. Simonde de Sismondi, Œuvres économiques complètes (Economica, 6 vols, 2012–2018, edited with F. Dal Degan and N. Eyguesier); “The part played by general equi­ librium in the liquidity preference vs loanable funds episode (1936–1956)” (The

viii

Contributors to the two volumes

European Journal of the History of Economic Thought, 2021); and “Sismondi’s Price Theory: From a Liberating to a Despotic Market” (History of Political Economy, 2021). Essais sur l’histoire de la pensée économique. Un nain sur les épaules de géants (in French and English) (Classiques Garnier, 2022). Clément Coste is Associate Professor at Sciences Po Lyon, France, and a member of the research centre Triangle (Centre National de la Recherche Scientifique). His recent publications include “A trilogy of debt: the emancipatory virtue of public debt in Saint-Simonian, liberal and socialist discourses in nineteenth cen­ tury France (1825–1852)” (The European Journal of the History of Economic Thought, 2020); “Inventorier et inventer la société. Constantin Pecqueur (1801– 1887): expertise sociale et processus de socialisation” (L’Année Sociologique, 2017); “ ‘Si je crois à la liberté c’est que je crois à l’égalité’: philosophie pour une république sociale et pratique de l’égalité autour de 1848” (Revue euro­ péenne des sciences sociales, 2018); and “L’économique contre le politique. La dette, son amortissement et son financement chez de jeunes et vieux saint­ simoniens (1825–1880)” (Cahiers d’économie politique, 2016). He also edited De la République de Constantin Pecqueur (Presses Universitaires de FrancheComté, 2017, with L. Frobert and M. Lauricella). Thierry Demals is Associate Professor at the University of Lille, France, and a member of the research centre Clersé (Cnrs, University of Lille). His recent pub­ lications include “Forbonnais, the two balances and the Économistes” (with Alex­ andra Hyard, The European Journal of the History of Economic Thought, 2015); “Mercantilism and the science of trade” and, with Gilbert Faccarello, “French Enlightenment” (both in G. Faccarello and H.D. Kurz (eds), Handbook on the History of Economic Analysis, vol. 2, Edward Elgar, 2016); “Enlightenment in Europe” (Routledge Historical Resources/History of Economic Thought, 2017); and “Pareto and Saint-Simonianism. The History of a Criticism” (with Alexandra Hyard, The European Journal of the History of Economic Thought, 2020). Ragıp Ege is Emeritus Professor at the University of Strasbourg and a member of the research center Beta (Centre National de la Recherche Scientifique). His recent publications include “The employment contract with externalized costs: The avatars of Marxian exploitation” (with Rodolphe Dos Santos Ferreira, The Euro­ pean Journal of History of Economic Thought, 2018); “L’aggiornamento des sciences économiques en France: le cas strasbourgeois au tournant des années 1970” (with Rodolphe Dos Santos Ferreira and Sylvie Rivot, Œconomia. His­ tory, Methodology, Philosophy, 2020); “The net product in the ‘Formule du Tableau Économique’: Lessons from a formalism” (with Rodolphe Dos Santos Ferreira, Portuguese Economic Journal, 2022); and “From a Hegelian to a Smithian Reading of Rawls” (with Herrade Igersheim, in Economic Reason and Political Reason. Deliberation and the Construction of Public Space in the Society of Communication, edited by Jean Mercier-Ythier, ISTE/Wiley, 2022). Gilbert Faccarello is Emeritus Professor at Panthéon-Assas University, Paris, France. He is a co-founder of The European Journal of the History of Economic

Contributors to the two volumes ix Thought published by Routledge and acted as a chairman of the Council of the European Society for the History of Economic Thought. His publications include books and articles in the history of economic thought. Recently, he published “A Calm investigation into Mr Ricardo’s principles of international trade”, “A dance teacher for paralysed people. Charles de Coux and the dream of a Christian political economy” and “ ‘I profess to have made no discovery’. James Mill on comparative advantage” (The European Journal of the History of Economic Thought, 2015, 2017 and 2022), and he edited The Reception of David Ricardo in Continental Europe and Japan (Routledge, 2014, with Masashi Izumo), Handbook on the History of Economic Analysis (Edward Elgar, 2016, three volumes, with Heinz D. Kurz), Political Economy and Religion (2017, a special issue of The European Journal of the History of Economic Thought), Marx at 200 (2018, a special issue of The European Journal of the History of Economic Thought, with Heinz D. Kurz) and Malthus across Nations. The Reception of Thomas Robert Malthus in Europe, America and Japan (Edward Elgar, 2020, with Masashi Izumo and Hiromi Morishita). Ludovic Frobert is Research Director at the Centre National de la Recherche Scientifique and a member of the research centre Triangle (Lyon, France). He was the director of a national research programme on French utopian socialism between 1830 and 1870 (ANR “Utopies19”). His recent publications include “What is a just society? The answer according to the Socialistes Fraternitaires Louis Blanc, Constantin Pecqueur, and François Vidal” (History of Politi­ cal Economy, 2014), De la République de Constantin Pecqueur (1801–1887) (edited with C. Coste and M. Lauricella, Presses Universitaires de FrancheComté, 2017), “Theology and knowledge of the ‘collective man’ in the writings of Pierre-Simon Ballanche” (in J.L. Cardoso, H.D. Kurz, and Ph. Steiner (eds), Economic Analyses in Historical Perspective, Routledge, 2017), Les Canuts, ou la démocratie turbulente: Lyon 1831–1834 (2nd edition, Libel, 2017) and Une imagination républicaine, François-Vincent Raspail (1794–1878) (edited with J. Barbier, Presses universitaires de Franche-Comté, 2017). Antoin E. Murphy is a retired Professor and Fellow Emeritus of Trinity College Dublin, Ireland, and a co-founder of The European Journal of the History of Economic Thought published by Routledge. His publications include Richard Cantillon: Entrepreneur and Economist (Oxford University Press, 1986), John Law: Economic Theorist and Policymaker (Oxford University Press, 1997), Du Tot. Histoire du Système de John Law (1716–1720) (ed., INED, 2000), The Gen­ esis of Macroeconomics (2008), and The Fall of the Celtic Tiger (with Donal Donovan, Oxford University Press, 2013). Guy Numa is Associate Professor and Director of Graduate Studies at Colorado State University, Fort Collins, USA. His recent publications include “The Mon­ etary Economics of Jules Dupuit” (The European Journal of the History of Eco­ nomic Thought, 2016), “Charles Coquelin and Jules Dupuit on Banking and Credit” (Journal of the History of Economic Thought, 2017), “Jean-Baptiste

x

Contributors to the two volumes Say on Free Trade” (History of Political Economy, 2019), “Money as a Store of Value: Jean-Baptiste Say on Hoarding and Idle Balances” (History of Political Economy, 2020) and, with Alain Béraud, “Beyond Say’s Law. The Significance of J.-B. Say’s Monetary Views” (Journal of the History of Economic Thought, 2018) and “Retrospectives: Lord Keynes and Mr. Say: A Proximity of Ideas” (Journal of Economic Perspectives, 2019).

Arnaud Orain is Professor at the University of Paris 8 (Saint-Denis, France). He was Davis Fellow of the History Department of Princeton University in 2015– 16 and Florence Gould Fellow of Princeton Institute for Advanced Study in 2020–21. His recent publications include Les voies de la richesse? La physi­ ocratie en question (1760–1850) (edited with G. Klotz and Ph. Minard, Presses Universitaires de Rennes, 2017), La politique du merveilleux. Une autre histoire du Système de Law, 1695–1795 (Fayard, “L’épreuve de l’Histoire”, 2018) and Les savoirs perdus de l’économie. Contribution à l’équilibre du vivant (Gal­ limard, “Nrf essais”, 2023). Jean-Pierre Potier is Emeritus Professor at the Université Lumière (Lyon, France) and a member of the research centre Triangle (Centre National de la Recherche Scientifique). He was a co-editor of the Œuvres économiques complètes de Auguste et Léon Walras (Economica) and is presently a co-editor of the Œuvres complètes de Jean-Baptiste Say. His recent publications include Léon Walras, économiste et socialiste libéral. Essais (Classiques Garnier, 2019), “Auguste and Léon Walras and Saint-Simonianism” (The European Journal of the History of Economic Thought, 2020, with G. Jacoud), “Dialogues Manqués Between Antonio Gramsci and Piero Sraffa on Ricardo, Classical Political Economy and ‘Pure Economics’” (in Maria Cristina Marcuzzo, Ghislain Deleplace, and Paolo Paesani (eds), New Perspectives on Political Economy and Its History, Palgrave-Macmillan, 2020) and the critical edition of Léon Walras’s translation of W.S. Jevons’s Theory of Political Economy (Classiques Garnier, 2022, with N. Chaigneau). Claire Silvant is Associate Professor at the Université Lumière (Lyon, France) and a member of the research centre Triangle (Centre National de la Recherche Scientifique). She also was in charge of a research programme on the history of public economics sponsored by the European Society for the History of Economic Thought. Her recent publications include “Gustave Fauveau’s con­ tribution to fiscal theory” (The European Journal of the History of Economic Thought, 2010), “Inheritance and property rights in the mid-19th century French liberal thought” (The European Journal of the History of Economic Thought, 2015), “Dette publique et financement de l’État chez les économistes français (1840–1900)” (Œconomia. History, Methodology, Philosophy, 2019), “The French financial controversies in the aftermath of the 1848 crisis: an overview of socialist and liberal Positions” (with Clément Coste, Research in the His­ tory of Economic Thought and Methodology, 2020) and, with François Etner, Histoire de la pensée économique en France depuis 1789 (Economica, 2017).

Contributors to the two volumes xi Philippe Steiner, trained in both economics and sociology, is emeritus professor of sociology at Sorbonne University (Paris, France) and former fellow of the Insti­ tut Universitaire de France. He published extensively in the history of economic thought and economic sociology. His recent publications include Durkheim and the Birth of Economic Sociology (Princeton University Press, 2011), Donner. Une histoire de l’altruisme (Presses Universitaires de France, 2016, Best Book Award of the European Society of the History of Economic Thought, 2017), Calculation and Morality in the Abolition of Slavery in France (with C. OudinBastide, Oxford University Press, 2019, Best Book Award of the History of Economics Society, 2021 and Best Book Award of the European Society of the History of Economic Thought, 2022) and Comment ça matche. Une sociologie de l’appariement (Presses de Sciences-Po, 2022, edited with Melchior Simioni).

Preface

Notre héritage n’est précédé d’aucun testament.1 The cultural treasures of the past, believed to be dead, are being made to speak, in the course of which it turns out that they propose things altogether different from the familiar, worn-out trivialities they had been presumed to say.2

Traditionally, there has been a long and sustained interest in studying the history of economic ideas in France. Yet, after World War II, this interest appeared to wane as attention shifted to the study of British and American authors and traditions. However, in recent decades, there has been a renaissance of interest in the contri­ butions of French-speaking authors. This revival was sometimes propelled by the publication of critical editions of major works such as those of Pierre Le Pesant de Boisguilbert, François Quesnay, Jean-Baptiste Say, Claude-Henri de Saint-Simon, Jean-Charles Léonard Simonde de Sismondi, Jules Dupuit and Léon Walras. It was also helped by the emerging availability on the internet of a sizeable num­ ber of scanned original works which would have been otherwise difficult to find. As a result, the field of study has been considerably extended, and novel original research has been made possible. Examples of this new research are eighteenthcentury studies highlighting “commerce politique”, sensationist political econ­ omy, quantification and formalisation. Nineteenth-century studies have provided detailed analyses on the different approaches of the liberal economists and the many attempts to propose alternative views, such as Christian political economy or the multifaceted developments proposed by associationist or socialist authors. All these advances necessarily changed the perspective from which the story was usually told. Based on this flow of recent research, the objective of this book is to present a new assessment of the history of political economy in France. Besides novel presentations of some traditional subjects, the reader will find topics that are not usually studied, and which are yet part and parcel of this history and contribute in 1 “Our inheritance was left to us by no testament”. René Char, Feuillets d’Hypnos, Paris: Gallimard, 1946. 2 Hanna Arendt, “Martin Heidegger at Eighty”, The New York Review of Books, 21 October 1971.

Preface xiii an important way to its understanding. The present work focuses on what could be called the “golden age” of French political economy, a period extending from 1695 to 1914. It symbolically starts with Boisguilbert’s foundation of laissez-faire at the end of the seventeenth century and ends with World War I. It is divided into two volumes, reflecting two very distinct phases of the evolution of economic ideas in France, separated by the traumatic events of the French Revolution. The first volume deals with political economy in the Age of Enlightenment, while the sec­ ond analyses political economy during the long nineteenth century, combining an assessment of both liberals and their opponents. Additionally, a Prelude, in Volume 1, presents the main features of the Age of Enlightenment and some developments which happened prior to this period. A substantial Postlude, in Volume 2, deals with the main theoretical developments which took place after World War I. Finally, there are a number of relevant issues here to bring to the attention of the reader. Firstly, the book deals with the history of political economy in France, and not strictly speaking French political economy because it focuses on works originally published in the French language: many important authors – such as John Law, Richard Cantillon, Ferdinando Galiani, Jean-Charles Léonard Simonde de Sismondi, Antoine-Élisée Cherbuliez, Gustave de Molinari or Vilfredo Pareto, for example – while not French but Scottish, Irish, Neapolitan, Swiss, Belgian, Ital­ ian – published path-breaking writings in the French language and played a major role in French debates. Secondly, the approaches used in the various chapters may be different, due to the subject discussed. However, aside from the analytical devel­ opments, they also concentrate on the institutional, political and/or philosophical aspects of these subjects. Thirdly, while comprehensiveness is of course out of reach in such an enterprise, the developments are nonetheless substantial and offer the readers a wealth of new analyses and perspectives. Fourthly, throughout the book, and unless otherwise indicated, italics in quotations are always those of the original works. Such a work could not be but a collective venture and the various chapters have been assigned to the relevant specialist(s). The editors are sincerely grateful to the authors who patiently and very professionally accepted the review process. They also would like to thank them – and the publishers – for their patience during the long gestation of this work. Gilbert Faccarello and Claire Silvant

Part I

Political economy in the age of industry

1

Prelude I Political economy in the age of industry Claire Silvant

The first volume of this book identified the existence of a genuine French liberal tradition from the eighteenth century onwards. Pierre Le Pesant de Boisguilbert (1646–1714), Anne Robert Jacques Turgot (1727–1781), François Quesnay (1694– 1774), M.J.A.N. Caritat de Condorcet (1743–1794) and other authors contributed in a substantial way to this tradition, which proved to be distinct from the British liberal approach. The passage to the nineteenth century was indeed complex (see Vol. I, Chapters 8 and 9) but, after the 1789 Revolution and the First Empire, French liberal thought – while sometimes heavily contested – consolidated and gradually became institutionalised: a process which is reflected in the progressive but slow triumph of liberal democracy during the last decades of the nineteenth century. From the perspective of the history of economic thought, the economists of the nineteenth century appear as direct or indirect heirs of the Enlightenment and the Revolution. They were struggling for freedom, both economically and socially, and shared a strong distrust of the regulations and arbitrariness of the Ancient Regime and of some episodes of the Revolution – especially the 1793–94 Terror. The authoritarianism of the First Empire further increased their rejection of any form of absolutism. Nineteenth-century French political economy would long bear these markers and a majority of French economists adhered to a form of uncom­ promising liberalism. Moreover, to them, the advent of industrialisation and free trade should have enabled a lasting improvement in the material living conditions of all social classes, whereas their critiques (below, Part II) expressed fears about its consequences. 1. Setting the stage From a global economic viewpoint, the nineteenth century was undoubtedly a period of great transformations, which provided fertile ground for the develop­ ment of political economy. The industrial revolution, characterised by a profound change in production structures and the organisation of labour, started in the 1830s in France, gradually transforming pre-industrial activities into modern industries, with steady economic growth (Verley 1985). Industrial production, mainly of con­ sumer goods, grew significantly, fuelled by the development of railways from the end of the 1820s, by the modernisation and extension of the banking system DOI: 10.4324/9780429202407-2

4

Claire Silvant

from the middle of the century, and by the support of public financing. Econo­ mists naturally witnessed these phenomena, which they sought to understand and explain. They believed that progressive liberalisation of the economy would allow the industrial and financial apparatus to gain in efficiency and tear France away from a state of backwardness. Like the Saint-Simonians and the socialists, liberal economists shared a hope for economic and moral progress, but they analysed the consequences of the industrial revolution differently. They were aware of the sad phenomenon of pauperism, and they had read the results of the inquiries of Louis René Villermé (1782–1863) in his Tableau de l’état physique et moral des ouvri­ ers employés dans les manufactures de coton, de laine et de soie (1840). However, they still believed that economic freedom would end in increased welfare for all – pauperism being ascribed by most of them to a problem of individual moral behav­ iour of the lower classes and of some greedy entrepreneurs. Two turning points marked the history of economic thought of the nineteenth century: the first occurred in 1848, and the second in the early 1870s. The pre­ 1848 situation can be analysed as a period of progressive consolidation of lib­ eral political economy. Before 1848, the relations of liberal economists to political power had fluctuated. During the First Empire and the Restoration, they clearly belonged to the opposition and censorship was a constant threat – as it was for Jean-Baptiste Say (1767–1832) in his time.1 Political economy was viewed as sub­ versive and had no place either at the Institut de France (until Guizot re-established the Classe des Sciences Morales et Politiques in 1832) or in French universities (until 1864). However, these relations slowly improved after the July Revolution: the new regime facilitated the expansion of liberal ideas and the institutionalisation of political economy. Say’s heirs increasingly entered the political arena, by acquir­ ing positions as ministers, prefects, ambassadors, or by being elected to parliament. This entry into the political realm went hand in hand with the beginnings of the institutionalisation of political economy, initiated by Say’s followers; in the 1840s, the liberals, grouped within the Société d’économie politique (see below), formed an opposition to the protectionist temptations of Adolphe Thiers (1797–1877) for example, and to the colonialist arguments of Alexis de Tocqueville (1805–1859) (Leter 2006). Apart from Pellegrino Rossi (1787–1848) and a few others, they also denounced the conservatism of François Guizot (1787–1874). The intellectual activities of the socialists and the Saint-Simonians were very intense in the pre­ 1848 period (see Part II of this volume); the liberals denied any relevance to their ideas but still did not measure the threat they would cause a few years later, either intellectually or politically. They even showed a certain openness to Pierre-Joseph Proudhon (1809–1865), with whom some had friendly relations, and several of whose works were published by Gilbert-Urbain Guillaumin (1801–1864), the liberals’ favourite publisher. 1 Say’s Traité d’économie politique was censored soon after publication, as he was reproached for not having changed some of his positions which were considered too liberal by Bonaparte. Publication of the Traité was again authorised in 1815 after the fall of the Empire. Other liberals, such as Charles Dunoyer (1786–1862) and Charles Comte (1782–1837), suffered from censorship.

Prelude I 5 In this period, classical ideas spread in France, mainly coming from Great Britain, thanks to the numerous translations of classical works published since the end of the eighteenth century. Adam Smith’s ideas had circulated easily in French-speaking areas since some early translations during the last decades of the eighteenth century (see Vol. I, Chapter 9; Faccarello and Steiner 2002). Henry Thornton’s 1802 Enquiry into the Nature and Effects of the Paper Credit of Great Britain had been translated in 1803. Malthus’ ideas on population also began to be disseminated in France from 1805 onwards and his 1820 Principles of political economy, considered with a view to their practical application was published in French the same year of its publication in Great Britain (Faccarello 2020). Last but not least, David Ricardo’s works also were available in French from the 1810s onwards: The High Price of Bullion was translated in 1810 and the Principles of Political Economy and Taxation in 1819 (Béraud and Faccarello 2014). In a nut­ shell, although the translations were sometimes questionable, classical British eco­ nomic thought circulated with some ease in France, and Smith’s ideas, especially, influenced French readers.2 The liberal political economy that developed in France at that time was thus in dialogue with the English school, without, however, being subjugated by it. The 1848 Revolution brought a break in this period of affirmation of liberal thought, with two consequences. First, the outburst of violence during the revolu­ tion and the radicalisation of the movement left lasting marks (Demier 2001): the socialist threat was now taken seriously, and there was no longer any question of treating with benevolence or patronising the writings of the socialists that had flourished in the preceding years.3 After 1848, a radicalisation of liberal thinking could be observed: private property had to be defended, and it had to be proved just and efficient. Liberal economists protested against the authoritarian organisation of labour and Louis Blanc’s “droit au travail” (right to have a job): they vehemently opposed the implementation of National Workshops and responded with a plea for the freedom of labour. Along with this theoretical fight against interventionist ideas, a political softening of their relations to political power occurred. After an initial period of mistrust and surveillance in the early years of the Second Empire, the regime took a liberal turn in 1860, which obviously benefited the economists of the liberal group. The movement was twofold: the Empire took a step towards liberalism, and in return, some eminent liberals supported the regime (Le VanLemesle 2004; Schwartz 2022). They thus accompanied the free-trade turn of the French economy and one of them, the former Saint-Simonian Michel Chevalier (1806–1879), was an architect of the effective trade opening by participating with Richard Cobden in the preparation of the Anglo-French free trade agreement (23 January 1860). After 1848, French liberal economists also significantly increased 2 As shown by Béraud et al. (2004), and by Béraud and Faccarello (2014), a liberal, classical, Smithinspired political economy emerged in France from the 1820s, which kept a good distance from Ricardian analysis, apart from a few isolated followers. 3 Only Proudhon partly escaped their vindictiveness, because of his moderate position in 1848, and because he shared the liberals’ distrust of state intervention in the economy.

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their presence in Parliament (Breton 2005), as was also occurring elsewhere in Europe during the same period. After the fall of the Empire in 1870, the first years of the 1870s marked another turn at several levels, for reasons that are both general and specifically French. France’s defeat by Prussia in 1871 came as an unprecedented shock. It was inter­ preted as France’s failure to develop skilled political and administrative elites, call­ ing for a deep change in education, in particular regarding political economy. The reforms that followed were mainly detrimental to the liberals: many of them did not find a place in the new organisation of university teaching of political economy (see Chapter 7 of this volume).4 The “long stagnation” (Breton et al. 1997) that occurred between 1873 and 1893 also called for a theoretical renewal, as both the analyses and the remedies considered by the liberals – especially Charles Coquelin’s (1802–1852) and Clément Juglar’s (1819–1905) “optimistic” analysis of cycles based on self-regulation – seemed to have failed. Finally, French Liberals were also experiencing a more general trend, which was occurring all over Europe: from the 1870s onwards, classical ideas were challenged by the new theories of historicism and marginalism. During the Third Republic, they lost ground under the growing influence of interventionists, nationalists and protectionists. 2. The rise and decline of liberal political economy The long nineteenth century is thus undoubtedly that of the rise and apogee of liberal political economy between the July Monarchy and the Second Empire, and its decline from the 1870s. The first part of this volume naturally begins with Jean-Baptiste Say and Antoine-Louis-Claude Destutt de Tracy (1754–1836), that is to say, with the Idéologues. The transition from the eighteenth to the nineteenth century was cer­ tainly accomplished through them; they were the bridge-builders between Turgot, Condillac, Condorcet and the Physiocrats, and the subsequent economists who were the architects of the institutionalisation of liberal political economy. Thus, both participated in a decisive way in the development of the French liberal tradi­ tion. Say’s role was especially crucial, in two respects. First, from an analytical viewpoint, he orientated classical French political economy in a particular way, focusing on the role of political economy to pro­ mote the industrialisation and modernisation of the French economy, and on the imperious necessity of competition in this process. He insisted on interest “well­ understood” as a way of reconciling economic efficiency and social justice, as we would say nowadays. His Traité d’économie politique remained the reference, the gospel of liberal political economy for a large part of the nineteenth century. Some 4 However, it should be mentioned that some liberal economists, such as Edmond Villey (1848–1924) and Alfred Jourdan (1823–1891), taught political economy in law faculties after 1880; furthermore, their influence outside the law faculties was still important, notably with Paul Leroy-Beaulieu (1843– 1916) at the École Libre des Sciences Politique and the Collège de France, and Clément Colson (1853–1939), again at the École Libre and the École Polytechnique.

Prelude I 7 other contemporary figures were also of some weight,5 but they never attained the aura of the founding fathers. Say’s role, however, was not only intellectual. He also played a decisive part in the institutionalisation process, which took place from the 1820s onwards. He held the two first academic chairs of political economy (at the Conservatoire des Arts et Métiers and at the Collège de France), which were afterwards occupied by other liberals. After his death, his family and friends – in particular, his son Horace (1794–1860) and his disciple and friend Adolphe-Jérôme Blanqui (1798–1854) – played an active part in the creation of the Journal des économistes (1841) and the Société d’économie politique (1842), which both had a central role in the dissemi­ nation of liberal economic ideas during the following decades. The liberal group, to which the third chapter is devoted, was formed in the 1830s mainly by Say’s followers.6 It gradually expanded during the Second Empire to become what Le Van-Lemesle (2004) called a “liberal lobby” who defended free trade, freedom of labour and laissez-faire at different levels: some publicists taught courses with a strong liberal flavour and published numerous treatises and hand­ books based on French classical political economy (Steiner 2012); others encour­ aged public debate by publishing articles or pamphlets; and yet others delivered economic advice to the government. Despite some important nuances, which will be presented in due course, they shared a classical (following the principles of Smith and Say) and individualistic way of thinking; they also mostly relied on the doctrine of natural law defended by Benjamin Constant (1767–1830), which enabled them to justify private property, freedom of labour and freedom of trade. After having been long neglected, the interest in French liberal thought after Say increased in the wake of Yves Breton and Michel Lutfalla’s seminal works in the 1980s, in which its heterogeneity and multifaceted developments were largely demonstrated (Breton and Lutfalla 1991). However, in the 1870s, important intellectual, societal and political changes took place, leading to a destabilisation of the liberal group and its gradual decline. For the liberal economists, the change was methodological and generational. It was the time when, in the whole of Europe, one could witness a progressive fading of classical ideas and deductivism, in parallel with a move towards more empirical economic studies. The influence of new methods, in particular historicism, mainly came from beyond the Rhine and denied the existence of universal laws capa­ ble of explaining economic phenomena, advocating an analysis rooted in history 5 Say had a crucial role in this respect, from both an intellectual and an institutional viewpoint. This nevertheless should not overshadow the contribution to political economy of some other lesserknown figures, who published significant works during the first two decades of the century, such as Louis-François Guillaume de Cazaux (1785–1840), Charles Ganilh (1758–1836), Alexandre Maurice Blanc de Lanautte, comte d’Hauterive (1754–1830), Joseph-Michel Dutens (1765–1848) or Joseph Droz (1773–1850). 6 It is noteworthy, however, that Charles Comte, Say’s disciple and son-in-law, was dismissed by Guizot from his succession to the Collège de France, in favour of Rossi. Some influential econo­ mists, such as Frédéric Bastiat and Gustave de Molinari, defended ideas that differed from those of Say.

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and sociology. Other novel insights, those of the marginalists, came to undermine French liberal economists – even if their influence remained limited in France for a time. This methodological turn came with a generational change: the gen­ eration of Joseph Garnier (1813–1881), Louis Wolowski (1810–1876) and Michel Chevalier aged and disappeared without leaving any equally outstanding and influ­ ential heirs. Certainly, there remained some important French liberal figures by the end of the century, such as Yves Guyot (1843–1928) or Gustave de Molinari (1819– 1912), but their thought was too radical to become a new common barycentre. In addition, the liberal economists hardly found their place in the newly created chairs of economics in the law faculties (1877), which allowed for different perspectives, including the defence of trade protection, an increased emphasis on the social ques­ tion, the promotion of cooperation or the call for stronger state interventionism. The courses of political economy taught by the professors of the new generation – Paul Leroy-Beaulieu (1843–1916) at the Collège de France, Charles Gide (1847– 1932) and Paul Cauwès (1843–1917) in the law faculties for example – were far away from those professed by their elder fellow economists. As a result, the liberal group became rigid and reduced its sphere of influence. Thus, on the eve of World War I, liberal thought had been challenged by the new conceptions of the professors of economics in the law faculties, as well as by the development of mathematical economics and economic calculation. 3. Mathematical economics and economic calculation Say’s legacy went far beyond the group of liberal economists. The contributions of Antoine-Augustin Cournot (1801–1877) and Jules Dupuit (1804–1866) were also extensively influenced by Say’s thought, even though they differed from him meth­ odologically (by using mathematical tools) as well as on certain theoretical issues (in particular the theory of value). Later, the work of Léon Walras (1834–1910), influenced by his father Auguste Walras (1801–1866), would also bear the mark of Say’s political economy, especially regarding the issues of equilibrium and com­ petition (Potier 2019). These three economists, to whom this volume devotes a chapter each, are in their own ways the heirs of a tradition of mathematisation of social and economic questions inherited from the eighteenth century (see Vol. I, Chapter 8). Each of them, in a very distinctive way, made major contributions to economic theory, which were ground-breaking steps in the development of modern economic analysis. Antoine-Augustin Cournot’s intellectual portrait is quite unique: he was a dis­ tinguished mathematician (initially specialised in mechanics and astronomy) and developed from his midlife a strong interest in the history and philosophy of sci­ ence, and in economics. If Cournot’s economic works were relatively ignored by his contemporaries, his contributions were considered in retrospect to be of major importance by the most eminent subsequent economists, notably Léon Walras, William-Stanley Jevons and Alfred Marshall. Indeed, he was the first to make explicit a decreasing function of demand with respect to price (his “loi du débit”), and to present a mathematical theory of price determination taking into

Prelude I 9 account the possibility of different market structures, from monopoly to “unlim­ ited competition”, in partial equilibrium; his analysis of the duopoly is, in this respect, singularly ground-breaking. In his analysis of monopoly, he introduced the concept of marginal cost – although without naming it so – and the principle of profit maximisation. Finally, another of his key achievements was his analy­ sis of the effect of taxation on consumers and producers, and his introduction of the notion of social income, distinguishing its nominal and real variations. In his late writings, Cournot distanced himself from liberal principles and took a criti­ cal stance towards some liberal economists, especially towards Frédéric Bastiat’s (1801–1850) optimistic views. Jules Dupuit belonged to a distinct current of authors, that of the French engineereconomists, whose roots go back to the creation of the corps des Ponts et Chaussées in 1716 and the École Royale des Ponts et Chaussées in 1747, the ramifications of which go as far as the most prestigious French economists of the recent period. In contrast to Cournot, who primarily addressed theoretical problems, Dupuit was a practitioner of public economics, who aimed at solving concrete issues related to the building or maintenance of public infrastructure. The context in which he contributed to political economy was also quite different from that of Cournot: although he was deeply involved in the liberal networks mentioned above, his most path-breaking contributions were expressed in other circles, those of the engineers of the Polytechnique and Ponts et Chaussées. He renewed the method for measur­ ing utility, introducing the concept of public utility and the principle of economic surplus with the meaning that welfare economics would later give to it. This is why he was considered by the commentators as a pioneer, to whom the “secret origins of modern microeconomics” (Ekelund and Hébert 1999) could be traced back, long before the marginalist authors of the 1870s. Finally, Léon Walras’s profile is again different. After a phase of professional uncertainty, during which he had some difficulty in finding his place among engi­ neers, liberals and socialists, he succeeded in obtaining the Chair of political econ­ omy in Lausanne (1870). From the perspective of economic analysis, Walras’s masterpiece is undoubtedly his formulation of general equilibrium analysis, in his Éléments d’économie politique pure (1874–77), whilst other marginalists limited themselves to partial equilibrium analysis. Walras’ approach is, like Cournot’s, that of a theorist applying a rational method, whose aim was therefore to study the interdependencies between markets – expressed through systems of equations – and the resulting formation of a general equilibrium. His formalisation has become the “Magna Carta of economic theory”, as Joseph Schumpeter noted (1954, 233). Nevertheless, Walras’s political economy cannot be reduced to its pure economics. Pure economics constitutes a trilogy with two other branches of economic science, social economics and applied economics, which he exposed in two later volumes: Études d’économie sociale (1896) and Études d’économie politique appliquée (1898), dealing respectively with production and the distribution of social wealth. Far from being a supporter of individualism, of which the Éléments d’économie politique pure would be the prototype, Walras provided an analysis that recon­ ciles the interests of the individual and those of society (Lallement 2017), and

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which attributes extensive functions to the State, including land ownership. As his Études show, he claimed throughout his life to be a “liberal scientific socialist” (Potier 2019). At the end of the century, Walras found a successor in Albert Aupetit (1876– 1944), while Clément Colson continued Dupuit’s work on public economics. Other engineers investigated different fields: Marcel Lenoir (1881–1927) used the most advanced developments in statistics to study the formation and dynamics of prices, building an approach that would be now described as econometric, and Maurice Potron (1872–1942), who developed a pioneering input-output analysis. But the most spectacular innovations of the period certainly came from the mathemati­ cians: Joseph Bertrand (1822–1900) renewed the analysis of oligopoly by reject­ ing some of Cournot’s hypotheses, and Jules Regnault (1834–1894) and Louis Bachelier (1870–1946) made decisive contributions to mathematical finance by introducing new concepts in the theory of probability. References Béraud, Alain, and Gilbert Faccarello. 2014. “ ‘Nous marchons sur un autre terrain.’ The reception of Ricardo in the French language”. In Masashi Izumo and Gilbert Faccarello (eds), The Reception of David Ricardo in Continental Europe and Japan. Abingdon and New York: Routledge, pp. 10–75. Béraud, Alain, Jean-Jacques Gislain, and Philippe Steiner. 2004. “L’économie politique néo-smithienne en France (1803–1848)”. Économies et sociétés (Cahiers de l’Isméa), XXXVIII (2), 325–418. Breton, Yves. 2005. “French economists in parliament from the second republic to the out­ break of the great crisis (1848–1929)”. In Massimo M. Augello and Marco E.L. Guidi (eds), Economists in Parliament in the Liberal Age. Aldershot and Burlington: Ashgate, pp. 129–62. Breton, Yves, Albert Broder, and Michel Lutfalla (eds). 1997. La longue stagnation en France. L’autre grande dépression. 1873–1897. Paris: Économica. Breton, Yves, and Michel Lutfalla (eds). 1991. L’économie politique en France au XIXe siècle. Paris: Économica. Demier, Francis. 2001. “Les Économistes libéraux et la crise de 1848”. In Pierre Dockès, Ludovic Frobert, Gérard Klotz, Jean-Pierre Potier, and André Tiran (eds), Les traditions économiques françaises. Paris: CNRS Éditions, pp. 773–84. Ekelund, Robert B., and Robert F. Hébert. 1999. Secret Origins of Modern Microeconomics: Dupuit and the Engineers. Chicago, IL: University of Chicago Press. Faccarello, Gilbert. 2020. “ ‘Enlightened Saint Malthus’ or the ‘gloomy protestant of dis­ mal England’? The reception of Malthus in the French language”. In Gilbert Faccarello, Masashi Izumo, and Hiromi Morishita (eds), Malthus across Nations. The Reception of Thomas Robert Malthus in Europe, America and Japan. Cheltenham and Northampton: Edward Elgar, pp. 83–173. Faccarello, Gilbert, and Philippe Steiner. 2002. “The diffusion of the work of Adam Smith in the French language: An outline history”. In Keith Tribe (ed.), A Critical Bibliography of Adam Smith. London: Pickering and Chatto, pp. 61–119. Lallement, Jérôme. 2017. “Individu et société selon Walras”. Revue de philosophie économ­ ique, 18 (1), 57–89.

Prelude I 11 Leter, Michel. 2006. “Éléments pour une étude de l’École de Paris”. In Philippe Nemo and Jean Petitot (eds), Histoire du libéralisme en Europe. Paris: Presses Universitaires de France, pp. 429–509. Le Van-Lemesle, Lucette. 2004. Le Juste ou le Riche. L’enseignement de l’économie poli­ tique, 1815–1950. Paris: Comité pour l’Histoire Économique et Financière de la France. Potier, Jean-Pierre. 2019. Léon Walras, économiste et socialiste libéral. Paris: Classiques Garnier. Schumpeter, Joseph Alois. 1954. History of Economic Analysis. Electronic edition: Routledge, Taylor & Francis e-Library, 2006. Schwartz, Antoine. 2022. Le libéralisme caméléon. Les libéraux sous le Second Empire 1848–1870. Coll. Les Cahiers de la MSHE Ledoux. Besançon: Presses Universitaires de Franche-Comté. Steiner, Philippe. 2012. “Cours, Leçons, Manuels, Précis and Traités: Teaching political economy in nineteenth-century France”. In Massimo M. Augello and Marco E. L. Guidi (eds), The Economic Reader. Textbooks, Manuals and the Dissemination of the Economic Sciences during the 19th and Early 20th Centuries. London: Routledge, pp. 76–95. Verley, Patrick. 1985. La révolution industrielle. Collection Folio/Histoire. Paris: Gallimard, 1997.

2

The “founding fathers” of the

French liberal thought

A-L-C. Destutt de Tracy and

Jean-Baptiste Say

Alain Béraud and Guy Numa

The history of political economy in nineteenth-century France is naturally associated with the contributions and the legacy of French classical econo­ mist Jean-Baptiste Say (1767–1832). Undoubtedly one of the most influential authors in the economic discipline, Say is known for his “law of outlets”1 (“loi des débouchés”) – known as “Say’s Law” – and for his pioneering analysis of the role of the entrepreneur. Say quickly became the intellectual reference for generations of French liberals. Three main characteristics emerge from his work: (1) he viewed political economy as the key to promoting modern industrial soci­ ety against the errors and abuses of the Ancien Régime and Napoleon’s policy; (2) in his framework, competition was not only an economic concept but also a political and moral principle in that it conveyed the idea of the social harmony of private interests; and (3) government intervention was required to achieve economic efficiency and social justice. This chapter explores Say’s multifac­ eted life and discusses his intellectual influences. Say’s views on production, value, income distribution, money, economic crises and the role of government are examined in turn. But in the first decades of the nineteenth century, another author was influential: Antoine-Louis-Claude Destutt de Tracy (1754–1836). Alongside Pierre Cabanis, leader of the Idéologues, he played a pivotal role in the development of the French liberal tradition. From a philosophical standpoint, like Turgot, he followed the sen­ sationist approach of John Locke and Étienne Bonnot de Condillac – “our sensa­ tions are the source and the origin of our ideas” (Destutt de Tracy 1796, 289). From a political standpoint, he distinguished between national governments and special governments: in the former, all rights and powers belonged to the entire nation based on the “general will”,2 while other legitimate sources of rights and powers (divine authority, conquest, birth, etc.) existed in the latter. Like Jean-Jacques Rousseau, he 1 The expression “law of markets” is often used in reference to Say’s Law. The problem is that this term does not allow to accurately describe the issue that Say sought to resolve: what are the causes that open greater or lesser outlets to products? 2 In the Social Contract, Rousseau (1762, 56–7) defined the general will as something that every citi­ zen should want for the good of all citizens. Destutt de Tracy does not refer to Rousseau’s definition. Instead, for him the general will is the “sum” of individual wills. DOI: 10.4324/9780429202407-3

The “founding fathers” of the French liberal thought 13 was convinced that direct democracy was only viable in a small country. For him, a system of representative government wherein citizens equally and freely choose their delegates could guarantee the permanence of democracy. He thus opposed those like Charles Louis de Montesquieu who considered the 1689 English Bill of Rights a symbol of perfection: the model to follow was the liberal system of the United States, not that of England (Destutt de Tracy 1819, 159). His philosophy led him to deal with political economy and to develop ideas close to Say’s but some­ times in disagreement with them.3 This is the reason why his developments are also examined in this chapter. 1. Life and background Say’s life was as fascinating as his work. He was successively bank clerk, sol­ dier, publicist, managing editor, government official, factory owner, and ultimately became one of the first professors of political economy in France. Say was born in Lyon on 5 January 1767, in a Huguenot family deeply rooted in business.4 His father, Jean Étienne Say, was a Swiss-born silk merchant in Lyon, and later a bank and currency trader in Paris. At the age of 15, Say started an apprenticeship in a trading house in Paris, then went to England and, in 1787, Étienne Clavière, a Swiss banker and businessman, took him on his insurance company. Say took an active part in the French Revolution. He briefly served as a soldier, and then he focused on literary activities. He worked at a newspa­ per, the Courrier de Provence, published by Gabriel-Honoré de Mirabeau, and was close to the Girondins, to whom Clavière, who was for a time Minister of Finance in 1792, had introduced him. In 1794, Say became the managing editor of the periodical La Décade philosophique, littéraire et politique. The incapacity of the Directoire to stabilise the Revolution led him and his friends, the Idéo­ logues, to support Napoléon Bonaparte’s Coup d’État on 18 Brumaire of Year VIII (9 November 1799). He became secretary of the Legislative Committee of the Conseil des Cinq-Cents and then, after the new Constitution of Year VIII, a member of the Tribunat, a legislative body. The first edition of Traité d’économie politique (henceforth Traité) was published in 1803. The book was a success and caught Bonaparte’s attention. He asked Say to release another edition of his text that would be more supportive of his economic policy. Say refused, and as a result, he was removed from the Tribunat following the partial renewal of its members in March 1804 (Jacoud 2020–21). He was and remained a Republican (Whatmore 2000, 12): for him “the representative government . . . is the necessary outcome of the economic progress of societies” (Say 1828–29, 954). But, disappointed by 3 “M. Destutt Tracy [is] a very agreeable old gentleman, whose works I had read with pleasure. I do not entirely agree with him in his Political Economy, – he is one of Say’s school: – there are neverthe­ less some points of difference between them” (Ricardo to Malthus, 16 December 1822, in Ricardo 1951–73, IX, 248). 4 The Huguenots were Protestants who fled religious persecution in France in the sixteenth and seventeenth centuries.

14 Alain Béraud and Guy Numa his experience, he rejected the idea that political freedom was the condition of economic progress: wealth is independent of the nature of government, a State can thrive if it is well administrated. . . . The forms of public administration have only an indirect and accidental influence on the formation of wealth, which is almost entirely the work of individuals. (Say 1803, 2)5 A heavily revised second edition of Traité was prepared quickly, but, in response to government censorship, it would not be released until 1814 and the fall of Napoleon. Stripped of all official appointments, Say instead turned to entrepreneur­ ship, owning and directing a cotton-spinning manufacture in Auchy in northern France from 1805 to 1812. Bothered by technical problems and by the restrictions on the import of cotton caused by the Continental blockade, he eventually sold his shares and returned to Paris near the end of 1812. He focused on writing and teach­ ing and became famous and widely read. After the fall of the Empire in 1814, Say travelled again to England, where he met James Mill, David Ricardo and Jeremy Bentham. He lectured at the Athénée, a private institution in Paris, which was a sort of political club for the liberal opposition to the policy of the Restoration. In 1819, a chair was created for him at the Conservatoire des Arts et Métiers: his lec­ tures were published as Cours complet d’économie politique pratique (henceforth Cours) in 1828–29. It is only after the 1830 Revolution and the July Monarchy that the government considered political economy an academic discipline, something that Napoléon and the Bourbons monarchy had previously opposed. A chair of political economy was created at the Collège de France; Say was the first to hold this chair until his death in Paris on 14 November 1832. Say authored three major texts. Traité, his magnum opus, was published in six editions (1803–41). He also authored Cours (1828–29, 1840), his second major publication even more voluminous than Traité, and Catéchisme d’économie poli­ tique (1815–26), published in the form of questions and answers. Among other titles, he also authored Lettres à M. Malthus (1820), a collection of five open letters to one of his detractors, Thomas Robert Malthus. Destutt de Tracy (1754–1836) came from a Scottish family who settled in France in the early fifteenth century. Appointed député representing the nobility at the États Généraux in 1789, he supported abolishing feudal privileges, embraced the declaration of human rights and the civil constitution of the clergy. He was a member of the Société de 1789 whose main leaders were M-J-A-N. Caritat de Condorcet and Emmanuel-Joseph Sieyès, and a member of the Club des Feuil­ lants which coalesced proponents of a constitutional monarchy. Elected député of the Assemblée Constituante in 1791, Destutt de Tracy sat alongside Duke Fran­ çois Alexandre de la Rochefoucault and Gilbert du Motier, marquis de La Fayette, 5 Translations of Say and Destutt de Tracy’s writings are ours, unless noted otherwise.

The “founding fathers” of the French liberal thought 15 who was a close friend. However, after the failure of the constitutional monarchy, he refused to follow them in exile. While retired at Auteuil, he spent time with Condorcet, Pierre Cabanis and Catherine Helvétius, among others. It was during that time that he studied Locke and Condillac and became familiar with the sensa­ tionist philosophy from which he designed his theory of “idéologie”, defined as the science of the formation of ideas. Arrested on 2 November 1793, during the Reign of Terror and scheduled to be tried on 29 July 1794, the downfall of Robespierre on July 27 spared his life. With the aid of Cabanis, Destutt joined the newly created Institut National des Sciences et des Arts (National Institute for Sciences and the Arts). On 21 April 1796, he read an essay on the ability to think in which he introduced the concept of ideology. He explained to his audience that he preferred this term in lieu of “psychology”, which “seemed to imply a knowledge of this being [the soul] that one surely does not flatter oneself to possess” (Destutt de Tracy 1796, 324). He was appointed senator for life by Napoleon in November 1799. Their rela­ tionship quickly deteriorated and, in 1814, he voted in favour of overthrowing the Emperor. Louis XVIII expressed his gratitude by naming him to the Chambre des pairs where he condemned the excesses of the Restoration and voted against all the laws opposing the spirit and progress inspired by the Revolution. From 1801 to 1815, he published his Éléments d’idéologie. The first volume (1801) deals with ideology per se, the second (1803) is concerned with grammar, the third (1805) addresses logic, while the fourth and fifth (1815) are titled Traité de la volonté et de ses effets. The fourth volume was reprinted as Traité d’économie politique in 1823.6 In 1811, Destutt’s Commentaires sur l’esprit des lois de Mon­ tesquieu were published in the United States by Jefferson without mentioning the name of the author of the book. The French version of the book appeared in 1819. Although the content of Commentaires was primarily political in nature, the book contains famous passages about the economy, particularly those that were wrongly interpreted as indicative of Destutt’s espousing the labour theory of value in the sense of Ricardo. 2. Industrialism and “practical political economy” Say strongly believed disseminating economic knowledge in the social body was the key to modernity. In this perspective, political economy was designed to be a useful and practical science. “Industry” or industrialism, a cornerstone of his system of thought, played a significant role in the new era of progress that he envi­ sioned, in his study of the relationship between the individual and society. In using the term “industry”, Say went beyond highlighting the superiority of manufactur­ ing in jumpstarting individual and social wealth: industry designated “the action of physical and moral forces of man applied to production” (1814, 1121), which

6 This new title was already that of the American edition: A Treatise on Political Economy (George­ town: Joseph Milligan, 1817), the translation being revised by Jefferson.

16 Alain Béraud and Guy Numa included both material and immaterial goods (services). The agents of industry (the “industrieux”) comprise scientists, farmers, entrepreneurs, producers or trad­ ers, and workers. The purpose was to show how an industrial society allows each citizen to improve his position. “Industry, consisting . . . of skill, talent, and knowl­ edge as well as labour, was an independent source of net wealth” and produc­ tiveness (James 1977, 469–70). Therefore, the “industrieux” constitute the only productive group. For Say, political economy is an experimental science. The experimental method consists in observing and confronting the objects of study with reality (Say 1819, 7): political economy should be based on general facts. One should observe objects and concepts as they are, in all their facets and with all their properties; and one should observe the chain of events that lead from one circumstance to another. A close observation of the “nature of things” is the only way to determine what is true. However, a set of established truths could be modified in light of how facts articulated with reality. Given the multitude of facts and circumstances which char­ acterise the state of the world, truth is never found unchanged, it could be modi­ fied depending on particular circumstances (Say 1826, 261). In other words, each principle may come with exceptions. Practical political economy provides an illustration of the experimental nature of the science that Say wanted to promote. He refused to oppose theory to practice, regarded as two sides of the same coin (Say 1814, 12). Practical political economy refers to opposition to routine, to an “old-fashioned” way of life. Say aimed to show the merits of industry – the new way of life – and how it applies to individuals in the private and public sphere (Steiner 1990; Potier 2010: xxx–xxxi). The more individuals are trained and informed about political economy, the more they would be able to conduct themselves in a way that is conformed to their interests and to the interest of the nation. Consequently, practical political economy is both a way of life and a principle of management of public and private affairs. In that regard, the role of the economist – both as a scientist and a practitioner – is to seek and disseminate the truth in the various parts of society so that the middle-class (“classe mitoyenne”) could better understand its enlightened interests and emancipate. Indi­ viduals who master political economy are therefore able to make better decisions for themselves and for others. 3. Say and the legacy of Adam Smith and Jeremy Bentham While Say praised the contributions of the Physiocrats and Adam Smith in certain areas, he did not hesitate to criticise them when he believed they made mistakes. He recognised that they deserved credit for disseminating political economy. Smith was the most often cited author in Traité, but citation did not necessarily imply agreement. His espousing of Bentham’s utilitarianism, on the other hand, is some­ what easier to analyse. Say praised the Physiocrats – the “secte des Économistes”, as they were named in the eighteenth century – for their promotion of laissez faire: “their writings have all favoured the strictest form of morality and freedom which each man must have

The “founding fathers” of the French liberal thought 17 for his person, his talent and his possessions, a freedom without which individual happiness and public prosperity are meaningless” (Say 1803, 30). However, Say’s industrialism is a clear rejection of the Physiocrats’ focus on land and agriculture, interpreted as the only sources of wealth.7 Despite the fact that [the supporters of Quesnay and physiocracy] were ahead of their time in the area of political economy, and the fact that they rendered great services to this science, in what state would we be if one had managed all the public affairs according to the doctrines of Dupont de Nemours, and if trade and manufacturing had been considered sterile activities? (Say 1828–29, 41 n1) Instead, Say favoured Smith. He bluntly professed that political economy did not exist before him (Say 1803, 33). Smith’s merit is to have applied to political econ­ omy “the new method of dealing with sciences . . . starting from observed facts and deducing the general laws, of which they are the consequences” (Say 1814, 34). Another merit of Smith, according to Say, is separating political economy from politics. However, the filiation from Smith’s ideas to Say’s is complex. Say ampli­ fied his criticisms of Smith’s views throughout the various editions of his main texts. His annotations to his own copy of the fifth edition of the Wealth of Nations show that he disagreed with him on a number of issues (Hashimoto 1980, 1982; Forget 1993). For instance, Say (1814, 39) complained about Smith’s “lack of clar­ ity in several places, and of method almost everywhere”. In another instance, in Lettres à M. Malthus, he (1820, 42) stated that, though he had been influenced by Smith, he “no longer belonged to any school”. Similarly, in Cours, he warned against following Smith’s ideas too closely (1828–29, 750). In terms of substantive disagreements, he thought Smith overemphasised the importance of the division of labour and did not give a full account of the phenomenon of production. Say contended that enhanced production, not savings, generates wealth, and as a result, both consumption and savings would augment (Say 1803, 201–2). More impor­ tantly, Say rejected Smith’s theory of value and prices8 (Faccarello and Steiner 2002). Say initially championed the utilitarian views of his fellow idéologues. In Traité, utility, defined as the power of an object to satisfy our needs and desires, plays a central role in Say’s thinking; yet the idea that “pleasure and pain are . . . the unique principle that guides human behaviour” (Helvétius 1773, 236) is surprisingly never discussed. The difference with Destutt de Tracy, who relied on this principle to ana­ lyse exchange, is striking. The break dates back to 1814. Say published in Mercure de France an article on the Théorie des peines et des récompenses that Étienne 7 Indeed, François Quesnay (1767–68, 567) professed that “land is the only source of wealth and . . . it is agriculture that multiplies it”. 8 Say interpreted Smith’s theory of value as a labour theory of value. On the first page of his annotated copy of the Wealth of Nations, Say wrote: “labor is the only basis for the value of things (I think it is erroneous)” (Hashimoto 1980, 67).

18 Alain Béraud and Guy Numa Dumont had authored, based on Jeremy Bentham’s manuscripts. During his 1814 trip to Britain, Francis Place introduced Say to Bentham. They then maintained a steady correspondence. In 1817, Say reviewed two books authored by Bentham for the journal Censeur Européen. In his review, he expressed his interest in Bentham’s criticism of the English political system.9 Say came to believe that political economy has to address utilitarianism. He thus discussed it in his lectures at the Athénée. While writing his Cours complet d’économie politique pratique, he initially planned to include a chapter on utili­ tarianism. Unsatisfied with the text he wrote, he asked Dumont if he could write the chapter; but Dumont died before he could produce a manuscript. Shortly after Say’s passing, in 1833, Charles Comte published the manuscript Say intended to include in Cours. In this text, Say criticised the Romantics and their praise of sentiments, particularly religious sentiments. However, to reply to the criticism that Germaine de Staël (1807, I, 165) made in Corinne ou l’Italie in reference to “this dull principle of utility”, Say was forced to change his formulation and admit that it is possible to make mistakes and prefer something harmful over something useful. What characterises the principle of utility, Say explained, is the fact that it compels individuals to exercise judgement and have knowledge about things: “it perpetually changes, as what was thought to be good is bad, or what was thought to be bad is good” (Say 1833, 139). Thus, individuals learn that showing respect for what is useful to others is the only way to obtain something useful from others. Say’s views carried on a long tradition10 which culminated with a notion that Alexis de Tocqueville (1840, III, 243) later called “self-interest well understood”. Yet the main issue was the relationship between natural rights and the principle of utility. Bentham’s criticism of the declaration of human rights developed in 1816 prompted a strong reaction from Benjamin Constant (1817, II, 120) who asserted that “no obligation would bind us to laws that . . . restrain our legitimate liberties”. Say did not directly take part in the controversy, but he expressed some reserve on the notion of natural rights. Thus, he wrote to Dupont de Nemours (18 June 1814): “I am no longer certain that [men] have rights”. However, this conclusion should be qualified in light of his analysis of property – that the French constitutions of that time considered a natural right. Though he (2003, 340) claimed that “the land­ owner holds a conventional right only grounded on the customs of society which encouraged farming by allowing the landowner to have full control over his crops”, he admitted that the control of a man over his person – defined as the capacity to have complete use of his person and faculties – is sacred, even if it is not always defended by positive law. In other words, Say believed some rights were natural. Say’s role in the dissemination of utilitarianism in France was peculiar. Carrying on an old tradition that dates back to Holbach and Helvétius, he adopted some ele­ ments of Bentham’s thinking. 9 On the dissemination of Bentham’s ideas in France, see Champs (2015). 10 The expression “interest well understood” was used by Condillac (1755, 407), but the term was already in use; for instance, Tocqueville believed he found it in Montaigne’s writings.

The “founding fathers” of the French liberal thought 19 4. Production Say defined political economy as the study of the formation, distribution and consumption of wealth. Production is at the beginning of the sequence and thus constitutes the source and the engine of economic development. His approach to production is peculiar for his utility-based definition thereof, his analysis of the role of the entrepreneur and for what has been called Say’s Law – arguably one of the most controversial principles in economic theory. What is production?

Say introduced a new definition of production:11 it is not a creation of matter, but of utility, and Destutt de Tracy (1815, 310) embraced Say’s view, which played a crucial role in his analyses. Utility is the ability to satisfy human needs. It is not measured in physical units, but in utility degrees (Say 1803, 78). Production is “an extended exchange in which producers . . . offer productive services . . . and where they, in return, receive products, that is, any quantity of produced utility” (Say 1828–29, 120). The Physiocrats maintained that craftsmen are unproduc­ tive because they do not produce any surplus, the value of their products being equal to that of their consumption. Say disagreed: craftsmen produce at least the interest of the capital used. For Smith (1776, 330), the labour not embodied in some material objects does not produce any value and is unproductive. For Say, instead, this labour renders useful services and produces an “immaterial product”, and Destutt de Tracy (1815, 162) argued that any labour that produces utility is productive labour. Say admitted, however, that the labour producing immaterial products could not be accumulated and could not increase the national capital. Charles Dunoyer (1827, 68) accused him of being inconsequent: the fact that a product is immate­ rial does not imply that it could not be accumulated, as the example of knowledge clearly shows, and in this perspective asserted that the state is the main producer in the economy (Faccarello 2010). This is not to state that, for Say, knowledge is not important. He did not think that the division of labour could alone explain the progress of wealth: well-being improved because men learned how to better exploit natural resources and, in this perspective, sciences are the basis of industry and wealth. But there was more. It is necessary to know how to make the most of its discoveries in order to satisfy human needs: this task is performed by industry. Invention and innovation lie at the heart of the development process, of which scientists and entrepreneurs are the deciding agents. 11 Say is probably the first economist who argued that production was not a creation of matter, but of utility. However, before him similar – but not identical – propositions were formulated. For example, Condillac (1776, 50) explained that trade enhances the quantity of wealth by moving goods from places where they are oversupplied to places where they are scarce and more useful. It should be noted, however, that Condillac mentioned an increase in the quantity of wealth, while Say referred to a production of utility.

20 Alain Béraud and Guy Numa Say divides the production process into three operations or functions: theory, application and execution. The entrepreneur, defined as the agent who “takes steps to create on his own account any product for his own profit and at his own risk”, is in charge of the second operation (Say 1803, 116). The entrepreneur . . . is the principal agent of production. The other opera­ tions are indispensable for creating products; but it is the entrepreneur who carry them out, who gives them a useful impulse, who produces values. He is the one who assesses the needs and especially the means to fulfil them, and who compares the goal with these means. (Say 1828–29, 101) The entrepreneur thus appears as the organiser of production, the intermediary between all the owners of productive services on the one hand and between all of them and the final consumers on the other (Say 1803–41, 735). In a nutshell, by performing a distinct economic function, the entrepreneur plays a pivotal role in the economy (Koolman 1971). Say’s analysis of entrepreneurship followed a long tradition. The term “entre­ preneur” was used in the Dictionnaire universel du commerce by Jacques Savary (1726, II, 630) to describe a person who creates an establishment where some indi­ viduals are hired to work under his direction. Cantillon took up the idea: entre­ preneurs organise production and the circulation of goods. As final prices are uncertain, so are their incomes. Cantillon (1755, 31) concluded: We can affirm that, except the Prince and the landowners, all the inhabit­ ants of a State are dependent; they can be divided into two classes, namely entrepreneurs and hired workers . . . entrepreneurs are subject to uncertain incomes, while all other classes receive certain incomes. Though Turgot also mentioned the idea that the income of the entrepreneur was uncertain, he focused on another issue: the role played by the advances required for all types of productions in farming, industry, or commerce. His central figure is the capitalist entrepreneur who advances capital, hires workers, and organises pro­ duction and sales. Turgot stressed that if entrepreneurs do not have enough funds, “they can easily decide to give up a part of their profits . . . to those who own capital” (Turgot 1766, II, 576). As he admitted that the interest of the loan does not depend on the profit on capital that the borrower expected to make, he thus clearly distinguished the interest on capital from the profit of the entrepreneur. “Apart from the interest on capital, the entrepreneur shall gain . . . a profit that rewards his skills, his work, his talents, the risk, and allows him to cover the yearly deprecia­ tion of his advances” (Turgot 1766, II, 591). Turgot’s reasoning involved an entrepreneur capitalist. Say, on the other hand, separated the two functions. The entrepreneur generally owns a portion of capital, but, most of all, he is the manager: he designs the product, identifies potential clients and buys productive services. All of this requires lots of knowledge. The

The “founding fathers” of the French liberal thought 21 entrepreneur is not a scientist properly speaking, but his role is to use science that can help satisfy human needs. “The job of an entrepreneur requires the ability to invent, that is . . . the ability to put forward the best ideas and the best way to uti­ lise them” (Say 1828–29, 723). Put simply, Say envisioned the entrepreneur as an innovator. Say’s Law

The importance of production in Say’s system is captured through his law of outlets (“loi des débouchés”), known as Say’s Law, which has generated numer­ ous controversies and misinterpretations. It describes the relationship between production and the demand for commodities. The core message is that production is the source of demand. However, that relationship need not imply that sup­ ply is necessarily equal to demand, nor that demand deficiency could not cause economic crises. The starting point is Say’s definition of outlets (“débouchés”) as “the means of trading products that [producers] have created for those that they need” (Say 1828–29, 349). Say’s argument is that an increase in the value of production leads to higher income and expenditures, which then generates greater outlets. In the chapter on outlets of the first edition, 1803–41, of Traité (Book I, Chapter XXII), Say seeks to refute the so-called “mercantilist” monetary fallacies. He criti­ cises the views of economists such as François Véron de Forbonnais (1754) and James Steuart (1767) who claimed that international trade spurs economic devel­ opment by opening up new markets, and by increasing the quantity of specie in circulation within a country. Say contends that the abundance of money does not affect trade. He then concludes that it is pointless to favour a trade surplus in order to enhance the stock of gold and silver: “it is not the abundance of money but the abundance of other products in general that facilitates sales” (1803–41, 244). He aims to show that, in general the production of goods rather than the supply of money stimulates the demand for goods (Baumol 1977, 154). But, in the first edi­ tion of Traité, Say’s discussion of the law is not limited to the chapter on outlets. In Book IV, Chapter V (1803, 688), he states that contrary to what many people thought, the scope of the total demand for means of production, does not depend upon the scope of consumption. Consumption is not a cause: it is an effect. One must buy in order to con­ sume; yet one can buy only what has been produced. Is the quantity of prod­ ucts demanded therefore determined by the quantity of products created? Undoubtedly so. . . . The total demand for products is therefore always equal to the sum of products, and therefore general overproduction could not occur. Say would later be less categorical. In the second edition of Traité, 1814, Say argues that “a product is no sooner created than it opens, from that instant, an outlet for other products to the full extent

22 Alain Béraud and Guy Numa of its own value” (1814, 250). The passage does not mean that supply created its own demand, but simply means that the sale of goods increases one’s holdings of money, which potentially, but not necessarily, allows the purchase of other goods with the proceeds of the sale. In Lettres à M. Malthus, Say (1820, 4–5) adds: “as each of us can only purchase the products of others with his own products; as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase”. Say was aware that, at times, producers would not be able to sell all their merchandise. Thus, if some products do not sell, it is because “many people bought less because they earned less” (Say 1814, 253). Demand was constrained by successful sales (Béraud and Numa 2018a, 2018b). Thus the failure to produce (or the failure of factor owners to sell their services) must have reper­ cussions on the demand for output, because the demand for product is financed out of earned income. In other words, a general demand shortfall is possible and can cause economic crises. In Say’s terminology, a product is not only something that met human needs; it is something whose utility was worth what it costs. An unsold good or a good whose market price is less than its production cost does not constitute a product. One could be led to believe that in his letters to Malthus Say sought to reformulate his definition of a product to respond to his critics. This argument is incorrect for two reasons. His definition of production (Say 1814, 1139) as creation of utility – utility being conceived of as a measure of exchangeable value – implies that an unsold good is not a product and that if its current price is less than its production cost, the good should be valued at its current price. The second reason is logi­ cal: Say’s analysis of outlets relies on the individual’s budget constraint. Using a sequential model, which is certainly consistent with Say’s reasoning, the resources that can be used by an individual to make purchases do not include the unsold goods that he owns. As Say (1814, 253) forcefully asserted, people bought less because they earned less. This is particularly significant in analysing situations where, as a result of sudden trade downturns, the structure of the supply of goods fails to adjust to demand. It is no wonder, then, that Say (1819, 260) acknowledges that in a stagnating or declining economy, “all the demands are on the decline; the value of the products is not equal to the costs of production”. In other words, “while the demands are on the decline, there are always more goods [that are] supplied than goods [that are] sold” (Say 1814, 260n). Say argues that a buyer manifests himself in an effective manner only when there is money to buy; and he can obtain money only through the products that he created or those that were created for him; it then follows that it is production that stimulates outlets. (Say 1826, 1105) In Lettres à M. Malthus, Say refutes Ricardo’s claim that “there is always as much industry as capital employed, and that all saved capital is always employed” (1820, 101 n1). In light of the 1813 recession in France, Say contends that many savings

The “founding fathers” of the French liberal thought 23 were not invested, not all capital was employed, and many workers were jobless. In other words, for Say the economy is not always operating up to its full capacity, thereby admitting that a general glut is possible. The production of a commodity does not necessarily create a demand because the good could remain unsold or could be sold at a price that is less than its produc­ tion cost (Say 1828–29, 356–7). Once a product is sold, a potential demand is cre­ ated so that the individual who sold it could use the proceeds of the sale to demand other products or financial assets. The individual could also keep all or part of the money proceeds to be spent at a later stage. If some products were oversupplied, they would be sold for less than their production cost. The purchasing power of the producer would be reduced, and this loss would eventually affect his expenditure. Therefore, demand deficiency could cause crises and money is not only a medium of exchange (Béraud and Numa 2018b). Say thus paid close attention to the secular record and economic events of his time, which involved general gluts and the hoarding of cash. In other words, he thought of his law as a long-term principle. This transpires in the final paragraph of Cours in which Say defended the validity of his law described as a powerful engine of long-term industrial growth: the theory of outlets, by showing that the interests of men and nations are not in opposition to one another, will undoubtedly propagate seeds of concord and peace, which will germinate with time and which will not be one of the smallest benefits of the more correct opinion that people will form about the economy of societies. (Say 1828–29, 1273) The law of outlets is an illustration of Say’s “practical political economy” (Say 1814, 12 n2; Numa 2019). He first lay out a general rule or a “law”, then he men­ tions some qualifications after analysing how the rule applies to the reality of economic life, considering its effects both in the private and public spheres. Like Malthus, he reproached Ricardo of applying principles in a rigid and unqualified fashion. Applying principles abruptly without confronting them with experience leads to vague and inconclusive results (Say 1828–29, 762). 5. Value Say and Destutt de Tracy developed their value theories in the context of a long tradition of French economists – starting from Turgot – who put emphasis on the role of utility in the formation of prices. Their reasoning was different, however. Like Turgot in Valeur et Monnaie, Destutt de Tracy started from the analysis of bilateral exchange: it allowed each individual to acquire a good whose utility was greater than that of the good that was traded. Turgot (1769, III, 91) observed that “trade between two men increases their respective wealth, in that they can receive a greater quantity of pleasure with the same faculties”. For him, this benefit came from the division of labour which allowed output to grow for both

24 Alain Béraud and Guy Numa goods.12 For Destutt de Tracy, the improvement could be explained by the fact that the satisfaction of both individuals – the total utility – increased. Essentially, like Condillac, Destutt de Tracy argued that trade was a productive activity. Say (1828–29, 312) rejected such a conclusion, contending that “the value that con­ stitutes wealth . . . is not an arbitrary value that any individual retrieves from a good that he owns”. Turgot distinguished between two types of exchange rates: the fundamental price (“prix fondamental”) and the “current price” (“prix courant”). “The fun­ damental price is what the good costs to that who sells it, that is, the costs of raw materials, interest on advances, wages and operating costs” (Turgot 1767, 655 n). The current price is determined by supply and demand and tends to be equal to the fundamental price. In the first edition of Traité, Say made a similar distinction, namely natural value and exchange value. The distinction between the two types of value gradually became secondary, leading Say to simply main­ tain that the price of a good was determined by supply and demand. Destutt de Tracy opposed necessary value (“valeur naturelle et nécessaire”) and market value (“valeur conventionnelle et vénale”); however, his necessary value was different from Turgot’s fundamental price. In Destutt de Tracy’s mind, the necessary value is only determined by the costs of the goods required to maintain the existence of the workers. The necessary value is therefore a minimum, unlike the fundamental price, which is the cost of production, including interest, around which the market value gravitates. What is the source of value?

In the first edition of the Traité, Say mainly developed his view of value from the Wealth of Nations: his development relies on the gravitation of the market price around the natural price. In the second edition, his analysis changed. Utility was now “the first base of the value of things” (Say 1814, 592), and the cost of produc­ tion was the second. The link between the two is supply and demand. Say first studied the role of individual choices and the distribution of income in the relation between the price of a good and the demand for it. Individuals have different needs they rank according to their degree of importance for them; they satisfy first the most urgent ones, then those that are less so, and so on. However, to derive the total demand from individuals, the distribution of income must be taken into account. Say described it as a pyramid: only a few consumers are rich, many are poor. When 12 On this point, Turgot is clear and explicit. After analysing the case of two « savages » trading corn for wood, he thus writes (1769, III, 91): I assume . . . that the shore which produces corn and the shore which produces wood are remote from each other. A single savage would be compelled to make two journeys to obtain his provi­ sions of corn and wood; he would consequently lose much time and effort in navigating. If, on the contrary, there are two of them, they will use the time and effort that would have been put into the second journey, one to cut wood, the other to obtain corn. The total sum of corn and wood gathered will be much bigger and, as a result, so will be the share of each man.

The “founding fathers” of the French liberal thought 25 the price is high, only a few persons can afford the good; when it was low, almost all are able to. On the other hand, Say (1826, 619) stressed that, when the demand for a good increases, the demand for productive services which are necessary to produce it and their prices increase as well. He concluded that, while some econo­ mists like Ricardo wrote that the cost of production regulates the price of products, they were right in this sense that products are never sold for a long time at a price lower than their cost of production; but when they said that demand does not influence their value, they were wrong . . . demand influences the value of the productive services, increases the cost of production and rises the value of products without exceeding product costs. (1826, 619) The exchange process involves a vast circulation of values, but exchange does not form the source of value: A mutual exchange indicates the value that men attach to what they own, in the time, in the place, in the type of society in which they live. . . . This is the reason why many people regarded exchange as the source of value and wealth, which it is not. It only allows you to determine value and wealth, by comparing it to other values, and particularly by reducing the various types of wealth to a common expression, to a certain quantity of a given product, just like any quantity of [money]. (Say 1819, 1107) Say conceded that there could be a difference in the perception of value between traders. However, “the personal opinion of the sellers and the buyers, each taken separately, makes no more changes to the value of goods than it changes their weight or size” (Say 1828–29, 312). Therefore, the only objective measure of value is the market price that Say called current price (“prix courant”). Smith (1776, 12) viewed the products of land and labour as real wealth. His approach rested on the idea that wealth consisted of physical goods. Relying on Say’s analysis, Destutt de Tracy contended that production – in the economic sense of the term – is a production of utility and that only human labour creates wealth. Goods used by individuals do not come from the means used to create them, but they were the result of the uses of human faculties: We own a good field or a good tool only because we recognise the properties of the raw material and made it easy to make it useful. . . . It is always from the use of our faculties that these goods are created. (Destutt de Tracy 1815, 98) This idea caused some controversies and led some commentators such as Say (1825, 713) and Head (1985, 130; 1987) to consider Destutt de Tracy a proto-Ricardian

26 Alain Béraud and Guy Numa author who proposed a labour theory of value – passages in this sense can be found in Ricardo himself. Several developments in the Commentaires and in the Éléments d’idéologie can also support this view: Because it is certain that our physical and moral faculties constitute our only true wealth, that using these faculties, that is any labour, is our only primitive treasure, and that it is always from this use that all the things we call goods originate . . . it is equally certain that all these goods only represent the labour that allowed them to be created, and that . . . they can only retrieve their val­ ues from the labour used to create them. (Destutt de Tracy 1815, 99–100) But should one conclude that Destutt de Tracy predated Ricardo in thinking that “the value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production” (Ricardo 1817–21, 11)? Ricardo himself seemed somewhat hesitant: M. de Tracy has given a useful and an able treatise on the general princi­ ples of Political Economy, and I am sorry to be obliged to add, that he sup­ ports, by his authority, the definitions which M. Say has given of the words “value,” “riches,” and “utility”. (Ricardo 1817–21, 284–5 n) Therefore, the question of whether Destutt de Tracy defended a labour theory of value calls for a cautious answer, as Magnan de Bornier (2013, 212) rightly sug­ gested (see also Béraud and Faccarello 2014, 26, 69). Destutt de Tracy did not claim that the quantity of necessary labour required for producing a good deter­ mines its value: he maintained that labour is the source of the utility of goods, considering that only our faculties enable us to use the means at our disposal to satisfy our needs. The measure of value

One should distinguish two separate questions, albeit related: the measure of value on the one hand, and the determination of value on the other. In chapter XX of the Principles, Ricardo criticised Say when he explained that the exchangeable value of a commodity “is the quantity of any other product that one can receive in exchange” (Say 1803–41, 596). To make his point, Ricardo used the following example: suppose someone intended to measure the value of cloth based on the quantity of another commodity received in exchange. Suppose the production of the commodity became easier; Say believed the value of that commodity would increase, while Ricardo (1817–21, 281) contended that it would remain unchanged, because the commodity must be produced with the same quantity of labour. In his Logique, Destutt de Tracy (1801, 150 and 336) explained that “To measure any thing is to compare it to a given quantity of the same thing, which we take as the

The “founding fathers” of the French liberal thought 27 term of comparison, as a unit”. This statement does not allow to solve the disa­ greement between Say and Ricardo, since they both seem to agree with Destutt de Tracy. In fact, they held two different conceptions of value theory. For Say, value was relative, while Ricardo regarded value as an absolute concept. However, when Say (1814, 1162) argued that the market price is a measure of utility, he seemed to violate Tracy’s principle: Only the utility of one good can measure the utility of another good. Destutt de Tracy suggests that to measure a thing’s utility to us, we must look at the sacrifices we are willing to make to acquire it (Destutt de Tracy 1815, 172). The differences between Say and Destutt de Tracy are clearer on trade and prices. Condillac (1776, 53), after Turgot, had indicated that “it is wrong to believe that in trade, equal value for equal value is given. On the contrary, each trader always gives up a lower value in exchange for a greater one”. Say (1828–29, 312) replied that, in terms of production and trade, value was not something that indi­ viduals assigned to goods they owned; value was a magnitude determined on the market. In other words, value was equivalent to the current price. Say’s comment leaves the problem unresolved because, obviously, Condillac understands value to mean the utility of the thing and not its price. Destutt de Tracy (1815, 144) adopted Condillac’s stance without making any explicit reference, however: “Trade is an admirable transaction in which the two parties are always better off”. He concluded that society, “which essentially . . . consists of a continuous series of trades”, is “an uninterrupted sequence of re-emerging advantages for all its members”. Trade enabled to improve the well-being of the members of the community. In the first edition of Traité – the only one that Destutt de Tracy had read when he wrote his Traité de la volonté – Say distinguished between natural value and exchangeable value in the same way Smith differentiated between natural price and market price. For him, the natural value of wheat comprises the profit from the land where wheat is cultivated (rent), the interest of capital of the landowner or of the farmer who uses the land, and the wage of all the individuals who contribute to the production process. Destutt de Tracy saw things differently. For him, land rent was not a specific income: “a field is a tool like any other and land rent is exactly the same thing as the cost of renting a machine or the interest on a loan” (Destutt de Tracy 1819, 285). Rather than distinguishing between natural value and exchangeable value, he opted for the opposition between necessary value (“valeur nécessaire”) and market value (“valeur vénale”): “[The] necessary value is the sum of essential needs whose satisfaction is necessary for the existence of that who performs [a] task during a specific time frame” (Destutt de Tracy 1815, 175). Put differently, the price of a good must be high enough to cover the subsistence wage of the workers who directly and indirectly participated in the production process. Thus, a good can never be produced in a durable fashion if the market value is less than the necessary value; but Tracy’s market value differs from Smith’s in that the market value does not gravitate around the necessary value. The market value is simply “the real measure of utility of production because it determines its price” (1815, 176). This could create some difficulties, Destutt de Tracy admitted. Sup­ pose an improvement of production techniques allows workers to double output

28 Alain Béraud and Guy Numa in the same time period. Initially, the market value might remain unchanged. In the long run, however, the market value would decline to a point where the value of the total product would reach its initial level, while the quantity produced dou­ bled. Wages would not be higher, despite the fact that workers performed twice as many tasks: “Therefore, their labour would not be more profitable for them, but it would be more profitable for society as a whole” (1815, 178). Destutt de Tracy thus highlighted problems that can arise when one intends to use the market value as a measure of utility. The measurement of the utility of public works can be used as an illustration. Claude Navier, a polytechnician and engineer from École Nationale des Ponts et Chaussées, called for the construction of new canals with free access in order to maximise the benefit for the public. To determine whether a canal should be built, Navier explained that its utility should be estimated. According to Navier, the util­ ity is equal to the product of the total quantity of goods transported multiplied by the difference between the transportation costs on the road (old traffic) and the transportation costs on the canal (new traffic). Although Navier (1830) did not mention Say, Dupuit (1844, 347) believed that in fact Navier’s formula was inspired from Say. Dupuit showed that the formula overestimates the utility of pub­ lic works, given that the new traffic of goods on the canal does not travel by road before the construction of the canal. Measuring utility remained unsolved until the publication of Jules Dupuit’s essays in 1844 and 1849: “To measure the utility of an object, political economy must use each consumer’s maximum willingness to pay” (Dupuit 1844, 343). 6. Income distribution Say summarised his thinking on income distribution as follows: once created, each product pays, through its acquired value, the totality of services used for its production. Several of these services were paid for before the product was created, which required the advance of someone; other services were paid for after the product was created and sold. In both cases, services were paid for by the value of the product [its market price]. (Say 1814, 687) He identified four kinds of income: wage, interest, rent and the remuneration of the services of the entrepreneur. This classification was partly due to his analysis of the role of the entrepreneur. For Smith, the entrepreneur is usually the capitalist, the agent who invests the capital: he focused on profit as a whole and stressed that profit was not the remuneration for supervision and direction – such tasks could be performed “by some principal clerk” (Smith 1776, 66). For Say, whether the entrepreneur owns a fraction of the capital of the firm was of no importance: what matters is the fact that he manages it. English writers, he observed, failed to distin­ guish between the interest of capital and the revenues that pays for the service of employing capital and other productive services, which require the specific abilities

The “founding fathers” of the French liberal thought 29 and talent of the entrepreneur. The difference between the two types of revenues is that the latter are uncertain (Steiner 1998). Smith disregarded the issue and “ran into difficulties” (Say 1803–41, 730 n1). The prices of the productive services are, like those of the products, determined by supply and demand. The demand for services is indirect: “when a product is in demand, all the services, which concur to its production, are also in demand” (Say 1828–29, 705) and their demand rises with that of the goods. Thus, when wealth increases, the amount of capital increases, interest declines and wages rise. Land rent is determined in the same way as wages and profits. Land differs in location and fertility: each kind of land is subject to a specific demand, which deter­ mines its remuneration. Say thus criticises the Ricardian theory of rent and particu­ larly the principle that rent is not a constituent part of the price of commodities. David Ricardo admits . . . that it is the increase in population, that is, the sum of needs, that raises the price of corn and allows a farmer to pay rent. He con­ cludes that “corn is not high because a rent is paid, but a rent is paid because corn is high”. It is also the case for all products, whatever they are. . . . Thus . . . the needs of society determine the price of all products and allow the entrepreneur to pay the profits of labour and capital, and even sometimes a monopoly profit, when such a monopoly is necessary for production, which is the case for agricultural products. (Say 1828–29, 801–2) However, this proposition does not allow to exclude rent from costs or to state that the existence of land of poorer quality is the cause of rents made on the more fertile land. One difficulty remains, however. Land is not the only productive natural factor: how can we explain that it is the only one that generates income? This is because it could be appropriated by men. This ownership must thus be justified. Say (1819, 793) used a utilitarian argument: “Land is cultivated, and we obtain its products in some abundance, thanks to its appropriation”. Income distribution also plays a central role in Destutt de Tracy’s work. He believed that “mankind as a whole is rich and powerful and sees its means of exist­ ence grow every day, but the same cannot be said for individuals” (1815, 297). Inevitably, resources and wealth are unevenly distributed. Inequality is a fact of nature, as individuals do not have the same level of force, intelligence and happi­ ness. Inequality is a necessary evil, and, as a result, laws should aim to protect the weak, not the powerful, as it was too often the case. Humanity, justice, and politics also command that among all the interests, those of the poor should always be the most consulted and the most respected persistently; and by poor, I mean simple wage earners and especially lowwage earners. . . . The true interests of the poor . . . are always in line with reason and with the general interest. (1815, 323–5)

30 Alain Béraud and Guy Numa For him (1815, 318), society was made up of “two large classes, one comprising those who, without having any capital, work in exchange for a salary, and another that included those who employ them”. The latter consists of two sorts of agents: all types of capital owners who loan their money or their land, and the entrepre­ neurs who earn both the income of their capital and the gains derived from their own work. Wages are determined according to what was to be called later the wage funds theory, that is, based upon the amount of funds that capital owners and entrepreneurs use to pay workers’ wages divided by the number of individu­ als supplying their labour. Following Malthus’s population principle, wages are paid at the minimum required for subsistence, leading population growth to be stationary in nations reaching a certain level of economic development. Most clas­ sical authors believed the principle to be always verified: the population level is always proportional to the available quantity of subsistence and there is no reason to assume that wage funds would increase. For this to happen, funds invested by entrepreneurs should rise, but “once all the profitable employments are made, it is no longer possible to create new jobs without destroying existing ones, unless new outlets arise” (Destutt de Tracy 1815, 321). In order for entrepreneurs to accumulate capital and hire new workers, new market opportunities must justify the production of additional goods. The only way to increase wage funds was to lower production costs, a convenient way to create new markets, new businesses and new jobs. A society divided into classes does not imply that their interests are divergent, Destutt de Tracy insisted. In his mind, the interests of the rich and those of the poor coincide with the interests of society. Like the rich, the poor are owners: they own themselves, their faculties and their products; in short, they own capital. The interest of the poor is to be given free disposal of their person and of their labour so that their work provides them with sufficient and stable incomes. The poor are also consumers, and as consumers, they have an interest in being supplied as cheaply as possible. No one has a greater interest in being served as cheaply as possible, than the person who has limited resources. 7. Money and economic crises Say’s monetary thinking is based on the idea that the value of money is determined by supply and demand. This implies that money supply can differ from money demand. In other words, individuals are susceptible to increase or decrease their money holdings. Money is not neutral. Say’s monetary theory of crises shows that monetary changes could affect the real economy. Say identifies two types of circulating medium: money stricto sensu (here­ after “money”), and monetary substitutes (“signes représentatifs”). Money took the form of metal (gold and silver) or consisted of inconvertible paper money (“papier-monnaie”). Inconvertible paper money differs from banknotes, which can be converted into gold and silver. It is “a real money made of paper which does not stipulate its refund, or which stipulates a merely illusory refund which is not made” (Say 1826, 503). The circulation of inconvertible paper money

The “founding fathers” of the French liberal thought 31 is drawn upon the fact that the government authorises its use to pay debts, and not on trust in the possibility of being converted into metallic money. It is thus “a true money, and not the representative sign of money” (Say 1826, 505). On the other hand, monetary substitutes – banknotes, bills of exchange and promissory notes – are not considered to be money but instead instruments of credit: they are convertible monetary substitutes that have no value other than to give the bearer the right to receive a sum of money, on par and on demand for banknotes or in function of asset maturity and uncertainty of payment for the other substitutes (Say 1826, 517). In Say’s mind, the quantity of money and its value were intrinsically related. Like any other commodity, the value of money derives from its uses. The value of money is inversely related to its quantity: “[E]very time the number of mon­ etary units has been increased, their value decreased proportionally, and . . . it has increased as their number has been lowered” (Say 1828–29, 402). This inverse relationship between value and quantity is applicable to inconvertible paper money, as Say (1826, 511) explained. Individuals can alter their money holdings. In the first edition of Traité, Say observed that these holdings remained more or less unchanged during the course of a year, but he did not mean that it was always and necessarily the case: Money is used [for trading] almost like posters and handbills that, in a large city, facilitate the intercourse of people who may want to do business together. At the end of the year, each producer used a very large amount of money, but except for a few insignificant balances, generally there is no more money in his hands at the end of the year than he had at the beginning. What matters is what he purchases with this money, in other words the products sold by others that he traded for his own. . . . In the end, [when] the exchanges have been completed, it turns out that one has paid for products with products. (Say 1803, 244–6; emphasis added) Say only stressed an empirical fact without drawing any definite conclusion. His formulation was later interpreted as “Say’s identity” (Becker and Baumol 1952, 357), that is, the sum of the excess demands, money excluded, is identically nil. In the second edition of his Traité, however, Say claimed that individuals can increase their holdings using monetary expedients to substitute for the lack of cash: money holdings can thus change, because market forces respond to any increased demand for money by making available substitutes for specie – bills of exchange, bank­ notes, or other credit instruments: [A]ny shortage of cash . . . can easily be overcome. . . . The intermediary merchandise that facilitates exchanges (money) is in those cases quite easily replaced by [other] means used by the merchants; and soon money begins to flow, because any sort of merchandise is directed toward places where one needs it. (Say 1814, 248)

32 Alain Béraud and Guy Numa Say later emphasised that the circular flow of output and income could be disrupted by dis-coordination between the suppliers and demanders of factor services, thus causing changes in the holdings of money. Therefore, money demand was not con­ stant. In Cours, he pointed out that money demand depends on immediate cash constraints and expectations of future needs: individuals consider how long they would hold cash but, at the same time, they have to consider the opportunity cost of holding idle sums of money, as this would entail losing out on interest. More precisely, three motives lie behind the desire to hold money: transaction, precaution and finance. First, Say described an income-elastic demand for money for transaction purposes: “What quantity of money will I need? The more sales and purchases I will have to carry out, the more money I will need” (Say 1828– 29, 400). Say then refers to a money demand to cope with unexpected expenses: “[T]here are some types of occupation and consumption that always require to keep . . . a certain sum to deal with unforeseen expenses” (Say 1828–29, 401). Finally, he writes that “as one loses interest in holding money, I assume that no one holds more [money] than one expects to use” (Say 1828–29, 401), and adds that “the money used . . . to cover expenses inherent to the movement of business, is part of the capital of the firm; and the portion of money that remains idle . . . is unproductive capital” (Say 1828–29, 401n1). These assertions logically imply that a higher interest rate induces people to lower their money holdings. Say’s approach brings to mind modern contributions which postulate that money is one of the components included in the asset portfolio of individuals. Simply put, the demand for money depends on the nominal income and on the velocity of cir­ culation of money, the latter being a function of the interest rate. It is clear that for Say money is more than just a medium of exchange. He did consider long-term and short-term hoarding, and more generally, he explained that money could serve as a store of value (Numa 2020). Finally, a last point has to be stressed. Say did not deny that economic crises could take place, but he rejected Malthus and Sismondi’s thesis, which held that crises resulted from too rapid a capital accumulation inducing a possible excess supply of goods. In his framework, crises could indeed happen, in two ways. In the first four editions of Traité (1803–1819), Say argued – like David Ricardo (1817–21) and Robert Torrens (1819, 1821) – that crises were caused by a dispro­ portion between supply and demand: too many goods were produced in some sec­ tors and not enough in others. But he later developed a monetary theory of crises (Say 1826), which held that economic disturbances were caused by poor decisions on the part of banking institutions. In his analysis of the 1825 crisis in England, Say indicated that by discounting too many bills issued by merchants, country banks spurred reckless speculation. The abundance of monetary instruments in circulation led to a decline in the value of money compared with bullion, and holders of bank­ notes issued by the Bank of England rushed to country banks in order to redeem their notes into specie. Constrained by the obligation of convertibility and facing exhausted metallic reserves, country banks were forced to interrupt their discount­ ing operations. As a result, entrepreneurs could no longer issue bills and thus failed to fulfil their commitments, leading to a spike in bankruptcies. Monetary crises are

The “founding fathers” of the French liberal thought 33 “public calamities”; therefore, public authorities should intervene to contain them. For this reason, it is necessary to limit the individual faculty to issue banknotes. Say (1828–29, 488–9) suggested that governments should prohibit the circulation of small denominations so that banknotes could only be used to settle transactions between merchants. In Say’s mind, this could help limit the losses endured by the poor during financial crises. Say explicitly acknowledged that his analysis of the effects of monetary changes led him to reconsider some of the positions he previously held. If monetary changes affect the level of economic activity, then one cannot argue that money is only a medium of exchange and that products are ultimately bought with products: in spite of the principles that teach us that money plays only the role of a simple intermediary, and that products can ultimately be purchased only with products, more abundant money fosters all sales and the reproduction of new values. (Say 1828–29, 479) 8. “Il mondo va da se” . . . ma non troppo In line with the liberal thought, Say questioned the existence and the legitimacy of government. He criticised government interventions in private affairs in general. However, he also discussed a number of exceptions to that rule, particularly for public works. For him, government interventions aim to achieve both economic efficiency and social justice. Say embraced the motto attributed to Vittorio Fossembroni: “Il mondo va da se” (“The world turns by itself”; see Faccarello 2010, 734). People “need not been governed. . . . The State exists without receiving an impulse, without the need of a system of administration, a thought of government”, he wrote in Politique pratique, an undated manuscript (Say 2003, 324). Several times, during the Revolution, “all the springs of authority were broken . . . there was no government. . . . All was functioning as usual” (Say 1819, 101). When a public institution fails, people know how to replace it for the best. Governments wrongly try to influence production, to stimulate the production of goods, the consumption of which they judge preferable, or to dictate the way in which they have to be produced. Worse, they sometimes want to create manufactures. Far from being a source of wealth, these establish­ ments are instead a cause of loss. The state is a bad producer because “it only acts through . . . the intermediary of persons, who have a particular interest different from its own – a particular interest which they prefer” (Say 1803, 382). While Say did not view government as a central part of social organisation, he did not think it was useless, however. Two areas of critical importance that required public intervention are public goods and public works. Besides the needs of individuals and families, whose satisfaction leads to private consumption, the sum of individuals, as a society, has its own needs as well, which leads to public consumption: it buys and consumes the service

34 Alain Béraud and Guy Numa of the administrator who takes care of its interests, of the soldier who defends it against foreign attacks, of the civil or criminal judge who protects each individual against the actions of others. (Say 1814, 921) Public consumptions are characterised by the following elements: they concern needs that an individual could only satisfy in society, they require the intervention of an institution with a coercive power, and they promote the production and diffusion of knowledge, whose advantages for society are much higher than the individual benefits of scientists. It was thus necessary, for example, to support “a small num­ ber of outstanding schools, where the stock of knowledge is not only preserved . . . but the field of science always extended” (Say 1803, 955). It is also necessary to give all the citizens the knowledge they need to determine their enlightened interests and the interest of society: “A nation is not civilised . . . when some do not know how to read, write and count” (Say 1803, 957). Thus, Say maintained that the government must build and maintain public works such as means of com­ munication, which, while being in the public interest, could not be the outcome of private interest. He rejected the idea that they must be only funded by those who used them. Tolls restrict the use of utilities by many potential users who could not afford them. They deprive society from some of the potential benefits public works could provide. Denying the construction of a means of communication because its operation would not cover its costs is also ill-founded because it neglects the fact that such a means would stimulate production in the areas where it was built. In modern economic textbooks, a public good is defined by two characteristics: non-excludability and non-rivalry. It should be noted that Say identified these two characteristics though they are not explicitly mentioned in his discussion of public consumptions. Discussing scientific knowledge that can be applied to industry, he notes that “it expands at will without being consumed, [and] it can be acquired with­ out [the collaboration] of those who originally produced it” (Say 1803, 728). The State should therefore intervene to allow scientists who produced such knowledge to receive adequate monetary compensation commensurate with their contribution. In the chapter on territorial revenue, Say explained that the benefit that someone derives from using certain natural resources “does not prevent another individual from receiving an equal benefit” (Say 1803, 793). These types of resources which present the characteristics of public goods cannot be appropriated. More generally, it is true, Say (1814, 278) insisted that, as a general rule, selfinterest is the key to prosperity as long as private interests are in opposition to each other. In other words, competition aligns private interests with the general inter­ est. However, when the interest of an individual is no longer counterbalanced by those of other individuals, self-interest becomes ineffective and socially undesir­ able, and public control is required (Numa 2019). Say (1803, 330) thus recognised that “there are circumstances that can modify this generally true proposition that everyone is the best judge of how to use his industry and capital”. For example, he argued that the government could grant temporary protection for infant industries facing international competition (1803, 329–30). He also pushed for government

The “founding fathers” of the French liberal thought 35 intervention in the form of public works as a remedy for unemployment resulting from the introduction of machinery (Baumol 1997). [A] clever administration can always find ways to alleviate this temporary and local evil. In the early stages, it can restrict the use of a new machine to certain areas where labour is scarce and demanded by other sectors of indus­ try. It can provide in advance unemployed individuals with some employ­ ment, by forming companies of public utility with its own funds, such as those in charge of a canal, a road, a major building. (1803, 136) Say (1814, 385) is very clear in his support of stimulating the private sector through public works, writing that “the government is a bad producer . . . yet it could pow­ erfully stimulate private production with well-designed public establishments, properly executed and well-maintained, and especially with roads, bridges, canals and ports”. For him, public infrastructure boosts productivity and spurs economic growth: “this is the reason why roads, canals, bridges . . . [and] everything that facilitates domestic communications, enhance the wealth of a country” (Say 1819, 171; 1826, 167; see also 1803, 388). While criticising public debt – he feared that the funds would be used for wasteful expenditures and unproductive consumption such as funding wars and military purchases – he nevertheless welcomes it for “the construction of bridges, the construction or maintenance of roads and canals, and all public infrastructure indirectly productive” (Say 1803, 766; see also 1828–29, 1007–8). Say explained that a tax could be levied in one of two ways: direct or indirect contributions. Direct contributions are based on the taxpayer’s ability to pay. Indirect contributions include taxes on the purchase of goods and services that they consume or that are the objects of their work. Indirect contributions are easier to collect, because it is difficult to assess the ability to pay. Thus, public authorities are faced with a trade-off. Nonetheless, Say was very clear: taxes should be commensurate with the taxpayer’s wealth. “It could be argued that consumption taxes are the most unequally distributed . . . and that, in all countries where they are the most common, the most destitute individuals are sacrificed” (Say 1828–29, 1110). *** Like Ricardo, Mill and Malthus, Say and Destutt de Tracy developed their analyses from their reading of the Wealth of Nations. They were all Smith’s heirs, and they could, for this reason, be described as classical. However, assuming the existence of a “Classical canon in economics” (Hollander 2005) can be a source of misin­ terpretations. Despite long and friendly discussions, classical authors disagreed on many issues. On some central questions – the theories of prices and of income distribution in particular – Say developed his own views, different from Ricardo’s,

36 Alain Béraud and Guy Numa because he did not conceive in the same way the role of demand in the determi­ nation of the prices of goods and productive services. Drawing from Condillac’s analysis of trade, Destutt de Tracy developed his own views which differed both from Say’s and from Ricardo’s. References Baumol, William J. 1977. “Say’s (at least) Eight Laws, or What Say and James Mill May Really Have Meant”. Economica, 44 (174), 145–61. Baumol, William J. 1997. “J.-B. Say on Unemployment and Public Works”. Eastern Eco­ nomic Journal, 23 (2), 219–30. Becker, Gary Stanley, and William Jack Baumol. 1952. “The Classical Monetary Theory: The Outcome of the Discussion”. Economica, 19 (76), 355–76. Béraud, Alain, and Gilbert Faccarello. 2014. “Nous marchons sur un autre terrain. The reception of Ricardo in the French language. Episodes from a complex history”. In Gilbert Faccarello and Masashi Izumo (eds), The Reception of David Ricardo in Conti­ nental Europe and Japan. Abingdon: Routledge, pp. 10–75. Béraud, Alain, and Guy Numa. 2018a. “Beyond Say’s Law: The Significance of J.-B. Say’s Monetary Views”. Journal of the History of Economic Thought, 40 (2), 217–41. Béraud, Alain, and Guy Numa. 2018b. “Keynes, J.-B. Say, J. S. Mill, and Say’s Law: A Note on Kates, Grieve, and Ahiakpor”. Journal of the History of Economic Thought, 40 (2), 285–9. Bonnot de Condillac, Étienne. 1755. Traité des animaux, réédition in Traité des sensations, Traité des animaux, Corpus des œuvres de philosophie de langue française. Paris: Fayard, 1984, pp. 309–420. Bonnot de Condillac, Étienne. 1776. Le commerce et le gouvernement considérés relative­ ment l’un à l’autre. Amsterdam and Paris: Jombert et Cello. Cantillon, Richard. 1755. Essai sur la nature du commerce en général. London: Fletcher Gyles [New ed., Paris: Institut National d’Études Démographiques, 1952]. Champs, Emmanuelle de. 2015. Enlightenment and Utility. Bentham in French, Bentham in France. Cambridge: Cambridge University Press. Condillac: see Bonnot de Condillac. Constant, Benjamin. 1817. “La puissance de la loi et ses limites”. Mercure de France, 4, 244–55, as in Œuvres politiques de Benjamin Constant. Paris: Charpentier, 1874, vol. 2, pp. 116–23. Destutt de Tracy, Antoine. 1796. “Mémoire sur la faculté de penser”. In Mémoires de l’Institut National des Sciences et des Arts, Sciences Morales et Politiques, I. Paris: Bau­ doin, 1798, pp. 283–450. Destutt de Tracy, Antoine. 1801. Projet des éléments d’idéologie. Éléments d’idéologie. Première partie: Idéologie proprement dite. Paris: Didot. Destutt de Tracy, Antoine. 1803. Éléments d’idéologie. Seconde partie Grammaire. Paris: Courcier. Destutt de Tracy, Antoine. 1805. Éléments d’idéologie. Troisième partie Logique. Paris: Courcier. Destutt de Tracy, Antoine. 1811. Commentary and Review of Montesquieu’s Spirit of Laws. Philadelphia, PA: William Duane. Destutt de Tracy, Antoine. 1815. Éléments d’idéologie. IVe et Ve parties Traité de la volonté et de ses effets. Paris: Courcier. Destutt de Tracy, Antoine. 1817. A Treatise on Political Economy. Georgetown, D. C.: Joseph Mulligan.

The “founding fathers” of the French liberal thought 37 Destutt de Tracy, Antoine. 1819. Commentaires sur l’Esprit des lois de Montesquieu. Paris: Théodore Desoer. Dunoyer, Charles. 1827. “Traité d’économie politique par Jean-Baptiste Say”. Revue Ency­ clopédique, 34, 63–90. Dupuit, Jules. 1844. “De la mesure de l’utilité des travaux publics”. Annales des Ponts et Chaussées, II 8, 332–75. Faccarello, Gilbert. 2010. “Bold Ideas. French Liberal Economists and the State: Say to Leroy-Beaulieu”. European Journal of the History of Political Economy, 17 (4), 719–58. Faccarello, Gilbert, and Philippe Steiner. 2002. “The diffusion of the work of Adam Smith in the French language: An outline history”. In Keith Tribe (ed.), A Critical Bibliography of Adam Smith. London: Pickering and Chatto, pp. 61–119. Forget, Evelyn L. 1993. “J.-B. Say on Adam Smith: An Essay in the Transmission of Ideas”. Canadian Journal of Economics, 26 (1), 121–33. Hashimoto, Hitoshi. 1980. “Notes inédites de J.-B. Say qui couvrent les marges de la Rich­ esse des Nations et qui la critiquent: rédigées avec une introduction”. Kyoto Sangyo Uni­ versity Economic and Business Review, 7, 53–81. Hashimoto, Hitoshi. 1982. “Notes inédites de J.-B. Say qui couvrent les marges de la Rich­ esse des Nations et qui la résument”. KSU Economic and Business Review, 9, 31–133. Head, Brian William. 1985. Ideology and Social Science. Destutt de Tracy and French Lib­ eralism. Dordrech: Martinus Nijhoff Publishers. Head, Brian William. 1987. Politics and Philosophy in the Thought of Destutt de Tracy. London: Garland Publishing. Helvétius, Claude Adrien. 1773. De l’homme, de ses facultés intellectuelles et de son éduca­ tion. London: Société typographique. Hollander, Samuel. 2005. Jean-Baptiste Say and the Classical Canon in Economics. The British Connection in French Classicism. London: Routledge. Jacoud, Gilles. 2020–21. “Jean-Baptiste Say au Tribunat”. Revue d’histoire de la pensée économique, 9, 19–42. James, Michael. 1977. “Pierre-Louis Roederer, Jean-Baptiste Say, and the Concept of indus­ trie”. History of Political Economy, 9 (4), 455–75. Koolman, Gary. 1971. “Say’s Conception of the Role of the Entrepreneur”. Economica, 38 (151), 269–86. Magnan de Bornier, Jean. 2013. “Valeur et travail chez Destutt de Tracy”. Cahiers d’économie politique, 64, 197–220. Navier, Claude. 1830. “De l’exécution des travaux publics et particulièrement des conces­ sions”. Journal du génie civil, des sciences et des arts, 8, 327–52. Numa, Guy. 2019. “Jean-Baptiste Say on Free Trade”. History of Political Economy, 51 (5), 901–34. Numa, Guy. 2020. “Money as a Store of Value: Jean-Baptiste Say on Hoarding and Idle Bal­ ances”. History of Political Economy, 52 (5), 925–46. Potier, Jean-Pierre. 2010. “Introduction”. Introduction to J.-B. Say, Cours complet d’économie politique pratique. Variorum edition. Vol. II of Œuvres Complètes. Paris: Economica, pp. ix–lxxxi. Quesnay, François. 1767–68. “Maximes générales du gouvernement économique d’un royaume agricole”. In Physiocratie ou constitution naturelle du gouvernement le plus avantageux au genre humain. Leyde et Paris: Merlin, pp. 99–172 [François Quesnay Œuvres Économiques Complètes et Autres Textes, t. 1. Paris: INED, 2005, pp. 565–96]. Ricardo, David. 1817–21. “Principles of political economy and taxation”. Variorum edition. Vol. I of D. Ricardo, The Works and Correspondence of David Ricardo, edited by Piero Sraffa. Cambridge: Cambridge University Press, 1951.

38 Alain Béraud and Guy Numa Ricardo, David. 1951–73. Letters, July 1821–1823. The Works and Correspondence of David Ricardo, vol. IX, Pierro Sraffa (ed.). Cambridge: Cambridge University Press, 1951. Rousseau, Jean-Jacques. 1762. Du contrat social. Amsterdam: Marc Michel Rey. Savary des Bruslons, Jacques. 1726. Dictionnaire universel de commerce. Amsterdam: Jansons. Say, Jean-Baptiste. 1803, 1814, 1817, 1819, 1826, 1841. Traité d’économie politique ou simple exposition de la manière dont se forment, se distribuent et se consomment les rich­ esses. Variorum edition. Vol. I of J.-B. Say, Œuvres Complètes. Paris: Economica, 2006. Say, Jean-Baptiste. 1814. “Sur les récompenses politiques qu’il convient de donner à la vertu”. Mercure de France, 60 (660), 62–9. Say, Jean-Baptiste. 1815–26. Catéchisme d’économie politique. Variorum edition. In vol. III of J.-B. Say, Œuvres Complètes. Paris: Economica, 2020, pp. 11–223. Say, Jean-Baptiste. 1817. “Tactiques des assemblées législatives. Ouvrage extrait des manu­ scrits de Jeremy Bentham. Compte-rendu”. Le Censeur Européen, 4, 74–96. Say, Jean-Baptiste. 1820. Lettres à M. Malthus. Londres and Paris: Bossange. Say, Jean-Baptiste. 1825. “Examen critique du discours de M. Mac Culloch sur l’économie politique”. In Œuvres diverses de J.-B. Say. Paris: Guillaumin, 1848, pp. 261–79. Say, Jean-Baptiste. 1826. “De la crise commerciale en Angleterre”. Revue Encyclopédique, 32 (10), 40–5. Say, Jean-Baptiste. 1828–29, 1841. Cours Complet d’économie politique pratique. Vari­ orum edition. Vol. II of J.-B. Say, Œuvres Complètes. Paris: Economica, 2010. Say, Jean-Baptiste. 1833. “Essai sur le principe d’utilité”. In Charles Comte (ed.), Mélanges et correspondance d’économie politique. Paris: Chamerot. Reprinted in vol. IV of J.-B. Say, Œuvres Complètes, Leçons d’économie politique. Paris: Economica, 2003, pp. 122–54. Say, Jean-Baptiste. 2003. “Politique pratique”. In vol. V of J.-B. Say, Œuvres Complètes. Paris: Economica, pp. 287–822. Smith, Adam. 1776. An Inquiry into the Nature and the Causes of the Wealth of Nations. Vols I–II of The Glasgow edition of the Works and Correspondence of Adam Smith. Oxford: Oxford University Press, 1976. Staël, Germaine de. 1807. Corinne ou l’Italie. Paris: Nicolle. Steiner, Philippe. 1990. “L’économie politique pratique contre les systèmes: quelques remarques sur la méthode de J.-B. Say”. Revue d’économie politique, 100 (5), 664–87. Steiner, Philippe. 1998. “Jean-Baptiste Say: The entrepreneur, the free trade doctrine and the theory of income distribution”. In Gilbert Faccarello (ed.), Studies in the History of French Political Economy: From Bodin to Walras. New York: Routledge, pp. 196–228. Steuart, James. 1767. An Inquiry into the Principle of Political Economy. London: A. Millar and T. Cadell [Reprinted London: Pickering and Chatto, 1998]. Tocqueville, Alexis. 1835–40. De la démocratie en Amérique. Paris: Gosselin. Torrens, Robert. 1819. “Mr. Owen’s Plans for Relieving the National Distress”. The Edin­ burgh Review or Critical Journal, 32 (54), 453–77. Torrens, Robert. 1821. An Essay on the Production of Wealth. London: Longman, Hurst, Rees, Orme and Brown. Turgot, Anne-Robert-Jacques. 1766. Réflexions sur la formation et la distribution des richesses. In Anne-Robert-Jacques Turgot, Œuvres de Turgot et documents le concer­ nant, avec biographie et notes par Gustave Schelle, vol. II. Paris: Félix Alcan, 1913–23, pp. 533–601.

The “founding fathers” of the French liberal thought 39 Turgot, Anne-Robert-Jacques. 1767. “Impôts indirects. Observations sur les mémoires récompensés par la Société d’agriculture de Limoges”. In Anne-Robert-Jacques Turgot, Œuvres de Turgot et documents le concernant, avec biographie et notes par Gustave Schelle, vol. II. Paris: Félix Alcan, 1913–23, pp. 626–58. Turgot, Anne-Robert-Jacques. 1769. Valeurs et monnaie. In Anne-Robert-Jacques Turgot, Œuvres de Turgot et documents le concernant, avec biographie et notes par Gustave Schelle, vol. III. Paris: Félix Alcan, 1913–23, pp. 79–98. Véron de Forbonnais, François. 1754. Éléments du Commerce, 2nd ed. Leyde, Paris: Bian­ son, David, Le Breton and Durand. Whatmore, Richard. 2000. Republicanism and the French Revolution: An Intellectual His­ tory of Jean-Baptiste Say’s Political Economy. Oxford: Oxford University Press.

3

Liberal economists after Say Alain Béraud and Claire Silvant

The 1830s were a pivotal period for the development of liberal economic thought in France: from this decade onwards, in the wake of Jean-Baptiste Say (1767–1832), a group of intellectuals dealing with political economy established new institu­ tions that spread the liberal ideas of individualism and economic freedom. While not necessarily agreeing with each other on many points of economic theory and policy, these economists, especially during the 1840s, succeeded in institutionalis­ ing the discipline through new means of disseminating their ideas, notably a spe­ cialised journal, a learned society and a publishing house. After the episode of the Physiocracy during the eighteenth century, it was probably the second time that an apparently authentic “school of thought” developed in such a way in France. This school, however, did not have one undisputed leader (contrary to the physiocrats) and its members had heterogeneous profiles. Prior to the research initiated by Breton and Lutfalla in the 1980s, by Dockès et al. (2001) and Béraud, Gislain and Steiner (2004), French liberal thought after 1840 was relatively neglected and suffered from a certain discredit in the eyes of most his­ torians of economic thought. Its contributions were long considered mediocre, since they could not be linked to either the prestigious French tradition of mathematicians and engineer-economists represented by Antoine-Augustin Cournot (1801–1877) and Jules Dupuit (1804–1866), or British political economy, particularly the Ricard­ ian tradition.1 Yet the French authors were, in their time, regarded as their peers by British economists, notably Thomas Robert Malthus, David Ricardo and John Stuart Mill, with whom they interacted on an equal footing. Recent developments in the history of thought have shown that the study of these authors is worthwhile for at least two reasons: the wealth of debates that enlivened the French liberals as a group, and the diversity and originality of their positions, which bring some singular figures to the fore. It was not economic theory but the art of economic policy – or “ques­ tions of pot-au-feu” (beef stew), as Michel Chevalier (1806–1879) called them – that most interested these economists. And it is in this field that the most fertile debates can be identified, although they are far from the analytical complexity of English

1 Joseph Alois Schumpeter’s History of Economic Analysis (1954) is partly responsible for this reputation. DOI: 10.4324/9780429202407-4

Liberal economists after Say 41 political economy. The aim of this chapter is thus to present the characteristics and diversity of these economists by studying their most salient controversies, which most often concerned concrete questions. In this perspective, the seminal works of Breton and Lutfalla (1991) and Le Van-Lemesle (2004) are valuable guides. 1. The institutionalisation of French political economy after Jean-Baptiste Say Jean-Baptiste Say’s multifaceted legacy

French liberal economists were first of all the heirs of the eighteenth-century free trade approach, especially through the Idéologues who helped to circulate the lib­ eral tradition of Turgot, Condillac and Quesnay (Picavet 1891, Nemo 2006, Leter 2006). However, the physiocratic legacy needs to be qualified, since the exclusive productivity of agriculture, as well as the resulting single tax doctrine, were widely rejected. These economists also acknowledged the notable influence of Adam Smith, and the permeation of French liberal thought by the ideas developed in the Wealth of Nations allowed Béraud, Gislain and Steiner (2004) to speak of a neoSmithian current of thought in France. Nonetheless, for the French liberals, the main reference was undoubtedly JeanBaptiste Say. His influence, both intellectually and institutionally, was decisive. Say’s intellectual legacy was first developed by his son-in-law Charles Comte (1782–1837), his son Horace Say (1794–1860) and his long-time friend AdolpheJérôme Blanqui (1798–1854). Other prominent economists supported and relayed Say’s thought: Barthélemy-Charles Dunoyer de Segonzac2 (1786–1862), Frédéric Bastiat (1801–1850) and Antoine-Élisée Cherbuliez (1797–1869), while others, such as Pellegrino Rossi (1787–1848) and, later, Gustave de Molinari (1819–1912), distanced themselves somewhat from his thinking. Say’s influence can first be seen in the adoption by most liberal economists of the idea that political economy should be spread among the public through teaching and books in order to fight against the obscurantism of the Ancient Regime. Secondly, many of these economists took up Say’s analysis of market, crises, and the role of entrepreneur, his definition of production as a production of utility and his criticism of protectionism inter alia, while deviating from it on other respects, such as value and distribution. Some of them even adopted Say’s way of exposing the principles of political economy and reproduced in their treatises the triptych presented in his Traité d’économie poli­ tique (Production/Distribution/Consumption), with some variations (Steiner 2012). But Say’s legacy is not only intellectual: it also took on more material forms for the dissemination of liberal thought. The circle of friends which formed around him during the 1820s became the core of the liberal group. Some important figures belonged to it: his son Horace, who used his network of manufacturers and acted as a sponsor himself, and Adolphe-Jérôme Blanqui, who made the link with the

2 Hereafter Charles Dunoyer, since that is how he used to sign his writings.

42 Alain Béraud and Claire Silvant publisher Gilbert-Urbain Guillaumin (1801–1864), whose role proved central in the creation of the Journal des économistes (below). It is worth noting that the constitution and expansion of the liberal group was made possible by a change in the relationship with the political authorities (Breton 1985a). During the First Empire and the Restoration, the Liberals were in the opposition, their activities were under close surveillance and censorship was not uncommon (Charles Dunoyer was imprisoned, others had to go into exile). After the July Revolution in 1830, the political context changed until the Second Empire and the relations between economists and the government became, if not closer, at least less conflictual – those who were close to the Orléanists even occu­ pied official positions. The liberals and their institutions

The institutionalisation of (liberal) political economy in France occurred in three main ways: teaching, publishing and participation in learned societies. Le Van­ Lemesle’s (2004) meticulous study reveals the central role of a small circle of friends from Jean-Baptiste Say’s entourage in this multifaceted process, which gradually became structured and gained more and more sympathisers. A first notable aspect is the teaching of political economy and the creation of academic chairs. Before 1830, only two chairs3 of political economy existed in France: that of the Conservatoire des Arts et Métiers, founded in 1820 (to which Adolphe Blanqui succeeded after Say’s death in 1832) and that of the Collège de France, established in 1830 – a chair specifically created for Jean-Baptiste Say, then successively held from 1833 by the Italian jurist Pellegrino Rossi and from 1840 by the former Saint-Simonian engineer Michel Chevalier. During the same period, the liberals reinvested the Académie des Sciences Morales et Politiques of the Institut, which had been re-established in 1832 by François Guizot (1787– 1874), then Minister of Public Instruction. Apart from Charles Dupin4 (1784– 1873), all the economists who sat on the Académie in 1832 and successive years were in favour of free trade: Emmanuel-Joseph Sieyès (1748–1836), for exam­ ple, or Pellegrino Rossi, Hippolyte Passy (1793–1880), Joseph Garnier (1813– 1881), Léon Faucher (1803–1854), Louis René Villermé (1782–1863), Michel Chevalier, Charles Comte, Adolphe Blanqui and Louis Wolowski (1810–1876). Many of them were also members of other institutions described in this section (Le Van-Lemesle 2004). From the 1840s onwards, new chairs in political economy were occupied by liberals, who used them as arenas for the dissemination of their ideas. These included the chair of economics at the École Royale des Ponts et Chaussées, 3 Say also lectured in a private institution, the Athénée Royal – where he was followed by Dunoyer and Blanqui – and at the École Spéciale de Commerce et d’Industrie founded by the Paris Chamber of Commerce. 4 Charles Dupin was an engineer and politician, well known for his observational trips to England, from which he brought back strong protectionist convictions (Le Van-Lemesle 2004).

Liberal economists after Say 43 established in 1846, where Joseph Garnier delivered a course for future engi­ neers. Later, economics courses were also established at the École Libre des Sciences Politiques – which subsequently became the Institut d’Études Politiques – founded in 1872 by the liberal Émile Boutmy (1835–1906): Anatole Dunoyer (1829–1908) (Charles’s son), Clément Juglar (1819–1905) and Paul Leroy-Beaulieu (1843–1916) delivered lectures with a strong liberal flavour to students who were destined to become the administrative elite of the nation. This expansion of the teaching of political economy was to the advantage of the liberal economists until 1877, when the government decided to open a chair of politi­ cal economy in each Faculty of Law. The expansion of economics courses went pari passu with the proliferation of textbooks that popularised and disseminated liberal ideas (Steiner 2012). The most widely circulated textbooks were those of Joseph Garnier (his Éléments de l’économie politique was first published in 1846, went through three editions and then became the Traité d’économie poli­ tique, sociale ou industrielle, the tenth and last edition of which was published in 1907) and Henri Baudrillart (1821–1892) – Michel Chevalier’s successor at the Collège de France – whose Manuel d’économie politique went through five editions between 1857 and 1883. In parallel, from the July monarchy onwards, liberal economists began to create and structure their own network of institutions. One person played a singular role in this regard: Gilbert-Urbain Guillaumin, a bookseller most interested in economics, who founded a publishing house in 1835 with the support of the Say family. From the 1840s, his publishing house became a central organ for the dissemination of lib­ eral ideas, reissuing the greatest French and British classics of political economy in a series titled Collection des principaux économistes and publishing most of the works and handbooks of contemporary liberal economists. The Guillaumin house also pub­ lished a masterpiece, the Dictionnaire de l’économie politique – the two volumes of which came out in 1852 and 1853, respectively – edited by the lawyer and economist Charles Coquelin (1802–1852) and Guillaumin himself. By bringing together the most prestigious personalities of the liberal group, this handbook became a reference in the field. Each entry established, as it were, the stance of the liberal doctrine in the main theoretical controversies of the time. It remained unmatched until the publica­ tion of R. H. Inglis Palgrave’s Dictionary of Political Economy in 1894. Guillaumin was also involved in the founding of the Journal des économistes (1841) and the Société d’économie politique de Paris (1842), both of which played a decisive role. The periodical was edited by – among others – Adolphe Blanqui (1842), Joseph Garnier (1845–1855, 1866–1881) and Gustave de Molinari (1881–1909). It offered a content characteristic of the specialised jour­ nals which blossomed from the French Revolution to the 1840s:5 in-depth articles 5 Laurent and Marco (1996) identify eight main attempts to create journals specialised in political economy over this period, from Roederer’s Journal d’économie publique, de morale et de politique (1796–97), to Jules Burat’s Journal de l’industriel et du capitaliste (1836–40). English-language academic journals specialised in political economy did not appear until several decades later (The Quarterly Journal of Economics was founded in 1886, and The Economic Journal in 1890). Until

44 Alain Béraud and Claire Silvant on economic theory were published alongside opinion columns, descriptive arti­ cles presenting current economic, financial or social problems, statistical data, book reviews and reports of discussions held at the Société d’économie politique on a monthly basis. The contributors had varied profiles: the most prolific authors were mainly well-known economists,6 but the journal was also open to contri­ butions from more modest authors, sometimes little known and sometimes from scholars not even from the liberal ranks – Léon Walras (1834–1910) or Émile de Laveleye (1822–1892), for instance. Introducing the fifth year, Joseph Garnier celebrated the editorial success of the Journal: In the midst of this still general tendency for governments to be driven by the most powerful interests, . . . it is with great joy that we observe a circle of readers gathering around us in ever greater numbers. . . . United in a common purpose, these men [the contributors] may have followed different political lines but they came together for science . . . with the noble aim of helping their fellow citizens to drop their old mistakes and ancient prejudices. (Journal des économistes, 1845, December, 2–3). The success of the journal was undeniable until the 1870s, when its influence started to decline along with that of the liberal economists themselves (Laurent and Marco 1996). Because of the frequency of its publications, the breadth of its contributors and its longevity (publication continued until 1940), the Journal des économistes was undoubtedly the most influential liberal review. But other journals also wel­ comed the writings of liberal economists: the generalist Revue des Deux-Mondes, founded in 1829, had a large readership and regularly published articles on political economy, alongside papers on literature, geography, history and the arts. More­ over, other specialised journals were published in the wake of the Journal des économistes. The Annuaire de l’économie politique et de la statistique, founded by Joseph Garnier in 1844, provided financial, demographic, military, commercial and industrial data once a year. The weekly review Le libre-échange (initially sub­ titled Journal du travail agricole, industriel et commercial), backed by Bastiat’s Association pour la liberté des échanges, was issued by Guillaumin between 1846 and 1848. Later, the Journal de la société statistique de Paris, a quarterly founded in 1860 and directed by Michel Chevalier and Louis Wolowski, among others, also provided a forum for liberals. Among the periodicals close to the liberal school, we should add the Revue de Paris, founded in 1851, L’économiste français, created in 1861 by Jules Duval, and Le Moniteur des finances, de l’industrie et du com­ merce, founded in 1869. This overview of the institutions created by the liberals thus shows in a striking way that the same small circle of economists finally played leading roles in various institutions. then, contributions in economics were published in generalist reviews, such as The Edinburg Review, the Quarterly Review or the Westminster Review (Laurent and Marco 1996). 6 These included Michel Chevalier, Joseph Garnier, Charles Dunoyer, Louis Wolowski, Jules Dupuit and later, Gustave de Molinari and Yves Guyot (1843–1928).

Liberal economists after Say 45 Some prominent figures

Yet the members of the school showed a great diversity of profiles, professions and involvement in its activities. Its core was made up of those who held the abovementioned teaching positions: besides Jean-Baptiste Say himself, it included Pellegrino Rossi, Henri Baudrillart, Michel Chevalier and Joseph Garnier. It should be noted that Alexis de Tocqueville (1805–1859), who is the best known of the French liberal thinkers, is not included in this chapter, since he was not part of the intellectual group referred to here.7 Gustave de Molinari, a Belgian economist, professor of political economy in Brussels and Antwerp, was also very active in France. Some other members were publicists, that is, authors whose main activity was the publication of articles and books – for instance Frédéric Bastiat, Ambroise Clément (1805–1886), Charles Coquelin or Frédéric Passy (1822–1912). The Société d’économie politique and the Journal des économistes also provided a forum for a number of statesmen and senior civil servants. The latter were mainly influential through their political support and the spread of the liberal cause, but not necessarily through their writings: the statesmen Léon Faucher, Félix Esquirou de Parieu (1815–1893) and Eugène Rouher (1814–1884), and the senator and then Governor of the Banque de France Gustave Rouland (1806–1878) belonged to this category.8 Some other members were also engineers by training (at the École Poly­ technique) or by profession – such as Jules Dupuit,9 Michel Chevalier, Roger de Fontenay (1809–1891), Jules Du Mesnil-Marigny (1810–1885) and Ernest LaméFleury (1823–1903) – or mathematicians such as Gustave Fauveau (1834–1895) and Mathieu Wolkoff (1802–1875), whose contributions were more sporadic. Finally, depending on the topics discussed, manufacturers, financiers and bankers completed this picture. Among all these names, however, a few stand out in par­ ticular, and a closer examination of their profile is in order at this point. 7 Tocqueville’s analyses are commonly considered to belong to political science and not political economy. Richard Swedberg (2009) and Jon Elster (2009) both qualified this view, showing that Tocqueville’s analysis of democracy also dealt with economic issues, such as the motives of human behaviour, income distribution and economic development. Indeed, in De la démocratie en Amérique (1835–40) and L’Ancien Régime et la Révolution (1856), Tocqueville analysed the effects of democ­ racy on the behaviour of individuals and the nature of their relationships. He defined democracy not as a political system but as a social state where conditions are equal, that is, where individuals are equal before the law. In such a society, they are individualistic and their behaviour is dictated by selfinterest. Thus, in a democracy, the poor are driven by the desire to get richer, and the rich by the fear of getting poorer; economic progress is stimulated. Equality of conditions does not lead to equality of wealth. Some are rich, others are poor, but interpersonal relations are not the same under democratic conditions as in societies where conditions are unequal. The distribution of income is affected. Land rents are higher in democracies and lease terms are shorter. Wage levels are likely to rise, although Tocqueville envisages the possibility of an unfavourable development if the owners of large compa­ nies constitute a new aristocracy. Democracy then appears, in the case of the United States, as one of the factors explaining the progress of wealth. 8 Liberal economists were numerous in Parliament – Breton (2005) lists 41 of them over the period 1848–1929, who were members of Parliament and at the same time published articles or books on political economy – which made the Parliament an important place for economic debates. 9 Dupuit had a rather paradoxical relationship with other liberals: they respected his reasoning but were suspicious of the radical positions he took on many subjects (Chapter 5).

46 Alain Béraud and Claire Silvant The first is certainly Pellegrino Rossi, an Italian constitutionalist and economist who arrived in France as the successor to Jean-Baptiste Say at the chair of political economy of the Collège de France. Guizot had Rossi appointed to the Collège de France, who defended different ideas from those of Say and Charles Comte, who was the other candidate for the position (Béraud 2018). In the lectures he gave there from 1834 to 1840 (Cours d’économie politique, 1840–41), Rossi achieved a form of eclectic synthesis10 between British political economy (especially Malthus and Ricardo) and Say’s political economy (Marco 1988; Vatin 2003; Ravix 2017). After a first difficult period – he was blamed as much for being overly biased towards Ricardian ideas as for his closeness to the Doctrinaires11 – he finally imposed himself as one of the most influential liberal leaders (Béraud 2018) and was particularly appreciated by Jules Dupuit. His political career was also remark­ able: after his naturalisation, he was called by Louis-Philippe to the Chambre des Pairs in 1839. He was assassinated in Rome in 1848, two months after having accepted to form the government of Pope Pius IX. Next, the most central figure of the liberal group was certainly Joseph Garnier. His meeting, in his youth, with Blanqui and Guillaumin, enabled him to partici­ pate actively in all the liberal institutions: he took part in the establishment of the Société d’économie politique and the creation of the Journal des économistes. He held the Chair of Political Economy at the École des ponts et chaussées from 1846 onwards and he was a prolific contributor to the Dictionnaire de l’économie poli­ tique. His political economy was marked by a striving for conciliation and syn­ thesis, although not devoid of iconoclastic positions. As he stated in his textbook, based on his teaching at the Ponts et Chaussées: I have endeavoured to situate myself within the scientific orthodoxy. . . . As I have sought to elucidate rather than innovate, I have sometimes taken sen­ tences verbatim from my models, and sometimes I have analysed, compared and commented on numerous passages from various writings, in order to adapt them to my framework. . . . The writings that mainly served as my guides are those of Quesnay, Turgot, Adam Smith, Malthus, Ricardo, J.-B. Say, and M. Rossi. (Garnier 1846, vii) He thus tried to build a theoretical compromise or consensus on issues that divided his liberal contemporaries: on value, for example, he followed both the utility approach of Say and Rossi’s approach based on production costs; on the question of population, he took up Malthus’s theses but distanced himself from the prin­ ciple of population. In the end, if Joseph Garnier can be considered as an ortho­ dox economist (Arena 1991), it is probably less because of the radicalness of his 10 In Publicistes modernes, published in 1862 (Paris: Didier), Henri Baudrillart called Rossi an “eclec­ tic” on the grounds that his analyses combined political economy, criminal law and constitutional law, and achieved a synthesis of the political economy of Smith, Malthus, Ricardo and Say. 11 On the moderately liberal group of the Doctrinaires, see for example Craiutu (2003, 2004).

Liberal economists after Say 47 analyses than because his ideas were often representative of what other French liberals thought (Etner and Silvant 2017). Another key figure of the liberal school was Frédéric Bastiat, characterised by his activism in favour of free trade. In his youth, he acquired a wide range of experience in agriculture, business and local politics, and he intensively read classical and revolutionary authors, which strengthened his individualistic con­ victions. It was not until 1844 that he wrote his first article for the Journal des économistes – the first of a long series. In 1846, he founded the Association pour la liberté des échanges (Association for the Freedom of Trade), modelled on the Cobden League in Britain. The association fought against mercantilist and pro­ tectionist tendencies and promoted the benefits of free trade, which would have allowed goods produced abroad to be purchased at a lower cost, to the benefit of both retailers and consumers. Bastiat’s activism as a lobbyist also included the publication of numerous pamphlets and letters addressed to his opponents, in particular socialists. In his Harmonies économiques, published in 1850, he dis­ tanced himself from the classical views of Ricardo or Say and developed original views not really accepted by other liberals:12 in his opinion, there were increasing returns in agriculture as well as manufacturing, and both the classical theory of value and the Malthusian laws of population were erroneous. Bastiat had only a few heirs: Prosper Paillottet and Roger de Fontenay, who published his collected works in 1864. Apart from Bastiat and Garnier, three other authors defended an uncompro­ mising liberalism: Charles Dunoyer, Jean-Gustave Courcelle-Seneuil (1813–1892) and Gustave de Molinari. Each in their own way, they developed what can be described as liberal orthodoxy in its purest form: rejection of public intervention, glorification of self-interested action and an unwavering commitment to individual freedom. Charles Dunoyer first supported the “most absolute liberalism” (Pénin 1991, 37) and, with Charles Comte, edited two important journals during the very end of the First Empire and the first years of the Restoration: Le censeur (1814–15) and Le censeur européen (1817–19). He then embarked on an administrative career, firstly as prefect and then as Conseiller d’État. Elected to the Académie des Sci­ ences morales et politiques as early as 1832, he participated in the creation of the 12 Some scholars considered Bastiat as one of the most central authors of the liberal group. This thesis was developed by Charles Gide and Charles Rist in their Histoire des doctrines économiques (first edited in 1909), in which they characterised the liberal group as an “optimistic” school, structured around the figure of the polemist. Recent research contradicts this assessment. According to Béraud and Etner (1993), Gide and Rist are guilty of having artificially set the “pessimistic” English clas­ sics, rooted in David Ricardo’s thought, against an “optimistic” French school, whose pivotal figure would have been Frédéric Bastiat. In so doing, Gide and Rist contributed to the lasting discredit of French liberal economists. Their interpretation seems inaccurate for several reasons: first, it over­ estimates the theoretical disagreements between Say and Ricardo, notably regarding the stationary state; second, it misattributes to Frédéric Bastiat the role of pivot between Say’s ideas and those of other liberals, and lastly, it underestimates the latters’ criticism of the pamphleteer (Béraud and Etner 1993).

48 Alain Béraud and Claire Silvant Société d’économie politique and the Journal des économistes, defending a theo­ retical and moral conservatism and fighting against novel ideas. His main work, La liberté du travail (1845), is a masterpiece of liberal orthodoxy, in which he intended to show that competition is superior in every respect to economic systems based on limitations to the individual freedom of work – whether serfdom and slavery or statism. Jean-Gustave Courcelle-Seneuil also embodied this liberal orthodoxy. His pro­ file is rather singular: he was part of the first circle of liberals (he wrote in the Journal des économistes, collaborated in the Dictionnaire de l’économie politique and published books with Guillaumin) but he did not have a university chair in France; he left for Chile to become professor of political economy at the University of Santiago (1855–63). During his Chilean period, he consolidated his expertise on banking, became what is today called a “money doctor” and an adviser to the Chilean Minister of Finance and wrote his Traité théorique et pratique d’économie politique (1858). While his main area of specialisation was banking, financial eco­ nomics and business economics, his aim was to build a multidisciplinary science around political economy. The Belgian economist and journalist Gustave de Molinari was the last repre­ sentative of this uncompromising liberalism and anti-statism. Molinari’s longev­ ity was exceptional: in 1846, he co-founded with Bastiat the Association pour la liberté des échanges, and in 1881 he succeeded Joseph Garnier as the editor of the Journal des économistes, a position he held until 1909. The concept of free competition was at the centre of his developments: he even proposed a competitive “production of security” aimed at replacing the public police or army. Louis Wolowski was another singular figure of the liberal group. Born in War­ saw, he studied in France and Germany before his family settled in France in 1831 after the defeat of the Polish uprising against Russia. He had a brilliant career and founded major journals in the field of law (especially civil law). In 1839, Hippolyte Passy noticed his talents as a publicist and entrusted him with a teaching chair at the Conservatoire des Arts et Métiers. From then onwards, he became one of the pillars of the liberal group, being part of all its coteries. He took singular positions on the question of money and banking and distinguished himself from his fellow liberals as regards methodology and social policy. Finally, the last notable author, with yet another profile, was the engineer Michel Chevalier. His personal trajectory was unique: trained at the École Poly­ technique and then at the École des Mines, he worked as an engineer and, in his youth, adhered to the Saint-Simonian doctrine (Chapter 10). He distanced himself from it in 1833 and, on behalf of Adolphe Thiers (1797–1877), undertook a mis­ sion of observation in the United States of America, which was the origin of his admiration for the American model of economic development. An outcome of this mission was the publication in 1836 of his Lettres sur l’Amérique du Nord. After having succeeded Rossi at the Collège de France and published his three-volume Cours d’économie politique (1842–50), Chevalier sided with the liberals, becom­ ing an indispensable reference on many subjects. He then embarked on a successful political career and became an economic adviser to Napoléon III. His ideas were

Liberal economists after Say 49 characterised by a total faith in free trade, the promotion of a voluntarist industrial policy, productivism, and a particular attention to communication networks, which bears the traces of his Saint-Simonian past. 2. Property rights and economic freedom Despite their different profiles, the French Liberals were united by a common legacy and by their adhesion to certain inalienable principles: private property, individual freedom and equality before the law. But adhering to these principles did not mean agreeing on how to tackle more specific economic issues, be they theoretical or empirical. The following sections show that, in many cases, different interpretations of these principles led to considerable theoretical or policy disa­ greement. One point, however, remained undisputed: the opposition to socialism and interventionism (although the opposition to interventionism had its limits for some liberals, as will be shown below). The liberal approach was fundamentally individualistic. The pursuit of self-interest is the driving force behind the growth of wealth – “it is as impossible to conceive of the production of wealth without the permanent action of self-interest as it is to conceive of the planetary mecha­ nism without gravitation” (Chevalier 1849, 5). The following pages focus on pri­ vate property and economic freedom as principles on which no compromise was allowed, showing that the lines of agreement quickly broke down when empirical, practical issues were discussed. Natural rights and utilitarianism

Not surprisingly, the attachment to private property, and the many virtues attributed to it, was a pillar of liberal economic thought. The expansion of the liberal group in the 1840s went hand in hand with a renewed interest in property issues, in a context of expanding socialist ideas. Before 1848, the liberal view on socialist theories was critical but quite benevolent: these theories were considered as unrealistic, based on false principles, but developed with a view to the welfare of the people. As Coquelin states: it is to the credit of the principal leaders of the socialist doctrines that they really aspire to good. As much as their theories are false, their intentions are pure. What they really want is, one may believe at least, a more abundant dis­ tribution of wealth, a general increase of well-being, and not a brutal reversal of acquired positions. (Coquelin 1848, 5–6) Until 1848, liberal authors did not perceive an immediate political threat, espe­ cially to private property. Charles Comte’s Traité de la propriété (1834) aimed to “reveal the nature of the various kinds of property, but also to explain their con­ stitution . . . [and to] recall a large number of truths which belong to the science of political economy” (Comte 1834, vol. 1, XXIV), but most liberals were not

50 Alain Béraud and Claire Silvant interested in the question of property as a priority. The year 184813 marked a break: they realised that socialist ideas could become a political danger and lead to major social unrest; they feared the shift from utopia to revolution. Consequently, their publications multiplied, in both periodicals and books, in anticipation of a looming danger. Adolphe Thiers’14 De la propriété (1848) was a response to the writings of Louis Blanc (1811–1882), Étienne Cabet (1788–1856) and, to a lesser extent, Pierre-Joseph Proudhon (1809–1865). Faced with a serious political threat, it was therefore urgent to address this concern head on. So began Thiers’ foreword: Since French society has come to this point of moral disturbance, such that the most natural, the most obvious, the most universally recognised ideas are being doubted, boldly denied, let us be allowed to demonstrate them as if they needed it. This is a tedious and difficult task, for there is nothing more tedious . . . than to try to demonstrate what is obvious. (Thiers 1848, 1) After 1848, a twofold theoretical necessity crystallised: that of giving private property solid foundations and justifications, first to counter the perception of a growing socialist threat during the Second Republic (February 1848 to Decem­ ber 1852), and then to reinforce it in the presence of growing interventionism dur­ ing the Second Empire (December 1852 to September 1870). The liberals agreed unequivocally on the need for private property rights, which they considered to be a guarantee of both efficiency and justice. On the one hand, private property is the most incentivising mode of appropriation, as we would say today, for individu­ als: only the certainty of appropriation through one’s own labour makes individu­ als engage in the maximum effort of production. Weak protection of individual property rights thus exposes society to a slowdown in economic activities. Private property is also a matter of justice: individuals should possess the goods that their personal faculties and work have made possible. But the debate was less about the merits of private property itself, which no one doubted, than about its theoretical and philosophical justifications: an opposition appeared within the liberal school between advocates of natural rights and utilitarians. The analysis of the founda­ tion of property rights followed the same historical milestones as those mentioned above: 1848 appears as the culmination of a return to natural law. Justifications of property rights

Charles Comte, Gustave de Molinari, Charles Dunoyer, Frédéric Bastiat, Adolphe Thiers, Louis Wolowski and the publicist Henri Dameth15 (1812–1884) were the 13 The February 1848 revolution led to violent riots and the formation of a moderate provisional gov­ ernment, which included the socialist Louis Blanc. 14 Molinari considered Thiers’ argument to be too weak, especially facing Proudhon’s ideas: “M. Thiers did not touch M. Proudhon’s edifice; he contented himself with killing a few rats in the attic” (Molinari 1848, 61). 15 Henri Dameth was a professor of political economy in Geneva.

Liberal economists after Say 51 front line in the defence of natural law against socialism and utilitarianism.16 They traced the source of property back to a specific relation between labour and nature. Only human labour can make the land productive; therefore, the first appropria­ tion of land was naturally acquired, as was its transmission through generations: it could not be taken away by prescription, which guaranteed the harmonious and peaceful development of societies. Any other mode of appropriation would amount to what Bastiat called “spoliation légale” (legal plundering). These authors thus attacked the consequences of utilitarianism for the definition of property rights. If one accepts that property rights be assigned according to the principle of util­ ity, they would in fact be cut off from the nature/labour connection. They would then be insufficiently protected from discretionary intervention by the govern­ ment; and if individuals cannot be sure of enjoying or being able to bequeath their wealth, the economic incentives (to work, save or invest) would necessarily be reduced. In that sense, these authors opposed what they call the “the principle of the jurists”, which states that property derives from the law, related as much to Rousseau as to Bentham, with their “principle of the economists” (Bastiat 1848, 22). They criticised the utilitarian principle for providing a rationale for socialist and interventionist theses. The law exists, they said, only to recognise, enshrine and protect property rights, acquired and transmitted according to the principle of natural justice. Some prominent liberal economists, however, did not hesitate to take the path of utilitarianism, challenging the foundations of natural law: among them, the names of Jean-Baptiste Say, Pellegrino Rossi, Jean-Gustave Courcelle-Seneuil, AntoineÉlisée Cherbuliez, and, in a slightly different way, Jules Dupuit stand out. They strongly criticised the myth of Robinson Crusoe and the first cultivation of land. In addition, the theory based on natural law was said to suffer from a logical incon­ sistency. From the perspective of this theory, we can only own what we produce entirely by ourselves. However, apart from very special cases, all production is in reality a joint production between an individual and his environment. In contrast to the advocates of natural law, this second group of authors considered that the definition of property rights according to the criterion of public utility is the most liable to ensure efficiency and equity: “the appropriation of land is no different from all manifestations of human freedom that affect the social order. The indi­ vidual fact must be contained by government within the limits of law and reason” (Rossi 1840–41, vol. 2, 10). This view was later reaffirmed by Jules Dupuit, who made public utility the guiding principle of his political economy (see Chapter 5), as stated in his famous sentence: “Public utility is the principle, the basis, the foun­ dation, not only of property, but of taxation, of all laws, because the society which makes them can only rule in the general interest” (Dupuit 1861a, 47). 16 French liberal economists had an ambivalent attitude to utilitarianism during the first half of the nineteenth century. The philosopher Victor Cousin (1792–1867), professor at the Faculté des lettres of Paris and member of the Académie, was one of the most critical commentators of Bentham. Other critics were Germaine de Staël and Benjamin Constant (Chapter 8). Rossi was inspired by Etienne Dumont (1759–1829), Bentham’s friend and translator.

52 Alain Béraud and Claire Silvant These general debates on a philosophical level were transposed to a number of concrete issues, depending on topical discussions: how to define, for example, the property rights to a literary work? What limits should be placed on the duration of patents? Should it be possible to expropriate, and according to what criteria? Should forest ownership be regulated in a particular way? What rules should apply to inheritance? Lastly, thoughts on property rights also raised the question of the intervention of the State as legislator: property then became an object of political economy as well as law. To illustrate these points, let us briefly focus on two of the controversies, regarding intellectual property and inheritance, respectively. Intellectual property and inheritance

The question of property rights was first of all discussed, particularly from the end of the 1850s, in the context of a topical issue: intellectual property. In 1858, a congress on literary property was organised in Brussels, bringing together authori­ tative figures from various backgrounds (writers, publishers, booksellers and econ­ omists). The discussions revealed a surprising fact: among the liberals, those who were otherwise fervent defenders of private property were rather hostile to the protection of immaterial property, particularly literary property – the question of whether immaterial property should be recognised according to the same principle as material property was heavily discussed (Vatin 2002, Sagot-Duvauroux 2002). Bastiat and Molinari adopted a strict extension of the theory of natural law in this matter: they defended what was called “monautopoly” (monautopole),17 defined as the absolute, exclusive and perpetual ownership by the inventor of his invention, generating a monopoly rent. In a way, this was the same rationale for them as the right of the first occupant à la Robinson Crusoe. Only such an absolute protec­ tion of the inventor’s property rights would be likely to stimulate innovation and reward the creator at his true value. But the monautopole raised difficulties for other liberal authors: how can this absolute right of ownership be reconciled with the principle of competition, of which they were strong advocates? Frédéric Passy – but also Wolowski, Coquelin and Baudrillart – provided a clear answer: inven­ tions or creations are not just the fruit of their creator’s brain: they come from the combination of a man’s intellectual dispositions with the material and institutional conditions surrounding him. Consequently, an invention is nothing other than a coownership between the inventor and society. It is therefore legitimate to maintain a reasonable balance between both, which can be achieved by limiting the duration of intellectual property. Finally, Dupuit developed yet another analysis, based on public utility, which was only followed (more or less) by Walras: he considered that the question of immaterial property was different from that of the production of commodities. He called, for example, for a “communism in literary property”, which implied a right to print and distribute that would immediately fall into the public domain, in order to disseminate knowledge and to protect works from poor copies and degradation. 17 The concept is believed to have been developed by Ambroise Jobard (1792–1861), a Belgian econo­ mist, of whom the Journal des économistes published several articles.

Liberal economists after Say 53 The other significant debate was about inheritance (Silvant 2015). The French Civil Code of 1804 had introduced an egalitarian division among the heirs where other countries had retained primogeniture or liberty to bequest. The topic of inheritance emerged quite naturally in the debates in the 1840s, under the com­ bined effect of socialist and Saint-Simonian attacks on inheritance and the abovementioned renewed interest in property rights. This controversy shows again the tensions that arose when liberal principles, especially the principle of natural jus­ tice, were put into practice: the liberals were torn between supporters of total free­ dom to bequest and supporters of its regulation by government. A vast majority of liberal economists were on the side of testamentary freedom (Bastiat, Baudrillart, Courcelle-Seneuil, Dunoyer, Garnier, Molinari), which was seen as a necessary extension of the (natural) property right, a feature without which this right would not be complete. They attributed economic as well as social and moral virtues to it: guaranteeing that everyone can freely dispose of his or her wealth stimulates accu­ mulation and saving, brings families closer together and makes individuals more responsible (Steiner 2008). In this respect, both the French equalitarian system and British primogeniture were to be criticised. Moreover, this would have ensured, through the supposed rationality of individuals, that wealth would be distributed according to the capacities of the heirs; it does not matter that the inheritance is shared unequally among the children if the best endowed are the most talented. A clear advantage of this system would have been the concentration of large indus­ trial fortunes, on the model of the English dynasties that played their part in the economic and commercial power of that country. Rossi, followed by Dupuit and Wolowski, made a quite different analysis of this question. In their view, it is necessary to restrict the absolute freedom to choose one’s heirs for several reasons. It is not ethically right, they argued, to deprive a child of his or her right to a share of the family fortune: after all, each generation adds only a marginal amount to the intergenerational formation of wealth. It would also be a mistake to trust the supposedly rational judgement of fathers: the distri­ bution of the inheritance may be inefficient. Finally, another argument referred to a possible perverse effect of the freedom to bequest: if a father has the right to disinherit one or more of his children, he could make them a burden on society, and the freedom to bequest would then be costly at the collective level. Thus, society should “regulate property and inheritance in such a way that the sum of the benefits to everyone is as great as possible” (Dupuit 1861a, 339). Economic freedom and its enemies

The second tenet of liberal thought is economic freedom: “freedom has many forms, it has many degrees, but considered at its core, it rests on that unique and wonderful fact, free will” (Baudrillart 1857, 14).18 The commitment to economic 18 Political freedom was also concerned. For our economists, the defence of political and economic freedom called for many other freedoms: the free expression of opinions, individual freedom of conscience, the self-determination of peoples against colonialism. On the issue of colonialism as seen by liberals, see Charbit (1991); see also Etner and Silvant (2017).

54 Alain Béraud and Claire Silvant freedom was so strong that in the April 1862 discussion of the Société d’économie politique, reported in the Journal des économistes, Garnier even used the word “dogma” to refer to its most important forms: freedom of work (liberté du travail) and freedom of trade (liberté des transactions). Free trade

Free trade was the first intangible part of economic freedom. At least until the 1860s, the ideas of French liberal economists were quite homogeneous on this issue. They took up the doctrine of laissez faire, laissez passer: “they do not claim that everything should be left alone and that everything should be allowed to pass, but simply that work should be allowed to be done and the fruits of labour to be exchanged without hindrance and without preventive measures” (Garnier, in Coquelin and Guillaumin 1852–53, vol. 2, 19). Their arguments in favour of free trade were inherited from Turgot, Smith, Destutt de Tracy and especially Say, but the name of Ricardo is missing; no refer­ ence was made to the principle of comparative advantage. Their argument was structured in two stages. Firstly, modern societies are based on a natural division of labour, which produces specialisation. Secondly, the law of the market pre­ vails at both the international and national levels. Thus, even at the international level, products are simply exchanged for other products according to the respec­ tive endowments of national economies in natural wealth, labour or capital. As for domestic trade, the main benefit expected from trade opening was thought to be lower prices through the division of labour and access to more competitive mar­ kets, which benefit consumers; conversely, prohibitions and customs duties tend to favour non-competitive industries and slow down both the enrichment of the nation and progress. International trade in this respect is no different from trade in general. As Molinari wrote, in the entry “Liberté du commerce” in the Dictionnaire de l’économie politique: a statesman who establishes a protective or prohibitive duty acts precisely in the opposite way to an inventor who discovers a new process to make pro­ duction more cost-effective and more perfect: he invents a process to make production more expensive and less valuable. . . . He is the opposite of an inventor, an agent of barbarism, as the inventor is an agent of civilisation. (Molinari in Coquelin and Guillaumin 1852–53, vol. 2, 53) Some economists, however, took particular positions on this issue. Dupuit, at one end of the spectrum, was roundly criticised for the brutality of his reasoning, when in his book La liberté commerciale (1861b) he defended a seamless transition to total free trade, even if it meant that whole sectors of the French economy might go bankrupt. Other liberals called instead for a smooth transition that would avoid any popular uprising. To Dupuit, the disruption of moving from a protectionist system to free trade should not be overestimated. He argued that “freedom of trade, for the hundreds of people whose wealth it momentarily diminishes, counts in the

Liberal economists after Say 55 thousands those whose welfare it permanently increases” (Dupuit 1861b, 121). Those who wish to protect manufacturers by granting them transitional measures forget that as they are onerous to society as a whole, they constitute a kind of gratuitous indemnity granted to certain individuals at the expense of the rest of the population; that many inventions, new discoveries, improvements in the conditions of pro­ duction, bring about similar disturbances, without the State feeling obliged to intervene to alleviate them. (Dupuit 1861b, 122) At the other end of the spectrum, criticism of absolute free trade had already had some support from Cournot, Du Mesnil-Marigny or Dupin, but the protectionist doctrine developed later, mainly from the 1880s onwards, under the influence of Paul Cauwès (1843–1917)19 in particular, in the context of the decay of a liberal economic thought more inclined to militancy than to argumentation (Ravix 1991). Within the group, we can point to two figures whose role was particularly important for international trade: Frédéric Bastiat and Michel Chevalier, who both switched from ideas to activism. Bastiat was a tireless promoter of free trade, espe­ cially in his later years. He succeeded in federating all the great names of French liberalism (Rossi, Dunoyer, Garnier, Wolowski, Chevalier, inter alia) in his Asso­ ciation for Free Trade, and even received a visit from Richard Cobden, in support of his programme. But an opposition to Bastiat’s movement was organised: claim­ ing to defend the cause of French workers, the manufacturer Auguste Mimerel (1789–1871) created in 1846 a committee for the defence of national labour. But it was above all the 1848 Revolution that defeated the free trade movement. The climate changed again in the 1850s and, as an advisor to Napoléon III, Chevalier actively lobbied for a trade agreement with England. After several years of negotia­ tions with Richard Cobden, the treaty was concluded in January 1860, for a period of ten years; it established a regime of moderate (and decreasing) customs duties, far from the absolute free trade that economists were calling for. It paved the way for other trade treaties to follow. But apart from a short period of free trade after 1860, the liberals failed to win the battle of ideas, and a protectionist turnaround started in the early 1880s. Freedom of work

The second pillar of liberal thought was the freedom of work, which was empha­ sised in opposition to the “right to work” (droit au travail – the right to a job) rheto­ ric promoted by socialist authors.20 This issue was dramatically put on the agenda 19 Trained in law and a supporter of the historical method, Cauwès was a professor at the Paris Faculty of Law where he taught political economy from 1873. 20 The right to work was enacted on 25 February 1848, by the Provisional Government; it established that government “commits itself to securing the worker’s existence through work; it commits itself

56 Alain Béraud and Claire Silvant during the 1840s: Louis Blanc had just published Organisation du travail in 1839, in which he defended the idea of a right to work (“droit au travail”) and a right to assistance, rights that the socialists would seek to have adopted by the Constituent Assembly in 1848 (Bouchet 2006). In a context of urgency caused by the deterio­ ration of material living conditions (Potier 2022), the right to work was intended to ensure that workers had the right to live through their work. Its implementation took place with the creation of the Ateliers nationaux, which were intended to pro­ vide jobs (particularly in public works) for the unemployed. The workshops were overwhelmed and the experience was a failure (Coste 2018). With the crisis of 1848 and the worsening of poverty, the socialists aspired to bring together the question of the right to work and the social question (Bouchet 2006). Two books are significant in this respect: the above-mentioned La liberté du travail (1845) by Charles Dunoyer, and Le droit au travail à l’Assemblée natio­ nale, a booklet edited by Joseph Garnier in 1848.21 It was urgent for the liberals to reaffirm the superiority of the freedom of labour, which was seen as the opposite principle to the right to work: “the right to work, that fundamental principle of the socialist bible, is not the faculty which belongs to every man, in a free State, to make use of his own industry. The right to work has nothing in common with free­ dom of work” (Faucher, in Coquelin and Guillaumin 1852–53, I, 605). To the liberals, the right to work is the negation of property rights and has noth­ ing to do with the right to engage in work (“droit de travailler”) either, as Faucher stressed: “the right to engage in work is nothing other than the freedom which belongs to each individual to make of his intelligence, of his arms, of his time, the use which he judges most advantageous; whereas the right to work . . . is an action which is given to the individual against society” (Faucher, in Coquelin and Guillaumin 1852–53, I, 612). The most dangerous aspect of the right to work is that it makes the State the caretaker of all lives, thereby diluting individual responsibil­ ity and undermining the grounds for economic incentive. The liberals advocated freedom of work, echoing the end of the administrative regulation of labour, provisionally achieved in 1776 with the abolition of corpo­ rations and masterships (“jurandes et maîtrises”) by Turgot. Freedom of work is inseparable from the notion of competition and was understood as the freedom to exercise the profession of one’s choice, to associate,22 and to appropriate the fruits of one’s labour. Even for the liberals who were the least hostile to public inter­ vention, poverty and massive unemployment could not be solved by a generous social policy of giving employment and/or wages to everyone. To them, the social

to guaranteeing work to all citizens; it recognizes that workers must form associations among them­ selves to enjoy the legitimate benefits of their work”. 21 This book includes Tocqueville’s famous address against the right to work and socialist ideas more generally, which he accused of being contrary to both freedom and reason. 22 Some criticised the prohibition for workers to unite (Dunoyer, Dameth) and even promoted the existence of a right to unionise (Wolowski, Garnier, Molinari), while others were wary of the conse­ quences of coalitions (Faucher, Puynode, Dupuit). Here again, there is a tension between the natural right of individuals to associate and the principle of fairness in contracts.

Liberal economists after Say 57 question has only two possible outcomes: either, at the individual scale, individual self-regulation or “self-government” (when the poor pay the consequences of their “immoral” behaviour, for Dunoyer (1845)), or, at a global scale, a reorganisation of the labour market through bourses de travail (labour exchanges) (Molinari, see Chapter 7) or an overall increase in production (for Wolowski or Chevalier) could improve the material conditions of the poorest.23 3. Controversies within French liberal thought Some controversies divided the liberal school even more. One concerned methodo­ logical issues, another the theory of value and distribution, and a third one money and credit. Methodological issues Is political economy a science?

The first methodological debate regarded the status of political economy as a sci­ ence, a subject that split the liberal school. Most economists understood politi­ cal economy as an inductive, observational science, as opposed to a deductive discipline based on the development of hypotheses.24 They were thus reluctant to believe in immutable laws from which economic phenomena cannot escape. In this sense, they shared the analysis of Say, who acknowledged both the existence of laws and deviations from these laws: “we must admit that the chain which links the effects to their causes sometimes escapes our investigation in the current state of our knowledge” (Say 1828–29, I, 23). This rejection of the deductive approach led Say to consider that “the advancement of political economy is hindered when its principles are established by overly abstract reasoning” (1828–29, I, 89). Many lib­ eral economists adopted this critical reading of the deductive approach, which they considered to be unable to address the complexity of economic facts. Later, LeroyBeaulieu took up these views, mocking abstract economics based on deduction. A small minority, however, adopted the opposite view, defending the deduc­ tive approach and accepting as a consequence the existence of economic laws of general application, on the model of Malthus’s law of population and Say’s law of markets. In this respect a few names stand out: Rossi, Courcelle-Seneuil and Molinari25 for example, but also Garnier and Dupuit. As Léon Walras did later, Rossi distinguished three categories of economic knowledge: rational economics, applied economics and social economics (Béraud 2018). He considered political

23 This issue is discussed in Bouchet (2006) and Potier (2022). 24 This opposition is probably inherited from Say’s reading of Smith and Ricardo: Say attributed to the former an inductive economic reasoning, going from particular facts to the statement of general laws, and to the latter an abstract reasoning departing from general theory. 25 Molinari dedicated a whole book to this issue, entitled Les lois naturelles de l’économie politique (Paris: Guillaumin, 1887).

58 Alain Béraud and Claire Silvant economy was a rational, “pure” science, whose starting point should consist in abstract general principles, from which propositions would derive – this is one reason why he was sometimes seen as a Ricardian. Courcelle-Seneuil agreed with John Stuart Mill (whose Principles of political economy he translated in 1854) and Rossi concerning the formal distinction between economics as a science and economics as an art: Political economy, considered as a science, is concerned with the level of wealth of human societies, or rather . . . of humanity: it seeks the general causes by which humanity . . . finds itself more or less wealthy. . . . Consid­ ered as an art, political economy has the purpose of increasing the state of wealth of mankind . . . and it seeks the general processes and means by which this purpose can best be achieved. (Courcelle-Seneuil 1858, I, 6) Thus, as a science, it is legitimate to set out the principles of political economy in the most general and abstract framework possible. In 1863, a vigorous exchange between Dupuit and Baudrillart took place in Journal des économistes, illustrat­ ing the animosity caused by this issue. “Is economics a science or just a field of study?” asked Dupuit. He reproached the economists (his chief target was Roger de Fontenay) for criticising in a non-rigorous manner the fundamental principles of classical political economy set out by Smith, Ricardo, Malthus, Say and Rossi, and for considering that economics was only a field of study. Challenged by Dupuit’s attacks, Baudrillart, then editor of the Journal, replied in a letter: “the ideal of M. Dupuit is that of economic science becoming a dogma” (Journal des économistes, February 1863, 249). In response, Dupuit considered the characterisation of “moral and political science” given to political economy – as opposed to the physical and mathematical sciences – to be irrelevant: “the double meaning of the adjective moral is misused in order to make political economy a branch of philosophy and to apply to the former the rules, principles and privileges of the latter” (Journal des économistes, March 1863, 475). Finally, some authors did not feel comfortable with this antagonism and devel­ oped an ambiguous position. This is the case, for example, for Charles Dunoyer. He promoted a method that can be described as positivistic, emphasising the observa­ tion of facts and induction, but he did not apply it in his own work. This contro­ versy over the scientificity of political economy was continued in two other ways: by discussing the merits of the mathematical and historical methods. Mathematical methods

The use of mathematical methods in political economy provoked substantial dis­ cussions among liberal economists. This was obviously not the first time that the opportunity of using mathematics in political economy had been discussed in France (see Volume 1, Chapter 8). During the first half of the nineteenth century, an increasing number of economists started to use mathematics more extensively.

Liberal economists after Say 59 The best known of these were Antoine-Augustin Cournot, Jules Dupuit, Camille Esménard du Mazet, Jules Du Mesnil-Marigny,26 Gustave Fauveau, Mathieu Wolkoff and, of course, Léon Walras. Both Dupuit and Cournot argued that the use of mathematics was legitimate in the analysis of phenomena and relationships involving quantitative variables (Breton 1992): The use of mathematical signs is a natural thing every time relationships between quantities are to be discussed; and even if they are not strictly neces­ sary, if they can facilitate the exposition, make it more concise, put us on the way to more extensive developments, and prevent us from the deviations of a vague argument, it would be unphilosophical to discourage them because they are not equally familiar to all readers and because they have sometimes been misused. (Cournot 1838, viii–ix) However, the use of mathematics was strongly rejected by most liberal econo­ mists.27 Cournot’s work was largely ignored or despised (Breton 1992),28 and Dupuit’s formalised contributions – published outside the Journal des écono­ mistes – were also neglected. Along with Say, many liberals considered the mathematical method as inappropriate in political economy. Dunoyer, Fontenay, Baudrillart and Wolowski were representatives of this hard line as relayed by the Journal des économistes. Their arguments were twofold. First, they pointed out a fundamental disagreement about the use of mathematical formalisation: political economy deals with human behaviour and social phenomena, which cannot be put into equations. Human behaviour is guided by moral and social considerations and is subject to uncertainty and unpredictability. Secondly, the liberals might have found a concomitance between the use of mathematical methods and the rejection or criticism of their ideas (Etner 1989). Those using mathematics were criticised for an “excess” of liberalism or for being too accommodating towards state intervention. Dupuit, for example, was criticised for defending absolute free trade, without nuance or adjustment, while Cournot and Du Mesnil-Marigny were criticised for the opposite reason, that is, their 26 Du Mesnil-Marigny accepted the use of mathematics under the condition that the variables are quantifiable. He was mainly interested in national accounting and statistical issues. Walras and Du Mesnil-Marigny corresponded about the use of mathematical method (Du Mesnil-Marigny even suggested to Léon Walras that they write a book together, but the project never materialised). 27 This must be distinguished from the statistics, about which the liberals were so enthusiastic (Breton 1987). 28 In his 1838 Recherches sur les principes mathématiques de la théorie des richesses, Cournot pointed out that he expected “reprobation from accredited theorists”, who “have spoken out against the use of mathematical forms, and it would doubtless be difficult today to overcome a prejudice which good minds, such as Smith and other more modern writers, contributed to establish” (1838, vi). Cournot charged in particular Canard’s Principes d’économie politique, that he considered as “so radically false and the application so erroneous”, that it would not have made it possible to “rec­ oncile with algebra economists such as Say and Ricardo” (Cournot 1838, vii).

60 Alain Béraud and Claire Silvant protectionist views. Walras’ mathematics also coexisted with socialist inclinations. In sum, it seems that it was not so much the formalisation that posed a problem for liberals, but the fact that it was associated with ideas considered too far-removed from the liberal orthodoxy – or associated with other theories they rejected, like the classical theories of population, rent or costs of production. Most commentators, however, pointed to a simpler explanation for the disqualification of mathematics by the liberals: their lack of knowledge of mathematics – with the exception, obvi­ ously, of some engineers trained at the École Polytechnique, École des Mines or École des Ponts et Chaussées (Etner 1989, Breton 1992).29 This climate of general hostility induced the economists using mathematical methods to remain on the fringes of the liberal group: their mathematical con­ tributions were either reserved for other circles (this was the case for Dupuit, for example, who published his formalised texts elsewhere than in the Journal des économistes), or they inspired nothing but distrust and disdain and remained unheeded, at least until the last decades of the nineteenth century. In short, one could be a respected economist recognised by one’s peers, as long as one left mathematical formalisation aside in the Journal des économistes or the Société d’économie politique. There were some notable exceptions: Gustave Fauveau, for example, published a number of articles in the Journal that used functions, differential and integral calculus.30 These included his contributions on value (1867), on taxation (1869, 1871) and on the optimality of customs duties (1873). Fauveau’s concern to remain a member of the group led him to systematically align his work with the authors favoured by the other liberals (he referred, among others, to Bastiat, Say, Thiers or Garnier). Yet, a singular voice emerged: Garnier, who gradually became a moderate defender of mathematical methods. In the fifth edition of his treatise, published in 1863, Garnier added a note titled “Sur l’emploi des formules et figures mathé­ matiques en économie politique”. Distancing himself from Jean-Baptiste Say, he timidly affirmed his agreement with Dupuit and also cited Karl Heinrich Rau and Wolkoff.31 And when he was the editor of the Journal des économistes, some math­ ematical content found a place in the periodical, including papers on the currency system by Walras (Breton 1992). Garnier’s death in 1881 and his replacement by Molinari marked the end of this tolerance. 29 It should be noted that it was not uncommon to see scientists who were themselves hostile to the use of mathematics in social sciences. The case of Joseph Bertrand (1822–1900) is one illustration of this. 30 Fauveau’s contributions to the Journal des économistes were collected in a booklet published by Guillaumin and Gauthiers-Villars in 1886, titled Études sur les premiers principes de la science économique. 31 Garnier was much more critical of other authors: in recent times M. Esmenard de Mazet and M. Du Mesnil Marigny [sic] have also misused, it seems to us, algebraic formulae, and M. Cournot’s Recherches sur les principes arithmétiques des richesses [sic] have not provided us with any means of elucidation (Garnier 1863, 701–702). – mangling the title of Cournot’s book in passing.

Liberal economists after Say 61 In the end, the rejection of mathematics by the majority of economists had seri­ ous consequences for the future of political economy in France from the second half of the nineteenth century onwards. The mathematisation of French political economy was delayed, as Charles Gide lamented, compared to what happened in British, American, Italian or German universities, which embraced mathematisa­ tion earlier. Influential scientific journals and publishing houses, mostly held by the liberals, were also slow to make room for mathematical economics (Breton 1987; Le Van-Lemesle 2004). The rejection of historicism

Until the mid-nineteenth century, the anti-historical approach of Jean-Baptiste Say permeated French liberal thought (Gislain 2001). Yet two liberal economists even­ tually presented an original analysis of historicism: Louis Wolowski and Léonce Guilhaud de Lavergne (1809–1880), a specialist in economic history. Wolowski’s 1857 translation of Wilhelm Roscher’s second edition of Grundlagen der National Ökonomie was the starting point of the debate on the historical method, which lasted two decades. This translation made historicist ideas accessible to liberal economists and attracted more criticism than the works of Bruno Hildebrand (Die Nationalökonomie der Gegenwart und Zukunft, 1848) or Karl Knies (Die Politische Oekonomie, vom Standpunkte der geschichtlichen Methode, 1853), which remained untranslated. Guillaumin published the translation of Roscher’s Grundlagen with annotations and a long preface – “De l’application de la méthode historique à l’étude de l’économie politique” – by Wolowski. The publisher ini­ tially seemed enthusiastic about the novelty of Roscher’s work, although he care­ fully pointed out that Wolowski’s “opinions were not entirely in agreement with those of Mr. Roscher” (Roscher 1857, vii). In fact, for Wolowski, history must be taken into account in order to avoid the lures of deductivism: historical analysis of the economy makes it possible to include the moral and social dimension of indi­ vidual behaviour and phenomena – which pure political economy fails to do – and also (Gislain 2001) to confirm the validity of the fundamental principles of politi­ cal economy. It thus differed from Roscher’s original thesis, where history has a more fundamental heuristic role: We renounce building purely ideal constructions. What we pursue is the sim­ ple description of the economic nature and needs of the people, as well as of the laws and institutions intended to provide for the satisfaction of these needs; finally, of the greater or lesser success with which these have been applied. (Roscher 1857, 53) The publication provoked numerous reactions from liberals. The first was that of Roger de Fontenay, who strongly criticised Roscher’s methodological choice in his book review for the Journal des économistes. To him, an interconnection between theoretical reasoning and historical facts was necessary, without the latter taking

62 Alain Béraud and Claire Silvant precedence over the former. But more than the historical method itself, Fontenay challenged Roscher’s and Wolowski’s rough opposition between historical method and method “by reasoning” or “idealist method” (Fontenay 1858, 64): the two processes . . . operate in the same environment of facts and abstrac­ tions, and are strictly bound, one as well as the other, to set up the agreement of facts and general formulae, – either by extracting the formulae from the facts, or by making the facts fit into the formulae. (Fontenay 1858, 64–5) Léonce de Lavergne entered the debate in the 1860s. He took up Rossi’s dis­ tinction between science and art and stated that it is to the latter that the histori­ cal method must be applied: science can well follow the idealist method, while applied economics is based on history. The critique of the historical school was of course taken up within the liberal group, especially by those who defended the existence of natural laws. The most fervent opponents of historicism were Baudrillart, Molinari and later Maurice Block (1816–1901), Leroy-Beaulieu and Guyot (Breton 1988). Value and distribution

Although the theoretical issue was not their main concern, some French liberal economists positioned themselves in relation to the classical theory of value and distribution. Among the few who showed some interest in this issue, there was a fairly open division between, on the one hand, certain followers of Ricardo’s theory of value32 and, on the other, those who criticised it for a supposed incompat­ ibility with “true” liberalism, that of “harmonies”. Pellegrino Rossi was one of those who helped to introduce and spread Ricardian ideas in France (Breton 1984; Vatin 2003; Baldin and Ragni 2015; Béraud 2018). His lectures at the Collège de France proposed a synthesis between Say’s and Smith-Ricardo’s value theories, by combining a utility-based approach and an explanation of exchangeable value in which the cost of production and market conditions (supply and demand) played complementary roles (Baldin and Ragni 2015; Béraud 2018). Rossi also adopted some aspects of Ricardo’s theory of inten­ sive rent, in particular the decreasing returns to land. Criticism of the classical theory of value came from Frédéric Bastiat, relayed by his disciple Fontenay. In his Harmonies économiques (1850), he moved away from the classical views of income distribution – those of Smith, Say and Ricardo. This was a prerequisite for demonstrating the “harmonies” of the interests of the different social classes. Bastiat rejected both the idea that the value of a good is determined by its utility and the idea that it is to be found in the amount of labour required to produce it. He argued that the value of a good depends on the labour

32 The reception of Ricardo’s thought in France is extensively studied in Béraud and Faccarello (2014).

Liberal economists after Say 63 saved by the person who purchases it (Bastiat 1850, 151). He also criticised the Ricardian assumption that the best land is farmed first, which – among other rea­ sons – accounts for the upward trend in the prices of subsistence goods. How then could rent be seen as anything but an injustice? Thus, to him, Smith, Mill, Malthus, Ricardo, Senior, McCulloch and their followers “have led us to the negation of property. . . . The communists have never said anything else” (Bastiat 1850, 290). Bastiat naturally criticised the Ricardian analysis of the dynamics of distribution in a capitalist economy. To him, capital accumulation, far from being a cause of depletion of land productivity under the effect of demographic growth, would on the contrary allow an increase in production by improving agricultural productiv­ ity. In this respect, the dynamics of capitalism produce harmonious results: the result will be rising profits as well as rising wages. Money, credit and the metallic standard

Intense debates also took place on monetary issues. Two main concerns preoc­ cupied economists in relation to the contemporary economic situation in France. On the one hand, the liberals debated whether the right to issue money should be assigned to a monopoly or whether banking competition should prevail. On the other hand, they also discussed the appropriate type of monetary system to adopt: a monometallic standard or a bimetallic regime. From the beginning of the nine­ teenth century, France had implemented a singular monetary and banking system: in 1803, a bimetallic monetary regime was established by Bonaparte’s government, giving gold and silver the function of legal tender simultaneously, the value of the franc being defined by both a gold weight and a silver weight.33 1803 was also the year in which the Bank of France, a private institution created three years earlier with the support of the Treasury, was given a monopoly on banknote issuance by the government. Every time the monopoly reached the end of its term, discussions took place as to whether it should be renewed or whether there should be a transi­ tion to banking competition. These two debates show the extent to which the appar­ ently intangible main liberal principles (individual property, freedom) could collide with the materiality of facts. Issuing money: monopoly or competition?

From 1803, the monopoly of the Banque de France had only been strengthened, particularly following the absorption by the Banque of the departmental banks in 1848. The “question des banques”, as economists called it, reactivated the debate in 1860 on the occasion of the annexation of Savoy, which had had its own central bank until then. Should two central banks be allowed to coexist? Or should the monopoly of the Banque de France be protected at all costs? Contrary to what one 33 This bimetallic monetary regime was also called the 15½ regime, since the simultaneous definition of the franc in a weight of gold and a weight of silver resulted de facto in the existence of a legal parity between the two metals (1 gram of gold being officially worth 15½ grams of silver).

64 Alain Béraud and Claire Silvant might imagine, liberals were far from unanimous in their opposition to the monop­ oly of the Bank of France. Of course, many of them were fervent advocates of the freedom to issue money: Chevalier for example, or Coquelin, Garnier, Juglar, and at the forefront, Courcelle-Seneuil, whose book La banque libre, published in 1867, was a seminal work in this regard. To them, free banking was merely an extension of the freedom to work, and issuing money was considered to be an activity like any other, falling within the scope of commercial law, which could be opened up to competition. The incentive of competition between banks would pre­ serve the economy from both over-issuing (by encouraging prudence) and insuffi­ cient money creation – many economists reproached the Banque de France for the overcautious management of its assets, to the detriment of the access to financing. Nor would a free banking system be prone to a resurgence of commercial crises, which find their causes elsewhere. The monopoly of the Banque de France therefore presents various disad­ vantages, the most apparent of which are . . . to allow the Bank . . . to raise or lower the discount rate arbitrarily, with no opportunity for competition to rectify its errors . . .; to place the Bank in such a situation that, if it makes mistakes, it is the public and not the Bank that suffers the consequences of its errors . . .; to allow the Bank to create artificial crises at will and to benefit from them, which is impossible for free banks . . .; and to expose, as a con­ sequence, the public to the alternatives of overabundance and scarcity, either of money or of circulating capital. (Courcelle-Seneuil 1867, 89) Banking competition and free issuance of money appeared as two sides of the same coin. The fundamental arguments in favour of free banking were coupled with an empirical critique of the French experience since 1803: they suspected that the Banque de France had both lent itself to arrangements hand in hand with the government – cheaper financing of the Treasury in exchange for extensions of the monopoly – and pursued a too-conservative policy, incapable of financing France’s industrialisation and commercial and agricultural development. Among these authors in favour of banking freedom, two developed a singular analysis of crises. Charles Coquelin, whose book Le crédit et les banques (pub­ lished in 1848) was an indictment of the government regulation of money issuance which emphasised how the bank’s monopoly can increase the intensity of crises. For him, excess credit is the determining cause of crises. But banks lend exces­ sively because one of them has a special and exclusive privilege to issue banknotes. Competition is then unequal because the privileged bank can discount at a lower rate than its competitors. This inequality leads to a congestion of the capital market, as the available capital cannot be invested at a profitable rate. It then falls prey to “project makers”, thus fuelling risky speculation. Clément Juglar, on the other hand, abandoned the crisis approach, preferring an analysis in terms of business cycles, with an emphasis on periodicity (see Besomi 2010). His 1862 book Des crises commerciales et de leur retour périodique en

Liberal economists after Say 65 France, en Angleterre et aux Etats-Unis undertook the first empirical and system­ atic study of this issue. Juglar pointed out that in the expansion phase, the increase in credit (especially commercial paper) enables an increase in the exchange of products, generating a rise in prices in the process. Inflation slows down the sale of products in both domestic and foreign markets. When commodities have not been sold by the due date, traders have to rediscount to finance their operations. At the same time, rising prices lead to a depreciation of the exchange rate and a draining of metal currency. The banks, in order to slow down the movement, raise the dis­ count rate in a hurry, adding to the general worry. The increase in the discount rate and the banks’ rejection of loan applications from the most risk-taking companies hinder the movement of business and make the development of speculation impos­ sible. It is then necessary to sell out and lower prices. For Juglar, the ending of price rises signals the downturn in the economy and the beginning of the crisis. Finally, the defenders of banking freedom crossed swords with a smaller but influential group of economists34 who defended the Banque de France and its monopoly. Their leader was Wolowski, who was largely inspired by the posi­ tion taken by Rossi a few years earlier in his 1840 report on a bill to extend the monopoly of the Banque de France (Wolowski 1864). Their arguments were in every respect opposed to the supporters of free banking: money creation is not an ordinary activity, and certainly not a commercial one, insofar as unregulated issu­ ance could affect the security of transactions and therefore of property. It is pre­ cisely for the sake of protecting individual property that the issue of money should be removed from competition and entrusted to a single and controlled institution. The greatest danger would be the risk of overissue, which would be a necessary consequence of banks in competition, seeking to increase their profits to satisfy their shareholders. In La question des banques, Wolowski also emphasised the sta­ bilising role that the Banque de France had been able to play since 1803, thanks to what he described as “prudent wisdom” (1864, 199), whereas at the same time other countries, such as Great Britain, experienced a strong instability, marked by bankruptcies and episodes of inconvertibility: [Rossi] has highlighted the widespread services for which the State and com­ merce were indebted to the Banque de France before 1840; what would he have to say of those for which the Banque can claim credit since that time? If its counters did not remain closed during the dangerous moments of 1817 and 1818, in 1825 and 1826, and in the second half of 1830, can we not also attribute to the wisdom of the Bank’s direction and the energy of its assis­ tance a part of the admirable decisiveness with which the country passed through the great crisis of 1848?. . . . This praise, well deserved in 1840, is much more so now. (Wolowski 1864, 197–8)

34 Other economists who supported the monopoly were Victor Bonnet (1814–1885), a French publicist close to Léon Walras, Adolphe Thiers and Léon Faucher.

66 Alain Béraud and Claire Silvant Finally, the opposition between supporters of free banking and defenders of the monopoly was mirrored by a theoretical divergence on the nature of money and banknotes; the former (Chevalier, Coquelin, Courcelle-Seneuil, Garnier, Molinari) considered banknotes as a credit tool, that is, as a substitute for commercial bills of exchange, which cannot be equated with money, while the latter defined the banknote as a component of money, to which strict issuing rules must therefore be applied. In the end, the supporters of free banking never succeeded in imposing their views, as the monopoly of the Banque de France was systematically extended. The monetary regime: a monometallic or bimetallic standard?

Another debate, in some ways related to the controversy over banking monopoly, raged within the liberal school: the debate over bimetallism. Wolowski, again, Laveleye and an Italian financier, Henri Cernuschi (1821–1896), held a very minor­ ity position35 in the Société d’économie politique, defending the existing bimetallic regime, while the vast majority of liberals called for a transition to a single standard (gold or silver, depending on the economists). The minority view attributed to bimetallism the virtue of great monetary sta­ bility, allowing monetary circulation to adapt more smoothly to changes in the market prices of both metals.36 In fact, great monetary stability had been observed in France during the first half of the nineteenth century, seemingly supporting this analysis. Bimetallism, it was argued, also allowed France to position itself as a pivot between the gold and silver standard countries, and the French regime was also supposed to be extended through a system of international bimetallism37 – a position which was later advocated by Laveleye (1891) and enjoyed renewed inter­ est following the experience of the monetary Latin Union in which France was a driving force (Silvant 2012). However, in the face of the monetary instability caused by successive waves of discoveries of precious metals – alternately gold and silver – the voice of the 35 Léon Walras also demonstrated the mathematical existence of a bimetallic equilibrium in a series of articles for the Journal des économistes published between 1876 and 1882. See Silvant (2012). 36 The stabilising mechanism acts as follows. If the ratio of commercial prices between gold and silver deviates from the legal parity initially set at 1:15.5, for example when the relative market price of gold decreases, gold replaces silver in the market circulation, according to Gresham’s law, and silver is exported. The relative fall in the demand for silver pushes up the relative price of gold. In this mechanism, the legal parity, defined by the monetary authorities, plays the role of pivot. Arbitrage behaviour allows the market ratio to meet the legal ratio, whereas a monometallic regime is hit hard by a change in production – an acceleration of gold discovery leads to a sharp rise in prices. Arbitrage only ceases when the market ratio reaches the legal ratio; the market ratio of gold and silver gravitates around their legal ratio. (Silvant 2012, 310–11) See also Gillard (1991). 37 International bimetallism was viewed by Laveleye as a worldwide extension of French bimetallism, in which all countries would adopt free coinage for gold and silver, and would apply the legal ratio 1:15.5 between the two metals (1891).

Liberal economists after Say 67 opponents of bimetallism became louder. Chevalier was their main spokesman, alongside Parieu, Puynode and Baudrillart: they denounced the arbitrariness and unscientific nature of the fixing of the legal parity between the two metals, arguing that the success of bimetallism before 1848 was only due to fortuitous circumstances. Chevalier advocated a move to the silver standard, while most of his fellow economists wanted to adopt a gold standard modelled on that of Great Britain. 4. Contrasting views on state intervention As seen above, the debates between French liberal economists revealed a much greater diversity of ideas than one might have expected. Another field in which this diversity can be observed is the question of public intervention. This issue, central to the liberal creed, was answered in multiple ways. How far should the state intervene?

As before, no consensus emerged within the liberal group on the limits to be set for public intervention: a remarkable continuum of positions was expressed, rang­ ing from frank hostility to public intervention – the position of libertarians, to use a modern word – to more moderate views granting the State extensive functions. But what bound all the economists in the liberal group was a fundamental rejec­ tion of arbitrary and authoritarian State intervention, seen as a relic of the Ancient Regime. Within the liberal group, there were, of course, several advocates of a mini­ mal State, who can probably be traced back to Benjamin Constant’s analyses, in which the minimal state has only two prerogatives: to prevent internal disorder and to repel foreign invasions. Unsurprisingly, these were Frédéric Bastiat and Gustave de Molinari (and Leroy-Beaulieu and Garnier, to a lesser extent). If one adheres, as they did, to a conception of property based on natural rights, and to the natural harmony of individual interests, then the room for public intervention is necessarily restricted: regulating markets would disturb individual incentives, and modifying the distribution of wealth would be contrary to natural justice. The notion of general interest is also meaningless for them: only individual inter­ est prevails:38 and if there is no general interest, no public expenditure can be made in its name. In addition, public administration is subject to two types of failure: malevolent behaviour on the part of civil servants and an inescapable lack of incentives and accountability, which makes government action systematically less effective than that of the private sector. In a nutshell, Dunoyer denounced the love of position (“amour des places”) that guides civil servants, Dameth evoked the possibility of political corruption and the incompetence of public authorities, who would be “the worst of administrators”, and who would “carry out everything 38 It should be noted that on this point they differed from Say, who admitted the existence of “general welfare” (bien général), an expression used on several occasions in his Cours (1828–29).

68 Alain Béraud and Claire Silvant more expensively than private industry” (Dameth 1859, 471–2), Leroy-Beaulieu pointed out the risk of politicians being captured by lobbies, and Molinari detailed the tendency of public servants to exploit the advantages of their function as a rent, and to indulge in what would later be called logrolling on a political market (see Faccarello 2010). In sum, “The State is the great fiction through which EVERY­ ONE strives to live at the expense of EVERYONE else” (Bastiat 1849, 11). Breton (1985b) has shown how the ideas of these orthodox liberal economists prefigured, in many ways, some of the analyses developed by the Public Choice school from the 1960s. Consequently, this left the state with only limited scope for legitimate intervention, fulfilling at the most some functions of a night-watchman state, that is, security and justice: to guarantee the physical security of individuals and to ensure the continuity of their property rights. All other expenditure was considered to be in the realm of “legal spoliation”, a phrase dear to Bastiat. The “production of security” could even be privatised, wrote Molinari in his 1849 essay, “La produc­ tion de la sécurité” (1849), developed in the same year in his book Les soirées de la rue Saint-Lazare: in the interest of the consumers of this intangible commodity, the production of security must remain subject to the law of free competition. From which it follows: That no government should have the right to prevent another gov­ ernment from establishing itself concurrently with it, or to oblige the con­ sumers of security to turn exclusively to it for this commodity. (Molinari 1849, 279) It should be noted that Molinari’s thinking on the privatisation of security was later qualified. Meanwhile, his proposal did not convince any of his fellow members at the Société d’économie politique, who considered this idea dangerous for the protection of property rights. It would of course be incorrect to consider Bastiat, Molinari and Dunoyer as anti-statist or even anarchist authors. Molinari and Frédé­ ric Passy confirmed this point: We are anti-interventionists [sic] . . . but we are not anarchists, like M. Proudhon and his school. We believe that the government meddles in many things it should not . . . and we would like to reduce its intervention to what is strictly necessary; but we do not intend to suppress it. (Molinari and Passy 1859, 22) Dunoyer even considered the State as the most important producer of immaterial capital (consisting of knowledge, virtue, good habits and safety), which are at least as important as material capital in increasing the wealth and well-being of society (Faccarello 2010). It would thus also be an overstatement to confuse a hard line, bordering on libertarianism, with what was more generally thought of the State in the liberal group: these authors represented a minority view, while the majority admitted broader functions for the State, as did Smith and Say, regarding education or public works (Potier 2023).

Liberal economists after Say 69 It nevertheless comes as no surprise to read that the poverty issue (“la question sociale”)39 did not have to be dealt with by the State either: no social policy could solve the problem of poverty, either through the right to work or the use of assis­ tance. Since inequalities originate in individual causes (unequal individual facul­ ties, insufficient effort, immoral or irrational behaviour), it would be illusory to think that public intervention could solve them. Worse still, misery even has moral virtues, as poverty plays a powerful role as a deterrent (Luciani 1991). In the best social organisation, poverty, like inequality, is to a certain extent inevitable and, like it, is an aspect of social progress. You say that it is incom­ patible with civilisation? I say that it is inseparable from it. . . . It is a good thing that there are inferior places in society into which families that behave badly are exposed to fall, and from which they can only get out by dint of behaving well. This dreadful hell is poverty. (Dunoyer 1842, 136) Individual charity can help the poor by creating personal links between them and their benefactor, which can enhance their morality and sense of responsibility: but institutional charity, which automatically and blindly helps people, is counter­ productive and thus to be banned. The only remedy to the social question that could be provided by the State is the extension of competition and economic freedom, which are the only means of improving the living conditions of the poor by lower­ ing consumer prices and enabling them to improve their condition, in particular through the deregulation of professions. A broader view of the state’s involvement was developed by other liberal econo­ mists, largely inspired by Rossi’s ideas, which were close to those of the Doctri­ naires. Rossi raised the question: whether, in the social interest, freedom is better than rule, or rule better than freedom; whether it is better for production that each person should be able to employ the forces he has and apply them as he sees fit, that each should be able to produce such results as he sees fit, or whether it is better to increase or restrain certain forces, to favour certain results, and to exclude others. (Rossi 1840–41, I, 216) In his Cours de droit constitutionnel, Rossi developed a conception of the State that was quite different from that of Benjamin Constant. To Rossi, “the State is a moral entity, a complex entity certainly, but a real one, for there is a set of obli­ gations and rights that belong only to society”. He continued by noting that “the State is the effective realisation of a fundamental idea . . . it is the creation of a moral individuality, sui generis, . . . for which, without doubt, the individual is necessary, but which is something other than the individual” (Rossi 1835–37, I, 39 On the liberal debate over the “question sociale”, see Luciani (1991).

70 Alain Béraud and Claire Silvant 3–4). Some economists followed Rossi’s lead by conceiving of public interven­ tion differently, either by (1) considering public intervention as not being harmful in itself but having to comply with rational criteria, or by (2) taking into consid­ eration broader societal issues than those considered by the authors who were the most hostile to the State. Their common point was to refuse a dogmatic and a priori rejection of the State, and to justify, albeit for different reasons, state inter­ vention in education, public works and even public regulation when the general interest so required. (1) The first approach was developed mainly by engineers in the liberal group, especially Michel Chevalier and Jules Dupuit. Both considered that the notion of general interest (“utilité publique” in Dupuit) was not meaningless and that it should be taken into account, without dogmatism, when evaluating the relevance of public intervention. Chevalier stated that the exercise of individual interest alone could not maximise the production of wealth (“puissance productive”). Admit­ tedly, one can count on the producers’ desire to enrich themselves to activate tech­ nical progress, but to avoid underinvestment, three other essential factors cannot be left to individual interest alone: communication routes, credit institutions and professional education. In these three areas, Chevalier assumed a different position from the majority view: “communication routes and public works are now State issues [“affaires d’état”]. This is why governments, instead of standing aside, must actively intervene. It is not a right, it is a duty”. With this qualification: “govern­ ment intervention in public works must not, however, be a monopoly. Nothing could be better than to call upon the forces and capital of private industry to con­ tribute to them” (Chevalier 1844, 11–12). Chevalier had a rational decision-making criterion in mind, which rejected all dogmatism: public intervention is justified whenever it is more effective than private action (1844, Chapters 2 and 3). The same rationale should apply to the organisation of the financial system, which must be able to combine private and public credit to enhance industrial development. There is obviously here a resurgence of Chevalier’s Saint-Simonian inheritance, which praised the principles of productivism and association. Public intervention in education is also indispensable in a similar productivist and moral perspective: “it is important to the nation that citizens be robust, almost as much as it is inter­ ested in them being intelligent” (Chevalier 1844, 384). (2) Other economists, such as Wolowski, Cherbuliez and the historian, geog­ rapher and economist Émile Levasseur (1828–1911) went further in their call for broader State intervention. Their reasoning was not based on a utilitarian principle as in Dupuit or Chevalier: they identified the existence of “social needs” that only the State can satisfy, insofar as they escape the sole action of individuals. They highlighted externalities and identified education, for example, as a merit good – Cherbuliez making the assumption of “a certain degree of ignorance that excludes the desire to learn” (Cherbuliez 1858, 197). The extension of the functions of the State was therefore justified, well beyond its sovereign functions: merit goods (health, education, poverty, fundamental research) fall naturally within the State’s remit. These positions were obviously in the minority and rather badly regarded by other liberals, who accused them of leaning towards interventionism.

Liberal economists after Say 71 Public finance issues

Controversies about public intervention were confined to these general discus­ sions. They also dealt with one area in particular: taxation. This was a pressing issue: criticisms of the existing tax system – inherited from the Ancient Regime and considered archaic and underperforming – were multiplying and the liberal economists wanted to consider ways to modernise or reform it. The International Tax Congress held in Lausanne in 1860 was a culmination in this respect, since all the most eminent economists attended and compared their views on taxation. In this field, liberal economists in general followed in the footsteps of Smith rather than Say. They based their analysis on the maxims of the Scottish economist – which can be summarised as the need for citizens to contribute accord­ ing to their ability to pay, predictability, non-arbitrariness and effectiveness. Many of them nevertheless adopted the theory of the minimal State from Say, justifying the lightest possible taxation, but were not influenced by his argument for pro­ gressive taxation (Silvant 2010b): the principle of moderation in public expenses, and therefore tax moderation, was shared by all, from those most hostile to pub­ lic intervention (Dunoyer, Molinari, Garnier) to those most favourable (Chevalier, Wolowski). Another point of consensus was about the choice of the best type of taxation: French liberals as a whole considered indirect taxes as unethical, harmful and costly to collect, and called for their replacement with direct taxation, even if they did not underestimate the immense practical difficulties involved when replacing a tax that has become invisible over time. However, the debate remained open on the type of tax scale – proportional or progressive – to be adopted, as well as the base to be chosen (capital or revenue). Unsurprisingly, most liberals were in favour of proportional taxation (Passy, Thiers, Dunoyer, Puynode, Baudrillart, Leroy-Beaulieu), on the grounds that it ensures both economic efficiency, since it does not distort the rational choices of indi­ viduals, and natural justice, since it does not alter the hierarchy of social positions (Silvant 2010b; Le Van-Lemesle 2006). In contrast, progressive taxation, which the socialists were accused of wanting to introduce, was widely criticised for being confiscatory, unfair and particularly disincentive. Some authors, nevertheless, defended the principle of progressivity (Silvant 2010b; Delalande 2014). Three of them are of particular interest. Garnier in the first place, considering that tax was above all the counterpart of a service ren­ dered by the State, proposed to determine the contribution to be paid by each individual according to the benefits they derived from it. Since the richest peo­ ple receive a more than proportional benefit from the services provided by the state, it is then legitimate to introduce “progressionnalité”, or progressive propor­ tionality (1846), as he called it – that is, low progressivity, already described by Rossi. Clémence-Auguste Royer (1830–1902), in the second place,40 developed 40 As a self-taught historian, scientist, philosopher and anthropologist, Clémence Royer was the first woman posthumously admitted to the Société d’économie politique. Although economics was not her primary concern, she published over 50 articles in the Journal des économistes. She is mainly

72 Alain Béraud and Claire Silvant a singular theory of taxation, which enabled her to win – ex æquo with Proudhon and ahead of Walras – the prize of the Canton of Vaud for her Théorie de l’impôt ou la dîme sociale (Paris: Guillaumin, 1862), a title which obviously referred to Vauban’s Dixme royale. Her theory adopted Condorcet’s and John Stuart Mill’s theory of equal sacrifice: even if the State is viewed as responsible for inequali­ ties and their reproduction, the role of taxation should not be to compensate for these inequalities but to enable each individual to make an equivalent sacrifice, which is only possible through progressivity. In the third place, the most original contribution was probably that of Gustave Fauveau (Silvant 2010a), who was an occasional contributor to the Journal des économistes. His 1864 book, Considé­ rations mathématiques sur la théorie de l’impôt, produced a singular mathemati­ cal analysis, in which he tried to determine what type of tax should be imposed, depending on different assumptions about the nature of public intervention and the distribution of tax levies, that is, by calculating what the optimal tax should be by adopting the benefit approach or the capacity approach. According to the benefit principle, the State is compared to an insurance company41 that insures against insecurity (for the purposes of the analysis). The tax is thus calculated as an insurance premium, taking into account the probability of being a victim of theft and the amount to be insured. His calculation showed that the tax must be progressive if the risk incurred by the richest increases with their wealth. He also formalised the notion of moral sacrifice, using Bernoulli’s hypothesis of dimin­ ishing marginal utility of income, and arrived at the result that taxes should be proportional (Fauveau 1864). Liberal economists showed a growing interest in tax issues and more generally in public finance after 1850. The subject started to occupy growing chapters in textbooks, then entire volumes, and even became the subject of specific courses, illustrating a trend towards greater autonomy of the discipline (Le Van-Lemesle 2006). Three authors distinguished themselves in this field: Garnier, CourcelleSeneuil and Leroy-Beaulieu, developing an increasingly detailed descriptive and normative analysis of how to allocate expenditure and raise financial resources for the State. They can be credited with the development of a new knowledge, mainly made available to a new administrative and political elite, which it had become urgent to train better after the French military defeat against Germany in 1871 (Le Van-Lemesle 2004). While the influence of the liberal group had reached its peak after 1848, the 1870s undoubtedly marked the beginning of its decline. As they moved away from the founding classical thought, notably that of Say, the liberals slowly shifted from a theoretical and descriptive economics to a dogmatic corpus with less analytical known for her translation in 1862 of Charles Darwin’s On the origin of species (1859). She adopted some of Darwin’s theses, which she set out in a long preface. 41 To some extent, this view is similar to that of Émile de Girardin (1802–1881), who explicitly pre­ sented taxes as an insurance premium paid to the State, seen as an insurance company, in his 1849 book L’impôt. This approach falls under the benefit principle, according to the typology that distin­ guishes between whether the tax should reflect contributory capacities (ability-to-pay principle) or the gains derived from the existence of the State (benefit principle).

Liberal economists after Say 73 value. After 1880, a generation of authors, marked by diversity and an abundance of ideas, progressively disappeared, and the group narrowed down to its most orthodox members, leaving aside those whose thought deviated too much from the doctrine. At the same time, the government established chairs of political economy in the law faculties in 1877. These chairs were attributed to proponents of the historical method. A new journal, the Revue d’économie politique, was created in 1887 under the impetus of Charles Gide, threatening the quasi-monopoly of the Journal des économistes and attracting a younger and more dynamic generation of authors, who had new ideas and were receptive to historical or socialist thought, more in tune with their time. Although the French liberal school was influential and esteemed in its time, it was subsequently forgotten in the history of economic thought, probably because of both disdain for the “pot-au-feu” aspect of their discussions, and the complexity of bringing out outstanding figures within the movement. Currents such as Aus­ trian libertarianism or the school of Public Choice would, much later, bring some of their more anti-statist analyses up to date. References Arena, Richard. 1991. “Joseph Garnier, libéral orthodoxe et théoricien éclectique”. In Yves Breton and Michel Lutfalla (eds), L’économie politique en France au XIXe siècle. Paris: Economica, pp. 111–39. Baldin, Claire, and Ludovic Ragni. 2015. “L’apport de Pellegrino Rossi à la théorie de l’offre et de la demande: une tentative d’interprétation”. Œconomia, 5 (2), 193–227. Bastiat, Frédéric. 1848. “Propriété et loi. Justice et Fraternité”. In Excerpt from the Journal des économistes of May 15th and June 15th. Paris: Guillaumin. Bastiat, Frédéric. 1849. L’Etat. Maudit argent. Paris: Guillaumin. Bastiat, Frédéric. 1850. Harmonies économiques. Paris: Guillaumin. Baudrillart, Henri. 1857. Manuel d’économie politique. Paris: Guillaumin. Béraud, Alain. 2018. “Pellegrino Rossi: A Ricardian at the Collège de France?” In José Luís Cardoso, Heinz D. Kurz, and Philippe Steiner (eds), Economic Analyses in Historical Perspective. Abingdon and New York: Routledge, pp. 62–70. Béraud, Alain, and François Etner. 1993. “Bastiat et les libéraux: existe-t-il une école opti­ miste en économie politique?” Revue d’économie politique, 103 (2), 287–304. Béraud, Alain, and Gilbert Faccarello. 2014. “ ‘Nous marchons sur un autre terrain’. The reception of Ricardo in the French language: Episodes from a complex history”. In Gilbert Faccarello and Masashi Izumo (eds), The Reception of David Ricardo in Conti­ nental Europe and Japan. Abingdon: Routledge, pp. 10–75. Béraud, Alain, Jean-Jacques Gislain, and Philippe Steiner. 2004. “L’économie politique néo­ smithienne en France (1803–1848)”. Économies et sociétés (Cahiers de l’Isméa), 38 (2), 325–418. Besomi, Daniele. 2010. “The Periodicity of Crises. A Survey of the Literature before 1850”. Journal of the History of Economic Thought, 32 (1), 85–132. Bouchet, Thomas. 2006. “Le droit au travail sous le ‘masque des mots’: Les économistes français au combat en 1848”. French Historical Studies, 29 (4), 595–619. Breton, Yves. 1984. “Les économistes français et la rente foncière entre 1830 et 1870”. Économie rurale, 161, 10–14.

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76 Alain Béraud and Claire Silvant Le Van-Lemesle, Lucette. 2006. “Les économistes et l’impôt en France au XIXe siècle”. In Maurice Lévy-Leboyer, Michel Lescure, and Alain Plessis (eds), L’impôt en France aux XIXe et XXe siècles. Paris: Comité pour l’histoire économique et financière de la France, pp. 235–48. Leter, Michel. 2006. “Éléments pour une étude de l’Ecole de Paris (1803–1852)”. In Philippe Nemo and Jean Petitot (eds), Histoire du libéralisme en Europe, Collection Quadrige. Paris: Presses universitaires de France, pp. 429–509. Luciani, Jean. 1991. “La question sociale en France”. In Yves Breton and Michel Lutfalla (eds), L’économie politique en France au XIXe siècle. Paris: Economica, pp. 555–87. Marco, Luc. 1988. “Un économiste éclectique: Pellegrino Rossi (1787–1848)”. Revue d’économie politique, 98 (2), 293–302. Molinari, Gustave de. 1848. “M. Proudhon et M. Thiers”. Journal des économistes, 1st série, 21 (86), 57–73. Molinari, Gustave de. 1849. “De la production de la sécurité”. Journal des économistes, 1st serie, 22 (95), 277–90. Molinari, Gustave de, and Frédéric Passy. 1859. De l’enseignement obligatoire. Paris: Guillaumin. Nemo, Philippe. 2006. “A. Destutt de Tracy critique de Montesquieu: le libéralisme économ­ ique des Idéologues”. Romantisme. Revue du dix-neuvième siècle, 133, 25–34. Pénin, Marc. 1991. “Charles Dunoyer, l’échec d’un libéralisme”. In Yves Breton and Michel Lutfalla (eds), L’économie politique en France au XIXe siècle. Paris: Economica, pp. 33–81. Picavet, François. 1891. Les idéologues. Essai sur l’histoire des idées et des théories sci­ entifiques, philosophiques, religieuses, etc. en France depuis 1789. Paris: Félix Alcan. Potier, Jean-Pierre. 2022. “Les économistes libéraux et la ‘question ouvrière’ en France dans les années 1840: de la glorification de la liberté du travail au combat contre le ‘droit au travail’”. Revue d’histoire de la pensée économique, 13, 317–54. Potier, Jean-Pierre. 2023. “ ‘Le gouvernement est un mal nécessaire’: Actions utiles et actions nuisibles de l’État chez Jean-Baptiste Say”. Revue d’histoire de la pensée économique, 15 (1), 89–134. Ravix, Joël. 1991. “Le libre-échange et le protectionnisme en France”. In Yves Breton and Michel Lutfalla (eds), L’économie politique en France au XIXe siècle. Paris: Economica, pp. 485–523. Ravix, Joël. 2017. “Pellegrino Rossi: A New Approach to Liberalism”. In Riccardo Soliani (ed.), Economic Thought and Institutional Change in France and Italy, 1789–1914. Cham: Springer, pp. 129–45. Roscher, Wilhelm. 1857. Principes d’économie politique. French translation by Louis Wolowski. Paris: Guillaumin. Rossi, Pellegrino. 1835–37. Cours de droit constitutionnel. In Pellegrino Rossi, Œuvres complètes, edited by A. Porée. Paris: Guillaumin, 1866–67. Rossi, Pellegrino. 1840–41. Cours d’économie politique, année 1836–1837. In Pellegrino Rossi, Œuvres complètes, edited by A. Porée, 4th ed. Paris: Guillaumin, 1865. Sagot-Duvauroux, Dominique. 2002. “La propriété intellectuelle, c’est le vol! Le débat sur le droit d’auteur au milieu du XIXe siècle”. In Dominique Sagot-Duvauroux (ed.), PierreJoseph Proudhon. Les majorats littéraires. Dijon: Les presses du réel, pp. 9–27. Say, Jean-Baptiste. 1828–29. Cours complet d’économie politique pratique. Paris: Rapilly. Schumpeter, Joseph Alois. 1954. History of Economic Analysis. New York: Oxford Univer­ sity Press. Silvant, Claire. 2010a. “Gustave Fauveau’s Contribution to Fiscal Theory”. The European Journal of the History of Economic Thought, 17 (4), 813–35.

Liberal economists after Say 77 Silvant, Claire. 2010b. “Fiscalité et calcul économique au milieu du XIXe siècle français”. Revue d’économie politique, 120 (6), 1015–34. Silvant, Claire. 2012. “L’école libérale française et la question du bimétallisme (1860–1885). Enjeux économiques et politiques de la controverse”. Œconomia, History, Methodology, Philosophy, 2 (3), 305–26. Silvant, Claire. 2015. “The Question of Inheritance in Mid-nineteenth Century French Lib­ eral Thought”. The European Journal of the History of Economic Thought, 22 (1), 51–76. Steiner, Philippe. 2008. “L’héritage au XIXe siècle en France. Loi, intérêt de sentiment et intérêts économiques”. Revue économique, 59 (1), 75–97. Steiner, Philippe. 2012. “Cours, Leçons, Manuels, Précis and Traités: Teaching political economy in nineteenth-century France”. In Massimo M. Augello and Marco E. L. Guidi (eds), The Economic Reader. Textbooks, Manuals and the Dissemination of Economic Sciences During the Nineteenth and Early Twentieth Centuries. London and New York: Routledge, pp. 76–95. Swedberg, Richard. 2009. Tocqueville’s Political Economy. Princeton, NJ: Princeton Uni­ versity Press. Thiers, Adolphe. 1848. De la propriété. Paris: Paulin, Lheureux and Cie. Tocqueville, Alexis de. 1835–40. De la démocratie en Amérique. Paris: Gosselin. Tocqueville, Alexis de. 1856. L’Ancien Régime et la Révolution. Paris: Michel Lévy frères. Vatin, François. 2002. “La morale utilitaire de Jules Dupuit”. In Jean-Pascal Simonin and François Vatin (eds), L’œuvre multiple de Jules Dupuit (1804–1866). Calcul d’ingénieur, analyse économique et pensée sociale. Angers: Presses Universitaires d’Angers, pp. 91–116. Vatin, François. 2003. “Jules Dupuit (1804–1866) et l’utilité publique des transports, actu­ alité d’un vieux débat”. Revue d’histoire des chemins de fer, 27, 39–53. Wolowski, Louis. 1864. La question des banques. Paris: Guillaumin.

4

Antoine-Augustin Cournot and

the emergence of mathematical

economics

Alain Béraud and Guy Numa

1. Introduction A pioneer of mathematical economics, most of Cournot’s contribution was over­ looked by his fellow economists in his time. He will later be vindicated by none other than William Stanley Jevons and Léon Walras, particularly for his analysis of the demand function and his study of monopoly and duopoly. Despite devel­ oping tools that would later become standard in the so-called neoclassical era, Cournot did not rest his analysis of the demand function on utility. Nonetheless, Cournot influenced modern economic theory in significant ways. This chap­ ter covers Cournot’s background, his theory of prices and his views on social income. Life and background

Antoine-Augustin Cournot1 was born on 28 August 1801, in Gray, in FrancheComté. He was admitted in École Normale Supérieure at the age of 20, but the school was closed in 1822 for political reasons. He then studied at the Faculty of Sciences in Paris where he defended his main doctoral thesis in mechanics and a secondary thesis in astronomy in 1829. The mathematical papers he published attracted the attention of French math­ ematician Siméon-Denis Poisson and, with his help, Cournot became professor of mechanics and analysis at the Faculty of Sciences in Lyon in 1834. In Octo­ ber 1835, he became “Recteur” of the Académie of Grenoble while teaching math­ ematics at the Faculty. The following year, he replaced André-Marie Ampère as general inspector of education. While occupying these three positions, he wrote his first economic publication, Recherches sur les principes mathématiques de la théo­ rie des richesses, published in 1838. He refocused on mathematics and published Traité élémentaire de la théorie des fonctions et du calcul infinitésimal (1841) fol­ lowed by a book on probability theory, Exposition de la théorie des chances et des probabilités (1843). Cournot’s visual faculties soon started to deteriorate, forcing 1 For more information about Cournot’s life and works, see, for instance, Theocharis (1983), Ménard (1978), Martin (1996) and Deschamps and Martin (2020). DOI: 10.4324/9780429202407-5

Cournot and the emergence of mathematical economics 79 him to stop using mathematics2; he then turned his attention to the philosophy of sciences with his Essai sur les fondements de nos connaissances et sur les car­ actères de la critique philosophique (1851) and Traité de l’enchaînement des idées fondamentales dans les sciences et dans l’histoire (1861). From 1854, he served as “Recteur” of the Académie of Dijon but, because of his blindness, he stepped down in 1862. He continued his research until his death. Cournot returned to econom­ ics by publishing Principes de la théorie des richesses (1863) which presented in literary form the ideas advanced in 1838. However, the book signalled a change in his views and the influence of John Stuart Mill and Friedrich List. Cournot’s dissatisfaction with liberalism became more evident. The idea that “the greatest good for society must necessarily be the result of the forces generated by private interests” (1863, 275) seemed ill-founded.3 His criticisms were twofold: on the one hand, the notion of optimum was not clearly defined, and, on the other hand, it was impossible to prove that individual interests necessarily led to a collective well-being. Cournot died in Paris on 31 March 1877. That year saw the publica­ tion of his Revue sommaire des doctrines économiques in which he criticised both liberalism and socialism. Mathematics, economics and philosophy

Cournot was a mathematician, an economist and a philosopher (Martin 1996). The challenge is to examine to what extent his views on probability theory and the his­ tory and philosophy of sciences informed his economic analyses. In Exposition de la Théorie des chances et des probabilités (1843), Cournot stressed that “nothing is more important than carefully distinguishing between the two meanings of the term probability, either used in an objective or a subjective sense, if we want to avoid confusion and errors” (Cournot 1843, 148). What char­ acterised his approach of random markets was the rejection of Bernoulli’s solution to the Saint Petersburg paradox. While admitting that, for an individual, the impor­ tance of a sum of money depended on one’s wealth, he did not think that it was possible to establish a functional relationship between the utility of a sum of money and one’s wealth. He maintained that the rules that governed the determination of moral expectation were arbitrary and non-applicable. In L’enchainement des idées fondamentales dans les sciences et dans l’histoire (1861), he studied economic optimism and maintained that the idea that the great­ est general good necessarily resulted from conflicting private interests was not sus­ ceptible of a logical proof. The motto Laissez faire, laissez passer must triumph in the end, not because of a theoretical proof, but because it naturally came to the 2 In a letter sent to Léon Walras, Cournot (1873, vol. 1: 331) wrote: I must confess that for the past 30 years, I have been compelled to appeal to a reader . . . I have not been able to find someone who is capable of reading mathematics . . . I cannot read mathematics with my ears, let alone dictate . . . and this is the reason why I was forced to stop using mathemat­ ics for the past 30 years. 3 All translations from the French are ours, unless noted otherwise.

80 Alain Béraud and Guy Numa mind of individuals, and because only artificial and arbitrary rules were proposed against it. At first sight, the 1863 Principes was a non-mathematical restatement of the 1838 Recherches. But there is more. In the book, Cournot returned to his initial economic approach, but he also drew upon his Essai sur le fondement de nos connaissances (1851) and upon the analysis he made of the Platonic opposition between science and opinion. From this point of view, political economy was in an ambiguous position. Cournot (1863, 326) stated “that it does not admit and will never completely admit the regular, systematic and always progressive con­ struction, which belong to the sciences . . . and never completely rely on unshak­ able and universally accepted bases”. First, while some propositions of the theory of wealth could be rigorously proved, their meaning depended on considerations drawn from social economics,4 but this field was based on opinion, not science. For example, he contrasted the scientific definition of wealth as the sum of the values of all goods, to the meaning – well-being – this term had in social econom­ ics. Cournot concluded that the value of income did not measure men’s well-being. Second, the abstractions to which economists must resort to simplifying questions are not shared by all of them and could sometimes appear artificial and arbitrary. Depending on the facts that they believe to be essential or of secondary importance, economists formulated hypotheses and reached different conclusions even if their reasoning was not erroneous. Cournot did not abandon his 1838 ambition – formu­ lating the mathematical principles of the theory of wealth – but he felt necessary to stress its dangers. The mathematical apparatus . . . lead us unfortunately to think that one confer to these hypotheses a value that they effectively have in the interpretation of natural phenomena, but that they cannot have to the same degree in the interpretation of social phenomena. (1863, 329–30) Although he considered political economy a positive discipline, and though he admitted that most individuals relied on experience to solve the most salient ques­ tions with regard to private and public affairs, Cournot underlined the importance of theory. He thus decided to study political economy only from a theoretical standpoint. Cournot’s theoretical political economy was conceived of through the lens of mathematics. In the preface to his Recherches, he wrote that he intended to apply to the theory of wealth “the forms and symbols of mathematical analysis” (1838, 3). He was led to use the theory of continuous functions and of infinitesimal cal­ culus, of which he gave an elementary exposition a few years later (1841). For Cournot (1838, viii), “it is natural to use mathematical symbols . . . to discuss 4 Drawing upon André-Marie Ampère’s terminology (1856, t.2, 127), Cournot (1877, 181) employed the term “social economics” to describe what used to be called “political economy” in his time. The theory of wealth is one of the components of social economics.

Cournot and the emergence of mathematical economics 81 the relationships between variables”. To do so, Cournot drew upon authors known today as classical economists. There are authors, such as Smith and Say, who wrote on political economy in a pure literary form; but there are others, like Ricardo, who studied more abstract issues or seeking greater precision, could not avoid algebra, but only ended up disguising it with long and tedious arithmetic. Any person who knows algebra, is quickly able to read in one equation the result that can be obtained with difficulty using Ricardo’s arithmetic. (1838, 4–5) Cournot warned the reader against a false idea regarding the application of math­ ematics to the theory of wealth. “Some believed that using signs and formulas had no other purpose than numerical calculus” (1838, 4). Indeed, using mathematics could lead to errors, or could even be perceived as lazy or pretentious. Therefore, rather than using basic algebra, Cournot favoured the theory of functions, differen­ tial calculus and integrals. He avoided being too specific about the algebraic for­ mulation of the functions employed, merely stating that they were continuous and derivable. Cournot’s analysis of the demand function serves as a perfect illustration of his methodology. By making the demand of a good a continuous and derivable function with respect to its price, Cournot aimed to show that greater analytical rigour could be attained, without specifying the mathematical form of the function, which he thought was impossible to do. 2. The theory of price: “loi du débit”, monopoly and duopoly Cournot (1877, 91) considered his theory of prices his main contribution to eco­ nomic theory. He broke not only with his predecessors because he used mathemat­ ics and proposed new tools, but also because his whole approach was different. Classical authors viewed monopoly as an exceptional case. For Cournot, instead, it was the point of departure to study duopoly and “unlimited” competition (“concur­ rence indéfinie”). On the theory of value, Cournot referred to “only one axiom . . . that every­ body tries to get the greatest possible value from his thing or labour” (1838, 35). He applied this axiom to explain the behaviour of the producers who wanted to maximise their profits, but he refused to use it with regard to the demand for com­ modities or to estimate the benefit an individual received from exchange. “There is nothing in common between the feeling of pleasure or pain and the mathematical notion of quantity in mathematics” (1851, 233). But the axiom that anybody tried to get the maximum income from his or her resources was not Cournot’s sole hypothesis. In several instances, he affirmed the principle of the uniformity of a price, which originated in the very notion of market understood as “the whole territory, the parts of which are united through free trade, so that prices are easily and quickly levelled” (1838, 40).

82 Alain Béraud and Guy Numa Cournot’s framework was partial equilibrium. While it is true that “the eco­ nomic system is an entity, the parts of which are linked together and act on each other” (1838, 99), yet it is possible, as a first approximation, to abstract from such effects: the change in price of a good causes producers’ income to change and thus make up for the change in consumers’ spending, so that “the same [amount of] funds remains available for the demand of all other merchan­ dise” (1838, 101). The “loi du débit”

Cournot posited that the relationship between price and quantity produced – the “débit” – cannot be established theoretically. The law of demand, he asserted, was fundamentally empirical and must be based on observations. He assumed that, in general, demand is a decreasing function of price, denoted5 as f ( p ) . Cournot (1838, 36) admitted that there could exist “objects of fantasy and lux­ ury which are desired only because of their scarcity and, as a result, their high price”. He believed, however, that the role played by such merchandise is so negligible that they can be disregarded. The demand of a small number of agents is a discontinuous function, but, when dealing with a great number of agents with different needs, fortunes and desires, it is possible to consider it continuous and its changes are proportional to changes in prices when they are small com­ pared to their initial level. The aggregate demand function is thus continuous and derivable. Given that the function f ( p ) is continuous, the function pf ( p ) which expresses the total value of demand must also be continuous. Since the consump­ tion of any good remains finite even on the hypothesis that it is absolutely free, the total value of demand is zero when p = 0 . A value can always be assigned to p so great that the demand for the article would cease. “Consequently, since the function pf ( p ) at first increases, and then decreases as p increases, there is a value of p that makes this function a maximum, which is given by the [following] equation” (1838, 40): f ( p ) + pf ¢ ( p ) = 0

(1)

The root of equation (1) corresponds to a maximum under the following condition: 2 f ¢ ( p ) + pf ¢¢ ( p ) < 0 If f ¢ ( p ) is negative, whenever f " ( p ) is negative, it is impossible that there should be a minimum, nor more than a maximum. In the contrary case, Cournot admitted that the existence of several maxima or minima was not proved to be 5 In Cournot’s text, F ( p ) is the demand function and f ( D ) is the reciprocal of the demand func­ tion. In the present essay, f ( p ) and f ­1 ( D ), respectively, denote the demand function and its

reciprocal.

Cournot and the emergence of mathematical economics 83 impossible. He would later concede that, with regard to taxation, this scenario could make sense: a tax cut, even modest, causes tax revenue to decline, which indicates that a maximum revenue can be reached by raising the tax; on the other hand, with a significant tax cut, say by half or by a quarter, it is possible that tax revenue rises a great deal. (1877, 95) Capitalising on his “loi de débit”, Cournot profoundly renewed price theory. While classical economists were almost exclusively interested in competition, the starting point of Cournot’s analysis was monopoly, which he viewed as the simplest way to analyse the formation of prices. By increasing the number of competitors, he then studied duopoly, oligopoly, and finally concluded his analysis with the study of unlimited competition, described as a situation where the change in output of one firm does not affect the market price. Monopoly

Cournot wrote: suppose that a man finds himself owner of a mineral spring which has just been found to possess salutary properties possessed by no one else. . . . After various trials, he will end up adopting the value of p which renders the prod­ uct pf ( p ) maximum. (1838, 43) When the cost of production is negligible or when it only consists of overhead costs, profit is maximal when the final revenue pf ( p ) is maximal. If f is a con­ tinuous function, the total revenue is a continuous function of price. When it is maximal, the marginal revenue f ( p ) + pf ¢ ( p ) is zero. The product é f ( p ) ùû pf ( p ) = ­ ë f ¢( p)

2

represents the revenue of the owner of the source, and this revenue only depends on the type of demand function. To make equation (1) applicable, it must be supposed that for the value of p obtained from it, there is a corresponding value of demand D that the owner of the spring can deliver; otherwise, the owner will derive the price of mineral water p from the maximum quantity, say qmax , that the spring can produce: p = f ( qmax ) . Let us now assume that an individual possesses the secret of an artificial min­ eral water, for which the materials and labour must be paid for. If the total cost is a function j ( D ) of the quantity produced, the producer maximises the net product

84 Alain Béraud and Guy Numa (or net revenue) pf ( p ) ­ j ( D ) . Since D is a function of p, the net product can be regarded as “depending implicitly on the single variable p, although generally the cost of production is an explicit function, not of the price of the good produced, but of the quantity produced” (Cournot 1838, 44). Consequently, the price p* to which the producer should sell his good is the root of the equation:

{

}

f ( p ) + f ¢ ( p ) p ­ j ¢ éë f ( p ) ùû = 0 This price will in turn determine the net product or net revenue. Thus, Cournot demonstrated that the profit of the monopolist is maximised when marginal rev­ enue f ( p ) + pf ¢ ( p ) is equal to marginal cost f ¢ ( p ) j ¢ ( D ) . It is possible the firm might only be able to produce the quantity qmax < f ( p *). In such a scenario, the price is determined by the relation p = f ­1 ( qmax ) . Therefore, the producer, not consumers, will bear the production costs. A decrease in the production costs will only be to the advantage of the producer, so far as it does not result in the possibility of increasing his producing power. Though Cournot did not use the term “marginal cost”, he nonetheless intro­ duced this concept in his analysis by noting that the form of function j ¢ ( D ) “exerts the greatest influence on how to solve the principal problems of economic sci­ ence” (1838, 45). He first noted that the marginal cost j ¢ ( D ) must be supposed to be positive, for it would be absurd to assume that the total cost decreased as production climbed. Cournot added that the price was not less than the marginal cost, p ³ j ¢ ( D ), because “the producer will always stop when the increase in cost exceeds the increase in revenue” (1838, 45). The marginal cost is capable of increasing, decreasing or remaining stable, as production grows. For manufactured goods, it is generally the case that the cost becomes proportionally less as production increases, due to a fall in general expense. As a result, powerful capitalists or large firms are able to . . . kill competi­ tion and artificially create a true monopoly which allows them to earn an above-normal rate of profit, that is, a rent . . . in some industries that would not allow it under normal circumstances. . . . This type of monopolies usu­ ally entails a fall in prices favorable to consumers; though the influence of the monopoly always persists in that the price does not fall as much as in the competitive case. (Cournot 1863, 79–80) It may happen, however, that when production is carried beyond certain limits, it induces higher prices for raw materials and labour to the point where j ¢ ( D ) again begins to increase with D. Thus, the idea that the marginal cost could successively rise and fall is clearly discussed in Cournot’s writings. In the case of productions using agricultural lands, mines or quarries, the func­ tion j ¢ ( D ) increases with D. In discussing Ricardo’s theory of differential rent in Principes de la théorie des richesses (1863, 76) and in Revue sommaire des

Cournot and the emergence of mathematical economics 85 doctrines économiques, Cournot admitted that land displayed various degrees of fertility. This fact is indisputable, but it is not the reason that explains the principle and the existence of rent. All plots of land of equal fertility would eventu­ ally produce the same level of rent. . . . Total rent would be shared between landowners in proportion to the amount of land they possess, instead of being unequally distributed based on the degree of fertility. . . . The principle, the reason [that explains the formation] of rent always consists in the fact that, according to the law of demand, the value of the product exceeds the cost of production. (Cournot 1877, 99–100) Rent can appear because plots of land of different quality are put into cultivation to meet demand; but rent can also appear on homogenous land due to increasing marginal cost, because only a limited quantity of produce can be farmed or because the same plot of land can satisfy multiple uses. There are two particular cases: the marginal cost could remain constant or could be zero. In the latter case, the price does not depend on cost. Such a scenario is more frequent than usually thought at first sight. By way of examples, Cournot mentioned a theatre play or the tariff of a bridge. In such cases, the price is set as if production costs were nonexistent. It seems natural to admit that, when production costs climb, the price set by the monopolist grows by the same amount. Cournot sought to demonstrate that this conjecture is incorrect: depending on the form of the demand function, an increase in costs could lead to a price increase of a smaller or larger proportion. In particular, this reasoning applies to taxation, which can be of two types: direct or indirect. If the monopoly is subject to a fixed tax or a tax proportional to its income, this tax will affect neither the price of the commodity nor the quantity produced. The burden of this direct tax falls entirely on the monopolist. Though the burden of this direct tax does not fall on consumers, it could nevertheless be detrimental to the general interest since the State may use the tax revenue less well than the monopolist would have done. Furthermore, such a tax can be an obstacle to capital accumulation. No one will use his capital in new investments, nor in the improvement of existing investments, if he can no longer obtain the ordinary interest brought in by capital in businesses of the same kind, on account of the tax imposed on the net income from his investment. (Cournot 1838, 52) Indirect taxation is another alternative. Suppose the tax is equal to t francs per unit of merchandise,6 leading to an increase in price ( p0 to p1 ) . The problem is to 6 Cournot also examined the case of a tax which is a percentage of the final price. In such a scheme, the higher the tax the lower the share of the income of the monopolist in the final price.

86 Alain Béraud and Guy Numa evaluate the loss borne by each type of agents once such a tax is established. The pecuniary loss borne by consumers who continue to buy the commodity in spite of the increased price is

( p1 ­ p0 ) f ( p1 ) The revenue of the tax perceived by the State is tf ( p1 ) So if the price increase exceeds the tax, p1 ­ p0 > t , the loss of consumers alone will be higher than the amount of tax revenue perceived. Cournot noted that consumers who stop purchasing a good upon which a tax has been imposed and transfer their spending to other goods experience a loss. How­ ever, Cournot contended, “this kind of loss cannot be estimated numerically. . . . It is in one of those relations of order and not of size, which numbers can indicate indeed, but cannot measure” (1838, 103). Cournot deliberately closed a door that Dupuit would later open to measure the consumer surplus. The loss borne by the monopolist is

{

}

p0 f ( p0 ) ­ j éë f ( p0 ) ùû ­ p1 f ( p1 ) ­ j ëé f ( p1 ) ûù ­ tf ( p1 ) = p0 f ( p0 ) ­ j éë f ( p0 ) ùû ­ p1 f ( p1 ) + j éë f ( p1 ) ùû + tf ( p1 ) Since p0 is the price which maximises the profit of the monopolist, the expression p0 f ( p0 ) ­ j éë f ( p0 ) ùû ­ p1 f ( p1 ) + j éë f ( p1 ) ùû > 0 is necessarily positive. Thus, the loss to the monopolist alone exceeds the amount of tax revenue perceived by the State. Cournot concluded that the doctrine of the physiocrats was perfectly applicable to the monopoly regime. It is better to levy a direct tax on the net income of the monopolist than to lay a specific tax on the commodity. If, instead of levying a tax, the State subsidises the monopolist, the gain for the monopolist would be less than the consumers’ burden. Duopoly

Departing from monopoly, the second step of Cournot’s price theory consists of introducing a second producer. Two firms producing the same good could have an interest in agreeing with each other to set a monopoly price. But each of them can increase its profit through an increase in its production. The cooperative equi­ librium, Cournot stressed, is unstable: “it could not persist unless a formal link is established; because one cannot . . . suppose . . . men making no errors or not being careless” (1838, 62).

Cournot and the emergence of mathematical economics 87 Rather than cooperating – a case examined below – each producer tries to increase his revenue and must take into account the behaviour of his competitor. He supposes that his competitor’s output is given: this is called Cournot’s conjec­ ture. Instead of using the demand function, Cournot used the reciprocal function which determines the price in function of the quantity of water demanded. Let D1 denote the flow of spring 1 and D2 the flow of spring 2, the price is a function of the total flow: p = f ­1 ( D1 + D2 ) Each firm seeks to maximise its profit independently (that is, with no coopera­ tion). If the cost of production is zero, the profits of the firms are respectively expressed by: pD1 = D1 f ­1 ( D1 + D2 ) pD2 = D2 f ­1 ( D1 + D2 ) To determine the quantities firms ought to produce, additional assumptions are required. Cournot admitted that the owner of spring 1 has no direct influence on the determination of the quantity produced by its rival. “All he can do, when D2 has been determined by owner (2), is to choose for D1 the value which is best for him, which he can accomplish by properly adjusting his price” (1838, 60). The quantity D1 is that which maximises profit of firm 1 for a given level of output D2 generated by its rival: f ­1 ( D1 + D2 ) + D1 f ­1¢ ( D1 + D2 ) = 0

(2)

Symmetrically, the quantity D2 is that which maximises profit of firm 2 for a given level of output D1 generated by its rival: f ­1 ( D1 + D2 ) + D2 f ­1¢ ( D1 + D2 ) = 0

(3)

In Figure 4.1, the mi ni curve represents the reaction function of firm i (Equa­ tions (2) and (3) above), i = 1, 2. An equilibrium is reached at point E where each firm sets its output at the level that its competitor took into account by setting its own output. Cournot could have supposed that the decision variable is the price instead of the quantity. Each firm would thus have fixed the price in such a way that p éë f ( p ) ­ D j ùû is maximal, D j being the production level of its competitor. The result would have been the same. In fact, each firm behaves as a monopolist, the demand for its product being the residual demand. To study stability, Cournot described a dynamic process where each firm sets its production in turn, supposing that its rival will maintain its output at the level of the previous period (Figure 4.1). If output of firm 1 is ox1 , firm 2 will produce

88 Alain Béraud and Guy Numa

D2 m1 m2 y1 y11

E

y

o

x1

x11

x

n1

n2

D1

Figure 4.1 Cournot’s duopoly Source: (Cournot 1838, 60)

oy1 , that is, a quantity such as to maximise its profits for a given ox1 . But for the same reason, firm 1 will produce ox11 . Cournot maintained that this process leads firms 1 and 2 to produce in the end, respectively, ox and oy. Equilibrium is stable. “If either of the two producers . . . momentarily departs [from equilibrium], he will be brought back to it by a series of reactions, the magnitude of which will be constantly diminishing” (Cournot 1838, 61). The two firms could have colluded, instead of competing against each other. Cournot showed that if that was the case, producers’ revenue would have been higher. If the firms compete against each other, by summing up equations (2) and (3) based on the total flow D, we obtain: 2 f -1 ( D ) + Df -1¢ ( D ) = 0

Û

2 p + Df -1¢ ( D ) = 0

(4)

If the producers had colluded, the price would have been yielded by the following equation: p + Df -1¢ ( D ) = 0

(5)

Cournot and the emergence of mathematical economics 89 To compare the equilibrium price in both cases, Cournot transformed equation (4) as follows: 2p = ­

f ( p) f ¢( p)

p=­

f ( p) f ¢( p)

and equation (5) as follows:

Given that, if f ¢¢ < 0 , ­

f ( p) is a decreasing function of p, the price is higher f ¢( p)

under collusion. Cournot’s duopoly theory and stability analysis were criticised almost fifty years after the publication of Recherches.7 Joseph Bertrand (1883, 503) maintained that the situation described by Cournot is not an equilibrium. “Whatever could be the common price adopted, if one competitor diminishes its price, he would attract . . . the whole sales and double his revenues if his competitor does not react”. He dis­ carded the assumption of a uniform price and replaced Cournot’s conjecture with the assumption that each firm took the price of its rival as given. Edgeworth (1897, 117–8) picked up the idea and introduced a simple form of decreasing returns in the model: the production capacity of each firm is limited. He concluded that the outcome was indeterminate: the price will continuously fluctuate between a minimum required by the firm’s capacity, and a maximum, that is, the monopoly price. Edgeworth claimed having showed that Cournot’s conclusion was erroneous; but nothing could be further from the truth, however. What Edgeworth showed is that, under differ­ ent assumptions, not used by Cournot, one could reach different conclusions. For his part, Irving Fisher criticised all his predecessors and stressed that, under certain conditions, Cournot’s conclusions are correct. Nonetheless, Fisher explained that these conditions are not applicable to competition between two producers. A more natural hypothesis, and one often tacitly adopted, is that each assumes his rival’s price will remain fixed, while his own price is adjusted. Under this hypothesis each would undersell the other as long as any profit remained, so that the final result would be identical with the result of unlimited competition. (Fisher 1898, 126) William Fellner added to the list of analysts who claimed that Cournot’s reasoning is mistaken. His argument is different from Bertrand and Edgeworth’s, however. 7 On this topic, see Magnan de Bornier (1992, 2000).

90 Alain Béraud and Guy Numa Fellner advanced that Cournot’s analysis of duopoly was unacceptable because the assumption upon which his model was designed – each firm assumes that the output of its rival is given – is not compatible with Cournot’s description of the process leading to the equilibrium, a process during which each firm changes its position based on the decisions of its competitor. The intersection of the reaction curves constitutes an equilibrium only if the firms react as these curves indicate, and it is unreasonable to conclude that they behave in such a way. To be sure, that firms should assume of one another that the other follows a policy of fixed output is conceivable, but on the way to the Cournot solution they would necessarily realise that their assumptions were incorrect and they would change their assumptions. This would, of course, destroy the validity of the Cournot reaction functions and of any analysis based on them. (Fellner 1949, 65) These are the leading interpretations of Cournot’s duopoly model before the emer­ gence of game theory. Most authors admitted that the analysis takes place in real time, where both firms react simultaneously until a state of equilibrium is achieved. No one suggested that producers make their decisions sequentially, with one firm setting its output at t time while the other firm reacts in the subsequent period. Later, the work of John Nash led to a better understanding of Cournot, which discards dynamics: Cournot’s solution is interpreted as an application of the the­ ory of non-cooperative equilibria to the analysis of duopoly. The profit of a firm depends on the quantity produced by its rival. To make a decision, the manager must consider and anticipate the behaviour of its competitor. For this reason, the model can be represented as a one-shot game. An equilibrium is a pair of quantities ( D1 , D2 ) so that each firm maximises its profit based on the expectations of what its rival will do, and assuming that the expectations about the behaviour of its rival are correct. This set-up may look like the problem that Cournot aimed to solve, but it is different, however. 3. The theory of prices: “concurrence indéfinie” and cooperation From duopoly to “unlimited” competition

The effects of competition reached their limit when any firm’s production could stop without creating a significant change in price. Let’s consider the firm i. Its profit function is: pDi ­ ji ( Di ) = Di f ­1 ( D ) ­ ji ( Di ) The manager sets the production level Di that maximises profit: f ­1 ( D ) + Di f ­1¢ ( D ) ­ ji¢ ( Di ) = 0

Û

Di = j ¢ ( Di ) ­ p ¢ f ( p)

Cournot and the emergence of mathematical economics 91 If, as Cournot (1838, 69) argues, “each of the partial productions Di is unrespon­ sive, not only to the total production D = f ( p ), but also to the derivative f ¢ ( p ) ”, then the equilibrium condition is that the price is equal to the marginal cost of each firm. The price of the good and the production of each firm are the solutions of the following system: p ­ ji¢ ( Di ) = 0 n

åD i =1

i

"i = 1, 2,… , n

= f ( p)

(6)

System (6) enables to determine the production of each firm as a function of the price. Total production, here called aggregate supply, appears to be a function Ω of the price determined by the equality between supply and demand: W( p) ­ f ( p) = 0 Cournot mentioned that “it is . . . clear that, under the hypothesis of unlimited com­ petition, and where at the same time the function ji¢ should be a decreasing one, nothing would limit the production of the good” (1838, 70). Simply put, unlimited competition is incompatible with increasing returns. Cournot drew upon this analysis to study the effects of taxation and measure the deadweight loss caused by a tax. In Figure 4.2, the equilibrium is initially deter­ mined by the intersection between the demand curve D and the supply curve W0 . The price is p0 . Suppose the production costs of the firms rise by the same quantity as it would be the case when an indirect tax is created. The increase in cost is rep­ resented by the shift of the supply curve from W0 to W1 with NE1 = t . The new equilibrium price exceeds the initial price, but the price increase is less than the amount of the tax. Let Δp denote the increase in price, if t is small, one can write:

( Dp ­ t ) W¢ ( p0 ) = Dpf ¢ ( p0 ) Ω’(p) is positive and f ¢ ( p0 ) is negative; therefore, Δp and Δp-t have opposite signs, while Δp and t have the same sign. One can conclude that a tax hike raises prices, but the rise in price is less than the tax hike. To analyse the effects of taxation on the interests of producers and consumers, Cournot hypothesised that a tax leading to a rise in price which is less than the tax increase would necessarily lead to a lower output. After the tax is applied, producer i loses the following amounts: • The difference between the initial price, p0 , and the final price before tax, p1 ­ t , multiplied by the quantity produced in the final situation, or ( p0 ­ p1 + t ) Di,1 • The net profit received from the quantity Di,0 ­ Di,1 which is no longer pro­ duced, or p0 ( Di,0 ­ Di,1 ) ­ éëji ( Di ,0 ) ­ ji ( Di,1 ) ùû

92 Alain Béraud and Guy Numa

Quantities

0

1

E0

D0 D1

N

H

E1 D

p1

t

p0

p1

Price

Figure 4.2 The effects of taxation Source: (Cournot 1838, 70)

The total loss borne by producers is n

p0 D0 ­ ( p1 ­ t ) D1 ­ å éëji ( Di,0 ) ­ ji ( Di,1 ) ùû i =1

Though Cournot failed to provide any diagram representing his analysis of the deadweight loss, his reasoning can be easily interpreted, as shown in Figure 4.2. The loss suffered by producers is represented by the trapezoid p0 E0 N ( p1 ­ t ) . For Cournot, the total loss borne by consumers is equal to the additional amount spent by consumers who purchase the good regardless of the price increase, that is ( p1 ­ p0 ) D1 , represented by the rectangle p1E1Hp0. The sum of total losses borne by consumers and producers exceeds the amount of tax perceived, which is represented by the area of the rectangle ( p1 ­ t ) NE1 p1 . The deadweight loss – a term used by Jules Dupuit – is represented by the triangle NHE0. Cournot failed to appraise the loss suffered by consumers who no longer consumed the good. Of the mutual relations of producers

Though producers compete against each other while selling the same good, they can cooperate to supply inputs that are required to produce another good. For

Cournot and the emergence of mathematical economics 93 instance, copper is alloyed with zinc to make brass. In other words, the firm pro­ ducing copper cooperates with the one producing zinc in order to produce brass. Cournot (1838, 80) shows that, in that case, “the association of monopolists, work­ ing for their own interest . . . will also work for the interest of consumers, which is exactly the opposite of what happens with competing producers”. His demonstra­ tion, discussed at length by Edgeworth (1897), brings to light several important analytical problems because it does not necessarily lead to an equilibrium. Cournot’s starting point is a scenario where copper and zinc have no use other than as alloying agents to produce brass. Production costs are neglected, and it is assumed that two monopolists handle the production of copper and zinc separately. Let pl be the price of brass, pc that of copper, and pz that of zinc. The coeffi­ cients of fabrication are fixed: a quantity ac of copper and a quantity az of zinc are combined to produce one unit of brass. The price of a unit of brass is given by the following equation: ac pc + az pz = pl The demand for brass Dl is a function of its price: Dl = f ( pl ) = f ( ac pc + az pz ) The demands for copper and zinc are respectively: ìD ï c = ac f ( ac pc + az pz ) í îï Dz = az f ( ac pc + az pz ) Each producer determines its profit-maximising price while regarding the price of the other monopolist as given. The conditions are respectively: f ( ac pc + az pz ) + ac pc f ¢ ( ac pc + az pz ) = 0

f ( ac pc + az pz ) + az pz f ¢ ( ac pc + az pz ) = 0

(7)

Copper and zinc prices are determined by these two equations. Cournot represented the solution of the system graphically. The first equation of the system (7) is represented by m1n1 , which shows the price of copper set by its producer for a given price of zinc. Similarly, m2 n2 represents the price of zinc as a function of the price of copper. We observe that when the price of one commodity is equal to zero, the optimal price of the other has a finite value. When the price of one commodity goes up, the optimal price of the other can rise or fall. These results are shown in Figure 4.3. One can conclude that the equilibrium is stable. Cournot indicated that the model could have no solutions or lead to economi­ cally impractical solutions. One can imagine that the demand function for brass is in such a way that the curves m1n1 and m2n2 would not intersect. That is the case, for

94 Alain Béraud and Guy Numa p2

p2

n1

n1 m2 n2

E E

m2

m1

n2

p1

m1 p1

Figure 4.3 The mutual relations of producers Source: (Cournot 1838, 79)

a . We can also imagine that the roots of system (7) render b + pl2 values implying that producers provide quantities of copper and zinc which exceed their production capacities. Cournot qualified his remarks, however. He stated that

instance, if Dl =

this singular result stems from an abstract hypothesis of the nature of those that we can discuss in this essay: it is very clear that, in the order of actual facts, and where all the conditions of an economic system are taken into account, there is no item whose price is not completely determined. (1838, 82) The main difference between this model and the model dealing with the competi­ tion of producers is that the composite commodity will always be made more expensive, by reason of separation [of monopolies] than by reason of the fusion of monopolies. The association of monopolists, working for their own interest, in this instance will also work for the interest of consumers, which is exactly the opposite of what happens with competing producers. (1838, 80) 4. The social income In his analysis of price determination, Cournot’s reasoning rested upon a market for good isolated from the rest of the economy. The problem for him was to show

Cournot and the emergence of mathematical economics 95 that this approach could be valid when he discussed the determination of the social income, defined as the sum of incomes which belong to members of society. So far we have studied how, for each commodity by itself, the law of demand in connection with the conditions of production of that commodity, deter­ mines its price and regulates the incomes of producers; we have considered the prices of other commodities and the incomes of other producers as given and invariable; but, in reality, the economic system is a whole of which all the parts are interconnected and interact with each other. An increase in the income of the producers of commodity A will affect the demand for com­ modities B, C, etc., the incomes of the producers of these commodities, and, as a result, will cause a change in the demand for commodity A. Therefore, for a complete and rigorous solution of the problems relative to some parts of the economic system, it seems necessary to take the entire system into con­ sideration. But this would surpass the powers of mathematical analysis and of our practical methods of calculation, even if the values of all the constants could be assigned to them numerically. The purpose of this chapter and of the following one is to show how far it is possible to avoid this difficulty, while maintaining some kind of approximation. (1838, 99) The principle of compensation of demands

Cournot’s core idea is that a change in price causes a change in producers’ income which compensates for the resulting change in consumers’ spending so that “the same . . . amount remains available for the demand for all other commodities” (1838, 101). Suppose the price of an item rises from p0 to p1. Sold quantities decline from D0 to D1 . The income of producers, which is equal to the value of the product, changes – for the purpose of illustration, say, falls – from p0 D0 to p1 D1 . Overall, the producers of the commodity will be left with lower revenues to fund their con­ sumption purchases. Besides, facing higher prices, consumers who continue to pur­ chase the commodity will have to spend more. Their increase in spending is equal to ( p1 ­ p0 ) D1 . In contrast, the consumers who no longer buy the commodity will have more funds available for other purchases. The decrease in their spending is equal to p0 ( D0 ­ D1 ) . All in all, consumers end up reducing their spending on the commodity by the following amount: p0 ( D0 ­ D1 ) ­ ( p1 ­ p0 ) D1 = p0 D0 ­ p1 D1 which is equal to the fall in income of the producers. Considering producers and consumers of the commodity altogether, it is apparent that “the same annual amount remains available for the demand for all other commodities” (1838, 101). Indeed, in general, the structure of demand for all the other goods will change. The distribution of the social surplus between producers of various commodities will change, but the change in social income will just be equal to p0 D0 ­ p1 D1 ,

96 Alain Béraud and Guy Numa which is the change in income of the producers of the commodity whose price itself changed. Real and nominal changes in social income

Cournot defined social income as the sum of incomes received by the landowners, the capitalists and the workers, including the sums by means of which the State or individuals sustain the groups of individuals that some economists have described as unproductive, because their labour does not produce any material or saleable goods. To analyse the evolution of social income, changes in nominal and real income should be distinguished. We saw that when an increase in the price of good A from p0 to p1 causes a fall in the income of producers equal to p0 D0 ­ p1 D1 , the reduction in social income will be of an equal amount. Nonetheless, the effects of the price increase of good A on the purchasing power of consumers should be considered. Those who continue to purchase the good end up spending more. For them, it is as if the price of the good did not rise, while their income dropped by an amount equal to ( p1 ­ p0 ) D1 . To this amount, one should include a decline in the income of the producers of good A, that is, p0 D0 ­ p1 D1 . Overall, the amount p0 ( D0 ­ D1 ) represents the real change in social income, while the quantity p0 D0 ­ p1 D1 denotes the nominal change in social income. This result can be obtained directly, Cournot (1838, 102) pointed out, by not­ ing that production has fallen from D0 to D1 and that, as a result, a value equal to p0 ( D0 ­ D1 ) has been destroyed. Admittedly, the price of the commodity rose, which reduced the loss borne by the producers; but this gain is exactly balanced by the loss that this rise has caused to the consumers who bear it. Cournot reiterated that his calculations did not take into account the loss borne by consumers who no longer purchase good A due to the price increase and allocate their income to other uses. Changes in social income and international trade

Drawing upon the principles discussed above, Cournot studied the effects of lifting an import ban on social income. His thesis is as follows: if country A is now able to export to country B a commodity M whose import was previously prohibited, the social income will rise in country A and fall in country B. Cournot aimed to oppose the view of those like Jean-Baptiste Say who intimated that removing trade barriers between two countries would necessarily lead to an increase in the national income of both countries.8 Let us call pa0 and Da0 the price and the quantity produced of commodity M in country A, at the time when its export to country B was prohibited. Similarly, pb0 8 Say (1828–29, 609) maintained that lifting a ban on the import of foreign goods would generate expansionary effects: “given that the foreign good can be sold at a low price and its consumers can be numerous, it increases consumption, and thus the demand for local products with which [the foreign good] is purchased”. For a comprehensive analysis of Say’s views on free trade, see Numa (2019).

Cournot and the emergence of mathematical economics 97 and Db0 , respectively, denote the price and the quantity produced of the same com­ modity in country B at the same time. Prices pa0 and pb0 are expressed in the same unit. Cournot assumes that the price of M is lower in country A, such as pa0 < pb0 . Now, let us call p1a and Da1 the price and the quantity produced of commodity M in country A after trade is allowed. The price of M and the quantity produced in country A has risen, such as p1a > pa0 Da1 > Da0 . Ca1 denotes the quantity of that commodity consumed in A and X a1 the quantity that is exported, their sum being equal to the production of M in A: Ca1 + X a1 = Da1 The price, pb1 , and the production, Db1 , of M in country B declined after lifting the import ban of M. The increase in the producers’ nominal income in country A is p1a Da1 ­ pa0 Da0 . The consumers in country A who continue to purchase commodity M now have to spend more to acquire it. They reduced their spending on other markets by an amount equal to ( p1a ­ pa0 ) Ca1 . Those who stop purchasing the commodity M spend on other goods an amount equal to pa0 ( Da0 ­ Ca1 ) . The value of exports of M from country A to country B can be expressed as p1a X a1 = p1a ( Da1 ­ Ca1 ) . This amount is taken away from domestic markets and used for buying foreign goods. In country A, the change in value of the demand for products other than M is: ­ ( p1a ­ pa0 ) Ca1 + pa0 ( Da0 ­ Ca1 ) ­ p1a ( Da1 ­ Ca1 ) = pa0 Da0 ­ p1a Da1 This is equal, in absolute value, to the increase in the income of producers of M. This is another illustration of the compensation principle. The total value of the demand for products from country A other than M remains unchanged. The rise in nominal income within country A is equal to the increase in the value of production of M. To determine the increase in real income, the fact that economic agents who continue to consume the commodity M pay a higher price for it must be considered. It is as if their income had fallen by ( p1a ­ pa0 ) Ca1 . The increase in real income is p1a Da1 ­ pa0 Da0 ­ ( p1a ­ pa0 ) Ca1 = p1a ( Da1 ­ Ca1 ) ­ pa0 ( Da0 ­ Ca1 ) = p1a X ­ pa0 ( Da0 ­ Ca1 ) In other words, the increase in real income in the exporting country is equal to the value of exports minus the reduction in domestic consumption of commodity M. It should be noted that the rise of country A’s real income means that the employ­ ment of the means of production – particularly labour – have increased. Given that the price of the good went up ( p1a > pa0 ) and considering that exports exceed the decrease in domestic consumption ( X a1 = Da1 ­ Ca1 > Da0 ­ Ca1 ), one can conclude that the exporting country profits from the establishment of free trade. Cournot uses a similar reasoning for the importing country and concludes that the fall of country B’s real income is equal to the value, at the price of the final

98 Alain Béraud and Guy Numa period, of the reduction in production in the sector producing the imported good. To understand the significance of Cournot’s analysis, it should be mentioned that his calculations rest on the fact that, in order to pay its imports of commodity M, country B will increase its exports to country A. Nevertheless, the demand for country B’s products other than M will not rise because the demand for domes­ tic products will decline, especially given the fall of resources of M’s domestic producers. Cournot (1863, 206) admitted that, in other circumstances, the importing coun­ try would not be worse off. If the imported commodity was an intermediate good – raw material or input, for instance – instead of being a good of final consumption, its fall in price would likely foster the development of a new industry in country B. International trade would thus be more profitable for the importing country than for the exporting country. Cournot also pointed out that he did not consider the damage experienced by the consumers of country A who no longer buy commodity M and thus devote a portion of their incomes to less convenient uses. Moreover, he did not consider the fact that the consumers of country B paying less for commodity M make a better use of their incomes. Cournot measured changes in social income, not changes in well-being. Cournot concluded cautiously that if we have tried to overthrow Smith’s doctrine with regard to [trade] barriers, it is only for theoretical considerations, and not in the least to become the advocate of prohibitory and restrictive laws. Moreover, it must be recognised that such questions as that of free trade are not settled either by the arguments of scientific men or even by the wisdom of statesmen. A higher power drives nations in this or that direction. . . . The skill of statesmen, then, consists in tempering the ardor of the spirit of innovation, without attempting an impos­ sible struggle against the laws of Providence. Possession of a sound theory may help this effort of resistance to abrupt changes and assist in easing the transition from one system to another. (Cournot 1838, 125) Thus, it is important to understand the motivations behind Cournot’s thesis. His scenario is specific in that it involves two countries in an asymmetrical situation: country B removes the import ban of commodity M with no compensation received in return. The difference between Cournot’s analyses and those of the classical econo­ mists would only become apparent when John Stuart Mill published his Principles of Political Economy. The Englishman thus noted that his analysis of international values rested on the assumption that The whole of the commodities which the two countries can respectively make for exportation, with the labour and capital thrown out of employment by importation, will exchange against one another. (Mill 1848, 611)

Cournot and the emergence of mathematical economics 99 Therefore, the real social income, in Cournot’s sense, does not change in Mill’s analysis. On the other hand, for Cournot, the total quantity of capital and labour employed in each country does change. These changes explain why the real social income change. Cournot and Mill’s approaches are different: Mill’s objective was to determine international values, while Cournot’s purpose was to study the effects of trade liberalisation on social income. “Economic optimism” and laissez-faire

Cournot discussed what he called “economic optimism” for the first time in 1861 in Traité de l’enchaînement des idées fondamentales dans les sciences et dans l’histoire. He developed his analysis in 1863 in Principes de la théorie des richesses, and summarised his views on the topic in 1877 in Revue sommaire des doctrines économiques. For him, optimism meant that conflicts between individual interests, when left on their own, necessarily led to the greatest common good. Though he did not mention his adversaries by name, his likely targets were Frédéric Bastiat, and more globally other French liberals usually described as optimists because, unlike English classical authors, they denied the existence of conflicts between social classes. Cournot explained that, in order to defend optimism, two problems must be addressed. Between two situ­ ations, how can we determine which one is best for the community? Once this question is solved, is it possible to demonstrate that individual decisions are optimal? Cournot then examined whether and how government intervention could be the solution. Economic optimism implies that it is always possible to determine the best outcome between various possibilities. As such, this notion is clearly differ­ ent from that of Pareto optimum that the Italian economist later developed in his Cours d’économie politique and his Manuel d’économie politique. Cournot maintained that it was not always possible to determine best possible outcomes, because the interests involved may contradict each other and there is no reason to give priority to some at the expense of others. His typical example is that of non-renewable energies, which call for a trade-off between current and future generations. To solve this type of problem, one should be able to determine “what the future of humankind consist of; whether it would be better that the center of civilisation burns longer, or that it burns faster with a more intense ardor” (Cournot 1863, 267). Similar difficulties arise when the discussion is about issues such as population growth, the merits of small-scale or large-scale farming, or the distribution of the national product. Admittedly, these issues must be addressed and solved when necessary, but without following the rigour of scientific rules. To define an optimum requires comparing baskets of goods of different propor­ tions. To undertake such a comparison, is it enough to rely on market prices and decide that the good with the highest price is the best one? Cournot believed such a position was untenable, because the vagaries of fashion, the perversion of tastes and the distribution of income affect prices, so that they do not allow to compare

100 Alain Béraud and Guy Numa the merits of different products: it is not possible to regard two products which cost the same price as economic equivalents. Consider a thousand hectares of fertile land which were farmed to produce wheat and cotton and now used to grow tobacco to the greatest satisfaction of landowners who become richer and of capitalists who lay their hands on the best of all taxable products: is it good or bad in the economic sense? (Cournot 1863, 270) Cournot (1863, 269) concluded that it was impossible to “define the optimum, either with regard to production or the distribution of wealth”. But it would be incorrect to conclude that there is no way to scientifically determine an improve­ ment or a worsening of the situation: the lack of definition of an absolute good does not preclude the definition of a relative good. If a change occurring within a part of the economic system does not affect the rest of the system, and if this change affects comparable magnitudes, it could be determined whether there is progress or not. “If change is about better matching each locality with each culture, so that the country produces more wheat and more wine, no one will hesitate to view this change as progress” (1863, 272). Frédéric Bastiat wrote: let men work, exchange, learn, band together, act, and react upon one another, since in this way, according to the providential decrees, there can result from their intelligent spontaneity only order, harmony, progress, things that are good, better, and increasingly better, and still better to infinite degree. (Bastiat 1851, 8) It was against this thesis that Cournot reacted in his discussion of economic freedom. Not only the demonstration has not been provided, but it is clear that it does not exist, given that it is easy to make assumptions or to mention real situa­ tions for which the so-called agreement does not take place. (1863, 277) Competition does not necessarily incentivise individuals to conform to the gen­ eral interest. The landowner will rule out innovations that can enhance the gross national product if they reduce his own net product. The capitalist will choose speculation over investment, if he can obtain a greater gain. As competition low­ ers prices – and in particular the price of labour – it does not only harm those who directly suffer from it, but it affects society as a whole. Simply put, competition can cause production to be greater than demand. Given that, under the regime of unlimited competition, each individual pro­ ducer cannot have any significant influence on prices and total output, none

Cournot and the emergence of mathematical economics 101 of them can ward off the unfortunate fallouts of the general influence; and if one could resist by himself, he would only add an individual . . . loss to the . . . general loss. (1863, 281) Cournot’s suggestion was that an entrepreneur who realises that the total produc­ tion of a good – which he only produces a small quantity – is excessive, is by no means encouraged to reduce his production, because such a scenario will not pre­ vent prices from falling. Not only will he face some repercussions, but he will also lose some market shares. The waste of natural resources is a typical example: the sailor kills the whale without worrying about a possible extinction of the species. In another instance, in the case of territory planning, the most profitable project is not necessarily the best possible outcome. The planning and development of a forest which would yield the highest annual wood output – measured in timbers, not thickets – and which would be more useful to society is a secular arrangement that no individual can accept: this project becomes less profitable when future returns are properly calculated based on the current interest rate. “If the interest on capital is one of the neces­ sary conditions of our economic organisation, it can certainly result in a conflict between the general interest and the individual interest” (1863, 279). Cournot concluded that public authorities should step in to regulate economic and social activity. In a closed economy, this intervention can apply to the produc­ tion and distribution of wealth. In the former case, the State directly provides or subsidises activities aimed to increase production or facilitate the circulation of products; moreover, using taxation it can stimulate or penalise some activities. It is possible to consider that, if public works are profitable, they can be built by private firms for their own benefit. A new road is directly useful to travelers, commercial carriers and people living in the vicinity of the road. It is also useful to consumers of goods whose price is reduced, and to entrepreneurs who use these goods as raw materials. The direct users will accept to pay a tariff, but the entrepre­ neur who built the road would not be able to set a cost-covering tariff that allows him to profit from the indirect benefits. Considering that users enjoy very different benefits from the road, tariffs should be differentiated, which is no small task for a private firm. The benefits generated by a new road would only appear gradually, which can make the construction of the road a losing enterprise due to the discount affecting future revenues. These various reasons can explain why, in some situa­ tions, a private firm will not be able to build public works, yet they could be useful to the community. The State should therefore intervene. Because we know that individual interests and the general interest do not coin­ cide, it is legitimate to ask “why governmental support would not be this additional force which allows . . . individual interests and the general interest to coincide?” (Cournot 1863, 294). However, in order to fund the subsidies granted to some activities, other industries must be taxed. Natural justice therefore requires that those who pay the tax must feel that their contributions to the general interest are an equitable compensation. Cournot did not believe it was possible to prove that it

102 Alain Béraud and Guy Numa was the case. He concluded that “the maxim laissez faire, assuming that it does not have the value of an axiom or a theorem (as some would like us to believe), must definitely prevail in most instances, as a motto of practical wisdom” (1863, 295). Cournot de facto adopted the same stance when he dealt with the way govern­ ment could influence income distribution. Some measures that reduce inequality, such as abolishing inheritance or establishing progressive taxation, can somehow be disincentivising. Thus, the criticism of conventional liberal positions did not lead Cournot to embrace radical policy proposals. 5. Cournot’s achievements Cournot’s contributions represented such a radical shift that it was first over­ looked by most analysts, including economists who were probably able to grasp his mathematical demonstrations. When Walras, Jevons and Marshall rediscovered Cournot’s work, it was somehow misinterpreted. The debate on his duopoly model shows that his critics – economists or mathematicians – instead of trying to under­ stand his approach, sought to uncover errors he never made. They forgot that, as Cournot conceded, he used abstractions that are not naturally evident for everyone; sometimes there is a part of dis­ cretion. [For some], what is neglected as a secondary and accessory fact, will be treated by others as a principal fact on which a theory must be built. Thus, contradictory theories will emerge, with none of them being wrong properly speaking, though they are incomplete and . . . incorrect in their application. (1877, 184) Bertrand, Edgeworth and Fellner misinterpreted Cournot’s work. In fact, they adopted assumptions that were different from Cournot’s. As Edward H. Chamberlin (1929, 91) correctly pointed out, “duopoly is not one problem, but several. The solution varies, depending upon the conditions assumed, being, with minor excep­ tions, determinate for each assumption made”. Cournot’s contributions are impressive. His work on price theory is wellknown. He introduced ground-breaking concepts that his followers would later study more closely: marginal revenue, marginal cost, the existence, unicity, and stability of an equilibrium. He demonstrated that the revenue derived from an indirect tax is less than the burden borne by taxpayers. Other aspects of his work have been overlooked, but they are equally valuable. By developing the principle of compensation of demands, he suggested a possible foundation to partial equi­ librium analysis, which differs from the framework later used by Marshall. He introduced the notion of social income – the equivalent of today’s national income – and suggested a method to measure its nominal and real variations. He applied this concept to the analysis of the communication of markets, and he showed that a country which lifts an import ban with no compensation can become worse off. However, as always, he cautiously refrained from drawing policy conclusions out of this result.

Cournot and the emergence of mathematical economics 103 References Ampère, André-Marie. 1856. Essai sur la philosophie des sciences. Paris: Malet-Bachelier.

Bastiat, Frédéric. 1851. Harmonies économiques, 2nd ed. Paris: Guillaumin.

Bertrand, Joseph. 1883. “Review of L. Walras’s Théorie de la richesse sociale and A.A.

Cournot’s Recherches sur les principes mathématiques de la théorie des richesses”. Jour­ nal des Savants, 499–508. Chamberlin, Edward H. 1929. “Duopoly: Value Where Sellers Are Few”. Quarterly Journal of Economics, 44 (1), 63–100. Cournot, Antoine-Augustin. 1838. Recherches sur les principes mathématiques de la théo­ rie des richesses. Paris: Hachette, as in vol. VIII of Œuvres Complètes de A.A. Cournot. Paris: J. Vrin, 1980. Cournot, Antoine-Augustin. 1841. Traité élémentaire de la théorie des fonctions et du calcul infinitésimal. Paris: Hachette, as in vol. VI of Œuvres Complètes de A.A. Cournot. Paris: J. Vrin, 1984. Cournot, Antoine-Augustin. 1843. Exposition de la théorie des chances et des probabilités, Paris: Hachette, as in vol. I of Œuvres Complètes de A.A. Cournot. Paris: J. Vrin, 1984. Cournot, Antoine-Augustin. 1851. Essai sur les fondements de nos connaissances et sur les caractères de la critique philosophique. Paris: Hachette, as in vol. II of Œuvres Com­ plètes de A.A. Cournot. Paris: J. Vrin, 1975. Cournot, Antoine-Augustin. 1861. Traité de l’enchaînement des idées fondamentales dans les sciences et dans l’histoire. Paris: Hachette, as in vol. III of Œuvres Complètes de A.A. Cournot. Paris: J. Vrin, 1982. Cournot, Antoine-Augustin. 1863. Principes de la théorie des richesses. Paris: Hachette, as in vol. IX of Œuvres Complètes de A.A. Cournot. Paris: J. Vrin, 1981. Cournot, Antoine-Augustin. 1873. “Lettre à Léon Walras”. In W. Jaffé (ed.), Correspon­ dance of Léon Walras and Related Papers, vol. 1. Amsterdam: North-Holland Publishing Company, 1965, pp. 331–2. Cournot, Antoine-Augustin. 1877. Revue sommaire des doctrines économiques. Paris: Hachette, as in vol. IX of Œuvres Complètes de A.A. Cournot. Paris: J. Vrin, 1982. Deschamps, Marc, and Thierry Martin (eds). 2020. Cournot, économie et philosophie. Paris: Éditions Matériologiques. Edgeworth, Francis Ysidro. 1897. “Teoria pura del monopolio”. Giornale degli Economisti, 15, 13–21, 307–20 and 405–14. English translation in F.Y. Edgeworth, Papers Relating to Political Economy, vol. I. London: Macmillan, 1925, pp. 111–42. Fellner, William. 1949. Competition among the Few. Oligopoly and Similar Market Struc­ tures. New York: A. Knopf. Fisher, Irving. 1898. “Cournot and Mathematical economics”. The Quarterly Journal of Economics, 12 (1), 119–38. Magnan de Bornier, Jean. 1992. “The ‘Cournot-Bertrand debate’: A Historical Perspective”. History of Political Economy, 24 (3), 623–56. Magnan de Bornier, Jean. 2000. “Cournot avant Nash: grandeur et limites d’un modèle uni­ taire de concurrence”. Cahiers d’économie politique, 37, 101–25. Martin, Thierry. 1996. Probabilités et critique philosophique selon Cournot. Paris: Vrin. Ménard, Claude. 1978. La formation d’une rationalité économique: A.A Cournot. Paris: Flammarion. Mill, John Stuart. 1848. The principles of political economy with some of their applications to social philosophy. Vols II and III of Collected Works of John Stuart Mill. Toronto: Uni­ versity of Toronto Press, 1965.

104 Alain Béraud and Guy Numa Numa, Guy. 2019. “Jean-Baptiste Say on Free Trade”. History of Political Economy, 51 (5), 901–34. Say, Jean-Baptiste. 1828–29. Cours complet d’économie politique pratique. Variorum edi­ tion. Vol. II of Jean-Baptiste Say, Œuvres complètes. Paris: Economica, 2010. Theocharis, Reghinos D. 1983. Early Developments in Mathematical Economics, 2nd ed. London: Macmillan, 1989.

5

Jules Dupuit and the “ingénieurs économistes” Claire Silvant

The French “ingénieurs économistes” are often considered as forming one of the most prestigious currents of thought in economics, having given birth to such basic concepts of welfare economics as marginal utility or economic surplus. In his His­ tory of economic analysis (1954), Joseph Alois Schumpeter asserts that this bril­ liant group of French engineers epitomises the notion of “school of thought” owing to the homogeneity of their curriculum and the ingenuity of their “discoveries”, contrasting with the supposed mediocrity of their contemporaries. This chapter focuses on the most prominent figure of that group: Jules Dupuit (1804–1866). By providing a path-breaking analysis of public utility and its measurement, he not only gave rise to a revolution in economic calculation for public works but also preceded in a brilliant way the later works of marginalism. Consequently, Dupuit has often been described as a pioneer in economic analysis, since the “secret ori­ gins” of modern microeconomic theories, to borrow Ekelund and Hébert’s (1999) phrase, are said to be rooted in his celebrated papers of 1844 and 1849. In his time, he was however neither a lonely trailblazer – he belonged to a group of engineers experienced in economic calculation – nor an isolated scholar in his ivory tower, since he was a member of many academic societies and was involved in numerous topical economic debates. He applied his utilitarian analysis to a wide variety of subjects, and his contributions to economic analysis went far beyond his original domain of expertise, which was public economics. This chapter starts with an overview of Dupuit’s position and role among his contemporaries. The two following sections focus on Dupuit’s most significant contributions to public economics: his pioneering method of utility measurement and its analytical and practical consequences. The last section deals with other noteworthy contributions made by Dupuit on a variety of other economic issues. 1. Jules Dupuit in his time Jules Dupuit was a peerless figure of the mid-nineteenth century with a double characteristic: his education, his carrier and his works made him a prominent figure in the lasting tradition of engineers-economists and, at the same time, his involve­ ment in the liberal institutions undoubtedly placed him at the heart of the French liberal school. DOI: 10.4324/9780429202407-6

106

Claire Silvant

A representative figure of “ingénieur économiste”

Arsène Jules Emile Juvénal Dupuit was born on 18 May 1804 in Fossano (Pied­ mont, Italy). His curriculum epitomises the typical traits of the French school of “ingénieur-économistes”: after his education in the prestigious École Royale Polytechnique and the École Royale des Ponts et Chaussées,1 he began his career as a simple engineer specialised in the management of canals and the mainte­ nance of roads in the French department of Sarthe. At the beginning of the 1830s, he devoted himself to technical studies concerning the wear of metalled roads and the friction of wagons on railways. His early works were remarked by his hierarchy and he became second-class Chief engineer of the Marne (1842) and first-class Chief engineer in Maine-et-Loire (1849),2 where he was alternately in charge of road maintenance, building and management of bridges, hydraulic studies and transport policy. After being appointed in Paris (1850) as a chief engineer of the Prefect of the department of Seine and then General Inspec­ tor (1855) and member of the Conseil général des ponts et chaussées (1855),3 Dupuit progressively became a public figure. He crossed swords with Baron Haussmann4 while leading the road services of Paris and multiplied interven­ tions outside his original field of competence. His career as an engineer slowed down with the reduction of his technical duties and his involvement in economic and social debates increased: he started a kind of “second life” and from a field engineer he became a man fully involved in the debates of his time (Simonin and Vatin 2016, 20).5 Contrarily to Cournot, Dupuit belonged to the lasting tradition of French engi­ neers, whose heritage can be traced to the soldier-engineer Sébastien Le Prestre de Vauban (1633–1707). Dupuit’s academic and professional path reflects the pecu­ liarities of the École polytechnique and the École des ponts et chaussées. These institutions trained civil engineers to the most qualitative scientific standards, giv­ ing them advanced theoretical tools that engineers applied to practical cases. There Dupuit acquired complete knowledge of mathematics, mechanics and engineering. Both schools are also often credited with having endowed French engineers with a particular ethics of “general interest” which was perpetuated within the elite Corps des Ponts et chaussées (Le Van-Lemesle 2004, Etner 1987). 1 The École des Ponts et Chaussées was (and still is) a reputed training school for State civil engineers. Dupuit graduated in 1827. 2 More bibliographical details are provided in the “Introduction générale” to Dupuit’s collected writ­ ings edited by Breton and Klotz (2009, vol. 1, 1–34) and the chapter by Chatzis (2009, 615–92). 3 He sat on the Conseil général until his death in 1866. 4 Georges Eugène Haussmann was Prefect of the Seine department between 1853 and 1870; he quar­ relled with Dupuit about the best way to supply water to Paris. Dupuit was in favour of using water from the Seine, while Haussmann argued for diverting water from distant springs. 5 Many French engineers (such as Gaspard-Gustave Coriolis, Henri Emmery de Septfontaines and Ernest Lamé-Fleury) credited him for certain advances in mechanics and engineering science, espe­ cially as regards roads, relating to the calculation of the diameter of wheels or road haulage regu­ lation, but Dupuit’s most influential achievements undeniably belong to economic theory, not to mechanics.

Jules Dupuit and the “ingénieurs économistes” 107 Apart from his technical excellence and public-oriented interests, Dupuit – like numerous other French economists – also acquired specific economic skills on the job, such as being able to balance expenditure and resources for any road or canal project, to draw up quotes or to manage a budget. In short, he learned how to think as an economist, even if he did not benefit from any specific training in econom­ ics.6 In their everyday work, Jules Dupuit and the other engineers of the Corps des ponts et chaussées had to solve practical problems closely linked to econom­ ics. They also had to make decisions complying with the highest interest of soci­ ety: the calculation of costs and benefits was systematised to settle the relevance of any public investment in communication networks. Every time civil engineers were responsible for public works, they had to follow a comprehensive approach in a broad (technical, economic, financial) perspective, much beyond the scope of engineering science: when questioning the practicability and desirability of a given bridge, canal or roads maintenance task, certain economic questions immediately arose: should the user be charged for the costs? Should this charge be equal or dif­ ferentiated? Should the flow of users and the size of their vehicles be regulated? In this way, his practical experience as an engineer à la française certainly set Dupuit on the path to economic calculation and then economic analysis (Vatin 2003). His most influential papers – “De la mesure de l’utilité des travaux publics” (1844) and “De l’influence des péages sur l’utilité des voies de communications” (1849) – were indeed published in the Annales des ponts et chaussées, a specialised journal dedicated to engineering science, and not in economic periodicals or textbooks. Due to this specific French background, Dupuit was not the only civil engi­ neer to show interest in political economy and to participate in (more or less fre­ quent) discussions with economists. Numerous engineers in their everyday work raised the same type of questions as Dupuit. Reciprocally, the Société d’économie politique included numerous engineers, from the most well-known, like Michel Chevalier (1806–1879), Ernest Lamé Fleury (1823–1903) or Roger de Fontenay (1809–1891), to more modest figures such as Benjamin Nadault de Buffon, PierreJules Mahyer or Félix-Jacques Obry de Labry. But, among them, Dupuit was the only one to show such a prominent analytical singularity. Etner (1987) remarks that these engineers were not really aware that they formed a specific group: this perspective only surfaced some decades later, when Dupuit’s contributions were recognised by prestigious heirs as seminal works for their intellectual tradition. Later on, historians of economic thought regarded Jules Dupuit as the founding father of this school of thought. Dupuit and the French liberal economists

Dupuit’s intellectual development shows a second essential feature: in the 1850s, in addition to his activities as chief engineer, he gradually succeeded in gaining an important stature within the liberal group. As an economist, Dupuit dealt with 6 The first Chair of political economy at the École des Ponts was established in 1846 and the position was held by Joseph Garnier. See Le Van-Lemesle (2004).

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the liberal legacy linked to several names he most often quoted: Adam Smith, Jean-Baptiste Say, Antoine-Louis-Claude Destutt de Tracy and Pellegrino Rossi (to whom he regularly paid tribute): they inspired his views, especially on value theory. Nevertheless, these references are perhaps a simple “rhetoric trick” (Vatin 2003) since Dupuit, like the other contemporary French engineers, was accustomed to reading political economy, especially the greatest authors. Dupuit’s involvement in economic debates increased in the second half of his career. He gradually became a full member of the most influential intellectual soci­ eties of his time, in which the liberal economists exerted a strong influence: the Paris Société d’économie politique and the Société de statistique de Paris, in which he discussed topical economic, social and technical issues with a wide variety of other members (professional economists, merchants, manufacturers, bankers, poli­ ticians, philosophers, engineers, etc.). His most important involvement was with the Société d’économie politique, one of the main channels of dissemination of liberal ideas in France.7 He started to attend its meetings in 1849 and multiplied his interventions during the following decade. In 1849 he wrote his first article for the Journal des économistes and dozens of articles were to follow on a large variety of topics. But he never published any treatise which might have gathered all his contributions together. Dupuit finally ended up belonging to the inner circle of liberal economists. In this respect, his intellectual trajectory is outstanding compared to many other engineers8 who participated in a more distant and irregular way in the debates within the Paris group. He was strongly supported by Joseph Garnier (1813–1881), a powerful liberal figure, while his main enemies were Roger de Fontenay, who opposed him on value theory, and Léon Walras (1834–1910), whose main criticism regarded his analysis of surplus.9 It must be noted that Dupuit never mentioned Cournot’s name in his writings in spite of the proximity of their investigations and the apparent similarity of their reasoning – but there is no evidence to prove that he either ignored or knew the mathematician’s works. Dupuit’s inclusion in the liberal group was, however, paradoxical. On the one hand, the liberal economists mostly ignored the originality of his developments on public economics, and Dupuit did not share his views as an engineer with his liberal contemporaries. He did his best to be accepted and acknowledged as an 7 On the institutionalisation of liberal political economy in France, see Chapter 3 of this volume. 8 A remarkable exception is the case of the polytechnicien Michel Chevalier, who intervened fre­ quently in the columns of the Journal des Économistes and in the monthly meetings of the Société d’Économie politique on a wide range of topics, from free trade to industrial policy and monetary theory. 9 To Léon Walras, Dupuit’s analysis was founded on inaccurate hypotheses and an erroneous under­ standing of utility; moreover, it led him to make questionable recommendations of public policy, for instance, price discrimination. Thus, to Walras, “Dupuit was twice guilty” (Etner 2011, 590). Walras also strongly opposed Dupuit’s analyses of tax and railway pricing policy, and denounced his liberal standpoints against socialism. The reasons for Walras’ acrimony towards Dupuit are examined by Etner (2011). In this intellectual struggle, Joseph Garnier explicitly stood up for Dupuit, rejecting a paper critical of Dupuit that Walras submitted to the Journal des Économistes.

Jules Dupuit and the “ingénieurs économistes” 109 insider, notably by removing the use of mathematics of his articles10 and by adopt­ ing the formal customs prevalent at the time in liberal institutions,11 as if there was an “other Dupuit” (Simonin and Vatin 2016) denying his own reasoning and methods as an engineer. But on the other hand, as time went by, the engineer took increasingly inflexible positions, gradually provoking hostility and rejection: he was alternately accused of going too far in “ultra-liberal” or “orthodox” positions,12 as will be shown about free trade, or of being an interventionist, as can be observed on inheritance or literary property rights. His supporters within the liberal group grew ever fewer. Consequently, when the group undertook the major project of pub­ lishing the Dictionnaire de l’économie politique (1852–53), Dupuit was side-lined from the writing on the core concepts of political economy (the articles “Utilité” and “Valeur” were assigned to Hippolyte Passy). He was merely entrusted with entries related to public economics, such as “Eau”, “Péage”, “Ponts et chaussées (corps des)”, “Routes et chemins” or “Voies de communication”. His interactions with his liberal contemporaries got worse from 1860 onwards as his positions became more and more opinionated and radical. Only Joseph Garnier remained a constant support for him, while many other Société members were increasingly irritated by his later opinions. In the twilight of his life, his rela­ tionships with the liberal economists deteriorated so badly that, in 1863, he failed to become the Vice Chairman of the Société d’économie politique – after having been in contact with Frédéric Le Play (1806–1882), he even ended up becom­ ing a member the same year of the Société internationale des études pratiques d’économie sociale (more often called Société d’économie sociale), considered as the opponent of the liberals. The strength and novelty of Dupuit’s analyses were subsequently appreci­ ated at their true value.13 If many marginalist authors credited Dupuit for major improvements in economic analysis,14 his theoretical contributions to the field were 10 There is an exception: his study about life expectancy, published in 1865, in which he proposed a formula for appraising the mean life length and analysed graphs relying on mortality statistics. 11 Some supporters of mathematical economics, such as Léon Walras or Gustave Fauveau, did not conform to this requirement and published mathematical demonstrations in the Journal des écono­ mistes. Their papers were accepted but aroused explicit disapproval in the liberal group. 12 With Vatin (2003) and Etner (1987), we consider that the matrix of liberalism (in the French sense of the word) is not relevant for appraising Dupuit’s ideas. Dupuit applied his utilitarianism to vari­ ous topics without any dogmatism, whatever its consequences regarding State intervention. In some cases, the search for maximal public utility could lead to the condemnation of any intervention (for example, on customs barriers); in other cases, such as consumption taxes or inheritance laws, the same criterion could require strong intervention by the State. 13 The status of Dupuit’s contributions surely offers an explanation to this lasting neglect and his quite recent rediscovery: Dupuit published fragmentary writings, dispersed over diverse formats, intended for various audiences. He showed no pretention to deliver a theoretical, abstract and uni­ fied body of economic theory (although he did mention for a time the preparation of a synthesis work), contrary to mathematical economics which expanded later. 14 William Stanley Jevons and Maffeo Pantaleoni plainly recognised Dupuit’s early comprehension of the theory of utility and from then on, all theoreticians of mathematical economics – except Walras – acknowledge the excellence of his analyses.

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belatedly rediscovered thanks to the 1933 reprint – by Luigi Einaudi and Mario De Bernardi – of some of his most famous works. René Roy and François Divisia strove to bring Dupuit’s thought up to date on the occasion of the centenary of his most reputed essay, “De la mesure de l’utilité des travaux publics”. But now the present readers can profitably enjoy his complete economic works edited in 2009 by Yves Breton and Gérard Klotz.15 2. Public economics (1): the measurement of utility and its consequences for economic calculation Undoubtedly the name of Jules Dupuit belongs to the hall of fame of economic the­ ory on account of his contributions to public economics. His attempt to address a practical problem – that of the refinement of utility measurement for public works – led him to develop a new approach which was deeply to influence the subsequent developments of economic analysis. Dupuit’s specific utilitarianism (Poinsot 2010), in which public utility is regarded as the cornerstone of economic analysis, structures his entire work. A path-breaking conception of the measurement of utility

Dupuit presented his conception of utility extensively in two well-known essays (1844, 1849) devoted to the measurement of utility applied to public works. The 1844 article aroused little interest among his fellow engineers, – apart from Louis Bordas (1815–1905),16 whose criticism incited Dupuit to improve his reasoning in his 1849 paper. He restated his demonstration, without graphics, in a long paper published in 1853 in the Journal des économistes, intended to reach a wider readership.17 Two remarkable contributions appear in these texts: (i) a new way of measuring utility, which results in (ii) a theory-based formulation of the demand curve. (i) Dupuit’s cutting-edge 1844 article begins with a discussion about the theory of value and an appraisal of Jean-Baptiste Say’s method regarding utility and its measurement.18 Like Say, Dupuit considered that the foundation of value is utility, in concordance with many of his contemporaries.19 Say focused on the definition of utility and considered that the utility of a commodity could be 15 Quotations used in this chapter are taken from the two-volume Œuvres économiques complètes (2009). 16 Bordas’ criticism focused on the definition of “utility” (Dupuit 1849). 17 This goal was largely missed by Dupuit, despite his efforts to give his ideas a more literary form; his contribution did not generate any discussion in the Société d’économie politique. 18 Dupuit also knew and quoted Say’s opinion of Ricardo’s conception of value (1849, 244–5). 19 There was no unanimity among French liberal economists regarding the foundation of value; some of them defended the utility theory of value in the tradition of Say (Rossi, Dupuit); Garnier proposed an integrated approach reconciling the different views on value. The most dis­ tinctive fact is nevertheless the relative theoretical disinterest of most French liberal economists for this issue.

Jules Dupuit and the “ingénieurs économistes” 111 measured through its market price. To Dupuit this assertion leads to “serious mis­ takes” (1844, 206): If society pays 500 million for the services rendered by roads, it only dem­ onstrates one thing: that their utility is of 500 million at least. But it can be a hundred times, a thousand times higher. . . . If you take this number as a measure, and not as a lower boundary of an amount that you do not exactly know, you act as a man eager to measure the height of a wall in the dark, who, seeing that he cannot reach the top by raising his arm, says: this wall is two metres high, because if it was not two metres, my hand would pass over the top. If you assert that this wall is at least two metres high, we agree. But you go further and you say that this is its measure; we do not agree anymore. When daylight comes and when you have a ladder, you will admit that this supposed two-metre wall is actually fifty metres high. (1844, 207) In the end, “J.-B. Say’s essential inaccuracy is not to have ignored utility or value in use, but to have excluded it from science, by replacing it with the value in exchange, which he considered as its measure” (1853a, 317). Dupuit preferred to follow the path opened by Pellegrino Rossi (1787–1848) on the theory of value. He introduced a distinction between “utilité absolue” (absolute utility) and “utilité relative” (relative utility): the absolute utility of an object is measured “by the max­ imum sacrifice that each consumer would be willing to make to obtain it” (Dupuit 1844, 213), while the relative utility is “the difference between the sacrifice the consumer would be willing to make to get it and the purchasing price he must pay in exchange” (1844, 214). Dupuit takes an example (which is his favourite method for being understood by the majority) to describe absolute and relative utility, by imagining that a price change occurs as the result of a new tax: For example, let us assume an object whose market price, roughly equivalent to the production costs, is 20 fr. The utility of this product, depending on the circumstances in which it is consumed, may have the following values: 30, 29, 28, 27, 26, 25, 24, 23, 22, 21, 20 fr. Its utility will therefore be, in the corresponding circumstances, 10, 9, 8, 7, 6, 5, 4, 3, 2, 1, 0. If a tax of 5 fr. is imposed, the utility of this product will decrease by 5 fr. under the same circumstances, for all consumers who used to find in it a util­ ity of 10, 9, 8, 7, 6, 5 fr. Now they will only find a utility of 5, 4, 3, 2, 1, 0. The loss is equal for all. As for those who found in this consumption a utility of only 4, 3, 2, 1, 0 fr., and who will no longer consume, because of the tax,

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they will lose precisely the utility they would have found there; their loss will therefore be different for all, and equal to 4, 3, 2, 1, 0 fr. (Dupuit 1844, 215) As a consequence, any increase in the price of a commodity ends in a decrease in relative utility. This reasoning allows Dupuit to establish a general formula: any rise or fall in the price decreases or increases utility by an amount equal to this variation for the consumers who remain in both circumstances; for those who leave or arrive, the utility lost or gained is equal to the old or new relative utility found by them in the product. (1844, 216) He also insisted on the variability of utility: the degree of utility of a commodity changes from one person to another and varies according to the quantity already possessed – thus taking up the idea, widespread since Daniel Bernoulli’s 1738 essay, that the same amount of money does not have the same utility for everyone. He particularly insisted on the decrease in marginal utility when the amount of commodity increases, since each incremental quantity satisfies new (secondary) needs. (ii) Dupuit’s 1844 paper is innovative from another viewpoint: it contains the first explicit formulation of a theory-based demand curve. Obviously, the rela­ tion between the quantity demanded and the price had been well-known for many decades, and six years before, Antoine-Augustin Cournot had already expressed his “loi du débit” (1838) from an inductive method based on an interpolation of observed economic data. But the first theory-based demand curve, called “courbe de consommation”, was produced by Dupuit in the Appendix of his 1844 article. We reproduce a simplified adaptation of Dupuit’s curve, preserving his mathemati­ cal notations (Figure 5.1). Dupuit’s curve Nnn’P represents a (global) demand curve,20 which is a decreasing function of the price P. If the price paid is 0p, then the relative utility is measured by the area of “triangle” npP, which is nothing other than the consumer’s surplus.21 Dupuit remarks that “utility decreases as the price of a commodity increases, but more and more slowly, and it increases more and more quickly as the price decreases, since it is expressed by a triangle which expands or contracts” (1844, 238). His formalisation also allows to high­ light the utility loss (“utilité perdue”) suffered by the consumer in the event of a price rise (whether resulting from a tax rise or a toll), which enables him to obtain very important results in terms of cost-benefit calculations or tax analysis (see below). 20 Note that N here represents the number of individuals-transporters using the infrastructure. We thus go from an individual consumption curve to the “aggregated” (or overall) demand: the total surplus is obtained by adding the individual surpluses. 21 Dupuit developed the essential idea of the consumer’s rent, although the term is Marshall’s.

Jules Dupuit and the “ingénieurs économistes” 113

Figure 5.1 Dupuit’s consumption curve (1844)

Dupuit gives his demand function an important property: convexity, explained by the pyramidal structure of society: the increase [in consumption] due to a lowering of the price is all the greater as the price itself is lower. . . . This property is due to the structure of society, which, when divided into categories by order of income, and superimposed starting with the poorest, presents the image of one of those pyramids of cannonballs that one sees in artillery parks, the layers of which are all the more numerous as they are lower. Thus, when the price of an object goes down, its use spreads to more and more consumers, not to mention the fact that existing consumers consume it in greater quantities, as we have explained several times. (1849, 232–3) It should be noted that Dupuit’s analysis is a geometrical one, with no transcription in algebraic form. His refinement of the definition of utility led to his being considered the inventor of the notion of surplus, which would be a genuine exemplification of a “discovery” in economics (Etner 1983).22 Economic calculation à la Dupuit

Dupuit’s new method of measuring utility has an important consequence as regards public economics, since it changed the way in which the cost-benefit ratio of public infrastructure projects is assessed. 22 Dupuit’s analysis of the surplus gave rise to numerous discussions, which are examined by Allais (1981).

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Dupuit’s conception of utility led him to change the method of economic cal­ culation in the corps of Ponts et Chaussées. During the 1830s, the engineers relied on a rule established by the senior engineer Claude-Louis Navier (1785–1836) to decide on public works issues, especially canals. This rule, published in 1830 in a paper of the Journal du génie civil, stated that the expenditure related to any public infrastructure must not be higher than the transportation cost savings.23 This method put into practice Say’s definition of utility measurement: the social benefit of digging a canal was estimated by the difference between the cost of transporting commodities using the new canal and the cost incurred with the previous means of transportation, multiplied by the quantity of commodities transported on the waterway. Dupuit disapproved of Navier’s method, considering it to be subject to the same bias as that of Say, that is to say, it would lead to a patent overestimation of the gains; it would in the end distort the social choice since the infrastructures would appear more profitable than they actually are. In his 1844 and 1849 papers, Dupuit proposed a revision of Navier’s principle. Any project of public infrastructure (especially in network industries) intended to reduce transportation costs certainly causes an increase in traffic; but the util­ ity enjoyed by the last users is inevitably lower than that of the first ones. In both papers, Dupuit establishes a monetary appraisal of utility variations, based on his demand curve presented above: rather than Navier’s inaccurate estimation, the benefit accruing to the users must be evaluated by considering their relative utili­ ties, based on the “law of consumption” and their individual willingness to pay. Dupuit criticised the previous method because it leads to “calculation errors” due to “the erroneous principle that the same product, the same service rendered, has the same utility for each consumer and in each circumstance” (1849, 270). With his methodology, the benefit yielded by any project of public infrastructure is clearly lower than the gain evaluated with Navier’s rule. Dupuit proposes a limpid numerical example which is summarised below. Let us consider, he writes, a canal without tolls on which 100 tons of goods circulate; and let us suppose that a toll of one franc per ton is established. If the traffic falls from 100 tons to 70 tons, then “it is clear that for these thirty tons, the utility does not exceed 30 francs” (1849, 264). If the toll is increased to 2 francs per ton and there is a reduction in tonnage from 70 to 50 tons, then it can be said that “for those 20 tonnes that have disappeared from circulation, the utility is 2 francs per ton and 40 francs for the 20” (1849, 264). By replicating this reasoning, Dupuit manages to draw up a table compiling the data in Table 5.1. Columns (1) and (2) represent the law of consumption, that is, “the relationship between the price of products and the amount consumed, a different law for each product” (1849, 265). Column (3) expresses the decrease in consumption as a result of successive toll increases; the fourth expresses the partial utility24 of different 23 Many reputed Ponts et chaussées engineers of that time, such as Charles-Joseph Minard (1781– 1870) and Guillaume-Emmanuel Comoy (1803–1885) recommended the use of Navier’s method. 24 The partial utility corresponds to the canal’s utility for each user category as the toll price is raised. For example, when the toll is increased from 1 fr. to 2 fr., the tonnage of goods transported is

Jules Dupuit and the “ingénieurs économistes” 115 Table 5.1 Utility of a canal at different toll levels Toll (1) Tonna ge (2) Decrease in Tonnage (3) ParTialuTiliTy (4) uTiliTy of The canal (5) 0 100 1 70 2 50 3 35 4 27 5 20 6 14 7 9 8 4 9 1 10 0 Totals . . . . . .

30 20 15 8 7 6 5 5 3 1

30 40 45 32 35 36 35 40 27 10

100

330

330 300 260 215 183 148 112 77 37 10 0

portions of the tonnage, while the last one represents the “possible utility” (1849, 265) of the canal, that is, the utility in the absence of any toll. Then, to find out the utility of an object, the following method of calculation can be used: suppose that all similar products are subject to a tax which is increased by slight amounts. With each increase in this tax, a certain quan­ tity of goods will disappear from consumption. This quantity, multiplied by the rate of the tax, will give its utility evaluated in money. By increasing the tax in this way by slight amounts, until there are no more consumers, and adding all the partial products, we will have the total utility of the object considered. (1849, 273) The opposite reasoning is also made by Dupuit, based on a reduction in transport costs as a result of infrastructure improvements or toll reductions. In both cases, Dupuit’s method evaluates the gains and losses of utility as precisely as possible, whereas Navier’s method overestimates them. Dupuit’s reassessment of the meas­ urement of public utility,25 defined as the utility of public goods, has important consequences, both in terms of economic analysis and for the determination of criteria for public decision-making. In this respect, our engineer is credited with elaborating what would become classical principles in public economics: a costbenefit analysis based on his way of calculating public utility (Etner 2011, 594). reduced by 20; therefore, for each of these 20 tons lost, the utility was 2 fr. The partial utility of this segment is therefore 40. 25 “Nations have a public wealth just as individuals have a private wealth. Ports, canals, roads, rivers, museums, prisons, hospitals, markets, public squares, promenades, temples, barracks, strongholds, etc., are public wealth. Their utility is called public utility, and all that we have just said about pri­ vate utility is applicable to it” (Dupuit 1853a, 325).

116 Claire Silvant 3. Public economics (2): monopoly, price differentiation and taxation The exposition of the demand curve by Dupuit and the identification of a surplus enjoyed by the consumer has numerous consequences for his economic analysis. We focus on two issues: price discrimination in a monopoly situation and taxa­ tion principles. At the heart of Dupuit’s reasoning, for both of these subjects, is a particular approach: he uses the hypothesis of a tax (or toll) increase as a “thought experiment” to study its effects on the demand and utility of users or consumers. Natural monopoly and differentiated pricing

In his study on tolls (1849) and later in the entry “Péage” of the Dictionnaire de l’économie politique (Dupuit 1853b), Dupuit wondered what optimal pric­ ing should be applied to communication routes. To study the effects of tolls, he used numerical examples from which he drew general principles. The calcula­ tion of utility is based on the “law of consumption” presented above, which is established on (observed or hypothetical) data about the use of infrastructures. According to him, ignorance of the law of consumption is not an obstacle to rational speculation on tolls; probability, by substituting itself for certainty, makes the problem more difficult without doubt; but it adds a new attraction to the solution. . . . [With] the uncertainty in which the producer finds himself, the solution depends both on the sagacity with which he guesses the needs of the consum­ ers, and on his imagination, which suggests to him the means of obtaining from them the greatest possible sacrifice. (1849, 281) For the measurement of the overall effects of a toll, Dupuit draws up the same kind of table as above using a different example (1849, 276, example A) – that of a bridge, but this time including the gains and losses for the producer (either the toll concessionary or the State). Table 5.2 gives important indications for measuring the effect of every toll level on the utility of the bridge. It can thus be seen that the latter is broken down into (i) a lost utility (due to the eviction of a certain number of users), and (ii) the util­ ity produced by the bridge (measured by the number of crossings that have taken place); the latter is in turn broken down into two types of gains: the gain for the “producer”, who pockets the toll revenues, and the utility for the users, measured by the difference between the service that the bridge renders to them and the price that they paid (their surplus). If we refer to Figure 5.1, we understand that it would be sufficient to apply to each individual the maximum toll he or she would be will­ ing to pay, if we wanted to maximise public utility. At this stage, the situation is different, he says, depending on whether the toll is implemented by the State or by a private company. He continues: “if the road is privately owned, it is clear that the owning company will have no other aim

Jules Dupuit and the “ingénieurs économistes” 117 Table 5.2 Gains and losses associated with a bridge toll Toll

VisiTs

0 100 1 55 2 37 3 24 4 15 5 10 6 5 7 2 8 0 Totals . . . . . .

loss of traffic due to increased tariffs

0 45 18 13 9 5 5 3 2 100

Toll reVenues

uTiliTy

lost through increased tariffs

lost by the tariff

corresponding to the tariff

0 45 36 39 36 25 30 21 16 248

0 45 81 120 156 181 211 232 248

248 203 167 128 92 67 37 16 0

0 55 74(*) 72 60 50 30 14 0

Notes: (*) Maximum of the toll

than to make as much money as possible from the tolls” (1849, 279), which in the above example would result in the choice of a toll of 3 fr. per passage, which is a monopoly price. But “if the State, on the other hand, is the owner of the bridge, it will only want to get a fixed sum from the toll, representing the interest on the construction costs, the maintenance costs and perhaps a depreciation” (280); in the previous example, this could be achieved by opting for a one-franc toll, which would provide the State with annual resources of 55,000 francs, enabling it to cover all or part of its costs. There are clearly many advantages to be gained from public management of the toll: the toll will be lower, since there are no shareholders to pay – part of the money collected by the companies “is a profit for the shareholders who earn pre­ cisely what the users lose” (1849, 280); and consequently, the total utility will be higher due to wider use of the infrastructure. Dupuit touches on the issue of natural monopoly: where a private company (free to set its own tariffs) would favour quan­ tity rationing and a higher passage price, the State could lower the toll in order to reduce utility losses: There will only be a fiscal loss; the money it [the State] has lost in this way has remained in the pockets of the existing users with all the profit they have made through the reduction of the toll; moreover, the lowering of the fare has given other profits to new users; the State is therefore in a position to make good its loss, by demanding in another form the sum which it has lost by the lowering of the fare. (1849, 281) But Dupuit’s reasoning on the pricing issue goes further: rather than think­ ing in terms of a unique toll price, thought should be given to the possibility of

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“tâtonnements” (1849, 283) to define categories of users. If a bridge is used by two types of people – entrepreneurs, on the one hand, who are prepared to spend a lot, and workers, who are prepared to spend very little and are inclined to make a detour to avoid paying – then it would be beneficial to charge a differentiated toll. The bridge owner could insert a clause in his tariff as follows: For the user in cap, smock or jacket, the toll is reduced to 0.01 fr. If he has thus succeeded in defining in a sufficient manner the workers he wants to enjoy the reduc­ tion, he will necessarily get the 3,000 francs revenue that the new crossings must yield. (1849, 285) This is where the notion of price differentiation comes in, as it was called later by Arthur Cecil Pigou and Joan Robinson. As a consequence, the price paid by the user must be disconnected from the production cost, contrary to the majority view at the Ponts et Chaussées,26 but should mirror the willingness to pay of each user: “[t]he best of all pricing systems would be the one which charges the user of any trans­ portation route a toll proportionate to the utility enjoyed by using it” (1849, 286). The practical way to enforce differential pricing consists in offering a variety of services or qualities to the users through some kind of classification. This classifi­ cation can be done externally, for example, by defining categories of goods trans­ ported by rail or by ship: an ad valorem toll could be charged, which would affect the goods more or less according to their price (thus depending on whether the transport concerns necessities or luxury goods). Classification can also be done by the users themselves, for example, by offering them several classes (for instance, several classes for train rides or theatre tickets27), so that each user, by choosing one or another level of service, expresses his ability to pay, which reflects his per­ sonal utility gain. Dupuit took up his reasoning again in later writings, applying it to other network industries; in a sense, his method of tariff determination “recalls what today is known as Ramsey’s pricing theorem” (Mosca 1998, 262), which states that a monopoly achieves second-best when it charges a tariff according to the elasticity of demand for its services. Of course, Dupuit was aware of the practical and moral difficulties of such a system: it is clear that, by multiplying the classes indefinitely, one could make travel­ lers pay for all the utility they derive from the road. but for this to happen, it is necessary to be able to distinguish between the classes that attach a different utility to their transport and to oblige them to voluntarily classify themselves 26 At the time of Dupuit, other engineers of the Ponts et Chaussées favoured the principle of “equal cost, equal tariff”. Dupuit’s analysis, which went against the tide, elicited no reaction from his fel­ low engineers at the Ponts et Chaussées, since no article in the Annales takes up his recommendation (Vatin 2003). 27 For a more detailed overview of the issues surrounding tariff discrimination, see Diemer (2000).

Jules Dupuit and the “ingénieurs économistes” 119 in one or another category of the tariff. Now, this is a great difficulty, which gives rise to the establishment of a host of measures that are generally poorly understood by the public. It would cost so little, it is said, to put a few metres of leather here and a few kilograms of horsehair there, that there is nothing but avarice in refusing them. Certainly, no one believes less than I do in the philanthropy of the companies. . . . We strike at the poor, not because we want to make them suffer personally, but to frighten the rich. . . . [It] is to keep in the first [class] those who would be willing to make this expenditure, if the second did not exist. (1849, 296–7) The practical relevance of price discrimination lies in the ability for each seller to determine which proportion of his customer base is willing to purchase at any price, as if submarkets could be identified and separated according to the willing­ ness to pay of consumers. The engineer also recognised the risks associated with the “universal unscrupulousness of users” (1849, 286). This is why in some cases, Dupuit suggested the possibility of a unique toll, mainly for reasons of simplifica­ tion, in spite of the inevitable loss of utility (Etner 1983, Mosca 1998). Marginal cost pricing would certainly generate losses, but Dupuit imagined that the State could easily compensate for them: “the State is in a position to make good its loss, by requesting in another form the sum it lost through the lowering of the tariff” (1849, 281). For this reason, Hotelling credited him with the development of mar­ ginal cost pricing for natural monopolies, probably going a little beyond Dupuit’s own intentions.28 Dupuit’s pricing analysis did not arouse the interest of his fellow engineer col­ leagues until the 1880s, particularly with regard to railroads (Vatin 2003). His method was taken up and developed by Clément Colson (1853–1939) and Émile Cheysson (1836–1910).29 Dupuit’s views on taxation

Dupuit’s developments on utility and demand also go in another direction: the anal­ ysis of the effects of taxation, with two main points: the analysis of the effect of a tax increase, and the criterion for an optimal tax system. Dupuit’s analysis, based on his decreasing and convex demand function, gave him the opportunity to develop a singular but luminous analysis of tax changes (Figure 5.2). He considers a commodity whose initial price p is subject to several successive tax increases. 28 Hotelling introduces his article as follows: In this paper we shall bring down to date the revised form of an argument due essentially to the engineer Jules Dupuit, to the effect that the optimum of the general welfare corresponds to the sale of everything at marginal cost. (1938, 242) 29 For further details on the Dupuit–Cheysson–Colson pricing principles, see Etner (1987).

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Figure 5.2 Tax and loss of utility Source: This figure is a simplified reproduction of Dupuit’s third graph in his 1844 Appendix (1844, 239)

Going from p to p’, the deadweight utility loss is measured by the triangle area nn’q. Not only do those who continue to consume the good despite the increase in its price suffer a loss – the same as that highlighted by Cournot – but some of those who previously consumed the good have to give it up, since the price they would have to pay is higher than the additional utility they would get from it: “the tax acts not only on those who pay it, but also on all those who would have consumed without the tax” (Dupuit 1844, 215). The introduction of the tax results in a net loss for consumers. In his 1838 Recherches sur les principes mathématiques de la théorie des richesses, Cournot came close to this outcome: he perceived the double effect of such a tax which weighs upon consumers at the same time as it excludes others; he, however, did not attempt to estimate the latter effect.30 Dupuit succeeded in giving this loss a monetary measure. Dupuit’s argument goes further. Doubling the tax, bringing the new price to p’’, causes a multiplication by four of the utility loss (nn’’q’), while tripling it would multiply the loss by nine (nn’’’q’’), with this conclusion: “the higher the tax, the lower the revenue it yields relatively. The lost utility increases as the square of tax” (1844, 239). Thus, the amount of the loss to consumers depends on the slope of the 30 Cournot’s reasoning is based on two arguments: firstly, such a privation would be partly counterbalanced by an increase in the demand for other commodities; secondly, he thought this loss would not be a quantifiable amount.

Jules Dupuit and the “ingénieurs économistes” 121 demand curve; and doubling the tax would only lead to a proportionally smaller increase in State resources. In the end, Dupuit’s analysis seems from this point of view to argue for the broadest possible tax base and the lowest possible tax rate. Whereas the French liberals showed a clear preference for direct taxes,31 Dupuit considered that there is an “analogy between capital tax, income tax and consump­ tion tax” (1865a, 275), which always end up hitting personal income. Dupuit held a singular position among his colleagues of the Société d’économie politique who strongly rejected consumption tax, on the grounds that it would be inequitable. To Dupuit, direct taxes also have major shortcomings: Seeking justice in the tax base is a mistake; justice is nothing but a mirage which vanishes when approached; what is to be found in the tax base as in wealth repartition is public utility. The best tax is the one that is least damag­ ing to society’s wealth. (1865a, 277) As a consequence, the best tax system is the one with the least negative impact on public utility: “each type of tax must be settled so that it causes the smallest dam­ age to society. Here is the rule that must be followed by legislators” (1859a, 580), without worrying about its consequences on wealth distribution. Tobacco taxes fit this criterion perfectly, and Dupuit considers them as the most desirable ones. To him, admittedly “tobacco tax is . . . supremely inequitable” (1859a, 578) since it affects the poorest while the rich are spared. However, he is “neither for its sup­ pression nor for its decrease. Because it is outstandingly utile” (1859a, 578) since it encourages a reduction in the use of a harmful good satisfying a dispensable and damageable need.32 Finally, tobacco tax must not be suppressed or diminished because “it is easy to levy it; taxpayers pay it without trouble; it does not harm the consumption of anything that is useful for health” (1859a, 579). Unsurprisingly, he also approved of differential tax rates, especially on tobacco,33 since the objective is to “extract from the tobacco tax all the revenue it can yield” (1859a, 582). 4. Dupuit’s political economy: between singularity and dogmatism Dupuit’s decisive contributions to public economics attracted the greatest attention from historians of economic thought. Although more than half of his works are related to further themes in political economy, this other side of his thought has long been neglected but rediscovered recently.34 The variety of issues he tackled 31 The liberals reluctantly accepted consumption tax: admittedly such a levy conflicts with natural justice, but a pragmatic historical analysis shows that it is the easiest and most painless way to increase public revenue. 32 To Dupuit, the same argument could be employed to rationalise a tax on luxury goods and frivolous consumption, if it was as easy and cheap to implement (1865a, 579). 33 Taxe rates on tobacco differ according to the quality level. 34 See Mosca (1998), Ekelund and Hébert (1999), Simonin and Vatin (2016), Etner (2011), Breton and Klotz (2006, 2009), Poinsot (2010) and Numa (2014).

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is so broad that it cannot be dealt with extensively in this chapter. This section therefore focuses on three issues which are emblematic of the ongoing debates inside the Société d’économie politique, and on which Dupuit developed a singular analysis compared with his contemporaries. Public utility and property rights

We have shown above that Dupuit’s work on utility came from his reflections as an engineer working on public infrastructure. His developments on utility were involved in an important controversy among liberal economists, which culmi­ nated around 1848, about the foundations of property rights. Politically, 1848 was marked by a revolution that led to the proclamation of the Second Republic on 27 February 1848. On the intellectual level, there was a certain effervescence of publications on property-related issues: socialists sought to criticise its merits, or called for its reform, while liberals wanted to consolidate the economic, philo­ sophical and moral foundation on which private property was based. Numerous articles and contributions appeared around 1848 on the question of property, nota­ bly about Adolphe Thiers’s work De la propriété. In a nutshell, in the liberal camp the majority, proponents of natural law, opposed the supporters of utilitarianism. For Dupuit, this controversy was an opportunity to develop singular views on property rights. His general ideas on property are set out in a two-part article published in the Journal des économistes in 1861,35 titled “Du principe de propriété. Le juste – L’utile”. He applied them to a number of particular economic topics (ownership of mines, literary and artistic property, freedom to test, compensation for slave owners). For him, it is necessary to distinguish between two principles that are traditionally opposed by lawyers: justice and utility. To Dupuit, the doctrine of natural law, defended by Adolphe Thiers, Léon Faucher, Henri Baudrillart, Frédéric Bastiat or Gustave de Molinari (among others) was based on the myth of Robinson Crusoe and the first appropriation of land, in total contradiction with historical facts: The first farmers therefore worked on fertile land, on land that the tribe had conquered, lost and reconquered a hundred times at the cost of the blood of its warriors, on land where the herds had grazed from ancient times. (1861a, 591–2) Conversely, Dupuit continues: the consent of society, a human convention, and by this very fact different according to time and place, is the true origin of the ownership of land and of all property. . . . Natural law has nothing to do with this question. (1861a, 592) 35 Some developments on this question could already be found in 1855, when Dupuit spoke on the foundations of property rights at the Société d’économie politique (Dupuit 1855).

Jules Dupuit and the “ingénieurs économistes” 123 Considering that property rights are neither natural nor sacred, he favours public utility as a criterion for the appropriation of wealth: The principle of justice, with regard to property, is a vague, uncertain prin­ ciple, variable according to the point of view which one adopts. . . . The principle of public utility is the only one that provides the solution to all the many problems of the ownership of wealth. (1861a, 638) Dupuit’s ideas were disapproved of by many liberal economists from the Société d’économie politique.36 He concretised his general views on utility in debates on multiple subjects, applying to each of them his utilitarian principle: “there is no absolute property right in society; each time public interest is involved, the law intervenes to limit, to contain individual rights” (1861a, 627). The increase in collective utility therefore justifies any infringement of individual interest (Vatin 2003). Let us give three examples. Inheritance laws. Inheritance laws were the object of an intense debate in France from the 1840s. Most French economists supported unlimited testamentary freedom, regarded as a consequence of natural rights applied to inheritance.37 Dupuit, influ­ enced by Rossi’s ideas, put forward his principle of public utility instead: “society has to regulate property rights and inheritance so that the sum of everyone’s enjoy­ ments is as high as possible” (1861a, 603). How to implement this theoretical princi­ ple? He dealt specifically with this question in 1865 in the Journal des économistes, in response to Jean-Gustave Courcelle-Seneuil’s argument in favour of unlimited testamentary freedom (1865c). He considered that arguments about morality, as well as reflections based on natural law, lead to a dead end. Indeed, how can one decide between the natural right of some (parents) to choose what will become of their fortune, and the natural right of others (children) to appropriate a part of the family wealth? Thus, he rejects both the “omnipotence of the State” (1865c, 658), which would result in the capture of bequests, and the total freedom of wills. In order to maximise social utility, Dupuit tells us, the State is justified in limiting testamentary freedom, because the latter would provoke more harmful than desirable behaviour: it would not improve the discipline of children in families but would risk deteriorat­ ing the State’s finances if the latter had to take charge of a number of disinherited children. It was therefore on the grounds of public utility that Dupuit defended the principle of the hereditary “réserve”,38 enshrined in the Civil Code of 1803. Thus, [p]roperty rights and testamentary law are conceived pursuant to the princi­ ple of public utility, and their limits also must be drawn in accordance with it. 36 The 1861 article takes the form of a fictitious dialogue between Dupuit and his opponents. He takes in particular Joseph Garnier as one of his opponents, using ideas from the fourth edition of the lat­ ter’s Traité d’économie politique published a year earlier. He also imagines himself facing a “chorus of socialists” and landlords, to whom he responds. 37 This issue is studied in detail in Silvant (2015). 38 In French law, the “réserve héréditaire” is the fraction of the deceased’s assets that must go to the family heirs.

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Laws are used for contributing to the happiness and welfare of each member of society: they are good or bad depending on whether they achieve their aim or not. (1865c, 660) Immaterial property rights. Dupuit engaged in a second debate related to the overall issue of property rights: the controversy about immaterial property (which covers literary, industrial and artistic property rights). Once again, he elaborated a singular analysis based on the principle of public utility, rejecting most ongoing ideas on the topic. Judging that the most significant concern in this respect is the insufficient dissemination of intellectual works, Dupuit argued for “communism for literary property” (1861a, 624) in which private property rights on literary works would be reduced to a minimum. Such a legal arrangement, giving everyone printing rights over off-patent works, would allow their widest diffusion and maximise public utility, as it would protect their integrity, since the heirs of authors or artists would have no specific editing rights: Today most [literary works], having fallen into the public domain, can be printed by everyone in all possible formats. . . . I say that this is a great ben­ efit. . . . Today, everyone, however poor, can have a library, provided that they only put masterpieces in it. (1861a, 623–4) Expropriation. With the same criterion of the maximisation of public utility, Dupuit reflected on the conditions under which it is desirable to proceed with an expropriation. In the entry “Eau” in the Dictionnaire de l’économie politique, he questioned the conditions under which it is legitimate to run navigation or water transport routes over private land. Any infringement of the free disposal of property is a damage which is not always repaired by the reimbursement of the material loss suffered, and recourse to this system should only be made when the public interest is strongly involved. If one could say to one’s neighbour, I need your house to enlarge my factory, and I will pay you the value of it as estimated by experts, there would no longer be any property. The right of expropriation can only be exercised in the name of public utility, and what has this character in one country may not have it in another. (1852, 555–6) Here again we find Dupuit’s utilitarianism, according to which, far from being fixed, property rights must evolve, in time and space, according to what the public interest requires, even if the property rights of one or more individuals may be challenged from time to time.

Jules Dupuit and the “ingénieurs économistes” 125 Dupuit on free trade: La liberté commerciale (1861)

1860 was an important year for trade policy in France as the Cobden–Chevalier free trade agreement39 was signed with England. It was in support of this change in the customs regime that Dupuit produced his essay titled La liberté commerciale,40 which put together three articles published in the Revue Européenne. La liberté commerciale is Dupuit’s unique political economy book. It aims at “rigorously demonstrating that free trade is always good; that it benefits all nations, regardless of the gifts and skills of residents, the abundance of resources, the soil fertility or the mineral wealth” (1861b, 415). Dupuit’s demonstration is grounded on the advantages each country can enjoy by importing commodities for a lower price than its own production would cost; this benefit is even higher when the natural endowment is poor, and commercial or food crises would be softened because of international trade. The arguments employed by Dupuit are close to the ideas of Destutt de Tracy and Adam Smith on the gains from trade, while those of Ricardo on comparative advantage were ignored, as his French contemporaries also often did.41 Reciprocally, protectionism is accused of encouraging the survival of “artifi­ cial industries” (“industries factices”) whose disappearance would be advanta­ geous for the whole of society: “it is for [all social classes] a painful, but salutary operation; an amputation has inescapably to be done; today, it only concerns one finger, in a while it will be the hand, later it will be the full arm. Thus, the best is to resign to immediately leave cut what cannot be saved” (1861b, 482). The book also contains some developments on money and the means of international circulation.42 The most distinctive feature of Dupuit’s free trade analysis has little to do with economic theory: his essay became famous due to his call for a total and instan­ taneous free trade regime, without any specific transitional regime. Admittedly, some industries would incur temporary losses or even go bankrupt, which would be caused by previous domestic protection rather than the easing of trade restric­ tions. Factory closures would necessarily lead to the migration of workers, but Dupuit adds: [w]orkers do not move around like goods, they hold on to their work by a multiplicity of ties. . . . These considerations, which are likely to facilitate a transition from one regime to another, cannot, however, be a reason for 39 This treaty significantly reduced duties on imports between both countries and granted a transitional period for endangered sectors. It was applauded by French liberals, especially by Dupuit who con­ sidered it “a great victory for political economy” (1861b, 415). 40 The articles and book were published at the end of 1860, but the latter is dated 1861 by the publisher. 41 In contrast, Dupuit used the differential rent theory (without referring to any specific author). According to Simonin (2016, 218–19), this hypothesis allowed Dupuit to show that, with interna­ tional trade, the price of cereals can fall, bringing with it a decrease in rent: a redistribution would take place, from landowners to consumers. 42 For more insights on Dupuit’s monetary economics, see Numa (2014).

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maintaining a system so contrary to public wealth, to material and intellec­ tual well-being, as that of prohibition [protectionism]. (1861b, 469–70) All these social, economic and territorial difficulties, Dupuit continued, are the price to pay for a more efficient system: there would be no reason to organise a progressive shift to free trade, in the same way as there is no reason to implement progressively an industrial innovation: “the great objection to commercial freedom is therefore the same as the one that could be made, and has been made, about machines. The answer is, therefore, the same” (1861b, 472). Most French liberal economists recognised Dupuit’s efforts to clarify and popu­ larise free trade opinions, but his inflexibility resulted in sharp criticism, including from authors who were not renowned for their social inclinations (Charles Dunoyer and Henri Baudrillart, for example). Dupuit’s Malthusian ideas on population

In the first half of the nineteenth century, Malthusian ideas were extremely wide­ spread among French liberal economists, while the Socialists and Catholics strongly rejected them (Faccarello 2020). The situation changed in the middle of the nine­ teenth century when the French economy was characterised by a significant improve­ ment in workers’ living conditions, despite the industrial, agricultural and monetary shocks that occurred during the 1850s.43 Dupuit took part in the intense debates about the theory of population, which arose inside the French liberal group from the end of the 1850s. From then on, most French economists, apart from notable exceptions,44 considered Malthus’ views as false or excessive, dogmatic and heartless. To them, the Malthusian doctrine was discredited by the recently observed improvements in workers’ economic and social standards of living, and strong population growth could even be considered as a requisite for economic progress (Breton and Klotz 2006). Dupuit successively denounced the counterproductive effects of private charity and of public or collective assistance,45 which he accused of reducing individual responsibility and of encouraging improvidence and immoral practices. He con­ cluded that: after examining all the expedients devised by governments and individuals to remedy the inconveniences of food crises, we came to the conclusion that the only effective one was the great principle: Laissez faire! Laissez passer! (1859b, 320) 43 The 1846, 1853 and 1855 crop failures gave rise to discussions in the Société d’économie politique about solutions to the food crisis. 44 Charles Dunoyer, Léonce de Lavergne, Joseph Garnier, Ambroise Clément and Pellegrino Rossi before them. 45 Public assistance could take the form of “sociétés alimentaires” (which sold food items to the poor at cost price), “ateliers de charité” employing inactive workers or direct local food aid.

Jules Dupuit and the “ingénieurs économistes” 127 He refused public intervention, arguing that any remedy would be worse than the disease. In a paper that remained unpublished at that time, he stated, in line with Malthus, that: When the population reaches this limit [given by the amount of food that the country can produce] the surplus that arises cannot remain there; it either expels itself or succumbs to misery. I say then that the country is overcrowded with population. When by any cause the country is not over­ crowded with population and the inhabitants or only a part of the inhab­ itants do not impose any restraint on themselves with regard to early marriages, the population increases rapidly and the country is promptly overcrowded. (Dupuit s.d., 283) Dupuit regarded poverty as the consequence of deficient individual behaviour. Lastly, if he condemned excessive population growth, he also considered that longer life expectancy would be a sign of economic and social progress. He examined the factors determining the average life duration of populations; since the main cause of deaths is the lack of subsistence, the average life duration would be “the true barometer of the population’s welfare” (1865b, 349). By correlating birth and fecundity rates with the average life duration of different French departments, he established a decreasing relation between life duration and birth rate. Private assistance schemes, such as mutual societies (“sociétés de secours mutuel”) that expanded in accordance with the association principle, were equally criticised by Dupuit for encouraging irresponsibility of the poor. Through them, he targeted the very principle of insurance and risk pooling: I am quite inclined to believe that mutual aid societies encourage improvi­ dence, as does all insurance in general. The man whose house is insured, for example, takes far fewer precautions against fire than the one who runs the risk of losing everything in case of a disaster. Well, the same is true for a man who is insured for medical care and cash relief in case of sickness; he is less likely to avoid occasions for endangering his health. (1862, 760) Insurance has definite disincentive effects, revealing a situation that would later be described as moral hazard: the worker who is certain of receiving sick pay will necessarily become lazy and demotivated. Finally, Dupuit’s stances regarding property rights, free trade and the issue of population reinforced his isolation inside the liberal group. His colleagues found it increasingly difficult to accept his extreme and categorical positions, which, depending on the subject, could be close to the most radical socialist ideas or, con­ versely, linked to a brutal, uncompromising liberalism.

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References Allais, Maurice. 1981. “La théorie générale des surplus”. In Economies et Sociétés, Série Mathématique et Économétrie, 8 and 9, New ed. Grenoble: Presses Universitaires de Grenoble, 1989. Breton, Yves, and Gérard Klotz. 2006. “Jules Dupuit, Société d’économie politique de Paris and the issue of population in France (1850–1866)”. The European Journal of the History of Economic Thought, 13 (3), 337–63. Breton, Yves, and Gérard Klotz (eds). 2009. “Introduction”. In Jules Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Econom­ ica, pp.1–34. Chatzis, Konstantinos. 2009. “Jules Dupuit, ingénieur des Ponts et Chaussées”. In Jules Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Economica, pp. 615–92. Diemer, Arnaud. 2000. “Jules Dupuit et la discrimination par les prix”. In Pierre Dockès et al. (eds), Les traditions économiques françaises: 1848–1939. Paris: CNRS Éditions, pp. 337–55. Dupuit, Jules. 1844. “De la mesure de l’utilité des travaux publics”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Econom­ ica, 2009, pp. 203–41. Dupuit, Jules. 1849. “De l’influence des péages sur l’utilité des voies de communication”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Economica, 2009, pp. 243–308. Dupuit, Jules. 1852. “Eau”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Economica, 2009, pp. 535–59. Dupuit, Jules. 1853a. “De l’utilité publique et de sa mesure. De l’utilité publique”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Economica, 2009, pp. 309–34. Dupuit, Jules. 1853b. “Péage”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 1. Paris: Economica, 2009, pp. 517–29. Dupuit, Jules. 1855. “Des fondements du droit de propriété”. In J. Dupuit, Œuvres économ­ iques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 563–8. Dupuit, Jules. 1859a. “Est-il juste que les citoyens qui consomment du tabac contribuent aux charges de l’Etat plus que les autres?” In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 577–80. Dupuit, Jules. 1859b. “Des crises alimentaires et les moyens employés pour y remédier”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 285–300, 301–20. Dupuit, Jules. 1861a. “Du principe de propriété. Le juste – L’utile”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Econom­ ica, 2009, pp. 583–612 and 613–40. Dupuit, Jules. 1861b. “La liberté commerciale. Son principe et ses conséquences”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 414–537. Dupuit, Jules. 1862. “Je suis assez disposé à croire que les sociétés de secours mutuels favorisent l’imprévoyance”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 759–61.

Jules Dupuit and the “ingénieurs économistes” 129 Dupuit, Jules. 1865a. “De l’impôt du revenu et du capital”. In J. Dupuit, Œuvres économ­ iques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 275–7. Dupuit, Jules. 1865b. “Des causes qui influent sur la longueur de la vie moyenne des popula­ tions”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 347–77. Dupuit, Jules. 1865c. “De la liberté de tester”. In J. Dupuit, Œuvres économiques, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Economica, 2009, pp. 657–66. Dupuit, Jules. s.d. “[Il y a aujourd’hui deux choses de la société”. In J. Dupuit, Œuvres économiques complètes, edited by Yves Breton and Gérard Klotz, vol. 2. Paris: Econom­ ica, 2009, pp. 281–4. Ekelund, Robert B., and Robert F. Hébert. 1999. Secret Origins of Modern Microeconomics: Dupuit and the Engineers. Chicago, IL: University of Chicago Press. Etner, François. 1983. “Note sur Dupuit”. Revue Économique, 34 (5), 1021–35. Etner, François. 1987. Histoire du calcul économique en France. Paris: Economica. Etner, François. 2011. “Walras avait-il raison de critiquer Dupuit?” Œconomia, 1 (4), 589–612. Faccarello, Gilbert. 2020. “ ‘Enlightened Saint Malthus’ or the ‘gloomy Protestant of dis­ mal England’? The reception of Malthus in the French language”. In Gilbert Faccarello, Masashi Izumo, and Hiromi Morishita (eds), Malthus across Nations. Cheltenham and Northampton, MA: Edward Elgar, pp. 83–173. Hotelling, Harold, 1938. “Problems of taxation and of railway and utility rates.” Econo­ metrica, 6 (3), 242–69. Le Van-Lemesle, Lucette. 2004. Le Juste ou le Riche. L’enseignement de l’économie poli­ tique 1815–1950. Paris: Comité pour l’histoire économique et financière de la France. Mosca, Manuela. 1998. “Jules Dupuit, the French ‘ingénieurs économistes’ and the Société d’économie politique”. In Gilbert Faccarello (ed.), Studies in the History of French Politi­ cal Economy. London and New York: Routledge, pp. 254–83. Numa, Guy. 2014. “The monetary economics of Jules Dupuit”. The European Journal of the History of Economic Thought, 23 (3), 453–77. Poinsot, Philippe. 2010. “The foundations of justice in Jules Dupuit’s thought”. The Euro­ pean Journal of the History of Economic Thought, 17 (4), 793–812. Schumpeter, Joseph A. 1954. History of Economic Analysis. New York and Oxon: Routledge. Silvant, Claire. 2015. “The question of inheritance in mid-nineteenth century French liberal thought”. The European Journal of the History of Economic Thought, 22 (1), 55–76. Simonin, Jean-Pascal. 2016. “Dupuit’s theory of international specialisation: Formalisation and critical evaluation”. In Jean-Pascal Simonin and François Vatin (eds), The Works of Jules Dupuit Engineer and Economist of the French XIXth Century. Saint-Denis: ÉdiGestion, pp. 218–48. Simonin, Jean-Pascal, and François Vatin (eds). 2016. The Works of Jules Dupuit Engineer and Economist of the French XIXth Century. Saint-Denis: Édi-Gestion. Vatin, François. 2003. “Jules Dupuit (1804–1866) et l’utilité publique des transports, actu­ alité d’un vieux débat”. Revue d’histoire des chemins de fer, 27, 39–56.

6

Léon Walras A trilogy of pure, applied and social economics Jean-Pierre Potier

Of the three founders of marginalism, Marie-Esprit-Léon Walras (1834–1910) was the only one to create general equilibrium theory. He owed his vocation as an economist and the foundations of his economic and social thought to his father. In this chapter, we will address successively his itinerary from Paris to Lausanne, the components of his “political and social economy” and his methodology, the con­ tent of the pure economics in the Éléments d’économie politique pure, and then his applied and social economics. The chapter concludes on Walras’s relationship with the so-called Lausanne School. 1. From Paris to Lausanne Léon Walras was the son of Auguste Walras (1801–1866), a professor of rhetoric, then a school inspector, but also an economist. In preparing his first book, De la nature de la richesse et de l’origine de la valeur (1831), in which he based the the­ ory of value of commodities on scarcity [rareté], or limitation in quantity, Auguste Walras took a strong interest in the Saint-Simonian ideas spread through public lectures and pamphlets and was a diligent reader of the newspaper Le Globe. With­ out adhering to some of their assertions, such as the long-term decline of ground rent or their criticism of capitalists’ idleness, he appears rather as a “travelling companion”, because some convergence of views appears on points such as the harmful idleness of landowners. In 1836–1837, he taught political economy at the Athénée royal in Paris. Later he published a Théorie de la richesse sociale (1849), but political prudence led him not to publish several manuscripts, particularly those related to property. After obtaining a Bachelor of Arts and Sciences degree, Léon Walras took the competitive exams for entrance to the Parisian grandes écoles. In 1853 he failed the École Polytechnique exam, but in 1854 he was admitted as an external student at the École des Mines. Unfortunately, his grades were insufficient and in 1856 he was definitely excluded from this École (see Dockès and Potier 2001). In fact, he neglected his studies in preparation for an engineering career and turned to litera­ ture, philosophy and art criticism. He even wrote a novel, Francis Sauveur, pub­ lished in 1858. In his “Notice autobiographique” (1909a, 12), Léon Walras recalled that during a night walk in the summer of 1858, his father had vigorously asserted DOI: 10.4324/9780429202407-7

Léon Walras 131 to him that two great tasks remained to do during the nineteenth century: “to com­ plete the creation of history” and, above all, “to begin to create social science”. Convinced by his father’s arguments, Léon promised him that he would continue his work and devote himself to political economy and to the scientific solution of the “social question”. Auguste Walras, for his part, made a number of manuscripts available to him, providing him with notes, sending him books and advising him closely during his early years as an economist In 1859, Léon Walras wrote his first book on economics, a refutation of PierreJoseph Proudhon’s ideas, L’Économie politique et la justice (1860). In 1860, he took part in the Congrès international de l’impôt [International Congress on Taxa­ tion] held in Lausanne (Switzerland), where his interventions were highly noted. In the following years, he gradually developed his famous tripartition of “political and social economy” – pure economics, social economics and applied economics – as well as a “general theory of society” (or the “pure” component of his “social economics”), which would be developed in public lectures published under the title Recherche de l’idéal social (1867–68). In 1862, he was employed in the sec­ retariat of the Compagnie de chemin de fer du Nord, then between 1864 and 1868 he became involved in the Parisian cooperative movement. Then, together with Léon Say, Jean-Baptiste Say’s grandson, he launched the Caisse d’escompte des associations populaires de crédit, de production et de consommation, of which he became managing director, and he ran a newspaper devoted to the promotion of cooperation: Le Travail. Organe international des intérêts de la classe laborieuse. Revue du mouvement coopératif. But these experiences ended in failure. In the autumn of 1870, thanks to the help of Jules Ferry and Louis Ruchonnet, minister of public education of the Canton de Vaud, he succeeded in a competition for the chair of political economy at the Law faculty of the Lausanne Academy (which was to obtain the status of university in 1890), where he taught until 1892. Léon Walras was the heir to a French tradition dating back to the eighteenth century. He took up a theoretical heritage from François Quesnay, Turgot and also Condorcet and the Idéologists, to follow the trend of mathematisation of social issues. He was introduced to the philosophy of Victor Cousin, Théodore Jouffroy and Étienne Vacherot, and Saint-Simonianism was also part of his education. Léon Walras’s first master was his father, from whom he largely adopted the economic terminology and the project of repurchase of land by the State as a solu­ tion to the social question. His second master was Antoine-Augustin Cournot, for demand as a continuous and decreasing function of price and the different equilib­ rium situations presented in the Recherches sur les principes mathématiques de la théorie des richesses (1838). However, in his research into the application of math­ ematics to political economy, Walras was interested in the general equilibrium, that is to say, the general interdependence between markets and the establishment of an equilibrium between prices and quantities supplied and demanded on all the markets, expressed through systems of simultaneous equations. At the Lausanne Academy, Léon Walras taught law students pure econom­ ics, applied economics and social economics – what he considered to be the three branches of economic science. This is a very illuminating example of the

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integration of research and teaching. The first edition of the Éléments d’économie politique pure was published in two parts (1874 and 1877). Walras published a sec­ ond edition in 1889. On retiring in 1892, he wanted to draw on his lectures in social and applied economics to publish Éléments d’économie sociale and Éléments d’économie politique appliquée, to form a trilogy with the Éléments d’économie politique pure. However, he gave up on this project due to fatigue, instead bring­ ing together old and new works and articles in the collections Études d’économie sociale (1896d) and Études d’économie politique appliquée (1898).1 The lessons in social and applied economics were not published until 1996, forming volume XII of the Œuvres économiques complètes of Auguste and Léon Walras. However, our author succeeded in publishing a third (1896), then a fourth edition (1900) of the Éléments d’économie politique pure. A final, posthumous edition appeared in 1926.2 2. Walras on “political and social economics” and method While awarding Walras the title of “the greatest of all economists” for the general equilibrium theory, Joseph A. Schumpeter deplored the fact that the author gave so much importance to questions of social and applied economics (1954, 827–8). He described Walras’s research on social justice, on the repurchase of land by the State, and on monetary management as “questionable philosophies”. Throughout the twentieth century, this line of interpretation was widely followed and helped to eclipse the fields of social and applied economics in the literature devoted to Walras. His work was long interpreted exclusively as the starting point of modern general equilibrium theory in the Arrow–Debreu mode. This has no longer been the case for some thirty years with the international renewal of Walrasian studies. In the years 1860–62, Léon Walras built his “political and social economy”, taking as a starting point his father’s distinction between political economy proper or the theory of social wealth, which was to have the status of a natural science, and the theory of property and the distribution of wealth, which was to have the status of a moral science based on natural law. However, as mentioned above, Wal­ ras’s “political and social economy” actually comprises three interconnected fields: pure, applied and social economics. “Pure economics” or the “theory of social wealth” is defined as “in essence, the theory of the determination of prices under a hypothetical regime of perfectly free competition” (1900, Preface to the 4th edition, 11; 1954, 40). Walras asserted that the general fact of exchange value is “natural”, from the point of view of its origins and manifestations. It does not result from the will of the traders but is imposed

1 The English translations of the Études d’économie politique appliquée and the Études d’économie sociale were carried out by Jan Van Daal (2005) and by Donald A. Walker and Jan Van Daal (2010), respectively. 2 The first English translation of the Éléments d’économie politique pure was carried out by William Jaffé on the basis of the final edition (Walras 1954); a second translation based on the 3rd edition was produced by Donald A. Walker and Jan Van Daal (Walras 2014).

Léon Walras 133 on them in the market, where “free competition” reigns, just as the law of gravity reigns. This does not mean, however, that men are deprived of any influence on this natural fact. In pure economics, as in pure mechanics, one must disregard all “fric­ tions”. Walras’s intention was to establish pure economics as an exact science that would join mechanics and astronomy within the “physico-mathematical sciences” whose criterion is “pure truth”. In the Éléments, he places it with rational mechan­ ics and astronomy. Indeed, he refers to classical mechanics, represented especially by Isaac Newton’s Mathematical Principles of Natural Philosophy (1687), JosephLouis Lagrange’s Mécanique analytique (1788) and Pierre-Simon Laplace’s Méca­ nique céleste (1799). In Walras’s view, the analogy, far from representing a mere metaphor, fulfils the function of delimiting the field of study and seeking scientific legitimacy. It is possible to speak of a theoretical analogy rather than a methodo­ logical one, with heuristic value. Applied economics is defined as the theory of the production of social wealth, or the organisation of industry in the division of labour. First, it must seek the means of “abundant” and “well-proportioned” production of social wealth. “Free com­ petition” is the “general and superior rule of agricultural, industrial, commercial and financial production of social wealth” (Cours d’économie politique appliquée, 1996, 446 and 463). The criterion of applied economics is that of “interest”, of economic efficiency. Social economics is defined as the theory of the distribution of social wealth among men in society through property and taxes. In order for the distribution of wealth to be “as equitable as possible”, the State must become the owner of all land, according to natural law. Its criterion is that of social justice. To understand the epistemological status of pure economics in Walras, one must refer to the sources of his conception of science and of his scientific method. Here he was strongly inspired by Étienne Vacherot’s La métaphysique et la science, ou Principes de métaphysique positive (1858).3 From his reading of this book, Walras developed a theory of knowledge as the basis of a theory of science in general. In the study “Socialisme et libéralisme. Lettres à M. Éd. Schérer” (1866–67, 15; 2010, 8), he distinguished between the “world of facts and reality”, the subject and field of practice and politics, and the “world of ideas and the ideal”, the subject and field of theory and science. Moreover, in the fourth lesson of Recherche de l’idéal social (1867–68, 97–101), he explains the path leading from the first to the second world. Three degrees of knowledge corresponding to three intellectual faculties (imagina­ tion, understanding [entendement] and reason [raison]) are distinguished. Finally, for Walras, science brings together all the “notions and conceptions, of man’s judg­ ments and reasonings made by the understanding and reasoning power” (1867–68, 105; 2010, 80). If reality (the relative) is imperfect, the ideal (the absolute) is “nec­ essarily perfect”. Science must therefore be conceived as the “idealization of real­ ity” and “art” (understood here as the practice of art) is the “achievement of the ideal” (1866–67, 15; 2010, 8). 3 The philosopher Étienne Vacherot, a critical disciple of Emmanuel Kant, fought materialism and spiritualism and tried to reconcile metaphysics and science in a rigorous way.

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In the Éléments, Walras states that: the mathematical method is not an experimental method; it is the rational method. . . . the physico-mathematical sciences, like the mathematical sciences properly speaking, do go beyond experience as soon as they have borrowed their type concepts from it. They abstract from these real types ideal types that they define, and on the basis of these definitions they construct a priori the whole framework of their theorems and proofs. They re-enter after into experi­ ence not to confirm but to apply their conclusions. . . . Reality does not confirm these definitions and proofs; it permits only a fruitful application of them. (1874, 3rd lesson, 53; 2014, 27–8) So the construction of pure theory does not require empirical verification. On his copy of Cournot’s Principes de la théorie des richesses (1863, 17), Walras noted: “pure economics does not wait for confirmation from experience [l’Économie poli­ tique pure n’attend pas des confirmations de l’expérience]”. The return to imperfect reality concerns only the application of the theory. Taking into account this method, the theory is an ideal, not what is usually understood by a hypothetical construc­ tion: rather it is a true blueprint [épure vraie], both mental and ideal. In Walras, as in Vacherot, the blueprint makes the world intelligible, just as geometrical figures make reality “geometrical” up to a certain point, and in this perspective, things are the “images of ideas”. But for all that, the Éléments d’économie politique pure do not correspond to a fiction, to a realistic Utopia (Jaffé 1980, 345), because the “pure economic truth” is supposed to be constructed from concrete reality. There is, in fact, a “realism” at this level. Moreover, the Éléments do not contain any “normative bias”, either in terms of interest or in terms of justice.4 A “normative bias” in terms of interest does not exist because the book does not aim to demonstrate the superior­ ity of absolutely free competition in terms of economic efficiency, nor does it advo­ cate its widespread implementation in practice. Indeed, it is in the field of applied economics that the areas in which the principle of free competition can be put into practice and the areas of exception are identified. A “normative bias” in terms of jus­ tice does not exist in the Éléments either. However, pure economic truth coincides with commutative justice in the exchange (fair equilibrium price), and is otherwise neutral with respect to commutative justice in relation to “equal social conditions”. 3. The elements of pure economics Five editions: 1874–77, 1889, 1896, 1900 and 1926

Léon Walras published four editions of the Éléments d’économie politique pure and in 1902 he prepared some corrections for the final edition that his daughter 4 This characteristic is not inconsistent with the sporadic presence in the Éléments of normative state­ ments in terms of justice, when the author notes that the rejection of slavery precludes the purchase and sale of persons as personal capital (1877, 17th lesson, 270 and 28th lesson, 435) and in terms of interest, when the author mentions the question of the “principle” of free competition (22nd lesson, 335–6).

Léon Walras 135 Aline published in 1926.5 Let us first briefly introduce the contents of the first edi­ tion of the Éléments (1874–77). The first part of the book consists of three sections. (i) Section I, “Object and divisions of political and social economy”, deals with the different definitions of political economy and the distinctions between sci­ ence, art and ethics. Then it presents the definition of social wealth as a set of rare things (i.e. useful and available in limited quantities) and focuses on the general fact of exchange value. Walras presents three models of general equilibrium successively: one pure exchange model, a second model with production, and a third with capitalisa­ tion and credit. Why begin with exchange rather than production? In his “Notes d’humeur”, the author observes in this regard: “economists generally think that since things are produced before they are traded, production must be studied before exchange. Mistake. Things are exchanged during production or before as produc­ tive services” (2000, 564). General equilibrium models with production therefore constitute extensions of pure exchange theory. (ii) Section II, “Mathematical theory of exchange”, considers the exchange of two commodities for each other and the exchange of several commodities for each other (general equilibrium). It should be noted that Walras, unlike William Stanley Jevons (Theory of Political Economy, 1871), does not focus on marginal utility theory and rejects the calculations of pleasure and pain of those whom he calls the “utilitarians” [utilitaires]. He does not focus on the individual, on his satisfaction and consumption, but on the social phe­ nomenon of the market. His theory of diminishing marginal utility is only one component of the theory of price in absolutely free competition.6 The author shows that it is possible to determine the quantities and prices of each commodity exchanged in such a way that the maximum utility achieved by each agent is compatible with those of all the other agents. Antoine-Paul Piccard, professor of industrial mechanics at the Academy of Lausanne, provided Walras, in the autumn of 1872,7 with a simple method to solve the problem of maximising utility under constraint, to express the maximum sat­ isfaction of the exchangers and to deduce the demand curves from the mar­ ginal utility curves – or curves of “intensity of the last needs satisfied”, or “scarcity”, in tribute to Auguste Walras. 5 On the content of the Éléments d’économie politique pure, see especially Baranzini 2016; Bridel with the collaboration of Baranzini 1996; Ingrao and Israel 1990; Lallement 2000; Rebeyrol 1999; Van Daal and Jolink 1993 and Walker 1996, 2006. 6 For example, in the first edition of the Éléments d’économie politique pure, in the “Theory of exchange of two commodities for each other”, this theory only appears in the 14th lesson. That led Jaffé to remark: “Instead of climbing up from marginal utility to the level of his general equilibrium system, Walras actually climbed down from that level to marginal utility” (Jaffé 1976, 313). 7 Walras to H. Brocher de la Flèchère, 19 October 1872, in Walras 1965, I, l. 211, 308–311, note 4.

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Walras acknowledged the precedence of Jevons in the theory of exchange of two commodities, and more specifically the “equation of maximum utility in exchange” (1900, Preface to the 4th edition, 5; 1954, 37). However, he considered that Jevons did not draw the “effective demand equation” from the maximisation of utility and therefore did not solve the problem of the determination of equilibrium prices. (iii) Section III, “Of numéraire and money”. In 1874, the theory of money contains an equation that anticipates Irving Fisher’s equation of exchange (1874–77, 30th lesson, “Problem of the value of money”, 468–72).8 The second part of the Éléments was not published until September 1877. It com­ prises the following three sections: section IV, “Natural theory of the production and the consumption of wealth”; section V, “Conditions and consequences of eco­ nomic progress”; and section VI, “Natural and necessary effects of the various modes of the economic organization of society”. Walras placed his theory of production, which sets out the second general equi­ librium model, in section IV. Unsatisfied with his hypothesis of “fixed coefficients of production”,9 he consulted Hermann Amstein, professor of analysis and mechan­ ics at the Academy of Lausanne on the problem of their variability. Amstein replied in January 1877.10 But Walras does not seem to have understood his colleague’s solution, which is based on the Lagrange multipliers technique, and he retained fixed coefficients of production in his models of general equilibrium with produc­ tion (on a provisional basis, he said). In section V of the Éléments, whose content is very heterogeneous, Walras started by presenting his theory of capitalisation and credit, which contains the third general equilibrium model. In this model, a market for new capital proper is introduced. However, by claiming to no longer ignore the “accessory phenom­ ena”, Walras was taking a step towards the integration of time: “we pass from the hypothesis of a market that is held continuously, to that of a market that is held periodically, we could say once per day, we will say rather once per year to take better account of the renewal of the seasons” (1877, 35th lesson, 576; 2014, 315). But we must go even further: “in order to approach closer and closer to the reality of things, we must still pass from the hypothesis of a periodic annual market to the hypothesis of a permanent market” (1877, 579; 2014, 317). He would later clarify that this was the transition from “the static to the dynamic state” (1900, 579; 1954, 380). This “permanent market” always tends to equilibrium, but never reaches it, just like a “lake agitated by the wind, where the water is incessantly seeking its level without ever reaching it” (1877, 580; 1954, 380). But it is necessary to place ourselves within the framework of a “progressive society”, that is to say a society in which capital and population increase. In this perspective, Walras introduces the 8 On the subject of money in the different editions of the Éléments, see Bridel 1997. 9 A coefficient of production is the quantity of a productive service that enters the production of one unit of a specified good. 10 Amstein to Walras, 6 January 1877, in Walras 1965, I, l. 364, 516–20.

Léon Walras 137 important distinction between “economic progress” (when the value of the coef­ ficients of production varies through the substitution of capital proper for land) and “technical progress” (when the coefficients of production change because of the withdrawal and arrival of certain productive services) (1877, 36th lesson, 585; 2014, 321). Furthermore, in this section, the author presents his criticism of the Physiocrats (lack of price theory for commodities and productive services) and the Ricardian school of rent (Ricardo and John Stuart Mill’s theories). Finally, in section VI, Walras deals with monopoly theory, but also with differ­ ent modes of taxation. One of the main reasons that led Walras to prepare a second edition of the Élé­ ments (1889) was the evolution of his monetary thought, as set out in his Théorie de la monnaie (1886), the substance of which he incorporated in the second edi­ tion. His monetary theory was now based on the concept of demand for “desired cash balances” [encaisses désirées], with the use of an equation similar to the Cambridge equation. Consumers and producers want cash. Money is considered as a circulating capital that provides consumers and producers with a “service of availability” [service d’approvisionnement] whose price is the interest rate. The order and number of sections were also reorganised in the second edition: the subject and divisions of political and social economy, exchange, production, capi­ talisation and credit, and then money. The author introduced improvements in the theories of exchange, production, capitalisation and credit. The third edition of the Éléments (1896) does not contain any major changes. However, it is marked by the withdrawal of four lessons on money (lessons 37 to 40 in the 2nd edition), which would be partly reused in the Études d’économie politique appliquée, and by the inclusion of three appendices. Appendix III, “Note on Mr Wicksteed’s refutation of the English theory of rent” (written in 1894–95), contains Walras’s first consideration of the theory of marginal factor productivity, where the variability of the coefficients of production reappears. This text was written after reading Philip Wicksteed’s book, An Essay on the Co-ordination of the Laws of Distribution (1894) and a note written by Enrico Barone, “Sopra un recento libro del Wicksteed”, and after exchanging letters with Enrico Barone and Vilfredo Pareto. The fourth edition of the Éléments (1900) reveals substantial changes. Walras now integrated desired cash balances and circulating capital equations into a fourth general equilibrium model. The introduction of cash demand in the individual util­ ity functions marks, in his view, the completion of “economic statics”. Appendix III disappears and the theory of marginal productivity is taken into account beyond the four general equilibrium models in section VII (“Conditions and consequences of economic progress”) in the 36th lesson (1900, § 326, 586–91; 1954, 384–6),11 where the author discusses the possibility in a progressive society of using less and less land and more and more personal capital and capital proper. Indeed, Walras

11 Modifications were introduced here in 1901–1902 for the final edition of the Éléments d’économie politique pure (1926).

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admitted that he preferred not to introduce marginal productivity into his “general theory of economic equilibrium, for fear that the general theory, which was already complicated enough, might then be too difficult to grasp in its entirety” (1900, 36th lesson, 588; 1954, 385). In the fourth edition of the Éléments, he further modified the sections. He duplicated his presentation of the theory of exchange: first two commodities, then several commodities. But he also revised the tâtonnement pro­ cedure in models with production in order to achieve, as in the exchange model, a virtual equilibrium. General equilibrium in a pure exchange economy: the role of the price system and tâtonnement

For the setting of market prices in the theory of exchange, Walras describes an oral tâtonnement (trial and error process), performed by crying out prices and associated quantities. This procedure of establishing market equilibrium prices by trial and error then enables economic agents to carry out their buying and selling. Indeed, in the context of this tâtonnement, no transaction can take place before the equilibrium prices are obtained. Let us summarise his argument. Walras defines the market in a very simple way: “The market is a place where commodities are exchanged” (1874, 5th lesson, 70; 2014, 42). He adds that the world can be considered “as a vast general market composed of various special markets” (1874, 5th lesson, 71; 2014, 43). The author classifies markets into three categories, from the most to the least organised. He states: The markets that are best organized in regard to competition are those in which purchases and sales are made by the crying out of prices, through the intermediation of agents such as floor traders [agents de change], commercial agents, criers, who centralize transactions in such a way that no transaction takes place without the conditions being announced and known and without the sellers being able to lower their prices and buyers to raise them. (1874, 5th lesson, 70; 2014, 42) In these organised markets, such as the Stock Exchange, the physical presence of real buyers and sellers is not necessary, because the stockbrokers or other market agents centralise the purchase and sale orders. Walras gives some examples: Stock Exchange, commercial Bourse, grain Bourse, fish markets. Walras points out that there are other markets in which competition is still work­ ing fairly well, even if it is “less well regulated”: these include fruit and vegetable markets and poultry markets (1874, 5th lesson, 70). Third, there are other markets where the organisation turns to be “a little more flawed”, where the competition is less direct: the streets of the cities where you will find bakers, butchers, grocers, etc. (1874, 5th lesson, 70–1). Walras also points out that “[i]t is similarly incontestable that competition presides in the determina­ tion of the value of doctors’ and lawyers’ consultations, of musicians’ and singers’

Léon Walras 139 recitals, etc.” (1874, 5th lesson, 71; 2014, 43). Before, he delivered a first key definition: Value in exchange left to itself occurs naturally in the market under the regime of competition. As buyers, the traders make offers to buy at higher prices; as sellers, they make offers to sell at lower prices, and their competi­ tion thus leads to a certain value in exchange that is sometimes rising, some­ times falling, sometimes stationary. (1874, 5th lesson, 70; 2014, 42). However, in order to achieve the “ideal type” of the market of “absolutely free competition”, the “real type” must first be established. To find it, Walras turns to the best-organised market, the Stock Exchange, which is in fact the “typical market [marché type]” in his eyes. He takes the example of French government bonds in the Paris Stock Exchange [Bourse de Paris], but his representation of a session à la criée of an important quotation in the nineteenth century does not aim at a rigorous description of its functioning. Walras invites us to attend a session of the Paris Stock Exchange, for the cash market, where 3% French government bonds (rente à 3 %) are negotiated. The 3% French government bond has an opening price of 60 francs. On the one hand, the stockbrokers have orders to sell “at best possible price” (whatever that may be) and “at limited price” (60 F, 59 F, 58 F, and so on), and therefore offer a certain quantity of bonds, and on the other hand, they have orders to buy “at best possible price” and “at limited price” (60 F, 61 F, 62 F, and so on), and therefore demand a certain quantity of bonds. (i) First case: if demand is higher than supply, the initiative will come from the long side of the market, from the demand. The agents who have orders to pur­ chase at best price will overbid. The purchasers limited to a price at 60 F, 61 F, etc., will gradually withdraw; sellers attracted by the rise will offer bonds dur­ ing the session. The result will be a gradual reduction in the spread between the quantities offered and demanded and the establishment of an equilibrium at a higher price than at the opening of the stock exchange. (ii) Second case: if supply is higher than demand, the initiative will come from the supply side. The agents who have orders to sell at best price will underbid. The sellers at 60 F, 59 F, etc. gradually withdraw; purchasers attracted by the fall will demand bonds during the session. The result will be a gradual reduction in the spread between the quantities offered and demanded and the establishment of an equilibrium at a lower price than at the opening of the stock exchange. When the agents do not find their counterpart in the market, “theoretically, trading must be suspended” (1889, 5th lesson, 72; 2014, 44) – this clarification, added by Walras to the 2nd edition of the Éléments, is a response to the objection formu­ lated by Joseph Bertrand in his review of Cournot’s Recherches sur les principes

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mathématiques de la théorie des richesses (1838) and Walras’s Théorie mathé­ matique de la richesse sociale (1883), published in the Journal des savants, in 1883.12 For Walras, the market tends towards the “stationary state or equilibrium of the market” (1874, 5th lesson, 71; 2014, 44) which is maintained as long as market conditions do not change. The price is known to all agents, who then carry out their transactions. The closer one gets to a perfectly organised market, the closer one gets to the true exchange value, and reasoning on a typical real market is a step towards this determination that will be only perfect in the ideal. The Walrasian model is therefore a price adjustment model. Buyers overbid [demandent à l’enchère] when demand is higher than supply, while sellers under­ bid [offrent au rabais] when supply is higher than demand. The price changes in the same direction as the sign of excess demand. Therefore, Walras does not define “free competition” in terms of market structure, nor by a list of conditions of “pure and perfect competition”, as in traditional microeconomics, but as a specific kind of behaviour by buyers and sellers confronted with a maladjustment between sup­ ply and demand. Contrary to what the commentators say, there is no question of an “auctioneer” to achieve the adjustment between supply and demand. So how did the “auctioneer” figure emerge with regard to the bidding mechanism in Walras? As Paul A. Samuelson explained to Donald A. Walker: Around 1935 Schumpeter’s lectures at Harvard used to speak of “an angel of the marketplace” or “a Walrasian angel” or “a Walrasian auctioneer”, who lowered price systematically in some proportion to the excess of supply over demand. In my 1941 MIT lectures, I continued the rhetoric (26 September, 1991). (Walker 2019, 152) In the literature devoted to the Walrasian general equilibrium, the figure of the “auctioneer” does not appear before World War II. Why did it then emerge in the 1950s? One can mention the impact of the English translation of the Éléments by William Jaffé (Walras 1954, 84, 106), in which Walras’s “crieurs” are sometimes translated as “criers” and sometimes as “auctioneers”, and the expression “à la

12 Bertrand’s main objection is as follows: the equilibrium to which the market converges depends on the order in which the transactions take place, and the agents’ endowments change during this process: the buyers’ curves lose their shape during the tâtonnement. Thus: One must note that the curves representing the orders of the purchasers at different prices must necessarily, without any change of intention, vary for each one of them throughout the market. The resulting curves, whose intersection solves the problem, are continually deformed. . . . For each price, a similar problem arises, and the curve representing the orders must be calculated and drawn anew after each transaction. Does one have to use the new curve to obtain the equilibrium price? If the answer is yes, Mr Walras’s theorem loses its geometrical character, and the final result depends on the accidental circumstances that we had the conceit to eliminate. (Bertrand 1883, 506)

Léon Walras 141 criée” is translated as “by auction” (See Walker 1996, 82 and 84–5; Translators’ introduction, in Walras 2014, XXXV–XXXVI).13 From real typical market to ideal typical market: the role of formalisation

However, one cannot conduct analytical reasoning on the real typical market (pub­ lic bonds stock exchange). It may be a synthesis, but it remains empirical, and the phenomena that are played out therefore have both the extreme complexity of concrete reality and its necessary imperfection. So the real must be analysed, that is to say, broken down into simple ideal elements; we must define them and reason on them in a deductive way by mathematical formalisation, and rebuild by succes­ sive complexifications in order to find again in the world of ideas the equivalent of the complex real type, but ideal, perfect. Thus, Walras asserts: “Let us, therefore, retrace our steps . . ., let us take any two commodities, say oats and wheat, or, designate them even more abstractly as (A) and (B)” (1874, 5th lesson, 74; 2014, 46). In a market, in the absence of money (and of numéraire), agents are willing to sell commodity (B) to obtain commodity (A). At the closing price of the previous market, an agent agrees to supply n units of (B) for m units of (A). Here Walras poses the individual “equation of exchange”: m.v a = n.v b

[1]

where v a is the exchange value of one unit of (A) and v b the exchange value of one unit of (B). In other words, the value of the quantity demanded of (A) is equal to the value of the quantity supplied of (B). Today, one would refer to budgetary constraint. Walras defines prices as the ratios of exchange values, equal to the inverse ratios of the quantities of commodities exchanged and reciprocal to each other (1874, 5th lesson, 74; 2014, 46–7): p a , price of (A) in terms of (B) is equal to va/vb = n/m and p b , price of (B) in terms of (A), is equal to vb/va = m/n, so pa = 1/pb and pb = 1/pa. It is assumed that in accordance with Equation [1], the value of (A)’s demand is equal to the value of (B)’s supply for all agents who request (A) against (B). Assum­ ing Da the total demand of (A) and Ob the total supply of (B), we have Da v a = O b v b . Vice versa, for all agents who request (B) against (A), we have D b v b = Oa v a . We can then write the demand equations: Da = O b p b et D b = Oa p a The supply equations are: Oa = D b p b et O b = Da p a 13 To our knowledge, the oldest use of the term “auctioneer” in the English-language literature about Walrasian general equilibrium appears in the handbook Microeconomic Theory by Henderson and Quandt (1958, 95 and 113). They speak about an “auctioneer” on each market. According to Clower and Howitt (1995, 31 note 1), the concept of “auctioneer” could have been invented by Richard Quandt in the United States; it was used in Northwestern University in 1959 and 1960.

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When the price increases in the market, each agent reduces his demand, which can be written as a function of the price. The demand of agent 1, d a1 , is a decreasing function f a1 of the price of the good: d a1 = f a1 ( pa ) . By aggregating, the total demand for commodity (A) in exchange for (B) is written (1874, 6th lesson, 85; 2014, 56): Da = f a1 ( p a ) + f a 2 ( p a ) + f a3 ( p a ) +¼ = Fa ( p a ) Similarly, total demand for commodity (B) in exchange for (A) is: D b = f b1 ( p b ) + f b2 ( p b ) + f b3 ( p b ) +¼ = Fb ( p b ) The corresponding total supply equations can be then written: æ 1 Oa = D b p b = Fb ( p b ) .p b = Fb ç è pa

ö 1 ÷. ø pa

æ 1 O b = Da p a = Fa ( p a ) .p a = Fa ç è pb

ö 1 ÷. ø pb

Da = O b p b and Oa = D b p b ,so

Da O b = =a Oa D b

The equilibrium between the two markets is achieved on the condition that a =1. On the other hand, if α is no longer equal to 1, the markets are in disequilibrium. For example, if a >1 we have Da > Oa on the market of (A) and we also necessar­ ily have O b > D b on the market of (B). Equilibrium prices and quantities can therefore be determined in the case of the exchange of two commodities between each other and this solution can be pre­ sented in geometrical form. The extension to three, then to m commodities, raises difficulties. In the case of a barter with m commodities, each commodity is exchanged for (m – 1) other commodities. And as there are m commodities, this gives m(m – 1) relative prices. But because of the bilateral exchanges between commodities of type A for B and B for A, it is possible to consider pairs of goods and to halve the number of relative prices to be established. We will have only m (m – 1)/2 relative prices. However, we have no guarantee as to the coherence of relative prices, and arbitrations (indi­ rect exchanges) are possible. According to Walras, in order to obtain a coherent price system (absence of arbitrations), it is necessary that “the prices of any two commodities in terms of each other are equal to the ratio of the price of each one in terms of any third commodity” (1889, 11th lesson, 161–3; 2014, 124). For example, for any three commodities, i, j, k, the condition of coherence p of the price system implies pi , j = i , k , the condition of transitivity being: p j, k pi , j . p j, k .p k ,i =1.

Léon Walras 143 To ensure the coherence of the price system, the Walrasian solution is to intro­ duce a numéraire, which in the absence of money allows relative prices to be stated in the same units. The price of the numéraire is 1 by convention. The numéraire is any good (e.g. wheat) and it serves as a unit of account. This solution reduces the number of relative prices to m – 1. We have: pi , j =

pi , a

p j, a

, pi , k =

pi , a

p k ,a

etc.

Let us consider the exchange of m commodities, A, B, C, D, . . . whose prices in numéraire are p b , p c , p d ,... if A is the numéraire good ( p a = 1 ). Because of the individual budgetary constraints, the sum of each individual’s excess demand is equal to zero, regardless of the price system. Let X, Y, Z, W, . . . denote the total excess demands of A, B, C, D, . . . (the algebraic sum of the demands of certain individuals and the supplies of others). One can then state what Walras names the “equation of the equivalence of quantities exchanged” (1874 and 1889, 12th les­ son, 176 and 179; 2014, 133): X + Yp b + Zp c + Wp d +¼ = 0 For all his models, Walras indicates: to demonstrate that commodity prices, which are quantities . . . result effec­ tively from such and such data or conditions, it is absolutely indispensable: 1° to formulate, on the bases of those data and conditions, a system of equa­ tions, rigorously equal in number to the number of unknowns, of which the quantities in question are the roots; and 2° to prove that the interlinked phe­ nomena in the real economy constitute indeed the empirical solution of this system of equations. (1877, 40th lesson, 651; 2014, 372–3) Without trying to analyse Walras’s thought in light of the developments in gen­ eral equilibrium theory from the 1930s onwards, it must be noted that the equality between the number of unknowns and the number of independent equations is no longer a sufficient condition for the existence of an equilibrium. Let us note that in Walras’s models, the different markets are successively bal­ anced, but each market once balanced will be again unbalanced by the variations of other prices. However, Walras asserts that these variations only generate “indirect effects” of weak extent which partially cancel each other out. In the end, the “direct effects” outweigh the “indirect effects”, so each new price system is closer to the equilibrium than the previous system (1889, 12th lesson, § 130, 195; 2014, 143).14 14 On the fragility of this argument, see Lallement 2000, 490–2.

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Far from being a descriptive and realistic process, the tâtonnement, realised without regard to time, is a technique of iteration allowing to reach the establish­ ment of ideal equilibrium prices. This would be confirmed with the introduction in 1900 in the Éléments d’économie politique pure of the tâtonnement on written pledges [tâtonnement sur bons] procedure. General equilibrium with production

In the different general equilibrium models with production, Walras introduces dif­ ferent capital and economic agents. There are three types of capital: landed capital, [capitaux fonciers], capital proper (or artificial capital) and personal capital (or personal faculties). Landowners dispose of the land, provide the land services (or rente) and are remunerated by the ground rent [fermage]. Capitalists dispose of capital proper, provide the capital services (or profit) and are remunerated by inter­ est. Workers, who dispose of personal capital, provide personal services (or travail) and are remunerated by wages. Among the services, we must distinguish between “consumable services” that are bought by landowners, capitalists and workers for public or private consumption (use of housing, lawyers, doctors, etc.) and “pro­ ductive services” that are bought by entrepreneurs and will be transformed into products (land fertility, labour of workers, use of machines, etc.). Only productive services are included in the general equilibrium models. Entrepreneurs own neither capital nor services, nor do they have any spe­ cific remuneration. Their role consists in buying the three productive services and bringing them together in various economic activities. They can cumulate their function with those of landowners, capitalists, workers, thus ensuring up to four roles, “in real life”, Walras said. They then credit themselves with a ground rent, interest and wage, which are their only normal remuneration. Entrepreneurs then “make their living not as entrepreneurs, but as landowners, workers, or capitalists in their own firms or in others” (1874, 18th lesson, 284; 2014, 210). In a letter to the American economist Francis Amasa Walker, Walras makes an interesting point: The definition of the entrepreneur is, in my opinion, the heart of the whole economics. I consider him exclusively as the person who buys productive services in the service market and sells products in the product market, thus making a profit [bénéfice] or a loss. (in Walras 1965, II, l. 800, 12 June 1887, 212) He adds that “if he takes part as a director” in the trans­ formation of services into products, he is a “worker” and no longer an “entrepre­ neur”. Léon Walras distinguishes here the activity of the director in charge of the management routine and the activity of the entrepreneur. Elsewhere, he gives the example of individuals forming a limited company who “become entrepreneurs” and who nominate “one or several directors to carry out the operations of the firm” (1897b, 246–7).

Léon Walras 145 In general equilibrium models with production, the entrepreneurs are at the interconnection between two markets: the market for productive services (rente, profit and travail) and the market for consumer goods (1877, 18th lesson, 281–2). The conditions of production equilibrium include the exchange equilibrium, that is to say: (1) equality between supply and effective demand of productive services and the fixing of the price for each of them; (2) equality between supply and effec­ tive demand of products and the fixing of the selling price for each of them; (3) equality between the selling price of the products and the cost price of productive services. The third condition is a characteristic of the production equilibrium, “an ideal and not a real state”, as Walras specifies. But it is the “normal state”, because in “a regime of free competition” things spontaneously tend towards this equilibrium (1877, 18th lesson, 283; 2014, 209). If the equilibrium is not achieved, we find ourselves in one of two cases: (i) if, for certain entrepreneurs, the selling price of the goods is higher than the cost price of productive services, a profit [bénéfice] appears. The branch’s entrepreneurs will then increase their production and there will be an influx of entrepreneurs to this activity, which will lead to the reduction of the initial gap. (ii) if, for certain entrepreneurs, the selling price of the goods is less than the cost price of productive services, a loss appears. The branch’s entrepreneurs will reduce their production or even leave it, leading to a reduction in the initial gap. Walras concludes that, in the state of production equilibrium, entrepreneurs make “neither profit nor loss [ni bénéfice, ni perte]”; the entrepreneur’s function ceases and then we can: make abstraction from the intervention of entrepreneurs, and consider not only the productive services as being exchanged for products and products as being exchanged for productive services, but, when all is said and done, even consider the productive services as being exchanged for each other. (1877, 18th lesson, 284, 2014, 210) So we return to J.-B. Say’s idea that production is a “great exchange”. A new conception of the tâtonnement

In the first three editions of the Éléments, the models with production operate by means of an oral tâtonnement, by crying out on the two groups of market, as in the pure exchange model. In these models, the author again asserts that the “direct effects” outweigh the “indirect effects” and thus that the system of new manufac­ tured quantities and new selling prices is closer to equilibrium than the previous one (1889, 21st lesson, 318; 2014, 236). But if the product prices are not in equi­ librium, not only must other prices be cried, but other quantities of products must also be manufactured. So, in the 2nd edition of the Éléments, Walras explains that,

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given the productive-service prices that are cried, the entrepreneurs borrow the necessary quantities of these services to produce quantities of products, and then sell them on the market. As long as the general equilibrium is not achieved, the tâtonnement must continue (1889, 20th lesson, 308; 2014, 229). Disequilibrium transactions are therefore possible during the tâtonnement with production. In the fourth edition of the Éléments, Walras introduces a tâtonnement on writ­ ten pledges [tâtonnement sur bons] in his models with production. Through this system of pledges for the supply of products and productive services, the agents achieve a virtual market equilibrium before starting the production process: After certain prices for services have been cried and certain quantities of products have been manufactured, if these prices and quantities are not the equilibrium prices and quantities, it will be necessary not only to cry new prices but also to manufacture revised quantities of products. In order to work out a rigorous tâtonnement . . . we have only to imagine, on the one hand, that entrepreneurs use pledges [bons] to represent the successive quan­ tities of products which are first determined at random and then increased or decreased according as there is an excess of selling price over the cost of pro­ duction or vice versa, until selling price and cost are equal; and, on the other hand, that landowners, workers and capitalists also use pledges to represent the successive quantities of services [which they offer] at prices first cried at random and then raised or lowered according as there is an excess of demand over offer or vice versa, until the two become equal. (1900, 20th lesson, § 207, 309; 1954, 242, revised translation) 4. Applied and social economics In his writings, Walras often recalls that, theoretically, the solution of the “social question” involves two problems to be solved. On the one hand, the production of social wealth must be “as abundant as possible”, and on the other hand, the distribution of this social wealth must be “as equitable as possible”. This approach raises the problem of the concordance (harmony) between the principle of interest or economic efficiency and that of equity or social justice. Walras developed his ideas by fighting both the representatives of the liberal school in France, grouped around the Journal des économistes, and the supporters of “empirical socialism”, which caused him to have opponents in both camps. Applied economics and the State

In the article “Une branche nouvelle de la mathématique”, published for the first time in Italian (1876), Walras distinguished between the fact, the idea and the prin­ ciple of competition, which correspond to three stages of the scientific process. (1) The “fact” refers to competition as it exists “under more or less imperfect conditions”. The author recalls here that in concrete reality, production and

Léon Walras 147 exchange operate under three factors (1876, 298): partly “under the influence of competition” (historically growing);15 partly “under the influence of legal restrictions” (historically declining), such as industry regulations, commercial tariffs, and fiscal or protective taxes; and partly under the influence of custom, which “always has considerable influence”. (2) The “idea” refers to the regime of “absolutely free competition” theorised in pure economics. (3) The “principle” refers to free competition as it should exist, with the crite­ rion of social interest. The “principle of free competition” should normally govern the production of most “services and products of private interest “, the State being here in charge of a complex task of legislation and regula­ tion. Thus, for example, in the interests of society, the State must lay down the rules for the exercise of the liberal professions. According to Walras, free competition constitutes up to a point, within certain limits, a “self-driving and self-regulating” mechanism of production of social wealth. However, in some cases, “its running needs to be aided and guided” (1886, 60; 2005, 53), which requires recourse to State intervention. In this perspective: Laissez faire should not mean do nothing, but let free competition work. Hence, where free competition cannot work, there is reason for the State to intervene to take its place. Where free competition is feasible there is reason for the State to intervene to organize it and to assure the conditions and cir­ cumstances for its working. (1880, 388; 2005, 339) What are the other areas of State intervention? The State must first provide pub­ lic services free of charge, as these activities correspond to “moral monopolies”. Why? Firstly, public services are used for the satisfaction of collective needs that are identical and equal for all individuals. Secondly, the utility of public services cannot be properly perceived “in its entirety” by individuals. Finally, there are also goods and services whose social utility exceeds the utility felt by individuals. Among public services, Walras considers the following activities: administration, justice, police, national defence, infrastructure (roads, etc.), education (including higher education) and progress of the arts (museums, etc.). In the name of social interest, the State must also take charge of certain “services and products of private interest” which have the character of “economic monopolies”. Walras refers to quarries, mines, including gold and silver mines, natural springs, gas, etc. He also refers to the post office. These activities, called “natural and neces­ sary monopolies”, are characterised by very high fixed costs, constituting a barrier to entry into the industry. Here, the working of free competition, with entrepreneurs moving towards profitable industries and away from loss-making industries, does 15 “Surely, competition is a natural tendency, as the sun is a physical fact” (1876, 303).

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not exist. The monopolist entrepreneur imposes a selling price higher than the cost price of productive services, thus achieving a “maximum profit” at the consumers’ expense; he can also engage in price discrimination between customers. Finally, the State must intervene in activities that fall into the categories of “moral monopolies” (public services) and “economic monopolies” (“natural and necessary monopolies”): this involves means of communication, canals and rail­ ways.16 Walras discusses the question in an article written in 1875, ”L’État et les chemins de fer”, but only published in 1897 with a supplementary “Note”. For him, the railroads and the trains that use them, like other means of communica­ tion, escape from competition “by nature”. Railways provide a “service of public interest”, playing an indispensable role not only in matters of national defence and justice (transport of troops and police), but also in providing transportation for participants in scientific conferences and exhibitions; they also serve as a means to distribute newspapers throughout the country. Railways also provide a “service of private interest” (regular passenger and freight transport). According to Walras, the State can choose several forms of organisation for each of these monopolies: (i) the private company may have responsibility for the monopoly with the authorisation of or under the supervision of the State; (ii) it may hold a State concession, granted after an invitation to tender, competing by offer­ ing either the lowest tariffs charged to customers or the highest rent [fermage] paid to the State (1897a, 213; 2005, 185) – in this case, the company that was granted the concession must comply with very precise State specifications indicating, for example, the maximum tariffs to be applied; (iii) the private company or compa­ nies may be “nationalized” and the monopoly is then ensured either directly by the State (through a régie), or through a public company. Walras did not seem to be in favour of the first solution, as State surveillance may be ineffective. The second solution seemed to him particularly appropriate for natural monopolies and railways. The third solution was, in his view, a possible option (1897a, 213–4; 2005, 185–6). However, later in the years 1896–1898 he considered this last solution in a more favourable light, thus proposing the repur­ chase of the six French railway companies and their management by the State itself (“Note”, 1897a, 216, 2005, 187). In all cases, the State must ensure as far as pos­ sible that the general rule of equality between the selling price and the cost price of productive services is respected in these companies: neither profit nor loss. In the years 1895–1900, Walras also discussed the theme of “collectivism of production”, based on the debates on Marx’s work that were taking place in France at the time. In “L’économique appliquée et la défense des salaires”, he asserted: All enterprises could possibly be supposed collective, but they cannot all be supposed private. Collective production is materially possible and would not, in itself, be contradictory to liberty, equality, order or justice. It is just a simple matter of social utility. (1897b, 250–1; 2005, 221) 16 On this topic, see Potier 2019, 451–62; Béraud and Numa 2019, 558–61.

Léon Walras 149 The prices of products and of productive services would be determined on the market through the overbidding and underbidding mechanism [enchère/rabais], and the State, now “single entrepreneur” [entrepreneur unique], would reduce the production in case of loss and increase it in case of profit. Although Walras does not advocate this solution in applied economics (see below), he examines with great attention this case of “collectivism” which cannot be equated with “communism” (Dockès 1996, 206–21; Potier 2019, 462–7). Thus he is led to assert that the “free competition” of firms is not, in theory, the “only way to bring the selling price down to the cost price”. Social justice and “liberal” or “scientific” socialism

In addition to the scientific approach itself, used in pure economics, which consists of starting from “real types” in order to identify “ideal types”, which will lead to the deduction of theorems, Walras used a “conciliation or synthesis method” in the field of social economics. For him, this method, which he called the “synthetic method”, is necessary when we are faced with completely opposite, a priori irrec­ oncilable doctrines. It consists in conducting a critical analysis of them in order to appreciate their strengths and weaknesses, and then “in rejecting the wrong parts of the doctrines and synthesizing the true parts” (1896a, 152; 2010, 115), especially in social ethics, with the cases of liberalism and socialism, or individualism and communism. Thus, the path of “liberal socialism”, which our author described as “scientific”, took shape. Walras wished to reconcile socialism with liberalism: on the scientific level, socialism was right against liberalism in asserting the importance of the social question and trying to find solutions, but it was wrong with regard to the authoritar­ ian political solutions proposed; on the political level, liberalism was right against socialism in defending freedom against authoritarian solutions, but it was wrong on the scientific level in underestimating the importance of the social question. Walras also wished to reconcile communism and individualism. In a note added in 1896 to the article “Méthode de conciliation ou de synthèse” written in 1868 (1896a, 151, note 1; 2010, 115), he revealed that he owed much of the idea of reconciliation to the “old Saint-Simonians” whom he had frequented in his youth. His theory of justice was based on a “general formula for the constitution of social science” that could be expressed thus: “Equality of conditions, inequality of posi­ tions”. The “personal positions” support the argument for individualism, while the “social conditions” support the argument for communism. The inequality of posi­ tions for individuals refers to distributive justice. In this field, every man must possess what nature has given to him in his own right or what he has given himself through the development of his faculties. Equality of conditions refers to commuta­ tive justice. In this regard, men must possess in common what nature has given to everyone. How can this double principle be established? To respect the inequality of positions, personal faculties, labour service and wages belong to the individual by natural law. To respect the equality of condi­ tions, land, land services and ground rent belong to humanity, that is, to all human

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generations, by natural law. All individuals must benefit equally from the resources provided by nature, for the achievement of their objectives, in the exercise of their activities. The system of private ownership of land constitutes a perpetual violation of natural law. According to Walras: The land does not belong to all the people of one generation; it belongs to humanity, that is to say, to all human generations. If society were a conven­ tional, free association, the parties contracting to establish it could decide to share the land in equal parts among themselves; however, if society is a natu­ ral and necessary fact, any alienation of land is against natural law, because it wrongs future generations. In legal terms, humanity is the owner and the present generation is the usufructuary of the land. (1896b, 189; 2010, 145) The legitimate representative of humanity can only be the State. In our time, char­ acterised by the privatisation of agricultural land, natural resources and public ser­ vices on a world scale, the Walrasian project has gained new significance in the context of reflections about the “commons”. If property rights to personal faculties and lands are attributed according to natural law, what about capital proper, profit and interest? For Walras, there is no theory of natural law for the wealth produced. Products belong to those who made or bought them. But capital proper is a product. Created by the State’s savings, it is the subject of collective ownership; created by saving from wages (or transmitted by donation and inheritance), it is the subject of individual ownership. In Walras’s view, an important connection between social economics and pure economics can be found in the 36th lesson of the Éléments d’économie politique pure. In this lesson, the author shows that in a “progressive society” (in which capital and population increase), the (present and future) ground rent [fermage] increases, the “rate of net income” (or the ratio of net interest to the capital price) “decreases markedly”, while on the other hand, “the price of land increases both in proportion to the decrease of the rate of net income and in proportion to the increase of rent” (1877, 36th lesson, 597; 2014, 328). From a critical examination of Hermann-Heinrich Gossen’s theory devel­ oped in Entwickelung der Gesetze des menschlichen Verkehrs (1854), Walras built a “Mathematical theory of the price of land and its repurchase by the State” (1881). According to Walras, the State should gradually repurchase all land at market price so as not to harm the interests of the landowners, who would be compensated in bonds issued at current interest rate. Most of the land should be rented out on long leases to entrepreneurs in agriculture, but also in industry and commerce. The highest rents for the State would be obtained through an auction system. To Walras, the farm-lease system seemed to be the most efficient, as in the case of English agriculture. In the industrial and com­ mercial stage, extensive cultivation would be replaced by intensive cultivation in large farms, whence the convergence of the principles of justice and eco­ nomic efficiency.

Léon Walras 151 For a number of years, the rent paid would not be sufficient to pay the interest on the bonds given to the former owners, and the State’s debt would grow. How­ ever, as the rent increased, amortisation of the debt would become effective. At its completion, the rent alone would allow the State to finance all public expenses and it would be possible to eliminate all taxes on income and capital. Thus, the main social question would be solved at the practical level, thanks to collective initiative. Here we should recall that for Walras, all systems of taxation are unjust, because individuals do not benefit from public spending in direct or increasing proportion to their income or capital. As members of society, everyone benefits equally from public spending. The worker, living exclusively from his labour, is taxed on wages and is prevented from saving, from becoming partially capitalist; he is reduced to the status of proletarian. Walras therefore rejects the principle of proportional or progressive taxation of income. However, until implementation of the repurchase of land, or during the transitional period, he suggested in 1896 a solution to avoid State intrusion into the sphere of private interests: “[a]n indirect tax on rent [loyer] or, rather, a direct tax income evaluated according to rent received, this would be the only tax that could pass as approximately proportional or progressive without enormous material and moral disadvantages” (1896c, 410; 2010, 336). As a tran­ sitional measure, Walras always accepted the principle of a tax on ground rent [fermage], as it could be interpreted as de facto State co-ownership of the land. Léon Walras’s plan was criticised by several economists, especially Paul LeroyBeaulieu, Charles Gide and Vilfredo Pareto. Paul Leroy-Beaulieu denounced the Walrasian reconciliations between social­ ism and liberalism and between individualism and communism. In Le Collecti­ visme, he exclaimed: Who will deliver us from the conciliators, those floating and empty spirits who believe that twilight reconciles night and day? This mania for wanting to unite and dissolve opposites is the most characteristic sign of intellectual debility. (Leroy-Beaulieu 1884, VII) Gide and Pareto criticised the programme of repurchase of land by the State. In 1883, Gide recommended that this experiment should not be carried out in France, with its “army of agricultural landowners”, suggesting that it might rather be attempted in England, in “new countries” (USA, Canada, Australia, South America, etc.) and colonies (Algeria) with grants of new land (Gide 1883, 95–7). And in a review of Études d’économie sociale, he deplored the prospect of the abolition of taxes. Firstly, on a moral level, because it is detrimental to social solidarity, since tax is for many people the “only act of altruism” they perform during their lives. Secondly, because in all countries, public expenditure is much higher than the income that the State could obtain from rent “even if the expropriation is carried out without compensation, all the more so if it is done by paying the full price” (Gide 1897, 306). In Les systèmes socialistes, Pareto argued that there is no way to be certain that the price of land will rise for a long

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time. And in the event that the State succeeds in becoming a landowner, it will need to withstand collective pressure from all the tenants: “One cannot imagine how a government existing on the basis of universal suffrage could resist a vote by all of the farmers and tenants asking for a general reduction of rent” (Pareto 1903, II, 311). Abolition of taxes is a utopian project, as the needs of the State are “infinite, the more they are satisfied, the more there are to be satisfied” (1903, II, 311–2). In the second half of the 1890s, Walras spoke about the rational society in the future as he imagined it: in such a society, we should imagine the mass of capital that does not belong to the State as being, in the hands of workers, in small fractions, in the form of shares and bonds of various firms, of bonds of cooperative enterprises, which adds to present well-being, assuring security for tomorrow, preparing for future retirement; all this thanks to private initiative, as it should be, with­ out any interference from the State except, if need be, to give disinterested and benevolent support. (1896b, 205; 2010, 157) Thus, he describes market production carried out by small or medium-sized firms of various legal forms. In this “rational society”, “wealth would be both the conse­ quence and the reward for labour and savings, poverty would be the consequence and the punishment for laziness and dissipation” (1896c, 404; 2010, 331). The inequality of individuals’ positions would be reduced to a minimum (no large for­ tunes), the class struggle would disappear and the State as landowner would achieve the equality of conditions and take charge of moral and natural monopolies. Walras asserted that, at a push, he “would not at all dislike declaring [himself] a collectivist, both in matters of the production and in matters of the distribution of wealth”. However, since the term “collectivism” had Marxist connotations, he pre­ ferred his formula of “synthetic socialism or synthetism” (1896b, 206; 2010, 158), or that of “liberal socialism”. From the years 1863 to 1867, he claimed to adhere to “scientific and liberal socialism” (1866–67, 22; 1867–68, 147 and 172; 2010, 14, 110, 130). On the day of his jubilee at the Lausanne University, he declared that he had finally succeeded in building a “scientific, liberal and humanitarian socialism” (1909b, 511). 5. Walras and the Lausanne School The term “Lausanne School” was first used by the mathematician Hermann Laurent, in 1900, in a lecture at the Institut des actuaires français, and then in his Petit traité d’économie politique mathématique, rédigé conformément aux préceptes de l’École de Lausanne (Laurent 1902). The term refers to the economists who developed general equilibrium theory and who succeeded one another in the chair of political economy in the Faculty of Law of Lausanne University. This line of authors includes Walras, Pareto and Pasquale Boninsegni. While Walras is

Léon Walras 153 considered the founder of the school and Pareto a co-founder, the contribution of Boninsegni (1869–1939) was very limited and remained focused on the teaching of Pareto’s theories. After World War II, a “New Lausanne School” was formed around Firmin Oulès (1904–1992), who succeeded Boninsegni at the chair, and Marcel Boson (1910–1988). This new school highlighted Walras’s contributions in applied and social economics to the point of considering him as the “founder of scientific economic policy”.17 In fact, the concept of Lausanne School is very reductive, because it ignores the differences that existed from the beginning between Walras and Pareto about the conception of science in general and the methodology of economic science in particular: The simplifying myth of a “Lausanne School” built by generations of econ­ omists and historians of economic thought hardly holds water. Even when one focuses exclusively on general equilibrium theory as a simple math­ ematical instrument for analysing the determination of a vector of equi­ librium prices, the methodological differences between Walras and Pareto appear immediately. (Bridel and Mornati 2009, 870)18 Fritz Wilfrid (Vilfredo) Pareto (1848–1923)19 was born in Paris to a French mother and an Italian father exiled to France, a disciple of Giuseppe Mazzini. After his family returned to Italy in 1854, he studied mathematics and physics at the Uni­ versity of Turin, then obtained an engineering degree in 1870. After working as an engineer and entrepreneur in industry in Tuscany, he turned to economics, taking advantage of his reading of Principii di economia pura by Maffeo Pantaleoni and then Éléments d’économie politique pure by Walras. In 1893, he succeeded Walras in the chair at Lausanne University. In his obituary, “L’œuvre scientifique de Léon Walras”, published in the Gazette de Lausanne, he noted: The main merit of this scientist, his very great merit, was to study, first, a general case of economic equilibrium. In this way, he has opened up a path to economic science that can only be compared to that which Lagrange has opened up to rational mechanics. (1910, 1) To help him in the preparation of his first lectures, Walras had provided Pareto with materials from his own course in pure economics, but Pareto would not use them (Bridel 1996, 730 ff). While they contributed to the diffusion of general equilibrium theory, Pareto’s lectures, which led to the publication in two volumes (1896–1897) of the Cours d’économie politique, diverged in form and content from 17 See Boson 1951.

18 See also Baranzini and Allisson 2016.

19 For an interesting presentation of Pareto, see for example McLure 2016.

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the Walrasian perspective.20 Based on his lectures, Pareto then published in French Les systèmes socialistes (Pareto 1902–1903) and the Manuel d’économie politique (Pareto 1909), a revised and expanded edition of the Manuale di economia politica (1906). We will limit ourselves here to some information on the content of the Cours d’économie politique. According to Pareto, political economy is a “natural science based exclusively on facts”, like psychology, physiology, physics or chemistry. It examines the phenomena resulting from the actions of men to procure things in order to sat­ isfy their needs and “does not have to give precepts” to solve practical questions (1896–97, I, iii and 2). Thus, in pure economics, the theory of exchange “gives no precepts either for or against free competition” (1896–97, I, 28). In contrast to Walras, Pareto asserted that: “pure economics is therefore an experimental science, because it draws its consequences exclusively from facts, and it is not based on any metaphysical principle” (1896–97, II, 40, note 1). According to Pareto, political economy must seek the regularities of phenomena, their laws, based initially on experience and observation. These laws are only hypotheses, abstractions derived from verifiable facts. Influenced by positivism, Pareto explained that: We have always asked statistics, observation, and history to demonstrate our proposals or to verify the inductions they have allowed us to make. In my opin­ ion, there is only one criterion of truth: experience. Any theory which explains the known facts and allows new facts to be predicted may be admitted, at least temporarily; any theory that is contrary to facts must be ruthlessly rejected. (Cours d’économie politique, I, iv-v) Léon Walras did not share this perspective. In his “Notes d’humeur”, he reacted to Pareto’s approach as follows: Certainly reasoning and science cannot stand in contradiction to experience and facts. But who knows the facts? Science tells truths that experience cannot confirm. . . . It is self-sufficient and can rectify the facts. (Newton’s system was at odds with the facts until Uranus’s disturbances were explained. Who com­ pleted the facts by finding the planet Neptune? Reasoning, not experience). (2000, 567) Although he was a better mathematician than Walras, Pareto did not give absolute priority to the mathematical method. Mathematics are necessary “to have an exact and truly complete conception of the relations that the economic equilibrium estab­ lishes between phenomena” (1896–97, II, 8), but they must be used with great cau­ tion, especially when the chain of deductions grows long. In the Cours d’économie politique, the mathematical apparatus is reduced to a minimum and is often placed in 20 See Baranzini and Bridel 1997; Baranzini and Bridel 2005; Bridel and Mornati 2009; Marchionatti 1999; Mornati 1999, 2017, 75–83. Walras did not wish to write a review of the first volume of the Cours d’économie politique for the Gazette de Lausanne.

Léon Walras 155 the footnotes, the author wishing the book to be read “by anyone with only a general culture” (1896–97, I, iii). Reasoning by analogy may be useful to clarify the meaning of a theoretical proposition, but not in demonstrating that proposition. This is the case with analogies between the equilibrium of an economic system and the equilibrium of a mechanical system (1896–97, II, 11–12). But for the study of the evolution of societies, of social organisms, biological analogies are more useful (1896–97, II, 27). Having to take into consideration a large number of phenomena, the human mind must proceed from the simple to the complex. Here, Pareto used the theory of “successive approximations”, borrowed from the physical and natural sciences. The first approximation gives us the general form of a phenomenon; so, for exam­ ple, the earth is first considered as a sphere by astronomy. By detailing the globe’s surface, geography allows us to establish a second approximation. Topology will then provide a third more accurate approximation (1896–97, I, 16). In the case of “economic phenomena”, the first approximation is provided by pure economics and the theory of general equilibrium in absolutely free competition. Here we con­ sider the most fundamental general facts, the “manifestations of ophelimity”21 in their abstract form (tastes and the obstacles encountered in obtaining the goods that will satisfy these tastes). Pure economics is the domain of the ideal man, the “homo œconomicus”, who has only one goal: to obtain the “maximum of ophelimity”. The analysis of agents’ rational behaviour is the starting point to study the structure of markets: an approach contrary to that of Walras. In the Cours d’économie politique, the part devoted to the principles of pure economics is relatively short (74 pages). It summarises the theories of exchange, production and capitalisation, in a static perspective. But extensions were made in the book, such as the introduction of monopoly into the general equilibrium (vol. I), or a consideration of the variability of coefficients of production and the estab­ lishment of the conditions of welfare (vol. II). According to the author, the general equilibrium is never achieved, because as we get closer to it, “it changes continu­ ously, because the technical and economic conditions of production change. The real state is therefore that of continual oscillations around a central equilibrium point, which itself moves” (1896–97, I, 47). Pareto did not attach much impor­ tance to tâtonnement (marchandage in his own terminology), which he saw as an irreversible process over time. In his view, the stability of the general equilibrium is a purely theoretical problem, unrelated to any mechanism that could actually occur in the markets. Referring to the debate between Walras and Francis Ysidro Edgeworth,22 he noted: Mr Walras pointed out that the marchandage established with free compe­ tition is the way to solve the equations of the exchange by trial and error. 21 The word “useful [utile]” being loaded with moral connotations, Pareto created the neologism ophelimity. 22 In his review of the 2nd edition of the Éléments (“The Mathematical Theory of Political Economy”, Nature, 5 Sept. 1889), F. Y. Edgeworth asserted that the process of tâtonnement was not “a very good idea”. According to him,

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Mr Edgeworth objected that it was only one means. He is right; but the means indicated by Mr Walras is indeed the one that represents the main part of the economic phenomenon. (1896–97, I, 24–5) In Pareto’s view, theoretically, the stability of the general equilibrium would require the implementation of a system of dynamic equations. However, he did not wish to engage on this path, and he observed: It should be demonstrated that these various adjustments bring us ever closer to the equilibrium. . . . We will not develop this demonstration, which would be useless to people who do not know mathematics, and which will be found easily by people who know the general theory of equations. (1896–97, I, 61, note 2) In fact, Pareto considered that, unlike physicists with d’Alembert’s principle, economists could still do no more than glimpse the dynamic state of a system. He recognised that “we are obliged to substitute the consideration of dynamic equilib­ rium with the consideration of a series of static equilibria”, and then presented the following metaphor: suppose a man on a sledge slides down a slope. Another man walks down the same slope, stopping every step. The two men start at the same time from the top, constantly travelling in company, and arrive at the same time at the bottom of the slope. . . . But the movement of the man on the sledge is a con­ tinuous movement, its study constitutes a problem of dynamics. The move­ ment of the man descending by foot represents a succession of equilibrium as Jevons points out, the equations of exchange are of a statical, not a dynamical, character. They define a position of equilibrium, but they afford no information as to the path by which that point is reached. Prof. Walras’s laboured lessons indicate a way, not the way, of descent to equilibrium. (1889, reprinted in P. Bridel with the collaboration of Baranzini 1996, 268) Very dissatisfied, Walras asked Ladislaus von Bortkiewicz to write a review of the Éléments refuting Edgeworth’s arguments, which appeared in January-February 1890 in the Revue d’économie poli­ tique. Bortkiewicz defended the static procedure of solving equilibrium equations and the “realism” of the Walrasian tâtonnement. Edgeworth then reacted in the Revue d’économie politique (Janu­ ary 1891) by asserting that “the game of all this haggling by which the market price is determined, the direction that the system follows in order to arrive at the equilibrium position, does not enter the sphere of science” (1891, reprinted in P. Bridel with the collaboration of Baranzini 1996, 364). Mutual misunderstanding arose from the fact that Edgeworth was reasoning on the basis of his own theory exposed in Mathematical Psychics (1881). He began with the formation of a contract between two traders, and in such an operation there is not a single solution to the determination of the quantities exchanged, but a series of final settlements located along the “contract-curve”, the precise exchange rate being the result of the traders’ bargaining power. When the number of traders increases, the possibility of contracting makes the solution more or less indeterminate and finally with an infinite number of agents, the “contract with perfect competition is perfectly determinate” (Edgeworth 1881, 20). Walras’ theory corresponds to this particular case.

Léon Walras 157 positions. . . . It is precisely a similar sequence of equilibrium positions that we can study in political economy. (1896–97, II, 10) In fact, Pareto did not return to this issue in his Manuel d’économie politique. The second approximation is provided by applied economics, which allows us to get closer to the complexity of reality; this field does not correspond to the one envisaged by Walras. Here we study beings closer to the “real man” (1896–97, I, § 592, 12, note 1). Historical facts and available statistical data are mobilised, and political economy can enrich itself with the contribution of other social sciences (history, anthropology, psychology, etc.). Within this field, Pareto presented his famous “curve of wealth distribution”. In the Cours, applied economics takes up 346 pages in the first volume and the main part of the second, in which we find developments that are already part of general sociology. Léon Walras was very critical of Pareto’s approach in terms of successive approximations. In his “Notes d’humeur”, he asserted: M. P[areto] believes that the goal of science is to get closer and closer to reality by successive approximations. And I believe that the ultimate goal of science is to bring reality closer to a certain ideal; that is why I express this ideal. (2000, 567) Pareto, as we have seen, believed that science does not have to provide “precepts” for the resolution of practical questions, that the search for utility and justice has nothing to do with science. His liberalism in economics is the antithesis of Walras’s “liberal socialism”. Pareto criticised Walras for contaminating his pure economics with social philosophy. In the article “L’œuvre scientifique de Léon Walras”, he noted: Léon Walras wished to apply his theories to practical problems. This gen­ erous impatience is easily explained; but, frankly, these applications were premature; and it will require a lot of time, many studies, many works, before we can think about putting the results of theory into practice. . . . He tried to accomplish a similar work for social economics as he had done for political economy; but his efforts were not successful. This does not detract from his merits; just as the great Newton’s merit is not diminished by the fact that he did not obtain, through his theory of light emission, the same success that so brilliantly crowned his theory of universal attraction. (1910, 1) In his eyes, Walras’s field of “social economics” did not belong to science, but to metaphysics. In 1896, he expressed his criticism to Walras after reading his study “Méthode de conciliation ou de synthèse”, submitted to the Revue social­ iste (Steiner 1994). According to Pareto, any consideration of “social justice” is a

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matter of faith, of metaphysics, because it cannot be demonstrated by experience and logic. Pareto even stated: “My ideal ‘of justice’ is certainly not yours; who will decide between us?” (Pareto 1975, XXIX-1, 288). References Baranzini, Roberto. 2016. “Marie-Esprit-Léon Walras”. In Gilbert Faccarello and Heinz D. Kurz (eds), Handbook on the History of Economic Analysis, vol. I. Cheltenham: Edward Elgar, pp. 245–61. Baranzini, Roberto, and François Allisson. 2016. “Lausanne School”. In Gilbert Faccarello and Heinz D. Kurz (eds), Handbook on the History of Economic Analysis, vol. II. Chel­ tenham: Edward Elgar, pp. 281–94. Baranzini, Roberto, and Pascal Bridel. 1997. “On Pareto’s First Lectures on Pure Economics at Lausanne”. History of Economic Ideas, 5 (3), 65–87. Baranzini, Roberto, and Pascal Bridel. 2005. “L’École de Lausanne, l’utilité marginale moy­ enne et l’idée de marché”. In Guy Bensimon (ed.), Histoire des représentations du mar­ ché. Paris: Michel Houdiard, pp. 347–65. Béraud, Alain, and Guy Numa. 2019. “Léon Walras’s Theory of Public Interest Goods: Toward an Organic View of the State”. Journal of the History of Economic Thought, 41 (4), 553–72. Bertrand, Joseph. 1883. “Théorie mathématique de la richesse sociale, par Léon Walras [. . .], Recherches sur les principes mathématiques de la théorie des richesses par Augustin Cournot”. Journal des savants, 499–508. Boson, Marcel. 1951. Léon Walras fondateur de la politique économique scientifique. Paris and Lausanne: L.G.D.J./Rouge. Bridel, Pascal. 1996. “Présentation of Matériaux sur le Cours d’économie politique pure”. In Cours, vol. XII of Œuvres économiques complètes d’Auguste et Léon Walras. Paris: Economica, pp. 717–71. Bridel, Pascal. 1997. Money and General Equilibrium Theory. From Walras to Pareto (1870–1923). Cheltenham: Edward Elgar. Bridel, Pascal, with the collaboration of Roberto Baranzini. 1996. Le chêne et l’architecte. Un siècle de comptes rendus bibliographiques des Éléments d’économie politique pure de Léon Walras. Textes et commentaires. Genève: Droz. Bridel, Pascal, and Fiorenzo Mornati. 2009. “De l’équilibre général comme ‘branche de la métaphysique’ Ou de l’opinion de Pareto sur le projet Walrasien”. Revue économique, 60 (4), 869–90. Clower, Robert, and Peter Howitt. 1995. “Les fondements de l’économie”. In Antoine d’Autume and Jean Cartelier (eds), L’économie devient-elle une science dure? Paris: Economica, pp. 18–37. Cournot, Antoine-Augustin. 1838. Recherches sur les principes mathématiques de la théorie des richesses. Paris: Hachette. Cournot, Antoine-Augustin. 1863. Principes de la théorie des richesses. Paris: Hachette. Dockès, Pierre. 1996. La société n’est pas un pique-nique. Léon Walras et l’économie sociale. Le Vrai, le Juste, l’Utile. Paris: Economica. Dockès, Pierre, and Jean-Pierre Potier. 2001. La vie et l’œuvre économique de Léon Walras. Paris: Economica. Edgeworth, Francis Ysidro. 1881. Mathematical Psychics. An Essay on the Application of Mathematics to the Moral Sciences. London: P. Kegan.

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Rebeyrol, Antoine. 1999. La pensée économique de Walras. Paris: Dunod. Schumpeter, Joseph Alois. 1954. History of Economic Analysis. New York: Oxford Univer­ sity Press. Steiner, Philippe. 1994. “Pareto contre Walras: le problème de l’économie sociale”. Écono­ mies et sociétés – Cahiers de l’ISMEA, 28 (10–11), 53–73. Vacherot, Étienne. 1858. La métaphysique et la science ou Principes de métaphysique posi­ tive, 2nd ed. Paris: F. Chamerot, 1863. Van Daal, Jan, and Albert Jolink. 1993. The Equilibrium Economics of Léon Walras. Lon­ don: Routledge. Walker, Donald A. 1996. Walras’s Market Models. Cambridge: Cambridge University Press. Walker, Donald A. 2006. Walrasian Economics. Cambridge: Cambridge University Press. Walker, Donald A. 2019. “Paul A. Samuelson as historian of economic thought: An intimate memoir”. In Richard Anderson, William A. Barnett, and Robert A. Cord (eds), Paul Sam­ uelson. Master of Modern Economics. Basingstoke: Palgrave Macmillan, pp. 137–70. Walras, Auguste. 1831. De la nature de la richesse, et de l’origine de la valeur. Évreux: Ancelle fils, as in Richesse, liberté et société, Pierre-Henri Goutte and Jean-Michel Servet (eds), vol. I of Auguste and Léon Walras, Œuvres économiques complètes. (Hereafter quoted as OEC.) Paris: Economica, 1990, pp. 47–233. Walras, Auguste. 1849. Théorie de la richesse sociale ou Résumé des principes fondamen­ taux de l’économie politique. Paris: Guillaumin, in La Vérité sociale, P.-H. Goutte and J.-M. Servet (eds), vol. II of OEC. Paris: Economica, 1997, pp. 113–70. Walras, Léon. 1860. L’économie politique et la justice. Examen critique et réfutation des doctrines économiques de M. P.-J. Proudhon, précédés d’une Introduction à l’étude de la question sociale. Paris: Guillaumin, in P.-H. Goutte and J.-M. Servet (eds), vol. V of OEC. Paris: Economica, 2001, pp. 145–301. Walras, Léon. 1866–67. “Socialisme et libéralisme. Lettres à M. Éd. Schérer”. Le Travail, 1 (4), 31 October, 1 (6), 31 December et 1 (8) 28 February, in Études d’économie sociale, Pierre Dockès (ed.), vol. IX of OEC. Paris: Economica, 1990, pp. 9–23. Walras, Léon. 1867–68. Recherche de l’idéal social. Leçons publiques faites à Paris. Premi­ ère série (1867–68). Théorie générale de la société. Paris: Guillaumin/Agence générale de Librairie des auteurs et compositeurs, in Études d’économie sociale, vol. IX of OEC. Paris: Economica, 1990, pp. 25–173. Walras, Léon. 1874–77. Éléments d’économie politique pure, ou Théorie de la richesse sociale, 1st ed. Lausanne/Paris/Basel: Corbaz/Guillaumin/Georg (2nd ed., 1889, 3rd ed., 1896, 4th ed., 1900, 5th ed., 1926). Variorum edition (Claude Mouchot, ed.), Éléments d’économie politique pure, vol. VIII of OEC. Paris: Economica, 1988. Walras, Léon. 1876. “Une branche nouvelle de la mathématique. De l’application des mathématiques à l’économie politique”. In Claude Hébert and Jean-Pierre Potier (eds), Mélanges d’économie politique et sociale, vol. VII of OEC. Paris: Economica, 1987, pp. 291–329. Walras, Léon. 1880. “La Bourse, la spéculation et l’agiotage”. Bibliothèque Universelle et Revue Suisse, 85 (3 and 4), in Études d’économie politique appliquée, vol. X of OEC. Paris: Economica, 1992, pp. 365–401. Walras, Léon. 1881. “Théorie mathématique du prix des terres et de leur rachat par l’État”. Bulletin de la Société vaudoise des sciences naturelles, 17 (85), in Études d’économie sociale, vol. IX of OEC. Paris: Economica, 1990, pp. 229–309. Walras, Léon. 1886. Théorie de la monnaie. Lausanne/Paris/Roma/Leipzig: Corbaz/Larose and Forcel/Löscher/Dunker und Humblot, as in Études d’économie politique appliquée, vol. X of OEC. Paris: Economica, 1992, pp. 57–145.

Léon Walras 161 Walras, Léon. 1896a. “Méthode de conciliation ou de synthèse”. Revue socialiste, 23 (136), in Études d’économie sociale, vol. IX of OEC. Paris: Economica, 1990, pp. 151–73. Walras, Léon. 1896b. “Théorie de la propriété”. Revue socialiste, 23 (138) and 24 (139), in Études d’économie sociale, vol. IX of OEC. Paris: Economica, 1990, pp. 177–212. Walras, Léon. 1896c. “Le problème fiscal”. Revue socialiste, 24 (142) and (143), in Études d’économie sociale, vol. IX of OEC. Paris: Economica, 1990, pp. 391–424. Walras, Léon. 1896d. Études d’économie sociale (Théorie de la répartition de la richesse sociale), 1st ed. Lausanne/Paris: Rouge/Pichon (2nd ed., 1936), vol. IX of OEC. Paris: Economica, 1990. Walras, Léon. 1897a. “L’État et les chemins de fer”. Revue du droit public et de la sci­ ence politique en France et à l’étranger, 7 (3), and 8 (1), in Études d’économie politique appliquée, Jean-Pierre Potier (ed.), vol. X of OEC. Paris: Economica, 1992, pp. 183–218. Walras, Léon. 1897b. “L’économique appliquée et la défense des salaires”. Revue d’économie politique, 11 (12), in Études d’économie politique appliquée, vol. X of OEC. Paris: Eco­ nomica, 1992, pp. 245–61. Walras, Léon. 1898. Études d’économie politique appliquée (Théorie de la production de la richesse sociale), 1st ed. Lausanne/Paris: Rouge/Pichon (2nd ed., 1936), vol. X of OEC. Paris: Economica, 1992. Walras, Léon. 1909a. “Notice autobiographique”. In P.-H. Goutte et J.-M. Servet (eds), L’économie politique et la justice, vol. V of OEC. Paris: Economica, 2001, pp. 11–27. Walras, Léon. 1909b. “Ruchonnet et le socialisme scientifique”. Gazette de Lausanne, 111, 11 juin, 2, in Mélanges d’économie politique et sociale, Claude Hébert and Jean-Pierre Potier (eds), vol. VII of OEC. Paris: Economica, 1987, pp. 504–14. Walras, Léon. 1954. Elements of Pure Economics or the Theory of Social Wealth. Translated and annotated by William Jaffé. London/Homewood: Allen and Unwin/R. D. Irwin. Walras, Léon. 1965. Correspondence of Léon Walras and Related Papers, edited by William Jaffé, vol. I (1857–1883), vol. II (1884–1897), vol. III (1898–1909). Amsterdam: North Holland. Walras, Léon. 1996. Cours (Cours d’économie sociale, Cours d’économie politique appli­ quée, Matériaux sur le Cours d’économie politique pure). In Pierre Dockès and JeanPierre Potier (eds), with the collaboration of P. Bridel, vol. XII of OEC. Paris: Economica. Walras, Léon. 2000. “Notes d’humeur”. In Pierre Dockès, Claude Mouchot, and Jean-Pierre Potier (eds), Œuvres diverses, vol. XIII of OEC. Paris: Economica, pp. 501–622. Walras, Léon. 2005. Studies in Applied Economics, 2 vols. Translated and Introduced by Jan Van Daal. London: Routledge. Walras, Léon. 2010. Studies in Social Economics. Translated by Jan Van Daal and Donald A. Walker. London: Routledge. Walras, Léon. 2014. Elements of Theoretical Economics or the Theory of Social Wealth. Translated from the 3rd ed. and edited by Donald A. Walker and Jan van Daal. Cam­ bridge: Cambridge University Press. Wicksteed, Philip Henry. 1894. An Essay on the Co-ordination of the Laws of Production. London: Macmillan.

7

Tradition and innovation at the turn of the twentieth century Alain Béraud and Claire Silvant

The fall of the Second Empire and the failure of the Paris Commune (1870–71) marked a turning point in the political and economic history of France. A paral­ lel shift occurred in the history of economic thought, with the publication of the Éléments d’économie pure by Léon Walras (1834–1910) and the development of chairs of political economy in French universities. To outline this evolution, this chapter first describes the general framework: what was called the French decline, the debates on government measures to stimulate economic development, and the evolution of economics teaching in French universities. Then, the main contribu­ tions of the various groups of economists are examined: the last classical liberals, the professors of economics in the law faculties, the economists in the faculties of literature and the mathematical economists. 1. After the disaster of Sedan and the Paris Commune Napoléon III’s defeat at Sedan in 1870 cruelly highlighted France’s relative eco­ nomic and demographic weakness, calling for stronger public intervention to counter the downturn in population growth, agriculture and industry. The fall of the Second Empire was followed by the establishment of a democratic regime, the Third Republic, but the Paris Commune uprising (March to May 1871) pro­ foundly changed the perception of the social question and the approach to State intervention. A Colbertist tradition had persisted in France, but the leading liberal economists during the Second Empire were the heirs of Turgot and Say; they even seemed, for a time, to have triumphed with the conclusion of a free trade agreement with Britain in 1860 (Chapter 3). Nonetheless, this success was short-lived. The Treaty of Frankfurt (1871), which ended the war between France and Germany, stipulated that France must grant Germany most-favoured-nation status. This was viewed as excessive to many economists, such as Paul Cauwès (1843–1917) and Edmond Théry (1854–1925), who expressed concern about it: they feared that the French economy would collapse when faced with the progress of industry abroad, and they advocated protectionism. Their concerns were in line with those of politi­ cians such as Adolphe Thiers (1797–1877) and Jules Méline (1838–1925), who expected to raise the necessary revenue from tariffs to cover the budget deficit caused by the war. This change was concomitant with the rise of nationalism. Jules DOI: 10.4324/9780429202407-8

Tradition and innovation at the turn of the twentieth century 163 Ferry (1832–1893) presented free trade as a factor of economic weakening that fostered external dependence. The return to protectionism was precipitated by the fall in agricultural and industrial prices, a fall that opponents of free trade explained as a result of the reduction in transport costs favouring exports from new countries. They demanded the introduction of a countervailing tariff for French producers, supported in the first instance by farmers but also by many industrialists who were worried by the fall in world prices. From 1872 onwards, Adolphe Thiers’s government followed American policy by raising taxes on imports: a wide range of commodities were hit by a tax increase of 4–5%. The general tariff provided an effective protection for manufacturers and farmers. Despite these decisions, the advocates of free trade had not yet lost the battle. One of the most prominent liberals, Léon Say (1826–1896) – Jean-Baptiste Say’s grandson – was almost constantly Minister of Finance from 1872 to 1882. Controversies about the Freycinet plan

The Franco-Prussian war left France considerably poorer, due to the high military expenses incurred and the indemnity paid to Germany after the Treaty of Frank­ furt.1 From the mid-1870s onwards, France underwent a severe depression result­ ing from an export industry crisis caused by the loss of foreign markets coupled with an agricultural crisis due to importations of foreign cereals and meat. Charles de Freycinet (1828–1923), then Minister of Public Works, implemented a government plan of 6 billion francs (for a GDP of 20 billion) to support final demand and improve industrial and agricultural competitiveness by reducing trans­ port costs. The State financed significant extension of the railway network (from 24,000 to 40,000 km) and improvement of waterways and ports, and at the same time bought up many secondary railway companies unable to continue operating their licensed lines. Two issues were involved: the measurement of the utility of the railways and the question of their organisation. To promote his plan, Freycinet used similar arguments to those put forward by Jean-Baptiste Say to support the development of waterways in the early nineteenth century. When presenting his project to the National Assembly, he stated: From a commercial viewpoint, the real benefit of railways is the savings they make on transport. Do you know what transport used to cost before the crea­ tion of the railways, and what it still costs where there are no railways for passengers or freight? The cost is 30 centimes per kilometre, whereas, thanks to the railways, the average cost is 6 centimes. The community therefore makes a gain of 24 centimes out of 30 . . . in other words a profit equal to four times the traffic toll, four times the gross revenue. (Journal officiel, 15 March 1878, 2906)

1 The total cost was 11 billion francs, equivalent to 7 months of national income.

164 Alain Béraud and Claire Silvant Nevertheless, the benefits of railways are far greater for the community than for the operator: they come from the reduction of costs enjoyed by users. In this respect, one should note that, like Jean-Baptiste Say and Claude-Louis Navier earlier, Freycinet overestimated the utility of communication routes, since a num­ ber of passengers and goods transported by the railways would not have used the road in their absence and only used the railway because of its low price. The many engineers who discussed the Freycinet plan – including Alfred Picard (1844–1913), Henri Varroy (1826–1883), Jules de la Gournerie (1814–1883) and Armand Considère (1841–1914) – used the Dupuit method (see Chapter 5), con­ cluding that Freycinet considerably overestimated the utility of such an extension of the rail network. The Freycinet plan had its supporters. Considère (1892), for instance, insisted on the indirect benefits of such an extension, referring to what could be called exter­ nal effects, such as the expansion of trade, agriculture and industry due to lower transport costs. Clément Colson (1853–1939), on the other hand, downplayed their importance (1890): to him it would be a mistake to include in the utility estimate the total gains which the new enterprises, prompted by the improvement of com­ munications, bring about. One loses sight, he wrote, of the fact that this labour and capital would have been employed elsewhere, if the infrastructure had not been built, perhaps in a less lucrative way but certainly not unproductively. He concluded that: for a work facilitating transportation to be a fruitful use of capital, it is by no means necessary that it be revenue-producing. . . . To determine whether [a road] is a useful enterprise or not, what must be ascertained is whether the value of the services which the public obtains from it is greater than, equal to, or less than the expense which it involves. The question of whether those who benefit from these services are charged for them remains absolutely independent. (Colson 1890, 809) In a nutshell, one must refer back to Dupuit. The expansion of the railways opened up two further questions. Should the State take over the networks of private com­ panies? Should it manage them directly as a public service or should it grant them as concessions to private companies? The organisation of the railways was indeed unclear. The law of 1842 had entrusted the operation of the network to private com­ panies, but the length of the concessions – from 27 to 34 years – was short and, on their expiry, the State had to directly take over the operation, while compensating the companies for their equipment. The network was thus divided among twentyeight companies whose financial capacity was too weak to withstand economic fluctuations. During the Second Empire, the concession system was radically redesigned. The operation was entrusted for a period of 99 years to six major companies, which had a regional monopoly but had to comply with more restrictive specifi­ cations: they had to bear the cost of building new routes and to charge regulated

Tradition and innovation at the turn of the twentieth century 165 fares, set by the State. In return, the government backed the bonds issued by the companies and gradually secured a minimum return for shareholders on the funds advanced. Despite these advantages, the companies were reluctant to open new routes. The government conceded local lines to secondary companies, which encountered dif­ ficulties in the 1870s. The State had to buy up a number of lines, resulting in confu­ sion and waste. Some politicians, engineers and economists advocated a takeover by the State of the entire network as the only way to reorganise the operation of the railways rationally and to reduce transport costs. This thesis was defended by Léon Walras against Joseph Garnier and Léon Say (1881), who assumed dogmatic rear­ guard positions. At the meeting of the Société d’économie politique on 5 June 1880 devoted to railway repurchase, Garnier argued that: as for the State operating these vast enterprises, there is no way it can be done; the State would necessarily operate in a worse way, more expensively and more authoritatively than the current companies. The public, on its side, would be unreasonably demanding and would want to be transported for nothing. This would soon lead to a considerable loss of revenue, increased bureaucracy, and the employees would soon become electoral agents. Exploi­ tation by the State is political waste. (Garnier, in Société d’Économie Politique 1880, 476) Political economy in French higher education

Although French economists played an important role in political life and intellec­ tual debates, by 1870 they had not succeeded in introducing political economy into the French university system, and its teaching had developed on the fringes. Chairs in economics had been created in some institutions (Collège de France, Conserva­ toire National des Arts et Métiers, École Nationale des Ponts et Chaussées) and had been occupied by liberals, in the wake of Jean-Baptiste Say (see Chapter 3). The situation changed progressively after 1870. The teaching of political economy was introduced in the École Libre des Sciences Politiques, in several engineering schools – notably the École Polytechnique and the École des Mines de Paris – and in the law faculties. But the liberals did not benefit much from this movement, as their influence began to fade away. In this general climate, the École Libre des Sciences Politiques appeared to be an exception. This institution was founded on the feeling expressed at the end of the Second Empire that no training existed to prepare students for the recruit­ ment exam of the “grands corps” of French public service, that is, the higher administration. The École Libre was founded in 1871 by the liberal Émile Boutmy (1835–1906). Unsurprisingly, a large part of the teaching consisted of lectures on political economy, which were initially entrusted to liberals such as Paul LeroyBeaulieu (1843–1916), Anatole Dunoyer (1829–1908) and Émile Levasseur (1828–1911). In 1883, an economic and financial section was created. But to the director of the École, the teaching of liberal economists appeared insufficient to

166 Alain Béraud and Claire Silvant satisfy the students’ growing curiosity for social issues. To make up for these short­ comings, he called on Émile Cheysson (1836–1910), a Polytechnicien engineer from the Ponts et Chaussées who was the director of the Schneider factories in Le Creusot (Burgundy) and a follower of Frédéric Le Play (1806–1882). The inter­ vention of social Christians, such as Cheysson, in an institution that trained future high-ranking civil servants seemed worthwhile in a period when young students could be seduced by socialist ideas. Liberals had long sought to introduce political economy into law faculties but met with resistance from jurists who believed that teaching should educate legal practitioners, not jurisconsults or scholars. As early as 1864, Victor Duruy (1811– 1894) had established a chair of political economy in the Paris Law Faculty that was unique in France at the time; to avoid offending the law professors’ corporat­ ism, he appointed Anselme Batbie (1828–1887), a specialist of public law and a liberal Orléanist who had rallied to the Empire. In his course, Batbie took up Say’s ideas and plan, which suited both jurists and liberal economists. Following his election to the National Assembly, Batbie was replaced by the jurist Gustave Émile Boissonade (1825–1910) in 1871, then by Paul Cauwès in 1873. Inspired by the analyses of the German historical school, Cauwès challenged certain principles of political economy that liberals held as fundamental. Above all, he criticised free trade as being detrimental to employment in France because of high production costs. He advocated a system of rational protection which would develop the pro­ ductive forces in a harmonious way, guarantee national independence and increase productive employment for the benefit of national labour. This protection would make it possible to obtain a “better balanced” production while avoiding the dis­ advantages of industrial or maritime monopolies (Cauwès 1879, t. 2). He naturally supported Méline’s customs policy. Thus, from the outset, the teaching of political economy in law faculties broke with the liberal tradition. Finally, in 1877, a course of political economy was officially established in all law faculties. At first, the teaching was done by law professors who had lit­ tle knowledge of economics. To them, the role of economics was to explain the rationale for property rights, to study their desirable extensions and necessary restrictions. Progressively, however, the situation changed. The study of law was reorganised: in 1895, the doctorate in economics was created, and a year later, a “Sciences économiques” section was opened in the “agrégation des facultés de droit”. The first four examinations were presided over by a professor of criminal law, but from 1906 onwards, a professor of economics was finally appointed to chair the jury. Meanwhile, the economists of the law faculties founded a journal in 1887, the Revue d’économie politique. The new journal was thus in competition with the Journal des économistes: the latter was reluctant to publish the contributions of this new generation of professors and the intention of Charles Gide (1847–1932) had precisely been to establish an independent journal that would provide an opportunity for his colleagues to publish the results of their research. He cleverly opened up the editorial board to professors who were close to liberal ideas and included as contributors professors who taught at foreign universities, such as Léon Walras.

Tradition and innovation at the turn of the twentieth century 167 The implementation of economics in engineering schools similarly had to face many obstacles. At the École des Mines de Paris, teaching was entrusted to Émile Cheysson, then to Maurice Bellom (1865–1919), both followers of Le Play who took up the themes of social Christianity. At the École Polytechnique, the course was taught by a socialist reformist, Eugène Fournière (1857–1914). But the French tradition of teaching economics in engineering schools did not really take shape until Clément Colson was appointed to the chair of the École des Ponts et Chaussées in 1892 and then to the École Polytechnique in 1914. Cheysson and Colson were former students of the École Polytechnique. They were both familiar with Walras’ work but were equally critical of the approach of pure political economy. Cheysson argued that: political economy cannot claim to be an exact science. . . . In spite of ingen­ ious attempts, the rigorous procedures of algebraic calculation have proved sterile in their application [to economic phenomena, since] . . . equations are powerless to embrace all the data. (Cheysson 1882, 359) Political economy was viewed as a moral science, whose method relies on obser­ vation. Like Cheysson, Colson considered economics to be a moral science, but rejected the idea that the observation of facts alone could be sufficient. To achieve knowledge of economic phenomena, it is essential to use observation and deduc­ tion simultaneously. His position on the use of mathematics gradually changed. In the first edition of his Cours d’économie politique, he regarded the use of math­ ematics in economics as a mere “amusement” (1901, t. 1, 20), while his stance was more nuanced in a later edition (1915): admittedly, in political economy, the use of mathematical formulae cannot be considered, even in pure economics, as the normal method. The problem was not human freedom, because reasoning on the totality of individuals allows us to use the law of large numbers. The problem lay in the complexity of the elements to be considered and the difficulty in describing exactly the impact of some individuals on others. In the end, as long as simple problems are involved, mathematical demonstra­ tions can just as easily be delivered in common language. However, the use of math­ ematics seemed to him not only useful but necessary in the case of interdependence: economic phenomena are by nature well-suited to being put into equations, because they are phenomena with interdependent relationships, rather than cause and effect, relationships which are easy to represent by formulae in which one or another quantity can be considered indifferently as an inde­ pendent variable. The existence of general equations of economic equilib­ rium has been proved, and it has been shown that, when a certain number of men face a certain number of goods, their relations are subordinated to a suf­ ficient number of conditions to determine all the operations done on the mar­ ket. However, from these general notions, it is difficult to draw conclusions that are precise enough to really increase our understanding of phenomena. (Colson 1901, t.1, 143)

168 Alain Béraud and Claire Silvant Further on in his Cours, his analysis of the determination of the wage rate and the interest rate illustrated this idea. Both variables are interdependent, and therefore, in order to analyse their determination, one must write a system of equations that depicts the functioning of both the labour market and the capital market. This is what he tried to do in a note (1901, t.1, 366–7), although not entirely convincingly. 2. The liberals The classical liberal strand continued in France for a long time after the marginal­ ist revolution. Nevertheless, it showed some signs of decline after the 1870s. The generation of Chevalier, Garnier and Dunoyer struggled to find successors to equal them. Noting this slump, Joseph Chailley and Léon Say published the Nouveau dictionnaire d’économie politique in 1891–92 (with its Supplément in 1897); it was intended to update and replace the Dictionnaire de l’économie politique edited by Coquelin and Guillaumin in 1852–53, which had been the authoritative handbook until then. However, two liberal figures stood out during the period: Gustave de Molinari (1819–1912) and Paul Leroy-Beaulieu. For the classical liberal economists, the idea that the utility of a good deter­ mines its value and that utility decreases as the quantity consumed increases was hardly new, so that the theses exposed by Jevons, Menger and Walras, which were reported in the Journal des économistes, did not appear to be fundamentally pathbreaking. It was precisely because they did not understand the significance of these new ideas that their influence slowly faded away. Molinari and the old guard, faithful to tradition

Gustave de Molinari, who was the chief editor of the Journal des économistes after Garnier’s death, became a central figure in the liberal group during the last decades of the century. He tirelessly defended the old liberal doctrine, but he also put forward new proposals. Among the latter, his most original contribution was probably his analysis of the labour market, which he developed in Les bourses du travail (1893). His starting point was a widespread observation: with the advent of the freedom of labour, the transformation of production technologies had led to an increase in labour productivity and an extraordinary rise in wealth, which had been very unequally distributed between the two main categories of producers – capitalists and workers. The unequal bargaining positions of entrepreneurs and workers in the determination of wages were at the root of this, as Adam Smith had already noted. According to Molinari, the organisation of labour markets had changed in a differ­ ent way from that of goods and capital markets. At the time when labour became free, the latter were dominated by price-setting monopolies; these markets became general markets where the price, resulting from all supplies and demands, was the regulator of each transaction. In contrast, labour markets remained fragmented. As slavery and serfdom disappeared, man: was free by law to take his labour to the most advantageous market in the country, and even – though not always – abroad, but was he free in fact?

Tradition and innovation at the turn of the twentieth century 169 Outside the narrow locality where he was born, did he know, could he know, on what markets his labour was needed, at what price and on what conditions? (Molinari 1893, 116) Thus, labour markets remained narrow markets where workers, under pressure to sell their labour for subsistence goods, were concentrated in small and isolated pockets of employment with few, if any, contractors and no real option to offer their labour elsewhere. In these circumstances, they were compelled to accept the condi­ tions dictated by the entrepreneurs, however harsh they were. Molinari believed that the solution to this issue was to allow the creation of firms acting as interme­ diaries between labour supply and demand which, by exploiting the opportunities for gain arising from incomplete information, would improve the efficiency of the market. He argued that they could reduce costs: because they have the specific function of recruiting workers and managing their work, they would be better able to select manpower and obtain it from where it was best and cheapest. The expansion of product and capital markets triggered the creation of com­ modity and stock exchanges that spread the information needed by traders and bankers. The enlargement of the labour market would have the same effects. For Molinari, public labour exchanges (“bourses du travail”) should provide the inter­ mediaries – employment agencies and emigration companies – with daily informa­ tion on the local market situation. He stated that the expectation of earning a profit would be enough to make it worthwhile for entrepreneurs to develop them (1893, 162). As Benkemoune (2008, 258) points out, Molinari sought to demonstrate that civil society, on its own, has the resources to address the problem of information deficiency and that an extended market would emerge spontaneously with no need for government intervention. Molinari (1849) had a reputation as a hard-line liberal. He criticised not only government intervention in economic life but also the very nature of government authority. While many economists saw the development of cartels and trusts as a characteristic of the new stage of capitalism, Molinari argued that the expansion of markets strengthens competition. However, the production of public service was not affected by this development, as governments claimed a monopoly on it. The result was that public services remained underperforming, expensive and of poor quality. The remedy he proposed was to modify the organisation of government to make it comply with the natural laws of the production and distribution of services. First, governments must abandon all the functions arbitrarily assigned to them, and bring education, worship, coinage and transportation within the domain of pri­ vate business. However, it is necessary to go further and impose competition on the sovereign functions of the State, including the production of security, which implies recognising the right to secession. Between citizens and the government, there were at least two intermediaries: the municipality and the province. Under the existing arrangement, municipalities had no way of protecting themselves if the province charged too much for its services or if the services it provided were of poor quality. In the system imagined by Molinari, it could secede and request affiliation with another province. In the same way, the province could leave the country either by becoming independent or by joining another country. He argued

170 Alain Béraud and Claire Silvant that this right to secession would create competition between provinces and coun­ tries, which would lead to better and cheaper services. The day will come . . . when political servitude will lose its raison d’être and political freedom will be added to the bundle of other freedoms. Then governments will be nothing other than free insurance companies on life and property, established and organised like any other insurance company. (Molinari 1884, 381) Yves Guyot (1843–1928) replaced Molinari as the director of the Journal des écono­ mistes in 1909. At the Société d’économie politique, he embodied a combative liberalism (Wartelle 1998), characterised by an abundant production of substantive articles tinged with militancy. He took a stand, inter alia, against protectionism, colonialism, socialism and antisemitism, and in favour of Alfred Dreyfus. His cen­ tral idea was that protectionism and colonialism go hand in hand, and inevitably lead to war. With his friend Arthur Raffalovich (1853–1921), he co-edited the Dic­ tionnaire du commerce, de l’industrie et de la banque (1898–1901), which ran to over 3,000 pages. Paul Leroy-Beaulieu, a new conception of liberalism

By rejecting the classical heritage, Paul Leroy-Beaulieu, followed by Alfred Jourdan (1823–1891) and Edmond Villey (1848–1924), developed a version of liberalism that was clearly distinct from that of Molinari. Instead, he followed a tradition of liberalism influenced by Saint-Simonianism, which was, in particular, defended by Michel Chevalier (Leroy-Beaulieu’s father-in-law). The liberals were, in general, hostile to colonialism, but Leroy-Beaulieu (1874) broke with this tradition, certainly for political reasons. Defeated France had to recover its world standing by developing a colonial empire. Since colonisation had a political dimension and was not merely a search for new commercial outlets, it was, in essence, a task that should be assigned to the State and not to private companies. It was therefore essential to show that the cost of colonisation was lower than had been claimed. In addition, while Leroy-Beaulieu was a populationist, he thought it was necessary to preserve an opportunity for emigration to the colonies because it encouraged the success of educated men and enabled the removal of troublemakers. By exporting capital to areas controlled by the metropolis, higher interest rates would be obtained and the commodities produced could be exchanged for those of the homeland, with supply creating its own demand according to the law of mar­ kets. The more French capital the colonies received, the more French goods they would consume. Their great utility would be to expand France’s trade by opening, at the same time, new sources of cheaper supplies and new larger outlets, these new economies being more dynamic. He concluded that the benefits are reciprocal, with significant sources of income for the colonies as well. Leroy-Beaulieu made a radical break with tradition in his book on the distri­ bution of wealth (Essai sur la répartition des richesses et sur la tendance à une

Tradition and innovation at the turn of the twentieth century 171 moindre inégalité des conditions, 1881). On a theoretical level, his thesis was that all established doctrines in economics concerning the distribution of wealth – Ricardian rent theory, Malthus’s law of population, Turgot’s and Smith’s ideas – were to be discarded or, at least, revised. Empirically, he argued that modern society was evolving towards a reduced inequality of conditions: poverty, far from increasing as usually claimed, was actually decreasing. Any government action to foster this movement could only hinder and delay it. His criticism of the classics, however, came from his questionable interpreta­ tion of their analyses: he thought they wanted to predict the future evolution of the economy, and he consequently believed that he could oppose them with the facts, notably the rise in real wages which ran counter to Ricardian theory. Secondly, in his reconstruction, Leroy-Beaulieu still reasoned in terms of the trilogy of rent, wages and profit and tried to explain why real wage rates increased while rent rates and, to a lesser extent, profit rates decreased. Curiously, he dismissed the idea that distribution is determined by supply and demand. Such a proposition was, accord­ ing to him, a truism. It was necessary to go further, and he emphasised the role of productivity. But, as he reasoned in terms of average productivity and not marginal productivity, he struggled to explain the effects of a rise in productivity on distri­ bution. His attempt to reconstruct the theory of distribution thus ended in failure. A final important contribution by Leroy-Beaulieu concerned the analysis of public finance, and more generally of the State. In his time, Smith had explained that the sovereign had three duties: protecting society against violence and aggres­ sion from other nations; protecting every member of society against injustice; and creating and maintaining the institutions and public works that an individual or small group of individuals have no interest in creating and maintaining. LeroyBeaulieu considered this last statement to be excessive, because it suggests that individuals cannot create anything without being driven by their material interests. In L’État moderne et ses fonctions (1890), Leroy-Beaulieu developed an original analysis: unlike other liberals, such as Villey or Jourdan, he relied on the notion of “common good”2 and argued that “the State is entrusted with providing for the common needs of the nation, that is, those which cannot be adequately satisfied 2 The first Rossi Prize was awarded in 1881 by the Académie des sciences morales et politiques. Its subject was “the role of the State in the economic order”. The joint winners were Alfred Jourdan and Edmond Villey, who each presented an analysis that was in some points close to Leroy-Beaulieu’s developments. They each published their work under the eponymous title (Jourdan 1882; Villey 1882). However, they did not employ the notion of common good. For Villey (1882, 66), the common interest merges with the “well-understood interest” of each individual. The principle of subsidiarity applies: the State should only intervene as a last resort, if the initiative of individuals or private asso­ ciations fails. In particular, Villey emphasised the cooperation and voluntary association of individu­ als as an alternative to State intervention. Free association would even have a greater advantage, that of guaranteeing the satisfaction of individual interests: The State must only engage . . . in any service as long as this service is of common interest and as long as private industry is really and indisputably unable to undertake it, at least with the guarantees which are indispensable for this service to fulfil its purpose. It is therefore up to the State, whose action is never more than subsidiary, to prove the necessity and, consequently,

172 Alain Béraud and Claire Silvant under individual initiative, and which require the absolute and prior participation of all citizens” (1890, 93). He stipulated that these common needs can only be sat­ isfied by the action of the whole community: security, preservation against certain contagious diseases, the service of justice, but also the right to expropriate, which is a necessary prerequisite for the implementation of public works. On the other hand, the State must represent perpetual interests against the irresponsibility of pre­ sent interests: when some individuals’ behaviour deteriorates the future condition of the nation, the State must intervene.3 In his 1890 book, he also described the progressive extension of the state’s functions and its two main causes: the rise of democracy and the weakening of traditional ties (especially religious and intergenerational). The “modern State”, as described by Leroy-Beaulieu, is endowed with very limited qualities: it often produces less efficiently, and with less responsibility, than private agents would. The cause is the people who are at the heart of the functioning of the State. Firstly, governments are often short-sighted, with the next election as their horizon, which leads them to take hardly rational decisions that are sometimes contrary to the long-term general interest. Secondly, civil servants and politicians often have a lower level of skills and knowledge than private sector agents, if not captured by the interests of lobbies and pressure groups who expect them to make decisions in their favour. In a nutshell: “The state is not the brain of society; it has no title, no ability, no mission to lead it and pave its way. . . . The expansion of its attributions makes the control of its operations more difficult every day” (1890, 435–6). At the turn of the twentieth century, French liberals appeared to be deeply divided between those, such as Molinari, who remained faithful to classical liber­ alism and those, such as Leroy-Beaulieu, who departed from it. This second group quickly became dominant. However, the renewal of liberal thought was also to be found in the writings of Clément Colson. 3. At the École Pratique des Hautes Études Few students of literature chose to become economists, but their role in the evo­ lution of economic thought was nevertheless important. Adolphe Landry (1874– 1956) and François Simiand (1873–1935) have several features in common. Both were former students of the École Normale Supérieure and were “agrégés” in philosophy, and both chose to defend a thesis related to political economy. They were close to socialist ideas, but only Landry, who later became a deputy and then a senator for Corsica from 1910 until his death, and who was a minister several times, had a political career. Both were professors at the École Pratique the legitimacy of its intervention. In case of doubt, the cause of individual freedom must prevail: pro libertate respondendum. (Villey 1882, 55) 3 Leroy-Beaulieu admitted, with some reluctance, two other areas in which the State must intervene: it must protect weak beings deprived of any family support and subsidise the development of various works stemming from individual initiative.

Tradition and innovation at the turn of the twentieth century 173 des Hautes Études. In 1932, Simiand was elected Professor of the Collège de France at the chair of labour history. Both were interested in long-term economic movements. Adolphe Landry defended his doctoral thesis in 1901, devoted to L’utilité sociale de la propriété individuelle. This work caused such a sensation with its progressive ideas that even the mainstream press reacted to it, and the Catholic newspaper La Croix was indignant, wondering “how such a daring demonstration had not been suppressed by the university authorities” (4 June 1901, 1). The recep­ tion of his thesis by the academic community was not much better. At issue were mainly his socialistic views on property (see Chapter 12). To Landry, the system of private property is the source of a loss of wealth, for many reasons. He asserted that owners did not use the means of production at their disposal in the most productive way. He rejected Cournot’s analysis of the duopoly (1838) and thus found, without apparently having read it, Bertrand’s conclusions (1883, see below). He considered that in a duopoly, both producers would come to an agreement. When the num­ ber of competitors is large, it is undoubtedly more difficult for them to reach an agreement, but Landry maintained that competition is never absolute. Producers are not obliged to sell their products at the same price because each of them has an advantage over the others, which makes it in the interest of some consumers to buy from them. The conclusion is that reductions in production contrary to the general interest are not only possible in the case of monopoly: as they only suppose that the owner can change his price to increase his profit, the case is not an exception but the general rule. It remained to be seen whether, by setting different prices for different buyers, the producer could make profits at least equal to those he would make by reducing production. Dupuit, Tavernier (1888, 1889) and Colson saw this price discrimina­ tion as a remedy for social inequality, since prices were then proportionate, if not to need, at least to the ability to pay. But Landry believed that price discrimination was hardly achievable and that at best the producer can only set a few prices; then it would again become profitable to reduce production. Finally, in contrast to the analyses made by the classics, Landry considered the behaviour of the producer, who seeks to increase his net profit by reducing the quantity of production factors used, as harmful to the interests of society. Indeed, while it is in the producers’ interest to use smaller quantities of land or capital for the benefit of all, the same does not apply to labour: the price which a worker demands in exchange for his labour is not deter­ mined by the utility of that labour, by the price which that worker knows he should get. It is determined first of all by the needs of this worker. (1901, 79) In other words, the remuneration of labour is not determined like land rent or the interest of capital by the balance between supply and demand: it must be at least equal to a subsistence standard. Therefore, when a producer dismisses a worker, it is not obvious that the worker will find a job elsewhere. The producer’s decision

174 Alain Béraud and Claire Silvant to reduce employment is contrary to the interests of society, if it deprives workers of any employment. Since the rich who can buy the goods produced are precisely those owners who, in order to increase their income, decrease social welfare, one is led to acknowl­ edge that the damage caused by property is greater than appeared at first sight. Landry concluded that “the institution of individual ownership of the means of production necessarily [gives rise] to opposition between particular interests and the general interest, that in many cases and in many ways it sacrifices the latter to the former” (1901, 407). It should also be noted that, in L’intérêt du capital (1904), Landry criticised and restated Böhm-Bawerk’s analysis of capital. According to Landry, the difficulties encountered by Böhm-Bawerk originated in the consideration of only one factor to explain why the interest rate is positive: the preference for present commodities.4 Landry proposed the following analysis, which explains both why borrowers are willing to pay interest and why lenders are able to demand it: On the one hand, there are a certain number of activities in which capital can be invested and in which it will yield a profit; these activities can be ranked in order of decreasing profit, and we thus have the demand curve for capital. On the other hand, virtual capital can be arranged according to the surplus value it must yield in order to be employed as capital, in order to become real capital: thus we have the supply curve of capital. . . . Interest equals both the marginal surplus value that the employed capital will give and the marginal sacrifice that is involved in capitalisation. . . . It is the over­ all demand curve for capital and the overall supply curve that determine the rate of interest, which must be the same for all capital, in the same market and at the same time. (Landry 1908, 639–40) Landry’s thesis marked an important stage in the evolution of economic thought in France. He clearly introduced socialist ideas into the academic world, where they had until then scarcely been allowed to exist. Into this world – admittedly on its fringes, since his thesis was not defended at the Law faculty, but at the Fac­ ulty of Literature – he introduced the analyses of Cournot and Dupuit which, until then, had hardly been read by anyone other than mathematicians and engineers. Of course, his reading of them was quite particular, since he did not limit himself to reporting them but tried to develop new proposals on their basis. But this is pre­ cisely what makes his book so valuable. François Simiand’s contribution was also singular, and his thinking especially attracted the attention of sociologists (Chapter 13). Simiand (1912) contrasted posi­ tive economics, which relies on experimental methods, with traditional political economy, called abstract or pure economics, and economic historicism, which was, 4 Note that even if agents do not prefer the present, the interest rate can be positive.

Tradition and innovation at the turn of the twentieth century 175 for him, a mere description of facts. He acknowledged that criticising a theory as abstract may sound equivocal because all scientific knowledge proceeds by abstrac­ tion. His criticism of some economists, particularly of Landry (Simiand 1903–1904), focused on their own specific use of abstraction (Chapter 13). In the experimental method advocated by Simiand, the researcher constantly sets his abstract reason­ ing against the facts. But, according to Simiand, Landry’s approach was different: the abstractions from which he developed his theory were mere “ideas”, without immediate match to the facts. In conceiving his statements, he undoubtedly relied on his observations of the active or passive psychology of the “economic man”: one would say, for example, that men are driven by self-interest. But in subsequent work, Landry did not set the conclusions drawn from these propositions against the facts, and his basic propositions are only postulates. Depending on how one interprets the question, for example, how one interprets the idea that agents follow their selfinterest, the reasoning leads to different conclusions regarding their choices. If eco­ nomics is to remain a positive science, the conclusions of the reasoning must be set against the facts. If not, the economist’s research does not concern the real economy, and economics does not appear as a positive discipline but a normative one. Simiand thus addressed a series of questions that fuelled debates during the inter-war period. 4. Political economy in the faculties of law In the faculties of law, professors of economics were a rather heterogeneous group in terms of analysis, methodology and ideology. Most of them were eclectic, but some were distinctly associated with certain pronounced traditions. Étienne Antonelli (1879–1971) was inspired by the ideas of Léon Walras (Antonelli 1914), others like Albert Aftalion (1874–1956) drew on the Austrian tradition (Aftalion 1913), while Cauwès (1879) was influenced by historicists and institutionalists. Methodologically, they were generally inclined to be empiricists, claiming to prac­ tice positive economics as opposed to pure theory. But many were aware of the limitations of a statistical research not based on theoretical analysis. Politically, they often played an important role: some, like Antonelli, were socialists; others, like Edmond Villey, were liberals (Villey 1887). Charles Gide

Among them, Charles Gide played an important role both institutionally – he initi­ ated the creation of the Revue d’économie politique – and theoretically. The posi­ tions he held, while sometimes criticised, appeared to most to be an acceptable starting point. Gide’s influence was clearly evidenced by the wide circulation of his books, notably the Principes d’économie politique (1884), the Cours d’économie politique (1909) and the Histoire des doctrines économiques depuis les physi­ ocrates jusqu’à nos jours (1909) that he wrote with Charles Rist (1874–1955). There were, for instance, 26 editions of the Principes, which were translated into 19 languages and became the standard textbook in the late nineteenth and early twentieth centuries.

176 Alain Béraud and Claire Silvant While the liberals argued that only one view could exist in a science – a scien­ tific proposition being either true or false – Gide admitted that there were several schools of thought in economics, which differed in the methods employed and the policies they advocated. He identified himself with the solidarist school of thought that developed in France at the end of the nineteenth century under the influence of Léon Bourgeois (1851–1925). Gide published his first articles in the Journal des économistes, but soon his relations with the liberals deteriorated and his Principes were severely criticised by them. They reproached him for making too many concessions to protection­ ists and advocates of State intervention. In the Principes, he explained that the doctrine of the liberal school could be summarised in three points: (i) “Human societies are governed by natural laws – which we could not change even if we wanted to, because we did not create them, and which, moreover, we have no inter­ est in changing even if we could, because they are good or at least the best pos­ sible”; (ii) “These laws are not contrary to human freedom; on the contrary, they are the expression of the relationships that spontaneously arise between men living in society”; (iii) “The role of the legislator, if he wishes to ensure social order and progress, is therefore limited to developing as much as possible these individual initiatives . . . and consequently the intervention of the authority must be reduced to the minimum indispensable for the security of each individual and the security of all, in a nutshell to laissez-faire” (Gide 1884, 24–5). He was very critical of these propositions. To him, social order is not natural because the institutions on which it rests are the result either of acts of war – he was thinking of land ownership – or of positive laws that certain classes of society enacted for their own benefit. Social institutions, in particular the system of wage labour, are not as permanent as liberals claim they are. But even if one admits that the laws governing society are natural, this does not imply that they are sound. No doubt, when we consider the economic organisation of a society and the institutions which underlie it, we are entitled to conclude that they are good, at least in some respects, since they have at least sufficiently shown their relative worth by the very fact of their existence and durability . . . but we are by no means allowed to conclude that they are the best possible. (Gide 1884, 26) While criticising the liberals’ optimism, Gide only supported State intervention in areas principally limited to social protection. In particular, he concluded his exten­ sive analysis of the benefits and shortcomings of protectionism in favour of free trade at a time when it was often questioned. To elaborate their analyses, some classics relied on the deductive method, start­ ing from a small number of axioms or hypotheses suggested by very general obser­ vations in order to deduce their propositions. At the end of the nineteenth century, this method was criticised by the historical school: only history could reveal the real character of social facts, by teaching us how economic and social institu­ tions were shaped and how they evolved. Louis Wolowski’s preface (1857) to the

Tradition and innovation at the turn of the twentieth century 177 French translation of Wilhelm Roscher’s Die Grundlagen der National Ökonomie had triggered a debate among French liberals on the historical method (see Chap­ ter 3). Most liberals rejected this method, but some of them – Louis Wolowski (1810–1876) and Léonce de Lavergne (1809–1880) – found it noteworthy. Among the economists opposed to the classics, many, such as Cauwès and Le Play, with­ out necessarily adopting all the theses of the historical school, were nevertheless inspired by them. Gide remained sceptical. The belief that the inductive method could be as effective in social sciences as in physical and natural sciences was, in his view, an illusion: firstly, because observation is more difficult there, and sec­ ondly, because direct experimentation is impossible. In his view, historicists would be deluded if they imagined that the mere observation of facts could allow them to develop a new political economy. The scientific method must combine induction and deduction: the main scientific laws are nothing more than hypotheses that have been confirmed. Among the professors in the law faculties, Charles Gide was one of the first to consider the work of the marginalists. In particular, he wrote reviews of the writings of Jevons (Gide 1881) and Walras (Gide 1883) for the Journal des économistes. He emphasised the close relationship between their contributions, which, while differing in their starting points, led to similar conclusions. While acknowledg­ ing the books to be among the most interesting that had been published for a long time, he warned against approving their approach and qualified the significance of their arguments. The problem was, first of all, one of methodology. While admit­ ting that any science aims at formulating laws which, if correct, must be expressed as mathematical relations, Gide thought that political economy had not reached such a stage of development that mathematical reasoning had become unavoidable. According to him, Jevons, Walras and Cournot established important results, but “these truths owe very little to mathematics and . . . would lose nothing of their value, nor even of their originality, if presented in the form of ordinary reasoning” (1881, 183). Mathematics is only relevant where the demonstrations are too com­ plex to be accomplished without it. This is not the case with the demonstrations of political economy, which rely only on simple sequences. The study of price determination did not constitute a central part of Gide’s anal­ yses and was awkwardly divided between an account of value and a presentation of the law of supply and demand, without any connection between the two approaches being made explicit. On the first point, Gide concluded that value is founded on a dual basis of enjoyment and pain. On the second point, he wrote: “The ancient economists had a simpler explanation of exchange value, which for a long time remained classical. They said that value varies as a direct function of demand and as an inverse function of supply” (Gide 1884, 74–5). He pointed out that, in this formula, supply and demand have no intelligible meaning but, unfortunately, he did not explain how contemporary economists have given them one by inferring supply and demand functions from the behaviour of the agents. His presentation of the theory of distribution is a superimposition of arguments taken from the classical tradition and more recent marginalist ideas. It was not until his wage analysis that Gide, in his Cours and in some editions of the Principes,

178 Alain Béraud and Claire Silvant came to discuss marginal productivity as it had been put forward by Johann Heinrich von Thünen and reformulated by John Bates Clark. Although he stressed its interest, he argued that it was not very enlightening. In his view, income distri­ bution is not solely or even primarily determined by economic factors involving individual rationality. Other elements, moral factors, contribute to the determina­ tion of wages, the most important of which are the perception that the workers have acquired of their social value and the means of action that they have found, in trade union and political organisations, to defend their rights. Gide and his col­ leagues had certainly read Jevons, Marshall, Böhm-Bawerk and sometimes even Walras; they tried to incorporate some of their ideas into their analyses. But as their theoretical framework is different, the reference to the notions of marginal utility or marginal productivity has little effect, and this is all the more true as they simultaneously introduce into their works elements borrowed from historicists and institutionalists. Most professors of economics in law faculties did not believe that the analysis of price formation and distribution could be based on study of the rational behaviour of individuals. They therefore made little attempt to build sup­ ply and demand functions by studying utility-maximising or income-maximising behaviour.5 The analysis of crises

Crises were one topic frequently discussed in the publications of these professors. Their contributions were influenced by their reading of Clément Juglar (1819– 1905) and the classical economists. In his Principes (1884, 224–7), Gide began by questioning how Say’s text should be interpreted. To the widely held idea that commodities would be difficult to sell because of overproduction, Say argued that an excess of production should never be feared if the increase in production occurs simultaneously and proportionally in all sectors. He did not assert that there can­ not be an excess of production in this or that industry; however, he argued that one remedy is to stimulate increased production in other sectors: his core idea was that the more abundant and varied the products are, the easier it is to find outlets for them. Crises were therefore an effect of disproportion: too much of one item was produced, and too little of another.6 In Gide’s time, many economists, such as Mau­ rice Bourguin (1956–1910), Mikhail Tugan-Baranovsky (1865–1919) and Arthur Spiethoff (1873–1957) rejected the possibility of a general overproduction crisis (Tugan-Baranovsky 1901; Spiethoff 1902; Bourguin 1904). However, they con­ ceived that a sectoral crisis may contaminate other industries, turning into a gen­ eralised crisis, caused by sectoral imbalances. Crises, Bourguin wrote (1904, 324), “cannot originate from general overproduction; the only excesses of production 5 A final noteworthy contribution by Gide concerns an analysis of associations, particularly in the form of consumer cooperatives (Chapter 8). 6 This does not mean that one should expect some prices to rise when others fall. Assuming that all money prices fall, one must conclude that there remains one good, money, whose quantity did not increase sufficiently.

Tradition and innovation at the turn of the twentieth century 179 that can lead to crises are partial overproduction, corresponding moreover to short­ ages of production”. Albert Aftalion (1874–1956), who had defended his thesis on Sismondi’s economic work (Aftalion 1899), broke with this tradition. Of course, he did not deny that “purchasing power always equals the amount of production, that income, demand and production are equivalent quantities, that a general decline in exchange values is logically inconceivable” (Aftalion 1908, 701), but he intended to demonstrate the theoretical possibility of general crises of overproduction. More precisely, he wanted to show that Say’s market analysis was not incompatible with a general overproduction, that is, with a fall in the general price level. To achieve this, he referred to the principle of diminishing marginal utility: as the quantity of goods increases, their utility decreases. While a general fall in exchange values is unthinkable,7 a general fall in “use values” – in Aftalion’s language, “use value” means marginal utility – is not only possible, but almost inevitable as a result of the increase in the quantity of consumer goods available. If the quantity of money and its marginal utility remain unchanged, the prices of goods fall. As long as the production facilities are not completed, the production of addi­ tional consumer goods cannot be started. The latter are in short supply and prices rise, which stimulates the production of new capital. But when the production facil­ ities are completed, the multiplication of consumer goods leads to a fall in their marginal utility, which causes prices to collapse. Aftalion argued that it is “possible to prove that the fall in prices is not due to monetary causes, but clearly reveals the general decline in the use value of goods” (1908, 702). Jean Lescure (1882–1947) rejected Aftalion’s thesis (1910, 158). To him, overproduction means not only a decrease in values, but also a breakdown of the equilibrium. However, if the reduc­ tion in values is the same for all commodities, the equilibrium will not be affected. From Juglar, these economists first retained a methodological principle: crisis analysis had to be based on a precise study of empirical data, which should not be limited to analysis of aggregate statistics but should look at the specific evolution of various economic sectors. The methods employed remained basic and essentially relied on graphic representations. Aftalion and Lescure took up Juglar’s definition of crisis: it is characterised by the end of price increases. They therefore drew on the observation of price indexes to determine the timeline of crises. Certainly, their thesis was based on what was, for them, empirical truth: “times of price increases are also times of increased production” (Lescure 1912, 469). Despite the increase in production, and therefore in supply, prices rise because the growth in demand, during these periods, precedes that of supply. This time lag leads one to wonder whether the increase in supply is the effect of technical factors, increased produc­ tivity or the consequence of a rise in demand. Finally, they learned from Juglar that prosperity, crisis and depression are successive episodes of the same industrial drama. Even if they continued to refer to crises, French economists considered that

7 Aftalion considered exchange values as relative, so that a general decline in exchange values is impossible.

180 Alain Béraud and Claire Silvant the distinctive feature of economic movement was the cycle’s periodicity, and they sought the origin of this periodicity not in accidental events but in endogenous mechanisms: to use Lescure’s term, they were trying to develop an organic theory of the cycle (1906, 337). However, Lescure and Aftalion differed from Juglar on one essential point. Juglar had developed a monetary theory of the cycle in which the evolution of credit and the structure of bank portfolios played a crucial role. His followers, by contrast, elaborated real theories of cycles. Aftalion built his theory around the con­ cepts of marginal utility of goods and length of the production process: production is cyclical because it takes time to build production facilities. The income received by the producers of a good could arise before the good in question is available for sale. As a result, aggregate income could be different from the aggregate value of the products. For instance, if workers are paid for the work they have done before the good produced is available, aggregate income and expenditure will exceed the production-priced value of the products. The general price level will rise. This is how Aftalion explained the cyclical behaviour of prices. As for him, Lescure (1906) emphasised two ideas: the evolution of profits plays a crucial role in the cycle and the interdependence of industries is such that if a crisis occurs in a par­ ticular sector, it spreads throughout the economy. At the end of the expansionary period, the costs in some key industries rise faster than the selling prices. Although incumbent firms still earn high profits, some new firms make losses because they had to pay high prices for their tools, borrow at high interest rates and pay high wages to hire a workforce which is often of lower quality. The bankruptcy of some of these companies is the cause of the crisis. Money and currency

During the nineteenth century, French economists, but also the directors of the Banque de France, had expressed their reticence towards the Currency School’s interpretation of the quantity theory of money. They often seemed closer to the ideas advocated by the Banking School and they were particularly critical of the way the Peel Act had organised the banking system. This tradition was continued after 1870, at least among the professors in the faculties of law. The idea that money is a commodity and that banknotes should be convertible at a fixed rate in gold or silver was challenged, notably by Gide (1884). According to him, metallic money has no viable future; it is likely to be replaced by fiat money until a system develops where money is entirely scriptural. Not only would such an organisation save the capital and labour spent on producing gold, but it would also be better than metallic money at ensuring price stability. An artificial money, rationally managed according to principles derived from the quantity theory, would be better than the natural money whose value necessarily fluctuates. While Gide, in defence of fiat money, relied on the quantity theory, many Frenchspeaking economists – notably Alfred de Foville (1842–1913) – questioned its validity on the basis of empirical work (Foville 1896). To Foville, it would hardly be possible to explain annual price changes solely by variations in the quantity of

Tradition and innovation at the turn of the twentieth century 181 money. Bertrand Nogaro (1880–1950), in his thesis (Nogaro 1904), developed a radical critique of it. Not only did he reject the idea that price changes are caused by a change in the quantity of money, but he also disregarded the analysis of inter­ national trade balance by classical economists such as David Hume, David Ricardo and John Stuart Mill. For him, the classical theory of international trade is mistaken because it views trade as a barter. If “money breaks the barter”, this is in a specific sense: not only does the intervention of money allow a difference to be established between the value of imports and exports, it makes these two operations totally independent: The exchange value in international trade is no more determined by the recip­ rocal demand for exports and imports . . . than the exchange value of a pair of shoes and a hat, equally priced at 10 francs, is determined by the ratio of the demand for hats from shoemakers to the demand for shoes from hatters. (Nogaro 1904, 55) Departing from Mill’s theory of international values, Nogaro criticised Hume’s and Ricardo’s analyses of balance of payments adjustments. The classical thesis stated that an excess of imports over exports led to an outflow of currency, which in turn led to a fall in prices. Nogaro observed that if the imbalance was minor, it would only cause a change in the exchange rate between the import and export gold points. Nogaro’s main argument was that securities play the role of money (1904, 97): capital flows can compensate for an imbalance in the balance of trade. When he attempted to develop a “realistic theory of money”8 (Nogaro 1906), he first attacked the quantity theory. He especially criticised the specific version given by Albert Aupetit (1876–1944) in his thesis (Aupetit 1901), inspired by Walras. His main critique concerned the dichotomy. Prices express two types of relation: first, an exchange relation between goods and then an exchange relation between goods and money. Thus, variations in the general level of prices would depend on the relationship between the volume of transactions to be made and the amount of circulation. This assertion would be the “logical outcome [of a] theory that bases price variations on need, hence on the supply and demand for the instru­ ment of exchange” (Nogaro 1906, 686). He criticised Aupetit and Walras for their approach to the problem, in which the general price level is determined in a market in which all goods and the stock of money face each other. To Nogaro, the notions of “exchanges to be made”, “desired cash” and the correlative notions of “supply and demand of money” would then be meaningless, and it would be wrong to think that the determination of monetary prices is a process in which first the relative value of goods and then the value of money are determined. In fact, exchange relations only exist between goods and money, and the relative value of goods can therefore be deduced from them.

8 His 1906 article, as the title suggests, aimed to propose a realistic theory, that is, a theory consistent with the facts.

182 Alain Béraud and Claire Silvant Money is in no way an object of supply and demand – apart, of course, from on the foreign exchange market. What needs to be analysed is not the supply and demand of money as distinct from the supply and demand of goods, but the demand for goods by individuals who are holders of money. What needs to be explained is the influence of the money stock on the supply and demand of goods. It was not until later, in 1924, that Nogaro developed this programme. Finally, the professors who emerged in the 1870s in the faculties of law gradu­ ally gained influence at the expense of the liberal group who wrote in the Journal des économistes. At the turn of the century, when the first economics theses were written and a specific competitive exam for economics professors was created, this evolution was almost complete. However, there were hardly any economists in this group whose work had a lasting impact on the development of economic analysis. This relative failure is undoubtedly due to the way in which econom­ ics was introduced into the law faculties, but the question of method was also of importance. The professors often criticised classical and marginalist theories as abstract and accused them of neglecting the lessons of empirical observation. The path they followed proved to be all the more difficult as they only had access to elementary statistical tools to observe facts. It was not until 1928 that the first statistics course was taught in a law faculty by Aftalion. It is therefore not sur­ prising that most of the French-speaking economists who left a legacy in their contribution to economic analysis came from the smaller group of engineers and mathematical economists. 5. Economists, mathematicians and engineers Nowadays, there is little doubt that Léon Walras’s analysis represents the main contribution of French-speaking economists to economic analysis during the period 1870–1914. However, his contemporaries in France were not aware of its importance. One might even have the impression of rejection. Walras was never invited to teach in the country where he was born. The jury who controlled the appointment of professors through the competition of “agrégation” were so short­ sighted that they refused, in the case of Albert Aupetit, or obstructed, in the case of Étienne Antonelli, the access to the professorship of young economists who claimed to be Walrasian. During Walras’s lifetime, law faculty professors generally showed little interest in his work. From 1880 to 1910, Gide was nevertheless his main ally in the facul­ ties, publishing in the Journal des économistes a review of his Théorie mathéma­ tique de la richesse sociale (1883). He involved Walras in the creation of the Revue d’économie politique in 1887 as a mere collaborator, and from then on Walras pub­ lished most of his articles in this journal. But their relationship remained ambigu­ ous, since Gide never understood the relevance of a mathematical demonstration in economics and concluded his 1883 review by wishing that Walras could put his equations into ordinary language. The reception of mathematicians was not much better, as they did not see the value of using mathematics in economic analysis: even engineers like Cheysson and Colson remained reluctant.

Tradition and innovation at the turn of the twentieth century 183 Albert Aupetit

Among the economists who relied on mathematics in their analyses, Aupetit occu­ pied a singular place for two reasons. He was the foremost disciple of Walras, and he was the only one who had not received full mathematical training. In spite of this, he appeared to be a better mathematician than Walras himself. He was the first economist in France to systematically use Lagrange multipliers. He also simpli­ fied Walras’s and Pareto’s analysis of production by introducing a function with substitutable factors. His thesis Essai sur la théorie générale de la monnaie (Aupetit 1901) consisted of a systematic analysis of monetary theory that combined theoretical research and empirical verification. Walras had shown that, if money is considered as a com­ modity, the quantity theory is only roughly verified. Aupetit clarified this conclu­ sion by showing that the effect on prices of a variation in the quantity of metallic money depends on the characteristics of the utility function. To integrate international trade into his analysis, Aupetit, drawing on Pareto, did not rely on the classical theory of the distribution of precious metals but on the law of one price: this led him to assume as an equilibrium condition that the prices of each commodity, expressed in the same currency, should be the same in all coun­ tries. This international levelling of the prices of goods and their services implied that the rates of return must be identical in the various countries. It thus broke with the Ricardian tradition, which considered, based on the hypothesis of immobility of factors, that these rates could even differ at equilibrium between countries. Aupetit admitted that if money is a pure instrument of circulation with no utility of its own, then the prices of goods should be proportional to the quantity of money. But this result is only achieved in static equilibrium: he assumed that the interest rate is equal to the net rate of return. Aupetit’s analysis suggested the existence of a dynamic process: an increase in the quantity of money leads to a decrease in the price of its service, and since commodity prices do not adjust instantaneously, the interest rate falls during the transition phase. We thus end up with the traditional view where a change in the money supply first affects the interest rate and only then prices. The empirical validation of these results raised some problems, which were dif­ ficult to overcome because Aupetit did not have estimates of the money stock and income. He circumvented the difficulty by calculating the gold production which would have allowed prices to remain constant. He then compared the evolution of prices with the gap between this theoretical gold production (ensuring price stability) and the actual gold production: the graphical relation between these two variables seemed to comply with the predictions of the quantity theory. Admittedly, this con­ clusion was fragile, but the important point was that Aupetit was offering one exam­ ple of a method that could be used to check the conclusions of a theoretical analysis. The engineer-economists

Among the economists who used mathematics, the largest group was that of the engineers. Gradually, several schools – the Ponts et Chaussées, the Mines, Poly­ technique – established chairs of economics, and a small but active group of

184 Alain Béraud and Claire Silvant professors ensued, who played an increasingly influential role in the development of economic analysis in France. Walras tried to persuade Émile Cheysson to adopt his views, but their approaches to political economy were too different for any meaningful dialogue to take place. Cheysson was a liberal, who presented himself as a disciple of Le Play and a sup­ porter of social Christianity. Most of his works were empirical studies devoted to the description of family budgets. Among these texts, one stands out, in which Cheysson (1886) advocated the use of “geometric statistics” as a tool for the entre­ preneur to set the best prices. Cheysson’s idea was that the managers of a firm are able to gather sufficient information to draw a curve showing the quantities sold at different prices and a production cost curve. From this, they can determine gross and net product curves, from which they will deduce the optimal price for their product. This method could be employed to determine the wage rate, he argued, based on empirical evidence. Clément Colson

Colson’s work marked a crucial turning point. He was appointed professor in 1892 at the École des Ponts et Chaussées, where he renewed the teaching of econom­ ics. He also taught at the École Libre des Sciences Politiques, then at École Poly­ technique just before World War I. Jacques Rueff (1896–1978), François Divisia (1889–1964) and René Roy (1894–1977) were his students and found in his teach­ ing the starting point for their own researches. The French engineering tradition, which goes back at least to Jules Dupuit, was reorganised and strengthened around him. To do this, it was first necessary to dismiss Cheysson’s ideas on mathematics. Colson’s argument, however, was a curious one: the reason why calculus can be employed to explain human actions is that the law of large numbers applies to what men will do in most cases. Each individual is free to do what he or she wants, but the actions of all obey general laws that mathematics helps to explain. The framework in which Colson developed his analyses is that of partial equilibrium.9 He did not attempt to anchor the demand function in choice theory. This function is decreasing because the need to pay more for a good never increases its demand: if high prices are a cause of attraction for some atypical purchasers, the number of those they exclude is so much greater that this law is absolute. On the other side, a change in price may lead to an increase or decrease in supply. The issue is thus the uniqueness of the equilibrium and its stability. To demonstrate this result, Colson did not invoke the existence of scarce resources or economies of scale. For example, a lower price encourages the seller to increase his offer when he has to sell at all costs to avoid bankruptcy. But if the seller has sufficient liquid assets, he can instead reduce his offer and accumulate stocks. Similarly, a wage cut forces 9 His partial equilibrium analysis was not inspired by Marshall’s developments on the theme. The fun­ damental Marshallian concepts of short and long periods are absent, Colson’s functions do not rely on the same foundations, and his definition of stability is Walrasian, not Marshallian.

Tradition and innovation at the turn of the twentieth century 185 workers to extend their working day to the point of exhaustion in order not to starve. On this basis, he investigated the uniqueness and stability of equilibrium. Despite Colson’s commitment to partial equilibrium, he was well aware of the interdependence between markets, which he illustrated by discussing the relation­ ship between the wage rate and the interest rate. In his view, employment, the quantity of capital employed, wage rates and interest rates are determined simul­ taneously by a system of interrelated equations. However, when Colson (1901, vol. 1) formalised this system, he did so in a model that more closely evoked macroeconomics than partial equilibrium. The other key contribution of Colson belongs to transportation economics (and public economics in a broader sense). He showed that in a monopoly market, a concession was preferable to a public operator. His analysis of tolls (Colson 1890) relied on his reading of Dupuit: he used the surplus theory to show that the intro­ duction of custom duty results in a deadweight loss even when it increases domes­ tic production (1901, vol. 4). He lastly confirmed Dupuit’s views on the need for price discrimination in order to maximise utility. Marcel Lenoir

Polytechnician engineer Marcel Lenoir (1881–1927) published in 1913 his the­ sis, Études sur la formation et le mouvement des prix, in which he used the latest developments in statistics. He devoted this work to the formation and movement of prices; it is a crucial step in the long evolution that led to the emergence of econo­ metrics. Based on Aupetit, he considered that statics (price formation) and dyna­ mics (price movement) relate to two different methods: the formation of prices is made along a logical synthesis of the neoclassical price theories, while the laws of their movement are to be found in statistical observation. Thus, he did not see statistical research as a means of verifying the conclusions of the theory, but as a method of obtaining new findings. His study of price formation is a remarkable synthesis of the analyses on which economists could draw in the early twentieth century. The key point is the com­ bination of the French and English traditions. He used the Edgeworth diagram to explain contract formation between a buyer and a seller and the Marshallian assumption of a constant marginal utility of money to study individual demand functions and to determine consumer and producer profit. Lenoir showed that add­ ing up individual demand functions leads to an aggregate demand function whose characteristics depend on income distribution, and he explained that the convexity of the aggregate demand curve is greater than that of the individual demand curves due to the distribution of income. When the price of a commodity increases, its aggregate demand is affected in two ways: (i) buyers are prompted to substitute other commodities, and (ii) the less wealthy among them may give up purchasing such goods. As this curve is defined assuming constant tastes and economic conditions, all that can be revealed by observation is the shape of the curve or what Marshall called the elasticity of demand. On the producer side, the marginal cost of goods

186 Alain Béraud and Claire Silvant determines their supply of goods. The equilibrium price of a commodity depends on three factors: its supply, its demand and the general economic conditions. These three elements are never fixed and prices follow their variations. This observation, which may seem trivial, was the basis for Lenoir’s central question in any econo­ metric study: the question of identification. Supply and demand curves cannot be observed directly: if a time series of quantities exchanged and prices is available, the path taken can be plotted on a graph, but generally, the graph cannot be inter­ preted as a supply or demand curve. The second part of his thesis, which deals with price movements, starts with a presentation of the concepts of covariation and regression that Lenoir used to study the price evolution of four products: coal, wheat, cotton and coffee. To distinguish between long movements and cyclical variations, Lenoir calculated 9-year moving averages and the deviations of the observations from this average. It was then pos­ sible to interpret price changes as the effect of shifts in supply, demand or general conditions. Lenoir did not attempt to determine a law of supply and demand: he merely referred to the shifting of these curves as possible causes of price evolution. He did not claim to test a theory. On the contrary, he regarded the theory as a means of explaining the evidence he observed. Maurice Potron

The example of Polytechnicien Jesuit Maurice Potron10 (1872–1942) shows how difficult it is for a researcher who has obtained new results to be heard and understood. Generalising the Perron-Frobenius theorem, he showed how it could be used to study the ability of an economy to reproduce itself (Abraham-Frois and Lendjel 2001; Bidard and Erreygers 2016). Oskar Perron (1907) and Georg Frobenius (1908, 1909) demonstrated that if every element, aij , from an irreduc­ ible square matrix A, is positive, the matrix has a dominant eigenvalue, l, which is unique, real and positive, and associated with a positive eigenvector x. One can then write lx = Ax . The positive value l is a simple root of the characteristic equa­ tion A ­ l I = 0. The moduli of the other eigenvalues of A are not greater than l. Frobenius showed that the equations lxi ­ åaij x j = 0

i, j = 1...n

j

held for all positive values of x1 ,..., xn . Potron (1911) generalised this result to the cases where aij are not negative and not all zero. This generalisation was necessary to deal with economic problems, particularly within the framework of input-output 10 Potron published notably two articles with the same title: “Some properties of linear substitu­ tions with coefficients ≥ 0 and their application to the problems of production and wages” (Potron 1911, 1913). Potron’s complete economic works were published in 2004 by G. Abraham-Frois and É. Lendjel. C. Bidard and G. Erreygers later published an English translation of Potron’s works (Potron 2010).

Tradition and innovation at the turn of the twentieth century 187 matrices in which a large number of coefficients are zero because the production of a commodity does not directly require all other goods. In order to apply mathematical results to the economy, Potron first had to define the inputs needed to produce goods or provide services. His solution was different from those of his successors, for example, Wassily Leontief or Piero Sraffa. Rather than talking about goods or products, he preferred to use the expression “out­ comes of work”, which consists of either work or work products (raw materials, machines). The relationship between results and means forms the technical condi­ tions. The various types of work correspond to different social categories (foremen, employees, workers, labourers), which he called administrative conditions. Each social category has its own way of life, which implies the consumption or use of this or that outcome of work (food, clothing, housing, etc.). Once these conditions have been set, we can imagine that the distribution of workers across the various jobs changes, that their social category changes, and that prices and wages also change. Three types of problems can then be identified: (i) Is it possible to assign workers to jobs and social categories in such a way that consumption equals pro­ duction without any worker having to work on non-working days? Potron called any system that satisfies this double condition “satisfactory” (satisfaisant); (ii) Is it possible to determine prices and wages in such a way that prices equate to costs and that, for any worker, the wage corresponding to the maximum work done is at least equal to the individual’s “cost of living”, that is, the value of the basket of goods usually consumed by people belonging to his social category? If so, Potron called the regime “simply satisfactory”; (iii) If the first condition is fulfilled, is it possible that the price of each good covers its cost and that, for any worker, the wage cor­ responding to the work actually required from him is at least equal to the cost of living? If so, then the regime will indeed be “effectively satisfactory”. Thus, in this analysis, the conditions for a regime to be satisfactory – there is no question of optimality – are technical, economic and social. Coefficients aij are not just technical coefficients, but socio-technical coefficients which depend on the way of life of the respective social categories. Actually, one can write three different matrices, reflecting the three previously defined states, according to the definition of coefficients aij . And, to determine whether the regime is satisfactory in the various senses of the term, the dominant eigenvalue must be calculated. The system is satisfactory if the dominant eigenvalue is less than or equal to 1. It should be noted that Potron, unlike the neo-Ricardians later, did not address the question of profits and, in particular, did not question the relationship between the dominant eigenvalue and the rate of profit. Mathematicians

Besides the group of engineers, French-speaking mathematicians of the nineteenth century showed little interest in political economy and regarded the attempts of Cournot, Dupuit and Walras with scepticism. The exceptions are, however, quite notable because their contributions, which were completely ignored during their lifetime, appear today to be fundamental.

188 Alain Béraud and Claire Silvant Joseph Bertrand

The case of Joseph Bertrand, probably the best known, is somewhat confusing. His contributions are remarkably rare and brief: a review of the works of Cournot and Walras (Bertrand 1883), and a short excerpt from his Calcul des probabili­ tés (1889). However, they were, at least for the first one, widely quoted and discussed. On the one hand, he seemed to share the opinion of most of his colleagues. After presenting Cournot’s analysis of monopoly, he concluded that “[his] calculations . . . are not clear . . . the results seem to be of little importance; sometimes, I must confess, they even seem unacceptable” (Bertrand 1883, 503). Cournot’s work was therefore, in his view, understandably neglected. On the other hand, he did make the effort to read Cournot and Walras, and the questions this reading suggested were important. Cournot’s reasoning on duopoly was as follows. Let there be two owners of two sources of the same quality supplying concurrently, at zero cost, the same market (1838). It would be in their interest to determine their production to maximise their overall profit. But this equilibrium is unstable, with each producer having an incentive to modify his production in order to make a temporary profit. To this reasoning, Bertrand objected: With this hypothesis, no solution is possible, the reduction would have no limit; whatever the common price adopted, if one of the competitors alone lowers his price, and if we neglect exceptions without importance, he attracts to himself all sales, and he will double his revenue if his competitor lets him do it. (Bertrand 1883, 503) It has often been pointed out that, in the process described by Cournot, the pro­ ducers fix the quantity produced, whereas Bertrand assumed that they fix their price. Bertrand’s oligopoly is thus contrasted with Cournot’s. Note that both pro­ cesses lead to the conclusion that the situation where the price is equal to the monopoly price is an unstable equilibrium. From this result, however, Bertrand drew an opposite conclusion to Cournot, who argued that this situation could only persist if a formal link existed between both producers: the equilibrium will be achieved when each entrepreneur fixes his production to maximise his profit for a given production of his competitor. Bertrand dismissed this hypothesis as implausible: the competitor’s output is variable. The adjustment process thus leads to an equilibrium where profit is zero. Bertrand’s conclusion was that we must abandon Cournot’s hypothesis that owners, each on their own, seek to max­ imise their profits. If they do so, their profits will be zero. They must therefore cooperate. Bertrand also criticised the Walrasian analysis of price formation (1883, 505). Suppose that the supply and demand curves for a good intersect at a price p. If this price is spontaneously proposed, transactions will be easily completed, each

Tradition and innovation at the turn of the twentieth century 189 supplier finding a buyer and each buyer finding a supplier. If a price p’ > p had been offered, supply would quickly have been found to exceed demand, and prices would have been lowered. Bertrand disagreed. If exchanges are made at price p’, the supply and demand curves are modified: the resulting curves are constantly changing and it is easy to show that the equilibrium price, the one at which they intersect, necessarily varies. Accepting this argument, Walras specified in the sec­ ond edition of the Éléments d’économie politique pure that if the suppliers or buy­ ers do not find a counterparty at the price announced, “theoretically, the exchange must be suspended” (1889, 72). Bertrand’s third contribution is perhaps less well known. It relates to his analy­ sis of a baccarat game11 in his book Calcul des probabilités (1889, 38–42). This game is of particular interest: the outcome does not depend solely on chance but also on the skill of the players, on their ability to mislead their opponent. Bertrand thus took a first step towards what is now called game theory.12 Louis Bachelier

The mathematician Louis Bachelier (1870–1946) had all the characteristics of the unrecognised scholar. After studying under difficult conditions, with a poorly rated thesis, he only became a professor at the University of Besançon at the age of 57. However, the thesis he defended in 1900, Théorie de la spéculation, is the origin of mathematical finance. It contains the starting point of the theory of efficient markets and the premises of the theory of Brownian motion which he developed in a paper published in 1913. Bachelier refrained from “undertaking an analysis of the causes that may affect stock market prices; this research would be futile and could only lead to errors” (1914, 176–7) and he believed that the evolution of stock prices is unpredictable: it obeys the law of chance. He did not seek to dismiss determinism, which he took for granted: according to him, price variations can be attributed to causes, but these are unknown, or worse, unanalysable. It is therefore necessary to reason as if randomness were acting on its own. Giving up the idea of forecasting trends, the object of his research was to determine the law of prob­ ability which they obey.

11 The gambler receives two cards, the banker takes two. The gambler can ask for an extra card or to keep his hand. The banker also has the right to ask for a card, but he knows if the gambler has asked for one and which one he has received. Each card is worth the number of points marked on it, figures are worth 10, the tens not counting in any case: 11 is worth 1. The winner is the one with the highest point. Bertrand’s issue concerned whether, when the gambler has received 5 points, it is advanta­ geous for him to ask for a card. He thus highlighted a strategic interdependence: what the gambler should do depends on what the banker will play and the strategy the banker chooses depends on what he thinks of the gambler’s behaviour. The solution proposed by Bertrand is the following: if the gambler frankly declares his habits from the beginning of the game, he must draw to 5; he should stick to 5 and make the banker believe, if he can, that he is used to drawing at 5. 12 Émile Borel (1871–1956) reproached him for not having studied the case where the players deter­ mine their choice by picking their cards randomly.

190 Alain Béraud and Claire Silvant Bachelier applied three principles: mathematical expectation, indifference and uniformity. Before him, Jules Regnault (1834–1894), in his Calcul des chances (1863), had already stated that, in the stock market: the whole mechanism of the game consists . . . in two opposite possibilities: the rise and the fall. . . . At any time, there is never more advantage to one opportunity than to another; and, in our ignorance of the future effect, it is absolutely immaterial whether we bet for or against . . . whether we buy rather than sell, or sell rather than buy. (1863, 34) This idea was taken up and developed by Bachelier: at a given stage in the market, some speculators expect prices to rise, and others expect them to fall. But, as the equality of supply and demand determines the price, “it seems that the market, that is, all the speculators, must believe at a given moment neither in the rise nor in the fall, since, for each price listed, there are as many buyers as sellers” (Bachelier 1900, 31–2). He expresses this idea mathematically by claiming that the math­ ematical expectation of any operation is zero. Regnault argued that on the stock market: the player is always tempted to conjecture what must happen from what has happened, so that after three or four days of decline, he will more readily believe in a rise the next day, or at other times will see in it, on the contrary, a reason for continuing the trend, although after all there is complete independ­ ence between these various effects. (1863, 38) This idea is probably the origin of what Bachelier (1912, 279) called the princi­ ple of independence: the stock price variations that occur at a certain moment are independent of previous variations and of the price that is listed at that moment. Prices follow a random walk, a random process without memory in which the future depends on the past only through the present. The principle of uniformity states that price volatility does not vary over time. Bachelier (1912, 286) argued that the market has no reason to believe that the probability of a price change of a given magnitude will be different tomorrow from today.13 On these grounds, Bachelier set up the probability distribution of stock prices. Let px,t dx be the probability that at time t the price of a security is between x and x + dx. Bachelier looked for the probability that the market price is listed at z at time t1 + t2, given that this stock price was listed at x at time t1 . According to the principle of compound probability, this probability is equal to the probability px ,t1 dx that the stock price is x at t1, multiplied by the probability that it is z at t, 13 This assumption is not as important as the indifference principle. It simplifies the calculations but if it is not verified, most of Bachelier’s results remain valid.

Tradition and innovation at the turn of the twentieth century 191 given that it was quoted at x in t1, that is to say, pz ­ x ,t2 dz . It is thus possible to

conclude that pz ,t1 +t2 dx = px ,t1 pz ­ x ,t2 dxdz . By an integration calculation, Bachelier showed that the probability that at time t1 + t2, the stock price is z is given by: pz ,t1 +t2 =

+¥

òp

­¥

z , t1

pz ­ x ,t2 dx

Then, Bachelier established that if the principle of uniformity is verified, one solu­ tion (where k is the coefficient of instability) is: px ,t =

e

­

x2 4p k 2 t

2p k t

Thus, the stock price follows a Laplace-Gauss centred normal distribution, at time t. The probability is a function of time: it increases until a certain time and then decreases. To study the distribution of probability followed by the stock prices, Bachelier admits that they are influenced by a large number of unanalys­ able factors. Many scholars before Bachelier had applied mathematics to economics, but the tools they used were well known. Antoine-Augustin Cournot was, in this respect, a typical example. With Bachelier, the situation changed. He introduced new math­ ematical notions to analyse questions that had certainly been addressed by some of his predecessors, such as Regnault, but which had yet to be elucidated. He even wrote that: the theory of speculation has been useful above all from the point of view of pure science. . . . It has given rise to the theory of the radiation of prob­ abilities and the theory of continuous probabilities. . . . If speculation did not exist, we would have to imagine it in order to better conceive the laws of chance. (Bachelier 1914, 177–8) The profusion of discoveries he made, both in economics and mathematics, is astonishing. The originality of his thought was so strong that it is not surprising that it remained misunderstood for a long time. References Abraham-Frois, Gilbert, and Émeric Lendjel. 2001. “Une première application du théorème de Perron-Frobenius à l’économie: l’Abbé Potron comme précurseur”. Revue d’économie politique, 111 (4), 639–65. Aftalion, Albert. 1899. L’œuvre économique de Simonde de Sismondi. Paris: A. Pedone.

192 Alain Béraud and Claire Silvant Aftalion, Albert. 1908–09. “La réalité des surproductions générales. Essai d’une théorie des crises générales et périodiques”. Revue d’économie politique, 22 (10), 696–706; 23, 81–117; 201–29 and 241–59. Aftalion, Albert. 1913. Les crises périodiques de surproduction. Paris: Marcel Rivière. Antonelli, Étienne. 1914. Principes d’économie politique. La théorie de l’échange sous le régime de la libre concurrence. Paris: Marcel Rivière. Aupetit, Albert. 1901. Essai sur la théorie générale de la monnaie. Thesis of Paris Law Faculty. Paris: Guillaumin. Bachelier, Louis. 1900. “Théorie de la spéculation”. Annales scientifiques de l’École Normale Supérieure, 3rd serie, 17, 21–85. Bachelier, Louis. 1912. Calcul des probabilités. Paris: Gauthier-Villars. Bachelier, Louis. 1914. Le jeu, la chance et le hasard. Paris: Flammarion. Benkemoune, Rabah. 2008. “Gustave de Molinari’s bourse network theory: A liberal response to Sismondi’s informational problem”. History of Political Economy, 40 (2), 243–63. Bertrand, Joseph. 1883. “Théorie mathématique de la richesse sociale. Recherches sur les principes mathématiques de la théorie des richesses (Compte-rendu)”. Journal des savants. 499–508. Bertrand, Joseph. 1889. Calcul des probabilités. Paris: Gauthier-Villars. Bidard, Christian, and Guido Erreygers. 2016. “La foi et l’économie: Maurice Potron, pré­ curseur de l’analyse input-output”. Cahiers d’économie politique, 71, 91–125. Bourguin, Maurice. 1904. Les systèmes socialistes et l’évolution économique. Paris: A. Colin. Cauwès, Paul. 1879. Cours d’économie politique, 3rd ed. Paris: Larose and Forcel, 1893. Chailley, Joseph, and Léon Say (eds). 1891–92. Nouveau Dictionnaire d’Economie poli­ tique. (A Supplément was published in 1897). Paris: Guillaumin. Cheysson, Émile. 1882. “Cours d’économie politique professé à l’école libre des sciences politiques. Leçon inaugurale”. Journal des Économistes, 20 (11), 349–75. Cheysson, Émile. 1886. “La statistique géométrique. Méthode pour la solution des prob­ lèmes commerciaux et industriels”. In Emile Cheysson, Œuvres Choisies, vol. I. Paris: Arthur Rousseau, 1911, pp. 187–218. Colson, Clément. 1890. Transports et tarifs, 3rd ed. Paris: Lucien Laveur, 1908. Colson, Clément. 1901. Cours d’économie politique, 7 vols. Paris: Gauthier-Villars, 1915–33. Considère, Armand. 1892. “Utilité des chemins de fer.” Annales des Ponts et Chaussées. Mémoires et documents. 7th Serie, III, 219–485. Cournot, Antoine-Augustin. 1838. Recherches sur les principes mathématiques de la théorie des richesses. Paris: Hachette. Foville, Alfred de. 1896. “La théorie quantitative et les prix.” L’économiste français, 11 April, 451–3; 2 May, 561–3; 16 May, 629–31. Frobenius, Georg. 1908. “Über Matrizen aus positiven Elementen, 1.” Sitzungsberichte der Königlich Preussischen Akademie der Wissenschaften, 471–6. Frobenius, Georg. 1909. “Über Matrizen aus positiven Elementen, 2.” Sitzungsberichte der Königlich Preussischen Akademie der Wissenschaften, 514–18. Gide, Charles. 1881. “La théorie de l’économie politique de M. Stanley Jevons. Compte­ rendu”. Journal des économistes, 16 (47), 179–91. Gide, Charles. 1883. “Théorie mathématique de la richesse sociale de Léon Walras. Compte­ rendu”. Journal des économistes, 23 (9), 444–8. Gide, Charles. 1884. Principes d’économie politique, 6th ed. Paris: Larose and Forcel, 1898. Gide, Charles. 1909. Cours d’économie politique. Paris: Sirey.

Tradition and innovation at the turn of the twentieth century 193 Gide, Charles, and Charles Rist. 1909. Histoire des doctrines économiques depuis les physi­ ocrates jusqu’à nos jours. Paris: Larose and Tenin. Jourdan, Alfred. 1882. Du rôle de l’État dans l’ordre économique, ou Économie politique et socialisme. Paris: Rousseau. Landry, Adolphe. 1901. L’utilité sociale de la propriété individuelle. Thesis of Paris Faculty of Letters. Paris: Société nouvelle de librairie et d’édition. Landry, Adolphe. 1904. L’intérêt du capital. Paris: Giard and Brière. Landry, Adolphe. 1908. Manuel d’économique. Paris: Giard and Brière. Lenoir, Marcel. 1913. Études sur la formation et le mouvement des prix. Thesis of Paris Law Faculty. Paris: Giard and Brière. Leroy-Beaulieu, Paul. 1874. De la colonisation chez les peuples modernes. Paris: Guillaumin. Leroy-Beaulieu, Paul. 1881. Essai sur la répartition des richesses et sur la tendance à une moindre inégalité des conditions. Paris: Guillaumin. Leroy-Beaulieu, Paul. 1890. L’État moderne et ses fonctions. Paris: Guillaumin. Lescure, Jean. 1910. “Surproduction générale ou surproduction généralisée”. Revue d’économie politique, 24, 157–62. Lescure, Jean. 1912. “Hausses et baisses générales des prix”. Revue d’économie politique, 26 (4), 452–90. Lescure, Jean. 1906. Des crises générales et périodiques de surproduction. 3rd ed. Paris: Larose and Tenin, 1923. Molinari, Gustave de. 1849. “De la production de sécurité”. Journal des économistes, 22 (95), 277–90. Molinari, Gustave de. 1884. Évolution politique et révolution. Paris: Reinwald. Molinari, Gustave de. 1893. Les bourses du travail. Paris: Guillaumin. Nogaro, Bertrand. 1904. Le rôle de la monnaie dans le commerce international et la théorie quantitative. Paris: Giard and Brière. Nogaro, Bertrand. 1906. “Contribution à une théorie réaliste de la monnaie.” Revue d’économie politique, 20 (10/11), 681–724. Perron, Oskar. 1907. “Zur Theorie der Matrices”. Mathematische Annalen, 64 (2), 248–63. Potron, Maurice. 1911. “Quelques propriétés des substitutions linéaires à coefficients ≥0 et leur application aux problèmes de la production et des salaires”. Comptes rendus heb­ domadaires des séances de l’Académie des sciences, 153, 4 and 26 December, 1129–31, 1458–59. Potron, Maurice. 1913. “Quelques propriétés des substitutions linéaires à coefficients ≥0 et leur application aux problèmes de la production et des salaires”. Annales scientifiques de l’École Normale Supérieure, 3rd Series, 30, 53–76. Potron, Maurice. 2004. Les œuvres économiques de l’Abbé Potron, Gilbert Abraham-Frois and Émeric Lendjel (eds). Paris: L’Harmattan. Potron, Maurice. 2010. The Analysis of Linear Economic Systems: Father Maurice Potron’s Pioneering Works, Christian Bidard and Guido Erreygers (eds). London: Routledge. Regnault, Jules. 1863. Calcul des chances et philosophie de la bourse. Paris: MalletBachelier and Castel. Say, Léon. 1881. “Le rachat des chemins de fer”. Journal des économistes, 16 (48), 329–49. Simiand, François. 1903–1904. Review of Adolphe Landry’s L’intérêt du capital. L’année sociologique, 8, 572–87. Simiand, François. 1912. La méthode positive en science économique. Paris: Félix Alcan. Société d’Économie Politique. 1880. “Réunion du 5 Juin. Le rachat des chemins de fer et le mode d’exploitation qui en résulterait”. Journal des économistes, 4th Serie, 10 (30), 459–76.

194 Alain Béraud and Claire Silvant Spiethoff, Arthur. 1902. “Vorbemerkungen zu einer Theorie der Überproducktion”. Schmollers Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im Deutschen Reiche, 26, 721–59. Tavernier, René. 1888. “Note sur l’exploitation locale des grandes compagnies et la néces­ sité de réformes décentralisatrices.” Annales des Ponts et Chaussées. Mémoires et docu­ ments. 6th Series, XV, 637–82. Tavernier, René. 1889. “Note sur les principes d’exploitation et de tarification du trafic voyageurs.” Annales des Ponts et Chaussées. Mémoires et documents. 6th Series, XVIII, 559–654. Tugan-Baranovsky, Mikhail Ivanovich. 1901. Studien zur Theorie und Geschichte der Han­ delskrisen in England. Jena: G. Fischer. Villey, Edmond. 1882. Du rôle de l’État dans l’ordre économique. Paris: Guillaumin. Villey, Edmond. 1887. La question des salaires ou la question sociale. Paris: Larose and Forcel. Walras, Léon. 1889. Éléments d’économie politique pure, 2nd ed. Lausanne: Rouge. Vari­ orum edition edited by Claude Mouchot. In Auguste and Léon Walras, Œuvres économ­ iques complètes, vol. VIII. Paris: Economica, 1988. Wartelle, Jean-Claude. 1998. “Yves Guyot ou le libéralisme de combat”. Revue française d’histoire des idées politiques, 7, 73–109. Wolowski, Louis. 1857. “De l’application de la méthode historique à l’étude de l’économie politique”. In Wilhelm Roscher, Principes d’économie politique, 2nd edition translated by L. Wolowski. Paris: Guillaumin, pp. ix–lxxiii.

Part II

Critiques of liberal political economy

8

Prelude II Introduction to the critiques of political economy Gilbert Faccarello

What was called political economy yesterday is well and truly dead. Attempts to resuscitate it will be as impotent as anything else that is attempted to bring a corpse back to life: false science, moreover, that which lets things happen; which begins by abdicating, by putting itself in the wake of the facts, instead of dominating them and imposing its law on them; which makes itself a solvent, instead of being organic; which tells instead of prophesying; which limits itself to the analysis and the inventory of what is; while true science will be the synthesis of what must be. (Pecqueur 1842, iii)

Along with the developments of the various trends of nineteenth-century liberal economic theory, the first appropriate formalisations and the progressive institu­ tionalisation of the field as an academic discipline, a great number of critiques were levelled against political economy. As seen in the preceding volume (Chap­ ters 7 and 9), some criticisms had already been aimed at the free-trade approach. But widespread hostility developed after the French Revolution and the rise of markets and industrial activities. The following chapters present the most relevant developments, which sought to present alternative economic ideas. They are first those expressed by Jean-Charles-Léonard Simonde de Sismondi (1773–1842) and Claude-Henri de Saint-Simon (1760–1825) and his followers, the so-called SaintSimonians who developed some of his ideas in a radical way. Then a series of authors are dealt with, who belonged to the various emerging “associationist” or socialist schools of thought during the first half of the century – namely, Louis Blanc (1811–1882), Victor Considerant (1808–1893), Pierre (1797–1871) and Jules (1805–1883) Leroux, Constantin Pecqueur (1801–1887), Pierre-Joseph Proudhon (1809–1865) and François Vidal (1812–1872), among others. Finally, one chap­ ter deals with three authors who provide a good illustration of different trends in the socialist discussions at the end of our period: Benoît Malon (1841–1893), Georges Sorel (1847–1922) and Adolphe Landry (1874–1956). This part devoted to the critiques of (liberal) political economy concludes with an analysis of some criticisms expressed by another new discipline: sociology – the main authors con­ sidered being Auguste Comte (1798–1857), Frédéric Le Play (1806–1882), Gabriel Tarde (1843–1904), Émile Durkheim (1858–1917) and a member of the Durkheim school, François Simiand (1873–1935). DOI: 10.4324/9780429202407-10

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1. The context outlined Setting the stage

Beyond these authors, however, the critiques levelled at political economy came from very different quarters and were not limited to social reformers, associationists or socialists who thought that the 1789 Revolution had not yet fulfilled all its prom­ ises and that it was high time to work towards the advent of a new society. Some were also expressed in traditional circles like the conservative Catholics hostile to the Revolution, and even in politically liberal circles favourable to the Revolution and to the new forms of political freedom, but very suspicious of the economic and social benefits allegedly brought by free trade. Moreover, in all cases, the critiques, regardless of their origins, cannot be read simply as economic conversations with liberal economists: they were far more wide-ranging, included essential political, philosophical and religious themes and referred to different views of what an ideal society should be. In a nutshell, most of them were characterised by three intertwined features, the relative importance of each of which depended on the different approaches. (1) First of all, there was the conviction that liberal political economy was inap­ propriate and dangerous because, of all the passions that drive men, only one was selected: self-interest. All other passions and sentiments were neglected. Conse­ quently, the morals of interest and utilitarianism had free rein and society was seen merely as a juxtaposition of selfish individuals in a regime of free trade. The material consequences for nations were inescapable: inequality, injustice, economic crises and pauperism. (2) In order to avoid these plagues, society had to be reorganised on a new basis. Stress was put on the action of sentiments and passions other than selfishness, and on the necessity for private and public wealth to proceed together instead of being opposed to each other. In most cases, this aim was supposed to be achieved through “association” – the motto of the time – between the members of a community or country. (3) But this was not suf­ ficient: what in fact was important for most authors and their projects for a just society were morals and even religion – not necessarily an established religion (this was not the case most of the time), but a religious sentiment, expressed in various ways. Two main periods must be distinguished during the century, punctuated by major political events. The first roughly includes the First Empire, the Res­ toration, the July Monarchy and the Second Republic, that is, the first half of the century, marked by two revolutions – the July Revolution of 1830 which put an end to the Restoration, and the 1848 Revolution which caused the fall of the July Monarchy and gave rise to the Second Republic. This hectic period was of great intellectual ferment, what Paul Bénichou ([1977] 2004) called Le temps des prophètes. It saw a remarkable flowering of books, pamphlets and theories, along with lively debates between the various parties, including liberal economists – Pierre-Joseph Proudhon, for example, was published by Guillaumin, and one of his papers came out in the Journal des économistes; and in 1838

Prelude II 199 the Académie des sciences morales et politiques gave an award to Constantin Pecqueur’s book, published one year later, Économie sociale. Des intérêts du commerce, de l’industrie, de l’agriculture, sous l’influence des applications de la vapeur. Critics of (liberal) political economy, also, whether conservative or liberal Catholics, or socialists, sometimes used the same vocabulary, speaking of “exploitation of man by man”, “new feudalism” or “new aristocracy” of indus­ try and money, “proletarian” and “proletariat”, or else “new slavery” to which workers were subjected. The second period includes the Second Empire and the Third Republic and saw instead a rigidification in the positions and an increased aggressivity between them – a kind of trench warfare in part due to the dramatic events of the 1848 Revolution, the forced exile of many protagonists after the coup of Louis-Napoléon Bonaparte and the establishment of the authoritarian political regime of the Second Empire, and finally the tragic events of the Paris Commune in 1871. The content of intellectual developments also changed over time. While open from the start to the ideas developed by foreign authors, the intellectual produc­ tion of the first period was original in relation to the foreign literature. The sec­ ond period, instead, saw a growing influence of foreign ideas and organisations on the French publications, which was a sign of a growing internationalisation of the debates: for example, Catholic authors often took part to the European movement which led to the publication in 1891 of the encyclical letter Rerum Novarum on the condition of the working classes by Pope Leo XIII,1 and socialist authors had grad­ ually to face the formation of a Marxist orthodoxy. Many authors, however, above all socialists, were careful to preserve their links with the developments made dur­ ing the first half of the century, which they often called the French tradition(s) and intended to perpetuate and update. The importance of the religious context

A last important point is in order. To properly understand the debates of the time, it is not sufficient to refer to the hectic political events. The peculiar situation of religion in France must be noted because it played a non-negligible part in the intellectual developments and motivations of the opponents to liberal economists. To put it briefly, the situation was characterised by three major features. (1) The first was a permanent fight of the Catholic Church against Protestant denomina­ tions. During the sixteenth century, the Wars of Religion devastated the country until the 1598 Edict of Nantes – a treaty proposed by King Henri IV – put an end to the hostilities and managed to preserve a space for the Protestants. Nevertheless, Henri’s successors considered Protestants with great suspicion. Intolerance led Louis XIV to repeal the Edict of Nantes in 1685, provoking new persecutions and the emigration of many Protestants out of the kingdom. Protestant denominations were again officially recognised in France during the 1789 Revolution. Religious 1 In 1892, in a new encyclical titled “Au milieu des sollicitudes”, Leo XIII asked the French Catholics to accept the Republican regime. This event was called the “Ralliement”.

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freedom was subsequently redefined by Bonaparte in some clauses added in 1802 to the 1801 Concordat signed with Pope Pius VII. As a consequence, at the begin­ ning of our period, the Protestant Churches were still very weak and, under the Restoration, their action was still hindered by the authorities, especially concern­ ing rights of association and publication. The situation changed significantly with the Second and Third Republics. (2) Second, the French Catholic authorities were divided between Gallicans and Ultramontanes. The controversy was important because it involved the question of the relationship between the spiritual and polit­ ical powers. Gallicanism, imposed on Rome by the monarchy during the Ancient Regime, stressed the relative autonomy of the French Church with regard to the papal power, that is, the intervention of the State in religious affairs, for example, the nomination of bishops. On the contrary, Ultramontanism was in favour of the power of the pope – both regulatory and spiritual – over the French Church. Gal­ licanism prevailed until the Revolution. But Ultramontanism eventually prevailed after the Restoration. (3) The third feature regards the links between the Catho­ lic Church and the political power. During the eighteenth century and until the 1830 July Revolution, the Catholic Church was increasingly contested because of its opposition to Enlightenment and reforms and its close links with the Abso­ lute Monarchy. The climax was reached during the Restoration, when the Church actively participated in the reactionary policy of the monarchy and saw its influ­ ence on the population dramatically decline – thus accentuating a secular trend. And yet, while the official cult was discredited and seemed to draw strength only from mutual support with political authorities, some authors noted a signifi­ cant religious revival in the population. Sismondi did not hesitate to write that “The nineteenth century proves to be eminently religious”, and added: “It is so by choice, freely and consequently in a deeper and more innermost way than all the centuries that came before” (Sismondi 1826, 21) in order to affirm that this revival did not owe anything to institutions. Sismondi’s assertion expressed a notable moment, which occurred in the middle of the 1820s, when three significant papers were published almost at the same time, symptomatic of a deep state of question­ ing and uncertainty as regards religion and the organisation of society. They were written by Théodore Jouffroy (1796–1842), a young philosopher of the school of Victor Cousin (1792–1867), Benjamin Constant de Rebecque (1767–1830), a major liberal political philosopher, and Sismondi himself. Jouffroy’s celebrated paper, “Comment les dogmes finissent” (“How dogmas come to an end”), was published as a supplement in the 24 May issue of the liberal journal Le Globe and caused a sensation. Without mentioning the Catho­ lic Church, it analysed how a religion progressively emerges, establishes itself, becomes an institution with a powerful clergy, loses sight of its original motiva­ tion and finally declines because it authoritatively imposes on the population dog­ mas that have become incomprehensible and meaningless: the cult is thus bound to come to an end because of indifference in the population and the fierce criti­ cism and mockeries it attracts over the years. However, Jouffroy noted, people cannot live without religion and, unavoidably, the destruction of one faith must be followed by the emergence of another. In 1825, the future was still blurred,

Prelude II 201 undecided.2 The following decades, however, witnessed a blossoming of various denominations of which Jouffroy could only have a vague premonition – even if the same year 1825 saw the publication of Saint-Simon’s Nouveau christianisme. Dialogues entre un conservateur et un novateur. Constant’s article, “Du développement progressif des idées religieuses”, was published in 1826 in Encyclopédie progressive, and Sismondi’s “Revue des pro­ grès des opinions religieuses” was a series of three papers published in 1826 in Revue encyclopédique. In a sense, they complemented Jouffroy’s analysis, with their insistence on the negative aspects of institutionalised religions – which only reason in terms of power, are characterised by rigid structures and are enemies of any evolution – as opposed to natural and genuine religiosity, that is, a “religious sentiment” felt everywhere by each human being and a source of continuous posi­ tive evolution and morality. As Sismondi wrote: Let man . . . abandon himself without scruple to the inspirations of his heart which raise him to the Divinity. . . . But he must beware as soon as a man wants to come between him and his God, when a man wants to teach him what he should believe and dares to assert that it is on this doctrine . . . that the mercy towards him of the God of all creatures will depend. This man, who is no nearer to God than himself, is deceiving him. (Sismondi 1826, 351) True religiosity rhymes with liberty. This approach was rapidly shared by a great number of (especially left-wing) critics of liberal economists, who tried to establish alternative religions as part of their new visions of society. The early nineteenth century was thus a period of great uncertainty and question­ ing of received doctrines. As Constant noted eloquently in another paper, “Coup d’oeil sur la tendance générale des esprits dans le dix-neuvième siècle”, published in 1825 in Revue encyclopédique: Politics, literature, philosophy, the exploitation of the material world by the sciences, the need to penetrate the invisible world by religion, . . . all that serves as a basis for physical life, or as an ornament to moral existence, is in an accelerated movement, in an ever more active fermentation. A new order of things is brewing; but, as chaos precedes creation, the fragments of what is crumbling prevent us from distinguishing the edifice that is to rise. (Constant 1825, 663) Through the examination of some significant examples, and as a complement to the following chapters, this Prelude is an illustration of the debates embedded in this peculiar intellectual landscape. It first deals with some early critiques expressed 2 “How will this great phenomenon occur? What particular circumstances will decide its appearance on one day rather than another, in one place rather than another? There is nothing necessary or absolute here” (Jouffroy 1825, 568).

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at the very beginning of the century. It then proceeds thematically, first with the evolution of some Catholic authors, conservative or liberal, and then with some associationist or socialist approaches. 2. Early critiques: Bonald, Staël and Constant As early as the first decade of the century, two kinds of critique were symptomatic of the range of political approaches hostile to free trade, different from that of Gracchus Babeuf (see Vol. 1, Chapter 9) for example. A first attack came, under­ standably, from the Counter-Revolution,3 because its partisans in general were sus­ picious of the liberty symbolised by the new commercial society. In 1810, one of its most prominent political philosophers, Louis-Gabriel-Ambroise de Bonald (1754–1840), wrote a text titled “De la richesse des nations”, in which he opposed the new society based on individualism and competition, and stressed the fact that the phrase “wealth of nations” was misused by Adam Smith in his analysis of com­ mercial society: it made no sense from the point of view of society. Smith, Bonald stated, only dealt with the material wealth of individuals. But the sum of the wealth of all individuals cannot be called the wealth of the nation, if only because a large part of the population does not have access to it: “in all Europe, there is nowhere more destitution than in the nations that we call affluent” ([1810] 1859, 307). More­ over, a nation is something different from the simple aggregation of individuals. Individuals are physical beings, and for them material wealth is the means of their conservation. Society, however, is a moral being and the means of its existence and perpetuation is moral wealth, that is, mores and laws, which give it strength. “Yes, society is a moral body; religion is its health; monarchy its strength; its goods are its virtues” ([1810] 1859, 308). The development of trade and markets ruined the stable hierarchy which used to organise nations both domestically and internation­ ally, and the natural order was turned upside down. The spirit of commerce – the calculation of individual interests – caused the neglect of agriculture; domestic competition and international rivalry transformed economic activities into games of chance, dissolved all personal ties between individuals, and generated conflicts and wars. The foundations of private and public morals were destroyed ([1810] 1859, 313–14). As Bonald wrote in Théorie du pouvoir politique et religieux dans la société civile: With respect to his fellow man, commerce . . . places man in a savage state, such as it can exist within civilised societies, and . . . it naturally allies itself with governments where the laws are only the particular wills of the depraved man. ([1796] 1859, col. 702) More interestingly, a second attack came from the opposite political camp, that of the advocates of the Revolution’s achievements, that is, from the liberal camp 3 On the Counter-Revolution, see for example Gengembre (1989).

Prelude II 203 itself. It was expressed by two writers and political philosophers: Germaine de Staël (1766–1817) – the daughter of Jacques Necker, the Swiss banker and minister of Louis XVI who played an important role in French politics – and Benjamin Constant.4 They were at the centre of an intellectual group known as the “groupe de Coppet” – named after one of Staël’s estates, Coppet, in Swit­ zerland – which included Sismondi among other intellectual figures. In a sense, as regards French intellectual life, Staël, Constant, Sismondi and their friends formed another Swiss connection,5 distinct from the first which was the result of the editorial activity of authors gathered around the Bibliothèque britannique in Geneva (see Vol. 1, Chapter 9) – even if the two were in contact. The fun­ damental problem dealt with by Staël and Constant was the stabilisation of the Revolution after ten years of war and turmoil, both against the claims of the Counter-Revolution (to restore a form of Ancien Régime) and those of the radi­ cals (partisans of a direct democracy, who often referred to an idealised GrecoRoman antiquity). In a manuscript written in 1798 – Des circonstances actuelles qui peuvent ter­ miner la Révolution, et des principes qui doivent fonder la république en France – and echoing the revolutionary debates about the Ancients and the Moderns, that is, different ways to consider politics in Greco-Roman antiquity and in modern commercial societies, Staël asserted: “The liberty of present times consists of eve­ rything that guarantees the independence of the citizens from government. The liberty of ancient times consisted of everything that guaranteed to the citizens the greatest share in the exercise of power” ([1798] 1979, 111–12). The historical evo­ lution of society is irreversible. What the modern citizens seek now is total freedom to earn a revenue in whatever activity they wish, and the peaceful enjoyment of their wealth and life without taking up arms or being disturbed by other citizens or by political turmoil. The problem was thus to secure the new political regime based on liberty and representative government. As is well known, Constant devel­ oped these themes, especially in his Principes de politique, applicables à tous les gouvernements (1806–10) and his celebrated address, “De la liberté des anciens comparée à celle des modernes” (1819). Staël, however, noted that modern citizens were “peaceful egoists” ([1798] 1979, 109), which, in her view, raised important problems for the maintenance of society. If people are left freely to pursue their private activities, she asserted, society goes to ruin because self-interest destroys all social bonds. “Exaltation of self-interest” leads to moral and economic violence (Staël [1798] 1979, 236). In De l’Allemagne (1810), she developed her critique of morals based on self-interest and its philosophical underpinning: sensationist philosophy, which, reasoning in terms of pleasure and pain, brings self-love to the fore, weakens all other senti­ ments and induces human beings to devote all their time and effort to the pursuit of material well-being (Staël 1810, III, 50). True morals are destroyed and “man 4 For more extensive developments, see Faccarello and Steiner (2008).

5 Another Swiss citizen played an important role in the French debates, but within the group of the

liberal economists: Antoine-Élisée Cherbuliez (1797–1869).

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will be no more than a mechanism within the great mechanism of the universe: his faculties no more than clockwork, his morals a calculation, and his religion success” (1810, III, 26). Corrupted men hence equate the just and the unjust, or rather consider them to be part of a game played well or badly. “Finally, individu­ als will come to consider themselves no more than obstacles or instruments, they will loathe each other as obstacles, and regard each as no more than means” (1810, III, 180–1). Yet it is impossible to discard the effect of sensations, although it should be possible to correct it through the presence of morals. Morals are necessary to coun­ teract the corrosive effects of the modern form of liberty, both at the individual and collective levels: “every time that calculation fails to coincide with morals”, Staël insisted, “it is calculation which is wrong” (1799, II, 198). But where do morals originate? “Religion is the true foundation of morality” (1810, III, 205). “Morality, and morality bound by religious opinions, alone gives a complete code for all life’s actions, a code which unites men together through a kind of pact of the souls, an indispensable preliminary for any social contract” ([1798] 1979, 223). Something more than the habits instilled by religion through education, however, is needed to explain why a human being can sacrifice material interests for a moral attitude. The point here, Staël stated, is the very nature of the religious feeling: a “sentiment of the infinite” that every human being can feel individually. “All sacrifices of per­ sonal interest come from this need to place oneself in harmony with this sentiment of the infinite, whose attraction is fully experienced, even if it cannot be expressed” (1810, III, 268). Only this sentiment can induce people to defeat negative passions (1810, III, 331), contain self-interest and maintain society. Constant’s opinion was no different, despite his many statements in favour of liberty and free trade, reasserted in the foreword to his Mélanges de littérature et de politique: I have defended the same principle for forty years: complete liberty, in phi­ losophy, in literature, in industry, in politics. And I mean by liberty the tri­ umph of individuality, in respect both to authority which seeks to govern through despotism and to the masses who arrogate the right to subordinate the minority to the majority. (Constant 1829, vi) “Leave egoism alone. Private egoisms clash with each other; they neutralise one another”, he wrote in his commentaries on Gaetano Filangieri’s La scienza della legislazione. He added, however, that egoism is dangerous when institutions encourage it and destroy all counterweights. “Nature, which has given man selflove for his personal preservation, also gave him sympathy, generosity and pity, so that he would not destroy his fellows. Egoism becomes harmful only when this counterweight is destroyed” ([1822–24] 2015, 251). And this is unfortunately the case in a modern society based on free markets, sensationist philosophy and utili­ tarianism. Like Staël, Constant insisted that calculations in terms of pleasure and

Prelude II 205 pain inevitably lead to moral decay. This is what he stated in his 1826 review of Charles Dunoyer’s L’industrie et la morale: [T]his state of civilisation tends toward . . . good order, rather than moral virtue. However, good order . . . is rather a means than an end. If, to main­ tain it, one sacrifices all generous emotion, men are reduced to a condition little different to that of some industrious animals, for well-ordered hives and artistically constructed huts cannot represent an ideal for the human species. (1826, 421) For Constant, the notion of natural rights is central, because it is independent of any calculation and gives men the sentiment of duty, as he stated against Bentham. The principle of utility “arouses hope of profit in the mind of man, and not the sentiment of duty. But the appraisal of profit is arbitrary; it is the imagination which decides; but neither its error nor its caprice are capable of altering the notion of duty” (Constant 1829, 144). And it is useless to put forth the notion of “interest well-understood” – or “enlightened self-interest” – so often evoked by Jean-Baptiste Say, among others, which was supposed to reconcile self-interest with morality and justice because men would then act according to their long-term interest, avoiding hurting other’s interests and thus possible retaliation. This kind of discourse, Constant stressed, is incompre­ hensible to most people. Self-interest only entails for them an immediate and restrictive meaning. As a consequence, “when you say to them that they must govern according to their self-interest, they understand that they have to sacri­ fice to their interest all opposing or rival interests” (Constant 1826, 422) and the problem remains as before. [T]he word utility, following common usage, puts us in mind of a different idea to that of justice, or of law. Insofar as usage and common sense attach a specific meaning to a word, it is dangerous to alter this meaning. (1829, 143–4) It is thus necessary to keep awake in men sentiments which form a counterweight to self-interest. As for Staël, this is the role of morals, themselves originating in religious sentiment: everything comes from a kind of universal and intimate revela­ tion that everybody can freely feel, independently of any intercession on the part of any clergy or dogma. Yes, without doubt there was a revelation, but this revelation is universal, it is permanent, it has its source in the human heart. Man need only listen to himself, he need only listen to a nature which speaks to him with a thousand voices to be carried invincibly into religion. ([1824–31] 1999, 43)

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Therefore, like Staël’s “sentiment of the infinite”, Constant’s religious sentiment cannot have any precise definition, as he himself admits. If I were accused here of not defining religious sentiment in a sufficiently precise way, I would ask how one defines with precision that vague and profound part of our moral sensations which, by its very nature, defies all the efforts of language. ([1806–10] 2015, 133) But the position of Staël and Constant was nevertheless clear: religious sentiment is a personal feeling, independent of any institutional organisation or clergy which could instead prevent its full development or even destroy it.6 Finally, Constant (1825, 672–3) asserted that a broad diffusion of morals and religion was not unfavourable to production and exchange: are not the countries in which religious sentiment is the most widespread – England and the United States – also the most economically successful? Look around you. Intolerance did what it could to make religion odious. Incredulity did what it could to make it ridiculous, yet religious sentiment is lively everywhere. In England, look at this multitude of sects which make it the object of their most lively ardour and of their assiduous medi­ tations. Yet England is first among European countries for work, produc­ tion, and industry. Look at America . . . America covers the seas with its flag; it devotes itself, more than any people, to the exploitation of physical nature; yet such is the degree of religious sentiment in this region, that often just one family is divided into several sects, without this divergence disturbing the peace or domestic affection, because the members of this family come together in the worship of a just and beneficial providence, coming together like travellers at a destination which they have reached by different paths. As a matter of fact, England and America were Protestant countries.7 Constant’s assertions thus continued an old controversy about the comparative economic effi­ ciency of Catholic and Protestant countries, already present in Montesquieu in a different context.8 6 For Staël, one model of genuine faith was Jean-Jacques Rousseau’s celebrated “Profession de foi du vicaire savoyard” in his philosophical novel, Émile ou De l’éducation (1762). As for Constant, his many developments resulted in his monumental five-volume (and last) work, De la religion considé­ rée dans sa source, ses formes et ses développements, published between 1824 and 1831. 7 Constant was himself Protestant, like Rousseau, Necker, Staël, Sismondi, and also Say and Cherbu­ liez, among others. 8 In Lettres persanes, for example, Letters 114 to 119 exemplify at length the impact of religion on population and wealth. As regards Catholicism, the prohibition of divorce, the celibacy of the priests, the huge mismanaged properties of the Church, and the institution of convents and monasteries were seen as causes of depopulation. The contrast between Protestant and Catholic countries was striking:

Prelude II 207 3. Religion first! Conservative and liberal Catholic thought A strong reaction against liberal economic thought came from the Catholic camp.9 For them, political economy was simply a Protestant ideology and had to be fought on the basis of traditional Catholic values. Attacks came almost at the same time from two circles, which are well represented by two main intellectual figures: JeanPaul Alban de Villeneuve-Bargemont (1784–1850), a conservative, legitimist10 civil servant and politician, admirer of Bonald, and Charles de Coux (1787–1864), a member of the Lamennais group.11 To these two figures, who also symbolise two different Catholic ways of thinking about politics and the economy, later called social Catholicism and liberal Catholicism,12 we can add two other prominent names, who, for different reasons, played an important part in the debates of the time: Louis Rousseau (1787–1856) and Charles-Henri-Xavier Périn (1815–1902). Despite their differences, all shared the same conviction: Catholic theology and morals take precedence over everything else and should shape all behaviour – without, however, infringing upon private property. The labour question is essen­ tial: labour is not a means of production, it is not a commodity, workers should be able to live with dignity. Charity, one of the three theological virtues, must play a predominant role in this process. Villeneuve-Bargemont and Économie politique chrétienne

Villeneuve-Bargemont13 began an administrative career under the First Empire, and continued it under the Restoration. At the time of the July Revolution, he was prefect of the Department of Nord and Councillor of State. As a legitimist,

9 10

11

12

13

“Trade gives life to everything among the ones, but monachism carries death everywhere among the others” (Montesquieu [1721] 1964, 124). In 1856, Pope Pius IX put Coquelin and Guillaumin’s Dictionnaire de l’économie politique on the Index Librorum Prohibitorum – the official list of forbidden books. The Dictionnaire was in good company: in the same year, J. S. Mill’s Principles of political economy was also condemned. A legitimist was a partisan of the elder branch of the Bourbon dynasty, who did not recognise the legitimacy of the 1830 July Monarchy – the new king, Louis-Philippe, being the descendant of Philippe d’Orléans, the younger brother of Louis XIV. For other reasons, some socialists also wrote of Louis-Philippe as the “quasi-legitimate king” (Reynaud 1832b, 15) and his regime as a “quasi-Restoration” (1832b, 19) – a phrase also to be found in Leroux who also spoke of “intrusive monarchy” (Leroux 1832a, 317). Félicité Robert de Lamennais (1782–1854) was an Ultramontane cleric considered in the 1820s as the most brilliant Catholic theologian and a fierce polemicist after the publication of his Essai sur l’indifférence en matière de religion (1817–23) and De la religion considérée dans ses rapports avec l’ordre politique et civil (1825). Robert was the family name. His father added “de Lamennais” (also spelled “de La Mennais”) to his patronymic. “Social Catholicism” is not to be confused with “Social Christianity”, a movement that Protestant authors developed during the second half of the nineteenth century and which was rather socialistoriented. On social Catholicism, see for example Moon (1921), Duroselle (1951) and Misner (1991), and, on liberal Catholicism, Leroy-Beaulieu (1885), Weill (1909) and Prélot and GallouédecGenuys (1969). On Villeneuve-Bargemont, Ring (1935) is still useful.

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he did not accept the July Monarchy and had to leave his position. For a time (1830–31), he represented the Department of Var at the National Assembly and took part to the (failed) legitimist plot against Louis-Philippe organised by the Duchess of Berry. From 1840 until the 1848 Revolution, he was deputy of the Nord to the National Assembly where he made a notable speech in favour of a law restricting the work of children in factories (Villeneuve-Bargemont 1840) – the first important social law of the century. Together with another legitimist, Armand de Melun (1807–1877), he took part in the foundation of Annales de la charité – “Monthly review devoted to the discussion of questions . . . concerning the lower classes” –, the publication of which started in 1845 and which became Revue d’économie charitable in 1860. He does not seem to have been active in the “Société d’économie charitable” founded by Melun in January 1847, but he was a member of the “Société internationale de charité” (also founded by Melun in the same year). Finally, he was also the president of the Institut Catholique, founded in 1839 in Paris. As a French “notable”, however, he did not neglect secu­ lar academic institutions: he was elected to the Académie des sciences morales et politiques (1845), published in the Journal des Économistes, and his book on the history of political economy – Histoire de l’économie politique (1841)14 – was published with Guillaumin. His main claim to fame was his 1834 book, Économie politique chrétienne, for which, as an epigraph, he chose a sentence from Edmund Burke’s 1795 Thoughts and Details on Scarcity: “Patience, labour, sobriety, frugality, and religion, should be recommended . . . all the rest is downright fraud”. The book is a welldocumented, three-volume work which caused a sensation because of its tone, a powerful denunciation of the evil of pauperism and its supposed causes – the policies dictated by political economy – and its proposal to develop a Christian political economy as an alternative approach. The book benefited from Villeneuve­ Bargemont’s extensive field experience: he had been a prefect in a region where the textile industry was developing, he could see the emergence of pauperism and was convinced that it was the consequence of the new industrial system. Destitution, under the sad and harsh new word of paupérisme, overruns entire classes of the population, . . . has a tendency to expand progressively, follow­ ing the very increase of industrial production; . . . it is no longer an accident, but the forced condition of a large number of the members of society. (Villeneuve-Bargemont 1834, I, 28) To document his approach, he sought to gather the greatest possible amount of data and, in this perspective, he asked for information from his colleagues in charge of other départements. This was a pioneering attitude: at that time, documented research on pauperism was just at its beginning, and the great books by LouisRené Villermé, Tableau de l’état physique et moral des ouvriers employés dans les 14 An unauthorised edition was published in 1839 (Brussels: Société nationale).

Prelude II 209 manufactures de coton, de laine et de soie,15 and Eugène Buret, De la misère des classes laborieuses en Angleterre et en France,16 were only published in 1840. It is true that there was already a literature on poverty – for example the successful Le visiteur du Pauvre by Joseph-Marie de Gérando (1820),17 and Tanneguy Duchâtel’s De la charité dans ses rapports avec l’état moral et le bien-être des classes infé­ rieures de la société (1829) – but they had been written from a liberal point of view and were much narrower in scope. For Villeneuve-Bargemont, political economy itself was at the root of all evil, since the industrial system was its work: “we are led to think that this science overestimated itself; that it rather taught the art of the production of wealth than that of distributing it with equity and that, instead of relieving destitution, it has probably contributed to its propagation. This doubt is serious” (1834, I, 30). One basic theme of Économie politique chrétienne was the identification of lib­ eral political economy with “English political economy” – or “the English system” – represented by Smith and Say. This idea was not new. Sismondi had already pre­ sented England as a remarkable example of how a highly civilised country could go astray and make important mistakes in economic policy because of the existence of wrong doctrines. He also stated that while focusing the attention of my readers on England, I wanted to show, in the crisis that she endures, both the cause of our present sufferings . . . and the story of our own future if we continue on the basis of the principles that she followed. (Sismondi 1827, I, xvi) But the criticism was radicalised by Villeneuve-Bargemont: the writings of Malthus and of Sismondi, he stated, “showed that, while the manufacturing sys­ tem in England could enrich . . . the industrial entrepreneurs, this was at the expense of the wealth, health, morality and happiness of the working classes” (VilleneuveBargemont 1834, I, 15). The “English system” was the (d)evil, an expression of the harmful influence of the Protestant religion. While Catholicism had walked firmly but cautiously to the conquest of civilisation through the freeing of the peoples, the progressive emancipation of slaves and serfs, by means of the development of agricultural property . . . Protestantism . . . generated the industrial entrepreneurs or speculators who, . . . basing their profits on the low price of wages, an excessive labour and the 15 Villermé was a physician and social scientist, and a member of the Académie des Sciences Morales et Politiques. His book was written after a long enquiry, at the request of the Académie, to show “with the greatest exactitude the physical and moral condition of the working classes”. 16 In 1840, Buret’s memoir won the Félix de Beaujour prize of the Académie des sciences morales et politiques – a prize to reward “the author of the best dissertation on questions, whose solution would help to prevent or alleviate poverty in different countries, but more particularly in France”. 17 Eleven editions between 1820 and 1844.

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monopoly and concentration of capital, gradually put the working class back under the yoke of serfdom and feudal vassalage from which Catholicism had freed them. Thus, in Protestant states and in nations which later adopted their economic doctrines, entire populations were to fall again under a despotic yoke, but without having the protection of the clergy and the huge resources of charitable and religious institutions as a remedy to their destitution, unlike in the past. (Villeneuve-Bargemont 1837, 25) Villeneuve-Bargemont (1834, I, 57–8, n.1 for example), praising “the beautiful words of Madame de Staël”, took up her criticism of political economy and the modern free-market society: that of being based on a narrow sensationist philoso­ phy which ignored sentiments and ethics. Hence, as in Smith and Say, “a system based on an insatiable self-love and a deep contempt for human nature” (1834, I, 22); “moral and religious considerations” were neglected, “with the consequence that, basing the principle of work and civilisation on a continuous excitement of the needs”, the production of wealth was based on “industrial monopoly” (Villeneuve-Bargemont 1836, 87) – the phrase “industrial monopoly” meaning here that all the forces of society were directed at the extension of factories, indus­ try and commerce, to the detriment of agriculture. The writings of the political economists “contributed to direct capital . . . and the greedy and selfish passions towards the manufacturing industry and, through it, to endless production” (1836, 88). The result was an unavoidable instability of the system, an excess of supply and crises,18 an incredible inequality in the distribution of income, pauperism and the emergence of a “new feudalism”, more oppressive than the former one: the feudalism of money and industry.19 The resulting state of things was unbearable, and violent social reaction was to be expected in England. As for the other coun­ tries, which had not yet reached this point of social disintegration, “it is still time to take another route and to cure . . . the English disease which threatens to infect us” (1834, I, 15). But which route? Two main complementary approaches were proposed to remedy the situation. The first consisted in putting an end to the “industrial monopoly” and thus in redirecting the development of the country in a more natural way, with agriculture as the pivotal sector – all other activities being subordinate to it –, together with a change in final demand, a limitation of needs and a fair distribution of income with decent wages. This first approach was to be accompanied by state intervention favouring public assistance and public 18 Villeneuve-Bargemont (1834, I, 53–4n.) was referring here to Malthus’ Principles of political economy, in which Ricardo was criticised. Moreover, for him, the principle of population was not the cause of pauperism: “the appalling destitution, the existence of which in England was pointed out by Malthus, could more rationally be attributed to the industrial system than to an excess of population” (Villeneuve-Bargemont 1834, I, 9). 19 Tocqueville also wrote of a new aristocracy: De la démocratie en Amérique, Part II, 1840, section 2, Chapter xx, “Comment l’aristocratie pourrait sortir de l’industrie”.

Prelude II 211 instruction, the creation of agricultural colonies, of workers’ associations for mutual aid, of savings and provident institutions, and so on. The second and probably more important solution, in Villeneuve-Bargemont’s eyes, was a nec­ essary moral reform based on religion and charity, without which the abovementioned policy could not really be implemented. This would allow a structural change in economic behaviour, based on the conviction that happiness and wel­ fare require neither continuous material accumulation nor ever-changing needs – an important aspect of welfare being the spiritual development of humanity – and that this change would be favoured by the practice of the main Christian virtue: charity. Let us base . . . the French system on a just and wise distribution of the products of industry, on an equitable remuneration of labour, on the develop­ ment of agriculture, on an industry applied to the product of the land, on the religious regeneration of man, and finally on the great principle of charity. (1834, I, 15) “Industrial egotism will, no doubt, answer: Master, your words are harsh!. . . . To you, maybe. But they are clear and soft to hearts which are not closed to justice and truth” (1834, I, 385–6). The insistence on charity is a basic feature of the Catholic authors of the time. They often opposed charity to philanthropy. In relieving poverty, charity is efficient because it establishes a positive personal link between persons, while philanthropy (of which the English poor laws were the best example) is institutional, blind, auto­ matic and favours the development of destitution – a point of view also shared by many liberal authors. Économie politique chrétienne made an impression on the public and was taken seriously by the new specialised press. Théodore Fix wrote a series of two favour­ able papers in his Revue mensuelle d’économie politique (Fix 1834). Not surpris­ ingly, the Catholic network of influence praised the book. In Revue européenne, for example, François Lallier welcomed a new school in political economy (Lallier 1835). François-Félix de Lafarelle-Rebourguil, in Du progrès social au profit des classes populaires non indigentes, while critical, nevertheless devoted an entire chapter to Villeneuve’s book, stressing its importance for the “charitable or Chris­ tian school” (Lafarelle-Rebourguil 1839, I, 50–72). But some critics also stressed its theoretical weakness. Behind the moral school, do we not already see an attempt to build a Chris­ tian school of political economy, which accuses Chrematistics because, it is said, it is English and, consequently, probably pagan – so that the genu­ ine political economy cannot be but Catholic, apostolic and Roman? In this industrial doctrine, all is focused on charity, on alms; the most important, for industry, is to re-establish a Chaplain general. A most estimable man . . . expresses these strange proposals. (Vincens 1836, 7–8)

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Lamennais, L’Avenir and Charles de Coux

Another criticism of liberal political economy came from a group of Catholic activists who gathered around Félicité de Lamennais.20 At the turn of the 1830s, Lamennais became disappointed by the reactionary policy of the Restoration. Without abandoning his philosophy of history based on “common sense”, he took a liberal turn and proposed an alliance between the Church and the liberals, an approach which had proved successful for the independence of Belgium in 1830. Accordingly, he called for the introduction of some fundamental rights – liberty of conscience, liberty of the press, liberty of teaching – and for the separation of the Church and the State, the Church only recognising the authority of the pope. At the time of the July Revolution, he and some disciples like the clerics Antoine de Salinis (1798–1861) and Philippe Gerbet (1798–1864)21 were joined by a Domini­ can monk, Henri-Dominique Lacordaire (1802–1861), and by some laymen like Charles de Coux (1787–1864) and Charles Forbes de Montalembert (1810–1870). Together, they founded a daily newspaper, L’Avenir – whose motto was “God and Liberty” – and the Agence générale pour la défense de la liberté religieuse, with the joint purpose of fighting for freedom of teaching and to serve as a publishing house. L’Avenir was published from 10 October 1830 to 15 November 1831 and developed progressive ideas which were eventually condemned by pope Gregory XVI (Encyclical Mirari Vos, 15 August 1832). The Lamennais group accepted the judgement but Lamennais himself progressively broke with the Church and moved towards socialism – his Paroles d’un croyant, published in 1834, caused a sensation among a wide readership. The other members of the group went on fighting in favour of Catholicism and they progressively formed an influential net­ work, with journals such as the Revue Européenne, Le Correspondant, the daily L’Univers and, on the impulsion of Gerbet, an intellectually ambitious periodical, L’Université catholique. Recueil religieux, philosophique, scientifique et littéraire – first published in 1836 –, the aim of which was to develop, in each field of knowl­ edge, a “Catholic science”. In 1830, the economist of the group was Charles de Coux22 who, as a child, had been raised in Great Britain where his family emigrated during the Revolution. He returned to France in 1803 but resumed travelling abroad and settled in Paris only in 1823. On 20 February 1830, he wrote a long letter to Lamennais proposing some critical reflections on political economy from a Christian perspective. The same year, he took part in the foundation of L’Avenir, in which he published political papers and a series of two articles titled “Économie politique” (Coux 1830–31) where he stated his project. The Agence pour la défense de la liberté religieuse published his Essais d’économie politique (1832), a short book composed of two

20 On Lamennais, the most comprehensive analysis is Milbach’s (2021).

21 Salinis later became bishop of Amiens, then Archbishop of Auch, and Gerbet became bishop of

Perpignan. 22 On Coux, see Faccarello (2017).

Prelude II 213 lectures which were part of a series organised by the group and titled “Conférences de philosophie catholique”. Lamennais encouraged Coux to develop his ideas. An opportunity presented itself when the Belgian episcopate decided in 1834 to found a Catholic university, first located in Malines and then in Louvain. The chair of political economy was held by Coux until 1845 when he returned to Paris as the director of the Catholic newspaper L’Univers. After the February Revolution, he left L’Univers and, together with Lacordaire, Antoine-Frédéric Ozanam (1813– 1853) and Henry Maret (1805–1884), he became a member of the editorial staff of the newly founded liberal journal L’Ère nouvelle, the organ of the first “Démocratie chrétienne” (but, like Lacordaire, he left some months later). In Malines and Louvain, Coux developed his ideas. However, some of his lectures had an audience beyond his own circle because, under the title “Cours d’économie sociale”, they were published in L’Université catholique from its first issue in 1836 until 1840. L’Université catholique also asked for the collaboration of Villeneuve-Bargemont – who, from 1836 to 1838, gave the journal a “Cours sur l’histoire de l’économie politique”, the origin of his 1841 book, Histoire de l’économie politique – and Louis Rousseau who, from 1840 to 1842 gave a series of papers also titled “Cours d’économie sociale”, the substance of which formed his 1841 book, Croisade du XIXe siècle. Appel à la piété catholique à l’effet de reconstituer la science sociale sur une base chrétienne. Coux, who had connections in Ireland, also collaborated in the new Dublin Review, first published in 1836. Among his papers were “Christian political econ­ omy” (1837, on Villeneuve-Bargemont) and “Saint-Simonism” (1838, on SaintSimon and the Saint-Simonians).23 He criticised Villeneuve-Bargemont’s project of a reorganisation of society on the basis of agriculture as a solution to pauperism: an excess supply of labour, he noted, can exist in agriculture as well as in manufactur­ ing, and “unhappy Ireland is a living proof of the utility, nay more, of the necessity of commercial industry” (1837, 166). As for Saint-Simonianism, he saw it as “a practical proof that incredulity is no preservative against complete degradation of the intellect” (1838, 139), even if Catholics would be satisfied to see “that these innovators . . . were obliged to have recourse to the institutions of our Church, although . . . they disfigured and degraded them” (1838, 140). What was Coux’s project? In his 1830 letter to Lamennais, in his 1832 Ess­ ais and in the lectures published in L’Université catholique, Coux reported the same story. While in England and the United States, he was struck by the contrast between these Protestant nations and many Catholic countries, the best example of which was Spain. The first were wealthy, the second poor. He was shocked by the link which apparently existed between the religion prevailing in a country and the social and economic state of that country: did Catholicism form an obstacle to economic development, while the Protestant faith favoured it? Coux’s faith was shaken because he could not understand how the “true religion” could put 23 A paper also published in French in Revue de Bruxelles (Coux 1839b), to which he added a short historical introduction (Coux 1839a). Young Ozanam also published an interesting pamphlet on Saint-Simon (Ozanam 1831).

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believers at such a disadvantage. It is true, he stressed, that the material conse­ quences of a religion cannot be a proof of its truth – it was the task of apologet­ ics to develop this truth, with totally different arguments. But he thought that God could not have neglected these material aspects, and that consequently the “true religion” should also possess some principles to ensure the prosperity of the community. I knew that the aim of the true religion . . . should not be the temporal hap­ piness of man, but I also understood that it is obliged to ensure it . . . like an additional reward, granted without being promised, because otherwise the society in possession of the absolute truth would not be what it must be: the aristocracy of mankind. (Coux 1830, 81) The important economic problems that first arose in England during the first dec­ ades of the century were a kind of revelation, because they were not temporary, as was first thought, but structural, permanent and intimately linked to the economic system. “Unfortunately, destitution deceived all expectations and thwarted the cal­ culations of the economists: it has grown according to a geometric progression and will end in dreadful chaos” (1830, 81). The arrogant prosperity of the Protestant countries was just a delusion, and it became clear that the economic system at the origin of this delusion contained seeds of self-destruction. Political economy was thus responsible for this situation. “The language of the economists reveals the depth of the social scourge; their teaching made this scourge, since they govern the world. They are the priests of money” (1832, 50). How is it possible to refuse to acknowledge that the industrial school, the school founded by Adam Smith, took a wrong turning . . ., when we look at the present state of England and France? In both countries, amidst appalling distress . . ., there are huge amounts of wealth; but all around a starving mob is rising up. (1832, 55) Examining some main doctrines put forth by economists, Coux rejected the prin­ ciple of population of “the Protestant Malthus”, and, as Villeneuve-Bargemont did later, criticised political economy for its focus on production and neglect of the distribution of income. He also rejected the economists’ “wrong concept of wealth” – which focused only on material wealth exchanged in markets – and their disregard for all non-tradable elements (institutions, sets of beliefs, morals and so on) which are in fact more important and make up the social wealth, without which material production could not take place.24 Yet, while harshly criticising its harmful consequences, denouncing “the outburst of all cupidities” and stating that 24 The liberal economist Charles Dunoyer also developed similar views (Faccarello 2010).

Prelude II 215 men solely led by their self-interest can only join together “as wolves do when they are chasing the same prey” (1832, 84), Coux was forced to accept the central hypothesis of political economy because, as in the Jansenist approach, the basic selfish and maximising behaviour of agents is explained by theology.25 As it is impossible to change it, it could at least be possible to neutralise its effects. In this perspective, Coux introduced the concept of “économie sociale” (social econom­ ics). His idea was to “give political economy what it is lacking”, that is, to include political economy in a larger set of theoretical propositions intended to give it its real meaning – a meaning without which it remains partial and therefore danger­ ous as in the English approach.26 The production of material wealth supposes the existence of society, and society supposes sociability: social economics studies the conditions of this social link. Its object is to determine which form of society is the most capable of securing it, therefore favouring the creation of wealth in a just and stable environment. This link is designated by religion. It is based on a fundamental ethical value: sacrifice. This point “distinguishes fundamentally Christian politi­ cal economy from anti-Christian political economy. The former considers sacrifice as the principle which generates wealth, but for the latter it is cupidity” (1836, II, 161). How should we understand this sacrifice? It is the Christian virtue which puts charity, love for one’s neighbour, at the centre of action, and which makes human beings behave virtuously even to their own detriment. In such a way, a lasting social link is created. Not only is this virtuous behaviour compatible with the mate­ rial prosperity of a nation, Coux stated, it is the only way to achieve it. Any sacri­ fice to the benefit of others certainly impoverishes the person who makes it. But this person in turn receives the benefits of the sacrifices made by others, and in this way the general welfare is increased. If the sacrifices of the Catholic were lost for society, if the hardships he endures, his unselfishness, his charity, his good faith, the purity of his mores, would not turn to the benefit of anybody, we would not have anything to answer to the anti-Catholic economists. But . . . the Christian sacrifice, while finding its principle in the love for God, always . . . turns to the benefit of others, and if it impoverishes those who make it, it enriches others. But we all are the others of others, and, consequently, each member of a Catholic society finds in the sacrifices of the other members a great compensation of his own ones. Nay, he is a hundredfold rewarded since . . . the more the spirit of sacrifice is vigorous, the greater are the social advantages that are divided between all. (1836, I, 93) 25 That is, the Fall of man and original sin: see Volume 1, Chapter 2. 26 It is precisely this correct division of the science between “social economics” and “political econ­ omy”, Coux admits, that the Saint-Simonians could be credited with (Coux 1838, 148). In the first issue of L’Université catholique, the distinction is also clearly stated in Gerbet’s “Discours prélimi­ naire” (Gerbet 1836, 32).

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But what obliges men to adopt such a behaviour so opposed to the nature of man after the Fall? It is, Coux states, not only the belief in a God, but in a “rewarding and vengeful God” who infallibly rewards and punishes men during their eternal life. In a kind of Pascal’s wager, human beings compare their immediate and tem­ poral interest, which is always uncertain, with their eternal interest, which is cer­ tain. They are still led by cupidity, but by “the cupidity for the goods of another life, the craving for an imperishable wealth” (1836, I, 96). Self-interest is always the prime mover, but “an enlarged, inflated self-interest, extended beyond the grave” (1836, I, 280). Sociability is based on this fact. There is no state of nature, no social compact. Only religion matters, a religion based on a revelation because what is just or unjust, good or bad, must be clearly stated from the outset and independent of the actions and opinions of men. The lectures published by Coux in L’Université catholique develop this point of view extensively and propose a typology of societies based on the possible combinations of two elements: what he calls the “legitimate order” (based on reli­ gious beliefs) and the “legal order” (based on political structures). The aim of these developments is to show that Catholicism is the only religion capable of generating genuine and lasting prosperity. The lectures are a work of apologetics, and Chris­ tian political economy is used as a weapon against the Protestants.27 Beyond these statements, the rest of Coux’s proposals are weak. When, for example, he tried to present remedies for the distress of the country, his solutions, based on the func­ tioning of free markets, are insignificant. For example, to increase wages, he stated that the solution consisted in acting on the labour supply to reduce it. And while he was later in favour of the creation of worker’s associations and a reduction of the length of the working day, in his paper on “Économie politique” published in L’Avenir, he traditionally referred to the institutions of the Catholic Church, such as the celibacy of the clergy (which avoids an increase in the population and thus in the labour supply)28 and the religious feast-days (which are public holidays and reduce the quantity of supplied labour) – supplemented by an ethics that holds luxury tastes and goods in contempt (thus reducing the needs of the workers). The point is restated in his 1837 paper in the Dublin Review: The old Dutch East Indian Company, in order to keep up the price of their spices, burned a part of those which they gathered in abundant years. The Church did the same; she consumed a part of the labour of the workmen 27 Coux’s strong ideological flavour and polemical tone were already mentioned by François de Corcelle in his 1833 review of Coux’s Essais d’économie politique. In addition, Corcelle noted that the Essais were often inexact when referring to historical facts. 28 In “De la misère publique, published in Revue Européenne, Louis-Auguste Binaut stated that the only conceivable remedy to the general problem of pauperism was the practice of “the highest theo­ logical virtue”: Catholic celibacy (Binaut 1831). In the following issue of the journal, in “Appendice sur la misère publique”, the editorial staff criticised this kind of position and stated that the evil was not so much in the total increase of the population but in a wrong distribution of it among sectors – and that one important element for a remedy was to let industry return to its natural limits given by the agricultural and non-commercial vocation of France.

Prelude II 217 by the multitude of her religious festivals; and the labourer then sold his remaining working days more dearly than he would have sold the whole year of labour, if he had consented to work all the year: and in the pomp of these festivals were held out to him unexpensive enjoyments, which turned his mind from more costly pleasures. The Church had nicely calculated that the labourer should gain the most and expend the least that was possible. The Catholic economists assert, that the Reformation, by suppressing ecclesiasti­ cal celibacy, has rendered powerless the different clergy which it has created; and that, by suppressing festivals, it has brought into the market that supera­ bundance of labour which is now mistaken for a redundancy of population. (Coux 1837, 197) From Rousseau’s Christian tribe to Périn’s apologia of renunciation

The dissemination of Catholic ideas on political economy benefited from VilleneuveBargemont and Coux’s publications. Other authors, of course, occasionally took part in the debates, with other proposals to relieve pauperism. For example, an anonymous paper titled “Des coalitions d’ouvriers”, published in Revue Europée­ nne in 1834 (vol. 8, n. 31), proposed an association between capital and labour in the form of workers’ participation in the profits of the activities in which they are involved. At the practical level of social policy and charitable action, some groups were very active, first, for example, around Armand de Melun, and, in the second half of the century, around Albert de Mun (1841–1914) (Moon 1921, Duroselle 1951, Misner 1991). But, for our purpose, the most ambitious (though very differ­ ent) attempts were those of Louis Rousseau and Charles Périn.29 Rousseau’s Christian tribes

In L’Université catholique and Croisade du XIXe siècle, Rousseau insisted on the necessity of associations. He had been for a time interested in Saint-Simoniansm and Fourierism but his approach was finally Catholic in the traditional way: noth­ ing positive can be done without a spiritual reform of society, based on Catholic teaching. “The monk is the soldier of unity” (1841, 180). However, in his fight against pauperism, “exploitation of man by man” and in favour of a just remu­ neration of labour, he stated that “one would be mistaken to think that, to solve the philosophical questions related to the organisation of society, it is sufficient to oppose the precepts of Christian morals to the degrading theories of the school of Adam Smith” (1841, 7) – probably an implicit criticism of Coux. These precepts are necessary, but one must go further and act concretely in the economic sphere, respecting and harmonising the two great principles of private property and the 29 On Rousseau, see Touchard ([1968] 1998). On Périn, the (rather hagiographical) book by Fèvre (1903) is still useful – Fèvre was a cleric and a fierce advocate of conservative Catholicism. Three examples of the critical reception of Périn’s ideas among economists are Molinari (1849), Lavergne (1862) and Gide (1882).

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right to live from one’s labour. The aim of a harmonious society, Rousseau insisted, cannot be reached with political action. Focusing on the form of government and the political regime was a blind alley, because it did not deal with what forms the core of society and the social link, the organisation of labour: “political science is radically incapable of founding liberty on justice, and of reconciling justice with industry, and all these constituent elements with social unity” (1841, 39). What is really capable of changing society is an action in the field of production and dis­ tribution, a different organisation of labour based on association: “the new path of salvation for civilisation is . . . the principle of association” (1841, 330), a principle that Christianity is titled to claim as its own (1841, 12). Rousseau recognised that this principle is also advocated by “several philosophical sects” (1841, 330), but in an obscure or extravagant way, as in Charles Fourier’s writings. In the end, we shall plant our philosophical banner between the earthiness of political economy and the Icarian flight of the Phalansterian school; we shall have to argue against heartless bourgeois people and unrestrained poets. To some we shall say that the system in which they believe, by founding public wealth on the antagonism of individual interests, has established in fact the reign of egoism; to others that their moral ramblings, by calling to replace the austere virtues on which the constitution of the family rests by the most revolting promiscuity, would make of society a filthy whorehouse. To the former, we must oppose the principle of charity; to the latter, that of purity – eminently social principles, whose heavenly types are Jesus and m ary. (1841, 22–3) Hence Rousseau’s plan for an association in agriculture, which he called a “Tribu chrétienne” (Christian tribe), of which he outlined the main features (1841, 315–21 and 491–501), stating that the final status could only be decided by the participants. In a nutshell, this “tribe” would be composed of 1,200–1,500 people and work on an estate of 2,000–2,500 hectares. It would associate three kinds of people: the owners of capital, the managerial staff of the productive activities, and the workers – and also some clerics (whose status is not clear among the categories of participants) for the education of children30 and to maintain the moral values of all members. There would be no wage system, but the profits of the exploitation would be shared on the basis of one-third for each category. This community, moreover, would not be strictly devoted to agricultural work, but would also develop indus­ tries useful to its good functioning and the daily life of its members – thus reducing the risks of imbalance between supply and demand. It would also possibly function as a consumer cooperative for its members, with the help of a local currency. Rousseau was aware that this project of a Christian tribe looked modest in rela­ tion to the more ambitious one of an in-depth reform of society. He also admitted

30 At the beginning, the tribe would adopt a certain number of abandoned children and educate them in a Christian way, with the view of forming the future new members of the community.

Prelude II 219 that the beginnings of such an enterprise would not be easy and would require a certain charitable spirit, especially from the providers of land and capital. But he was convinced that the association would be economically profitable in the end and that, together with its moral values, its harmony and the happiness of the partici­ pants, it would induce other people to create similar associations, not necessarily based on agriculture. This progressive movement was supposed to result in social harmony, the “social unity” of the country. It was worth undertaking this fight: it was a new crusade, the “croisade du xixe siècle” (the nineteenth-century crusade) as the title of his 1841 book states. Rousseau tried to collect funds – and, ironically enough, even looked for some government support – but unsuccessfully. He once wrote of Fourier: “Honour to Charles Fourier who founded the social economy! Honour to the alchemists who founded chemistry!” (1841, 11–12). But, was he himself not an alchemist or “unrestrained poet”? Périn’s modern Christian guilds

Another route was taken by Charles Périn, who followed in the footsteps of Villeneuve-Bargemont and Coux. He was a lawyer, professor of public law and political economy at the Catholic University of Louvain, and a corresponding mem­ ber of the Institut de France. He had been a student of Charles de Coux, and in 1845, at the age of 30, succeeded him to the chair of political economy when Coux returned to Paris. He published a lot during his long active life and can be compared to his liberal fellow citizen Gustave de Molinari: their life spans were almost identi­ cal and they were both very active in their respective camps. He started publishing when he was still a student, with a memoir titled “Du progrès des idées religieuses en économie politique” (1839), which set the tone for his future works. But his publications really started in a decisive way in reaction to the 1848 Revolution (Les économistes, les socialistes et le christianisme, 1849, and “Du socialisme dans les écrits des économistes”, 1850). Like Coux, but with a more conservative approach, he was at that time the most economics-minded author of the Catholic tradition. Through his many writings – which include his celebrated treatise De la richesse dans les sociétés chrétiennes (1861, dedicated to Coux), Le socialisme chrétien (1879), Les doctrines économiques depuis un siècle ( 1880), Le patron: sa fonction, ses devoirs, ses responsabilités (1886) and Premiers principes d’économie poli­ tique (1895) – he systematically developed his conception of social Catholicism. This is the reason why he not only fought constantly against liberal economists and socialists, but also criticised liberal Catholics and those who were called Catholic or Christian socialists. He had international connections, especially with the Cath­ olic hierarchy in France and the Vatican and – while not agreeing with it on all points (although he could see a global confirmation of his ideas in it) – he supported the social doctrine of the Church stated in Leo XIII’s 1891 Rerum Novarum31 – 31 On Rerum Novarum, its origins and reception, see for example the papers published on the occasion of the centenary of the encyclical letter in Review of Social Economy (49 (4), 1991) and in Boutry (1997). See also Moon (1921) and Misner (1991).

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especially in L’économie politique d’après l’encyclique sur la condition des ouvri­ ers (1891) and “Le juste salaire d’après l’encyclique Rerum Novarum” (1896) that he appended to the second edition of Premiers principes d’économie politique. Périn shared the harsh criticism levelled at liberal political economy by his predecessors. He continuously denounced the eighteenth-century philosophy of sensationism, which promoted materialism, individualism and anti-religious senti­ ments, and the 1789 Revolution with its democratic ideas, implementation of free trade and destruction of all intermediary bodies between the State and the citi­ zens. For Périn, political economy was the expression of this philosophy, with all its shortcomings. Based on the idea of utility and free trade, basing happiness on consumption, this discipline promoted an economic system based on a continuous excitement of needs and ever-increasing industrial production. It was thus at the origin of the important economic and social difficulties faced by modern societies and favoured the emergence of a new aristocracy – based on money, industry and trade – and a modern form of slavery, worse that the ancient one because industrial­ ists were not committed to maintain the workers in all circumstances. These eco­ nomic and social plagues could not be cured by liberalism: they were inherent to it. Neither could they be cured by socialism because, in Périn’s view, it was a logical consequence of free trade: it shared the same materialistic views and, as a remedy to the disorders generated by free trade, its aim was to submit everything to an allpowerful State – thus destroying private property, all forms of liberty and in the end any incentive to production. Moreover, some theories of liberal political economy also entailed the same outcome: for example, Périn criticised Frédéric Bastiat’s Harmonies économiques and John Stuart Mill’s Principles of Political Economy, asserting that, despite their attachment to liberalism, their theories inevitably lead to socialism because, with their respective theories of rent, they eventually under­ mine private property (Périn 1850). This is not to say, Périn wrote, that every development in political economy is to be rejected outright: “To proscribe political economy because it deals with material interests, the predominance of which is today a danger to the social order, would be to overshoot the mark” and constitute a serious mistake (Périn 1850, 23). Mate­ rial life exists and it is necessary to analyse the laws of its progress. But Périn’s reluctant reference to the positive aspects of the discipline is ambiguous, judging by his imprecations against this “fake science”, and this ambiguity is also to be found in his predecessors. Les doctrines économiques depuis un siècle opens with the statement that his aim, in dealing with the doctrines “taught by economists over the last century”, was “to give a better understanding of the theories and practices against which we have to fight every day” (1880, v). Some historical approaches, however, were of interest to him: as an appendix to the book, he republished his 1858 laudatory review of Wilhelm Roscher’s Principes d’économie politique and of the “Préface” by the translator, Louis Wolowski: “De l’application de la méth­ ode historique à l’économie politique”. For men and society, the genuine good lies in morals and in the realisation of the real spiritual nature of human beings. The good must subjugate the useful, not the other way round. For Périn, like his predecessors, the solution was a moral reform,

Prelude II 221 based on Catholic teachings and their principles: sacrifice (or “renunciation”) and charity. They imply a moderation of the need for material goods and a deep concern for others. Say had written that “moderation in desires, doing without what we do not have, is the virtue of sheep” (Say [1828–29] 2010, I, 514) – but men are not animals, and as God “gave men the possibility of multiplying the things that are necessary or simply pleasing to them . . . it is to contribute to the purpose of our creation to multiply our productions rather than to limit our desires” ([1828–29] 2010, I, 53).32 But Say, who “in his principles, belongs to the eighteenth century” (Périn 1839, 118), was mistaken, and his reference to religion flawed. Because of original sin and the Fall, society would always be divided into two classes, rich and poor. Neither class trusts the other, and each has its own flaws – laziness and depravity for the poor, most of the time the result of depravation, and cupidity and social violence for the rich, exacerbated by free trade. To get out of this state of affairs, the poor should be able to live in dignity, according to their con­ dition, provided that private property is not called into question. “The whole eco­ nomic question boils down to the labour question” (1891, 8). In particular, workers must be paid a “just” or “normal wage”, that is, what is necessary for them and their families to live decently – and not a “current” or market wage determined by the supply and demand of labour. Both workers and bosses should change attitudes and adopt a moral life. But, as for Rousseau, moral exhortations, while neces­ sary, are not sufficient to solve the problem. Something more is needed: the right institutional context, that is, in Périn’s view, association. Workers’ associations of course (mutual benefit societies, mentoring networks, any association based on the principle of mutuality), but bosses’ associations as well, in order for them to gain a better view of markets and possibly coordinate their charity initiatives. However, Périn states, the best form would be an association which assembles both workers and their bosses in their workplace. With this precision: this kind of association, “as Catholics conceive it, far from being egalitarian, is essentially hierarchical” (1879, 38) and it is up to the boss to take the initiative to create them (1886, 144). The boss must follow his “duty of social paternity”, a moral duty towards the employees, in the form of patronage: “there will be no serious attempt to reform our economic order except through patronage” (1886, 156). This patronage must be placed under the banner of religion, and would include, among other things, the religious educa­ tion of workers, an attention to their morality, family life and decent housing, their intellectual and professional development, hygiene in workshops, care and support in case of workplace accidents, promotion of mutual assistance and provident hab­ its (1886, 110–37). It is easy to understand how much self-sacrifice is required on both sides in such a work. The person to whom the patronage is addressed must renounce, to a certain extent, his own will; he must bow his intelligence to a higher intelligence and a more reliable reason than his own; he must make this 32 On these statements by Say, see also Villeneuve-Bargemont (1834, I, 51n and 147).

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admission, which is always so painful to the self-esteem of even the hum­ blest, of his moral inferiority and of the superiority of others. For his part, the boss has no lesser sacrifices to make. He must accept the duty of patron­ age, which will take away his leisure time, which will put him in habitual contact with men who are often rude, sometimes even profoundly vicious; he will have to lower his intelligence to the level of these narrow minds, which are usually stubbornly closed in their prejudices and their ignorance. Sacrifice and renunciation will be necessary on both sides, and in many cases, on the part of the boss, he will have to go to the point of complete self-abnegation. (1861, II, 374–5) This association would be the modern “Christian guild”, not an imitation of the medieval institution, but a guild adapted to the modern context and based on liberty: contrary to what was proposed by some authors like Albert de Mun, there must be no compulsory membership. Mutual trust among all members of the productive community would ensue and the sacrifices made by the boss would result in the workers’ acceptance of their own sacrifices and condition. Finally, in all these processes, the State must not intervene: its role is to secure a legal context for associations and to enact laws to protect the weaker part of society against possible negative actions by the powerful, for example, regulat­ ing the employment of women and children and the maximum working time of men. Like Rousseau and most social reformers of the time, Périn believed in the irre­ sistible force of example. He was convinced that, progressively, such guilds would be successful and eventually be adopted throughout the economy, thus realising his long-life dream of a pacified society under the banner of Catholicism. The guild is the great means of salvation, the supreme remedy for our eco­ nomic difficulties, because it is the guild that will bring about the moral reform of our industrial classes. Through it, the Church will solve the eco­ nomic problem and restore peace to our societies. (1891, 18) But these guilds, in the end, would not be able to suppress market fluctuations and crises, as Périn implicitly admits. They can only mitigate their most nega­ tive effects on workers through the action of associations and the charity of the rich. An unexpected analytical outcome

A final point must be noted as regards the debates about social Catholicism and the multiple discussions which followed the publication of Rerum Novarum. The focus was again put on justice in economic exchanges, accompanied by a revival of some Scholastic vocabulary like “just price” and “just wage”, with

Prelude II 223 particular attention to the latter. A just economy, and a just society, should bring harmony among the participants in all activities, whatever their place in the production processes. It is in these circumstances that Maurice Potron (1872– 1942), a Jesuit, who graduated from the École Polytechnique and was a first-rate mathematician, made an outstanding contribution to economic analysis. In his economic publications, from 1911 onwards, and in order to find a solution to the determination of these just prices and wages in a viable economy, he imagined for the first time an input-output system and used the recently established PerronFrobenius theorem (see Chapter 7, this volume; Bidard et al. 2009; Bidard 2014; Bidard and Erreygers 2016). His contributions remained unfortunately neglected for a long time, probably because he was a self-taught economist, employed a very idiosyncratic vocabulary in this field, published his papers in confidential or mathematical journals and used mathematical tools that very few people could understand. 4. “Cette confuse aurore qui commence à éclairer les ténèbres” The most well-known critics of liberal political economy were of course the many authors usually gathered under the name of associationists, socialists or sometimes communists, to whom the following chapters are devoted (Sismondi was at that time sometimes included in the group). During the first half of the century, these authors formed a constellation of writers with strong personalities, advocating more or less radical economic and social reforms. The vocabulary they used – characterising for example the regime of free trade as a new feudalism, workers as the new slaves, and denouncing “the exploitation of man by man” (a phrase coined by the Saint-Simonians) – was also largely accepted by some Catholics, as follows from the previous pages. Like the Catholics, also, they preferred the phrases “social economics” or “social science” to “political economy”, which appeared to them liberal in essence. There had arisen under the Restoration a kind of empty and subtle science which had dared to take the name of the most beautiful of sciences and which, without heart, eyes or ears, nevertheless claimed to be the rector of society: it was called political economy. Unfaithful to the French school of the end of the eighteenth century which had given birth to it, elaborated in its new form by England, that country of aristocracy and mercantilism, it soon reached in France a degree of vogue and insolence that we can hardly understand today. Its universal principle, its only axiom was free­ dom and competition. Every man for himself, and in the end everything for the rich, nothing for the poor, that is it in a nutshell; liberal in appearance, murderous in reality. Thus, the beautiful name of liberty had become the watchword of the material oppression of the lower classes, of the scholars, and of the artists. This so-called science was the very negation of all social science. (Leroux 1832a, 303)

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But the solutions they proposed were radically different: for them, the happiness of mankind had to be realised in this world,33 not in the afterlife, and the institution of private property had to be questioned in various ways in order, for most of them, to realise a “socialisation of the means of production”, an ambiguous phrase open to different interpretations. Many of them showed a rapid intellectual evolution: some were liberal under the Restoration – and even members of the French branch of the secret organisa­ tion of Charbonnerie (Carbonari), like Saint-Amand Bazard (1791–1832), Philippe Buchez (1796–1865), Jean Reynaud (1806–1863) and Pierre Leroux – then were interested in the ideas of Charles Fourier (1772–1837) and/or Babeuf or SaintSimon and the Saint-Simonians, before finding their own way. In this process, the press played an important part and there was a real flowering of (sometimes ephemeral) newspapers and periodicals published by the various strands of asso­ ciationism (Bouchet et al. 2015). Some of these authors also (like some liberal economists) had a political role during the 1848 Revolution and the short-lived Second Republic, in Parliament or even in government. They could share the view expressed by Victor Considerant, on the third day of the Revolution: “The Republic of 1789 destroyed the old order. The Republic of 1848 must establish a new order”. “Social reform is the goal; the Republic is the means. All socialists are republicans; all republicans are socialists”.34 Some years later, Pierre Leroux could state: “I have carried the Republic into Socialism and Socialism into the Republic; and the union has been so well made and so well cemented, that today Republic and Socialism are appropriate ideas”.35 The motto “Liberté, égalité, fraternité”, which had rather been forgotten since the 1789 Revolution but revived during the July Monarchy, was officially adopted by the Second Republic (Borgetto 1997, Peillon 2018) – at Leroux’s instigation in particular – and formed a kind of intellectual framework for many socialists’ reform proposals. As a consequence, also, many authors had to go into exile after the coup of Louis-Napoléon Bonaparte (2 December 1851) and the proclamation of the Second Empire. During the second half of the century, after the Second Empire and the Paris Commune of 1871, socialist authors generally held more stable opinions and posi­ tions, within more or less recently established institutions (political parties or new disciplines in universities, for example). They benefitted from a rich theoreti­ cal background inherited from their predecessors and from a less hectic political context.36 But they had also to face the emergence of marginalism, and some of 33 This hope gives this section its title: “This confused dawn that is beginning to illuminate the dark­ ness” (Reynaud 1832a, 9). 34 La démocratie pacifique, 25 February 1848, headlines of the evening edition. 35 L’Espérance. Revue philosophique, politique, littéraire, publiée à Jersey par Pierre Leroux, third instalment, October 1858, 170. 36 During the last decades, there has been a renewal of studies on this period. The literature is abun­ dant. See, for example, Haubtman (1982, 1988a, 1988b), Gaillard and Navet (2011), Chambost (2009) and Jourdain (2018) on Proudhon – Beecher (1986) on Fourier – Beecher (2001) on Consid­ erant – Le Bras-Chopard (1986), Peillon (2003, 2021a) and Viard (2007) on Pierre Leroux – Frobert and Drolet (2022) on Jules Leroux – Fourn (2014) on Cabet – Pétré-Grenouilleau (2001), Picon

Prelude II 225 them, like Landry, used concepts made available to them by the new theoretical approach.37 The evolution of the vocabulary

Especially during the first decades of the century, a new vocabulary was emerg­ ing along with the new doctrines. The words socialism and communism were part of these novelties, at least in the modern meanings of the terms. “Communisme” and “communiste”, for example, came from an adaptation of the various legal and social usages of “commun” and “communauté”, widely used during the preced­ ing centuries. But they only acquired a modern political meaning (to produce and consume in common) at the end of the eighteenth century, in the works of the novelist Nicolas-Edme Rétif de la Bretonne (1734–1806), before spreading in the 1830s under the July Monarchy (Grandjonc 1989). In this evolution, an impor­ tant moment had been the publication in 1828 of the book by Philippe Buonarroti (1761–1837), Conspiration pour l’égalité, dite de Babeuf, which rekindled the memory of François Noël-Babeuf (1760–1797)38 – who changed his first name to Gracchus in 1794 – and his project of “communauté des biens et des travaux et des jouissances” (community of property, works and enjoyments): it gave rise to what was called “babouvisme” (Babeufism) or “néo-babouvisme” advocating a first form of modern communism, stated for example by Théodore Dezamy (1808– 1850) in his Code de la communauté (1843). The term “socialisme”,39 by far the most widely used label and therefore less precise, was more recent,40 even if the word had already been employed spo­ radically in the eighteenth century in Italy, France and Germany, but in differ­ ent contexts. In Italy, some conservative clerics, fighting against the expanding jusnaturalist philosophies, which were supposed to make the interests of society prevail over spiritual interests, used “socialismo” and “socialisti” to characterise these tendencies. In France, the political philosopher Emmanuel-Joseph Sieyès (1748–1836) used “socialisme” in the 1780s, together with “sociologie”, as a kind

37 38 39 40

(2002, 2003), Prochasson (2005), Musso (2006, 2010, 2017) and Bourdeau (2018) on Saint-Simon and the Saint-Simonians – Démier (2005) on Blanc – Coste et al. (2017) on Pecqueur – Wernick (2001) on Comte – K. S. Vincent (1992) on Malon – Sand (1985) and Giordani (2015) on Sorel – Pénin (1998), G. Vincent (2002) and Rognon (2012) on Gide – and the more general studies by David (1992), Prochasson (1997), Chanial (2009), Frobert (2014), Bouchet et al. (2015), RiotSarcey (2016), Steiner (2017), Bellet (2018) and Peillon (2018). On the relations between socialism and early marginalism, see, for example, Steedman (1995). On Babeuf, see Volume I, Chapter 9. Grandjonc (1989, 16, 61–2) notes that Babeuf used “commu­ nautiste” once and that Rétif and Babeuf also coined the term “anarchisme”. The word “sociétaire” was coined at the same time by Charles Fourier and widely used by his disciples. See Deville (1908), Grünberg (1909), Bestor (1948), Gans (1957), Claeys (1986) and BrancaRosoff and Guilhaumou (1998). For some commentators, “association” was at that time almost synonymous with “socialism”. This is not entirely true: the preceding pages show that Catholic crit­ ics also proposed associations. Liberal economists ironically replied to socialists that they were also praising associations, in the form of factories and joint-stock companies for example.

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of equivalent for “science of society”. But modern meanings of the word only emerged in the early decades of the nineteenth century, for example, in Great Brit­ ain in the Owenite Co-operative Magazine, which referred to the “communionists or socialists” – The chief question . . . between the modern . . . political economists, and the communionists or socialists, is, whether it is more beneficial that . . . capital be individual or in common? We say it is much more beneficial that it should be in common. (November 1827, 509n) In France, the word “socialisme” was used once in 1831 in a new weekly Protes­ tant journal, Le Semeur, journal religieux, politique, philosophique et littéraire, but with a spiritual meaning.41 It was also used almost at the same time in SaintSimonian circles and in Pierre Leroux’s writings, from which it became popular.42 The liberal economist Louis Reybaud (1799–1879) repeatedly claimed that he was the first to introduce the word “socialisme” into the French language, in an article published in 1836 in Revue des deux mondes. His statement is obviously wrong. Leroux also claimed priority, with more justification since, although he was not the creator of the neologism, he was certainly at the origin of its wide diffusion. This was done, for example, through his celebrated article “De l’individualisme et du socialisme” published in 1834,43 where socialism was opposed to individualism (socialism was opposed to capitalism only later in the century). However, in 1834 Leroux used “socialisme” to designate the authoritarian turn taken by the SaintSimonian approach, in which society was paramount and individuals had almost no rights – not even the right to think freely. Later, in accordance with his own thinking, he conferred upon it a kind of half-way status between individualism and what he then called “absolute socialism” (totalitarianism). The word “indi­ vidualisme” was also a new term. It originated in the 1820s, probably within the ex-Carbonari circles to which Leroux had belonged, where it assumed a positive meaning, and in 1825–26 in the Saint-Simonian journal Le Producteur – but this

41 This happened in an article on “Catholicisme et Protestantisme” (23 November, 94) where it was asserted that individualism, that is, the action of one’s reason, the free examination of doctrines, must lead to socialism: this is probably to be interpreted in the light of what had been asserted in the first issue of the journal, that after the episode of rationalistic philosophy, one should replace the exclusive love of oneself by love for all. The first volume of the journal also included a series of four papers against utilitarianism. 42 Like Jean Reynaud, Leroux participated in the Saint-Simonian movement from November 1830 to November 1831, to which he brought his journal, Le Globe, which, having been liberal until then, became in January 1831 the organ of Saint-Simonianism. 43 In the issue of Revue encyclopédique, de facto published in 1834 but ante-dated October – Decem­ ber 1833. Leroux’s paper was published with the title “Cours d’économie politique fait à l’Athénée de Marseille, par M. Jules Leroux” (94–117). It was republished, with modifications and its new title, in Revue sociale, ou solution pacifique du problème du prolétariat (November 1845, 18–22), and finally in 1850 in the first volume of Œuvres de Pierre Leroux.

Prelude II 227 time with a negative implication: the Doctrine de Saint-Simon linked it with disor­ der, atheism and egoism. A last evolution happened during the second part of the century, with the words “collectivisme” and “collectiviste”: essentially linked to Marxism and certain major trends in social democracy, they mainly referred to a system where the means of production are the property of the State. Needless to say, the meanings of all these terms were open to many adap­ tations by different authors: for example, Malon noted seven different kinds of collectivism in 1887 (1887, 338–41), and nine in 1891 (1891a, 301–306). In this context, and moreover in the midst of incessant polemical exchanges between the authors themselves, things could certainly appear confused. Especially (but not only) among liberals, a clear distinction between the different trends of thought of their critics was not always easy to make, as can be seen, for example, in the list of authors dealt with in the various editions of Études sur les réformateurs ou socialistes modernes by Reybaud,44 or Alfred Sudre’s (1820–1898) Histoire du communisme, ou réfutation historique des utopies socialistes.45 In the Dic­ tionnaire de l’économie politique (edited in 1852–53 by Charles Coquelin and Gilbert-Urbain Guillaumin), Henri Baudrillart (1821–1892) tried to define “Com­ munisme” more accurately compared to the hazy concept of “socialisme”, but in the end referred to the books of Reybaud and Sudre. In the same Dictionnaire, the entry “Socialistes, Socialisme” was written by Reybaud, and passages from Sudre’s book were quoted in several entries. In 1864, the Dictionnaire général de la politique (edited by Maurice Block) had only one entry on “Socialistes, Socialisme”, still written by Reybaud – the entry “Communisme” simply referred the reader to that on “Socialisme”. In 1892, the Nouveau dictionnaire d’économie politique (edited by Léon Say and Joseph Chailley) did the same, but, this time, managed to publish three substantial entries on socialism: “Socialisme”, “Social­ isme chrétien” and “Socialisme d’État”, reflecting in particular the emergence of Marxism and social-democracy in Europe. As for “collectivisme”, it appeared and was widely used in the Nouveau dictionnaire d’économie politique, which noted that the term was recent. Apart from the attempts, sometimes by the authors themselves, to label the different approaches or new systems, another important development in the vocabulary took place during this period. Social critics and reformers used to divide society into two antagonist groups, the rich and the poor, with some vari­ ants. This changed with Saint-Simon and the Saint-Simonians, who opposed those who work (the “national” part of society) and the idle (the “anti-national” part). A decisive evolution happened in 1832, when Reynaud – who, with 44 First edition of the first volume in 1840, of the second volume in 1843. This work, the first volume of which was awarded the “Grand prix Montyon” of the Académie française in 1841, had many edi­ tions in France, and many pirate editions in Belgium. In the seventh edition, 1864, Reybaud even added Auguste Comte and the Mormons to the list. 45 First edition in 1848, fifth edition in 1856. This book was also awarded the “Grand prix Montyon” in 1849.

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Leroux, had left the Saint-Simonians movement – published two important arti­ cles in the Revue encyclopédique recently taken over by Hippolyte Carnot and Leroux: “De la société saint-simonienne, et des causes qui ont amené sa dis­ solution” (a critique of the evolution of Saint-Simonianism under the lead of Prosper Enfantin), published in the January issue, and “De la nécessité d’une représentation spéciale pour les prolétaires”, published in April. In the latter, he introduced a distinction destined to a bright future: that between the bourgeois and the proletarians. I say that the people are composed of two classes distinct in condition and distinct in interest: the proletarians and the bourgeois. I call proletarians the men who produce all the wealth of the nation, who possess only the daily wage of their work and whose work depends on causes left outside of them, who withdraw each day from the fruit of their labour only a small portion incessantly reduced by competition, who rest their tomorrow only on a shaky hope like the uncertain and deregulated movement of industry, and who fore­ see no salvation for their old age except in a place in hospital or an early death. I call proletarians . . . twenty-two million men, uncultivated, aban­ doned, miserable, reduced to support their life with six pennies per day . . . I call bourgeois the men to whose destiny the destiny of the proletarians is subjected and chained, the men who possess capital and live on the annual income it earns them, . . . who enjoy the present to the fullest, and have no wish for their fate of the next day other than the continuation of their fate of the day before and the eternal continuation of a constitution which gives them the first rank and the best share. (Reynaud 1832b, 12–14) This clear-cut distinction, which Leroux adopted verbatim in the August issue of the journal, did not mean, however, that there was an irremediable and violent state of war between the two classes. Most of the time, compromises were thought to be possible and desirable during a peaceful transition to a new social organisation. Finally, a last point is in order. Most of the doctrines developed by critics of liberal political economy were described as utopian. This characterisation was, for example, made by Say’s disciple, Adolphe-Jérôme Blanqui (1798–1854), who, in his Histoire de l’économie polique en Europe, wrote of Fourier, Saint-Simon and Owen as “utopian economists” (1837, II, 322) – a judgement repeated by Villeneuve-Bargemont in 1841 in his own Histoire de l’économie politique. But the phrase “utopian socialists” is above all famous because it was used some decades later by Marxists to oppose the doctrines of these authors to Marx’s alleged “scien­ tific socialism”. Friedrich Engels’s book, Die Entwicklung des Sozialismus von der Utopie zur Wissenschaft (the development of socialism from utopia to science) – in which he summed up this opposition, and essentially made of excerpts from his Anti-Dühring (1878) – was translated into French in 1880 by Paul Lafargue (Marx’s son-in-law), with the title, Socialisme utopique et socialisme scienti­ fique, which accentuated the contrast even more and progressively disqualified for

Prelude II 229 decades our authors in the eyes of many readers interested in socialism and poli­ tics.46 This vocabulary, however, was not new. The phrases “scientific socialism” or “scientific communism”, for example, had already been used for a long time in the course of the debates during the first half of the century (Grandjonc 1989, 231–53). No doubt, authors had a natural inclination to describe their theories as scientific, and those of their competitors or predecessors as utopian. A few authors, however, asserted the need for utopia as a useful guide for action. “We tackle here the issue of principles”, Pecqueur (1842, i) wrote: we seek the formula of what must be, independently of the current envi­ ronment of France or the world. Nothing is more important to us than this exploration of the ideal and even of utopia. If the principles are good, they are to the legislator, to the statesman, to individuals and to societies, what a lighthouse is to the navigators in the seas. . . . To reject the principles is to extinguish one’s lamp in the middle of the night; it is to cut the guiding thread in the dark labyrinth of thought. A few economic and political features

Unsurprisingly, some of the criticisms levelled by socialists (in the broad sense of the term) at liberal political economy are similar to those already noted in the preceding pages of this Prelude. Some others are detailed in the following chapters. The proposed solutions differed according to authors, but they almost all concern the creation of new structures, or associations, with a view to organising work differently and changing workers into associates. Private property was not nec­ essarily to be abolished – provided that it was the result of personal work – but cooperation between workers was generally proposed, in the form of production or consumption or credit cooperatives. “Mutualité” (mutuality) and “mutuellisme” – a term preferred by Proudhon and his followers, meaning an egalitarian relationship in exchanges – were on the agenda. Through specific autonomous associations like mutual benefit societies – or alternatively, for some, the action of the State –, insurance against life’s accidents or sickness, old age pensions, and so on, were also supposed to be developed. To put it briefly, a system of conscious and fair cooperation was planned to form a new economic and social relation, replacing the unregulated market and its negative consequences. In this process, modern sci­ ences and technologies were generally praised as useful tools to achieve social ideals – as Pecqueur wrote in a striking formula, “it had been foreseen that liberty and equality would move around the globe; but no one had said that they would do it by railway” (1839, II, 290). As an introduction to the subsequent chapters, a few additional characterisations must be stated, although very briefly. A first feature is the (sometimes neglected) importance attributed by many authors to the questions of banking and credit. During the first half of the century, 46 For an interesting reflection on the concept of utopia and the characterisation of Marxism as utopian, see Sorel (1899, 1910).

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the French banking system was obviously under-developed and the object of criti­ cism from all corners, socialists included: a new system of banking and credit was therefore thought necessary by social reformers for the achievement of their pro­ jects, in order to finance production in an efficient way and, possibly, thanks to a better distribution of credit, avoid discrepancies between supply and demand. In this context, the plan of a reorganisation of the banking system by the Saint-Simonians is a typical example of this approach, as is, in a radically different conception, Proudhon’s Banque du Peuple. Banking and credit were also one of Pecqueur’s significant concerns. An overlooked episode, which happened in 1838, is worth reporting in this context. André de Ripert-Monclar (1807–1871) – a legitimist like Villeneuve-Bargemont47 – had a project to launch a new bank called “Omnium. Association de crédit général”, which was supposed to remedy the shortcomings of the existing banking system and particularly of the Banque de France, which only had activities in some large cities – many producers all over the country could not find adequate credit. The Omnium was supposed to create a large hierarchic network of banking establishments, bringing credit facilities to the smallest places in France, having some branches abroad and issuing domestic “effets de circula­ tion” (circulating instruments) – and “effets de change” (exchange instruments) for the needs of foreign trade – both bearing interest and payable at any branch of the institution. The issuing of these credit instruments, moreover, would be based on a large variety of collaterals, including commodities and, according to some interpretations, ownership titles of land. It was also supposed that the abundance of credit would lower the interest rate, and that the reliability and soundness of the collaterals could cancel the risk of insolvency of the bank and allow it, in case of an economic crisis, to expand its issuing instead of contracting it. This was in a sense a partial revival and adaptation of the ancient projects of Land Banks, including John Law’s initial plans. The Omnium, largely advertised in the press, aroused a curious craze among some reformers from different corners. Pecqueur wrote a laudatory article in volume XV, 1838, of La France littéraire, Villeneuve-Bargemont (who was a member of the Provisional Council of Omnium) wrote a series of two positive articles in La revue du XIXe siècle (19 and 26 August 1838) and even Lamennais published an enthusiastic paper in Revue des deux mondes in the same year (1 Sep­ tember 1838), in which he stressed the progressive aspect of the project: any sound property could become money, production and employment could increase, and the working poor themselves could obtain credit at a low interest to develop their own activities, with the result that the terrible gap which existed between the exces­ sive wealth of some and the excessive poverty of others could be progressively reduced. Another feature regards the structure of the future economy, that is, the defi­ nition of what is to be achieved. This question is, however, intimately linked to another important one: that of the transition period, that is, the way in which a capi­ talist economy could be transformed into a “socialist” one. The specification of this 47 Like him, he took part in the (failed) legitimist plot against Louis-Philippe organised by the Duch­ ess of Berry.

Prelude II 231 transition and the definition of the final state of things were certainly the Achilles’s heel of many theories, which were confused on one or even both of these points. Two extreme positions can be noted: at one end of the theoretical spectrum was Proudhon’s position, and at the other end, Pecqueur’s. Proudhon insisted on certain means to be used to change society – associations, “mutuellisme” – but also on the fact that describing the future society was almost impossible and should certainly not be attempted beforehand: the workers would themselves invent the new social system through the progressive development of “mutuellisme”. I do not have any system, I do not want one. . . . The system of humanity, we will know it only at the arrival of humanity. I do not care about the goal. Call it a community, a phalanstery, or whatever you like: I do not care about that. I tell you I am looking for means. . . . Let humanity go wherever it wants. . . . What interests me is to recognize its path, and, if I can, to pave it. ([1849] 1869, 54) For Pecqueur, instead, while the aim to be achieved in the future was defined, the means to be employed remained mainly unknown or uncertain to the theoretician whose forecasting ability is necessarily limited: they depend on the state of the evolution of societies and the available knowledge, and are likely to be updated and changed (Pecqueur 1839, xv and 132). As for the means that can successively lead the peoples towards the perfect realisation of the ideal . . . no one can predetermine them; for it is the work reserved, the share of successive generations. . . . It is thus necessary to care­ fully distinguish between the social science speculating on what must be, apart from times and places, and the social science becoming social art, that is to say, falling within reality and coming to seize the facts. (Pecqueur 1849, 12) The position taken by authors also depended on another question: would this tran­ sition be peaceful, or would a violent revolution be necessary? The answer had implications for the nature of the future society. A peaceful transition was open to many different schemes leading progressively to the associated workers’ owner­ ship of the means of production, while a revolution was most of the time intended to lead to an immediate expropriation of the bourgeoisie and a collectivisation of the means of production in the hands of the State. During the first decades of the century, only a minority of authors proposed a violent, revolutionary way to change society: the 1789 Revolution, and in particular the episode of the Terror, was a model to follow for the members of the Babeufist movement, for example, and a few activists like Auguste Blanqui (1805–1881) – Adolphe-Jérôme Blanqui’s younger brother. But, from the late 1870s onwards, with the diffusion of Marxism, the doctrine of the class struggle and the perspective of the dictatorship of the proletariat (not to speak of the catastrophist view of an automatic final collapse of capitalism under the pressure of its own internal contradictions),

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the idea of a possible successful proletarian revolution rapidly gained momentum among French socialists who, influenced on this point by German social-democ­ racy, also subscribed to its orthodox but hazy Marxist economic programme.48 Authors who developed original progressive ideas for a new society, however, – that is, the Saint-Simonians, Jean Reynaud, Pierre Leroux, Constantin Pecqueur, Philippe Buchez, Étienne Cabet (1788–1856), Victor Considerant, Louis Blanc, Pierre-Joseph Proudhon, Charles Gide (1847–1932) among others – rejected the idea of a revolution. They proposed a peaceful transition protecting the liberty of the citizens who should not be dispossessed of ownership of the means of produc­ tion and submitted to an authoritarian State. In their eyes, and to various degrees, the creation and multiplication of associations could be progressively expanded all over the country. “It is through the principle of reciprocity”, Proudhon wrote ([1848] 1868, 130), “that we will arrive without communism, without agrarian law, without terror, with the free will of all citizens, to the satisfaction of the bourgeoi­ sie as well as the proletariat”. Leroux dismissed all opinion “which would tend to make the State intervene in the formation of a new society”. This society had to be “realised by the individual efforts of the citizens escaping from the nothingness of individualism and converging through attempts at associations of all kinds”:49 the action of the State was not to be rejected, but had to be limited to the creation of an enabling environment for these efforts. Moreover, it was recognised that the forma­ tion of this new society would take a long time. “For us, who do not believe in sud­ den and miraculous transformations, but in continuous progress”, Leroux wrote, “we can only resort to the successive progress of legislation” (1832b, 260). “All the steps must be progressively crossed, and to want humanity to make a great leap, to throw it without transition into this distant goal that it only glimpses” would be to ignore the nature of progress and evolution (Reynaud 1832a, 11). More than five decades later, Gide stressed the same principle. Those who tell you that the existing economic order can be changed in no time at all are wrong or deceive you. When it comes to a political revolution, 48 Gide ([1886–1904] 2001, 82 & sq.) described the way in which the collectivist Marxist approach imposed itself among French socialists and changed the goals of the movement. The new goal has completely changed: it is no longer the one we knew and which is summa­ rised in the formula: “the land to the peasant, the factory to the worker”; it is the one expressed in this other formula: “the land and all the instruments of work to society, to the community”. The public often confuses these two formulas: in reality, they are completely opposite. The first formula is the property of the instruments of production conferred on all those who use them; the second is the property of these same instruments taken away from all individuals to be attributed to an abstraction called the community. ([1886–1904] 2001, 87) On the reception of Marx and Marxism in France, see, for example, Bellet (2018) and the further bibliographical guidance supplied there. Cahen (1994) deals with the reception of Marx by the French liberal economists. 49 Speech to the Assemblée Nationale, 30 August 1848. In Compte rendu des séances de l’Assemblée nationale, vol. 3, Paris: Imprimerie de l’Assemblée nationale, 1850, 620.

Prelude II 233 it is possible. . . . But when it is a question of replacing the whole economic organism by a new one, it requires the work of a long preliminary elabora­ tion, similar to that slow and silent work . . . which makes the coral islands emerge from within the Pacific Ocean, by an invisible and uninterrupted push. (Gide ([1886–1904] 2001, 123) For a minority of authors – Cabet and Considerant for instance – the example of small voluntary communist communities – a “realist” adaptation of the model of the Fourierist phalanstery – could be successful and would induce many others to follow their example. For others, by far the most numerous, the best way was first thought to be the creation of production cooperatives, which would progres­ sively conquer all branches of production, exchange and credit. A few attempts, fostered by Buchez (Cuvillier 1922), had been disappointing and, moreover, this perspective was threatened by the criticism that such cooperatives would need too great amounts of capital to meet the requirements of modern industrial production; would still have to operate within competitive markets and be deprived of conver­ gent interests; and would not, in the end, fundamentally change the status of work­ ers. This is the reason why, during the last decades of the century, the focus was centred on consumption cooperatives, the first task of which would be to establish large wholesale stores and operate large-scale purchasing to the benefit of their members. The idea was especially developed by Charles Gide and the (Protes­ tant) École de Nîmes.50 Consumer cooperatives, Gide argued, would be successful because they act for the common good and are not opposed to each other. But they had to follow certain precise rules: those developed by the British model of such institutions, the Rochdale Society of Equitable Pioneers (established in 1844). Two rules, in particular, were of major importance: (i) to sell commodities for cash and not for credit to avoid a structural indebtment of the workers, and (ii) to set prices higher that the cost prices in order to obtain a benefit which would allow invest­ ment and pay at the end of the year a certain sum of money to the members of the association, thus favouring savings habits. Moreover, the association was not only supposed to develop the moral attitude of its members, their instruction and the management skills of some of them. They also had to expand through investment, gradually buying the factories which produce the final commodities needed by its members, integrating them as industrial production cooperatives – Gide was convinced of the economic efficiency of small units of production. Finally, they also had to acquire farms and land and thus integrate agricultural activities into 50 The so-called École de Nîmes was a Protestant cooperative movement established in the late 1870s in Nîmes, and part of the wider Protestant movement of Social Christianity. The two main cofounders were Édouard de Boyve (1840–1923) and Auguste Fabre (1833–1922). Gide joined the movement in 1885: his main writings on cooperation are reprinted in Gide ([1886–1904] 2001) and ([1904–26] 2005). On Gide and the École de Nîmes, see Pénin (1998) and Baubérot et al. (1995), and more specifically, on Gide’s Protestant ethics in relation to association and cooperation, see Baubérot (1995), Vincent (2002) and Rognon (2012).

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the scheme. In a word, such an association would almost amount to a vertically integrated sector. Over time, the growth of the association and the multiplication of such structures would transfer ownership of the means of production into the hands of the consumers and thus manage a peaceful transition to a “cooperative republic” (Gide [1886–1904] 2001, 79–145).51 Benoît Malon did not believe in Gide’s “generous optimism”. While admitting that the consumption cooperatives are more efficient than the production coop­ eratives, he denied that they can multiply to the point of reorganising production and society in a socialist way (Malon 1892, 238). Nevertheless, he believed in the dynamics of associations, but thought that the action of the State was necessary in this respect. Like his Belgian friend César De Paepe (1841–1890),52 his approach was a kind of collectivism, both at the level of municipalities and of the State: politi­ cal authorities were supposed to obtain the means of production and grant their use to associations of workers in all fields of production and exchanges, with, each time, a clear specification in order to preserve the general interest. But how to be in a posi­ tion to carry out this ambitious task? Malon did not discard the possibility that a vio­ lent revolution would allow socialists to seize power. But revolution only take place “at certain moments of crisis, rare enough in the history of peoples” (1891b, xix). Revolutionary explosions, which are in short only evolutionary crises, are . . . beyond the intervention of the [political] parties; they break out in their own time and all we can do is to prepare ourselves for them. In the meantime, the capitalist machine crushes its victims. (1891b, xix) Such events remain “uncertain and painful! In addition to the irreparable sacrifices of human lives . . . one must always count, in revolution, with the long, inevitable and terrible crisis of transition and general misery, during which everyone suffers”

51 In 1888, Gide stated that association was a natural law, verified in astronomy, physics and in animal life as well ([1886–1904] 2001, 110–15). Almost at the same time, in the context of the debates about the idea of a struggle for life as a general law of evolution, Social Darwinism was qualified with similar arguments. One significant example is that of the celebrated geographer and anarchist Élisée Reclus (1830–1905). With his Russian friends Pyotr Kropotkine and Lev Mechnikov – them­ selves geographers and anarchists – he accepted Darwin’s view of the struggle for life provided that it is complemented by the principle, also envisaged by Darwin, of cooperation or “mutual aid” – a theme also considered by the anthropologist and demographer Arsène Dumont (1849–1902). Mutual aid, it was stated, was as general as the struggle for life, and proved by science: the win­ ners of struggles are not necessarily the strongest but those who practice mutual aid. Kropotkine’s Mutual Aid. A Factor of Evolution (London: W. Heinemann, 1902) – a collection of previously published essays, and perhaps the most well-known expression of this idea – was in part based on the observation of animal life. The book was translated into French in 1906 (L’entr’aide. Un facteur de l’évolution, Paris: Hachette). 52 Both of them – but De Paepe above all – had been active in the first International Working Men’s Association (moreover, Malon had been a communard). Some of De Paepe’s writings were repub­ lished after his death (De Paepe 1895). On De Paepe, see his obituary by Malon (Malon 1891c) and his biography by one of his disciples (Bertrand 1909). See also Droin (2015) and Whitham (2019).

Prelude II 235 (1891b, xvi–xvii). Finally, a revolution does not by itself solve everything and is just the starting point of a long process: “we will not change overnight from the prevailing individualistic society to a collectivistic society” (1883, 296). This is the reason why Malon opted for a reformist policy of transition – “But how much we would prefer the peaceful solution!” (1891a, 402) – that is, active participation in the political life of the country (1891a, 32) and, in municipalities or in parliament, the promotion of measures which would really change the life of workers and the structure of the economy, and form a gradual transition to socialism. The second volume of his last work, Le socialisme integral. Deuxième partie. Des réformes possibles et des moyens pratiques (1891b) sets out in detail some such measures. The role of morals and religion

The very title of Socialisme intégral (integral socialism) allows us to stress a final point that is important for understanding the approaches of the main French socialist writers: socialism should integrate all aspects of the human condition. This means that, as it was usually interpreted by Marxists who exclusively insisted on the class struggle and the economic side of the problems, collectivism is a reductionist view of socialism which was thus “amputated of all the sentimental impulses, of all the philosophical and fraternal aspirations which had been half of its strength” (Malon 1891a, 26). As important as it is, the economic side of the social question is only one aspect of the problem. It depends itself on the development of the workers’ moral forces (1891a, 10),53 on “the law of solidarity which is to the moral and social order what the law of attraction is to the physical order” (1891a, 44). Socialism refers not only to economic justice and social change, “it is also a mental regeneration, that is . . . the integral renovation of progressive humanity entering a new cycle of higher civilisation” (1891a, 11). For the establishment and maintenance of the new soci­ ety, “a new faith” (1891a, 41) is needed.54 As each civilisation has an appropriate, transient religious form corresponding to it, Malon states, socialism will also have one.55 “To the religious sentiment [‘sens religieux’] properly speaking, it [social­ ism] substitutes the social sentiment [‘sens social’]; to the cult of an abstract entity, the cult of humanity” (1892, 178), “the love for one’s fellow men” (1891a, 41). Many authors identified with this approach, starting with De Paepe56 and some younger socialists like Eugène Fournière (1857–1914), Gustave Rouanet 53 “Let us not forget that a new social state is only sustainable if it is supported by a new adequate moral state, and vice versa” (1887, 347). 54 Malon also referred to a teaching of ethics based on Arthur Schopenhauer’s “universal sympathy” and Auguste Comte’s “altruism” (1891a, 55). He made several references to Immanuel Kant on the subject of morals. He published La morale sociale. Genèse et évolution de la morale (Malon [1886] 1895) and later, as a booklet, the fifth chapter of the first volume of Le socialisme intégral (L’évolution morale et le socialisme, 1890). 55 The new religion must not be supernatural but based on a “monistic naturalism”, “a rational concep­ tion of the universe” and the “collective desiderata of humankind” (1891a, 33–4). Malon sometimes writes that socialism itself is “this human religion of the new age” (1887, 346, 1891a, 167). 56 “You can also include me among the followers of integral socialism, although circumstances have led me to focus on the economic side of socialism. But I have always seen socialism as something

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(1855–1927) or Georges Renard (1847–1930). In a series of five papers on Marx’s economic materialism and French socialism published in 1887, Rouanet for exam­ ple insisted on the peculiarity of the French socialist tradition, based on rights, justice and the philosophy of the French Revolution, as opposed to the German Hegelian and Marxist “historical-fatalist” line of thought57 (Rouanet 1887, 396– 400) which despises sentiments of fraternity, duty, devotion, the spirit of abnega­ tion and sacrifice, the high moral virtues – all values that socialism must promote (1887, 531). Gide, while critical of collectivism, appreciated this aspect of Malon’s approach. Malon, he wrote, exerted on the French socialist school a real influence, and in any case a beneficial one . . . by bringing it back to its true national tradition, that is, to a certain idealism. He claimed a place for those words of justice, solidarity and love which had been disdainfully removed by Karl Marx from the eco­ nomic vocabulary, leaving only the word “surplus value” therein. He is to be thanked for having taught that the class struggle will not be sufficient to solve the social problem. (Gide 1891, 542) Hence, there was a movement of positive reappraisal of the authors of the first half of the century. Fournière, in Les théories socialistes au XIXe siècle (1904), criti­ cised the reductionist materialist reading of these authors by Engels and Marxists in general – “Engels has embalmed . . . the socialist innovators, having retained from them only those aspects through which they seem to make contact with the materialist interpretation of history” (1904, ii).58 And, writing from a solidarist59 point of view Les idées socialistes en France de 1815 à 1848. Le socialisme fondé sur la fraternité et l’union des classes, Gaston Isambert insisted that: French doctrinaire socialism has a character of humanitarian, fraternal [fraternitaire],60 solidaristic generosity and appeals to the collaboration of the various classes of society to achieve social reform. . . . Almost all of these

57

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other than a new organisation of work and property or a more equitable distribution of wealth among men. I have always considered that socialism touched all aspects of man and of the human species.” (De Paepe to Malon, in Malon 1891c, 12) “Purely materialist, the last term of the evolution accomplished by the German historical-fatalist school which was a reaction against the philosophy of the 18th century, Marx’s thought is essen­ tially anti-French. Hence the complete break with our traditions . . . made by his translators . . . But a people . . . does not break freely with its past. We believe that this useless break has been fatal to socialism in general.” (Rouanet 1887, 396) Fournière developed the reformist approach in a series of important writings. See in particular Fournière (1898, 1901, 1907, 1910). On certain aspects of Malon’s and Fournière’s philosophy, see Chanial (2009). French “solidarisme”, to which Gide was close, developed in France during the 1890s. Among its main figures were Alfred Fouillée (1838–1912) and Léon Bourgeois (1851–1925). On solidarist thought, see, for example, Audier (2010). It seems that this neologism is due to Isambert, who equates it with “solidarist” (1905, 4n).

Prelude II 237 thinkers judged that social reform should simply be superimposed on moral reform, and not supplant it: they would have considered their projects unat­ tainable, if they had not tried first to master human passions and to channel them into that single passion, love for one’s neighbour. (Isambert 1905, 3–4) As a matter of fact, this French tradition had been well developed during the first half of the nineteenth century. Most associationist or socialist authors were convinced that a society could not maintain itself if its members did not share some funda­ mental moral values. References to morals usually had religious connotations – also perceptible from the use of some Scholastic vocabulary like “just price” or “usury”61 – which did not suddenly disappear during the last decades of the century (Peillon 2008, 2021a, 2021b). The word “religion”, however, was to be understood in a broad sense, that is, according to one of its alleged etymologies: the Latin word religare – to unite, to link together.62 The pre-established relations between [human] beings naturally constitute a link between them: they link with each other. Hence the name of religion given to all the connections taken together. Religion, for us and for social science, is therefore synonymous with ion, association, solidarity and order. And irreligion, impiety, synonymous with isolation, disunion, disorder, license and anarchy. (Pecqueur 1844, 3) There was thus room for a wide range of approaches, from the Christian (then Catholic) socialism of Philippe Buchez, to the two most well-known attempts to establish new cults: the Saint-Simonian religion, and Auguste Comte’s Religion of Humanity. References to God, religion, and the figure of Jesus were numerous in the literature and in socialist public opinion. Jesus himself could be seen as a man, a prophet, and not necessarily as God. His figure, a symbol of fraternity, was a reference for the 1848 revolutionaries: he was “the Christ of the barricades” (Bowman 1987). Cabet – the author of the celebrated utopia, Voyage et aventures de Lord Villiam Carisdall en Icarie (1840) – published in 1846 Le vrai christian­ isme suivant Jésus-Christ (reprinted 1847, 1848) in which he set out to show that a perfect society could be built going back to the genuine teaching of Jesus (“the Prince of the communists”): contrary to what was claimed by Saint-Simon and the Saint-Simonians, there was no need for a “new Christianity”, but just for a “real Christianity”. Some authors, instead, were in favour of a different, republican form of religion: Constantin Pecqueur and Pierre Leroux for example – two outstanding 61 Pecqueur, for example, with reference to the Scholastics, generalised the concept of usury: “usury is wherever one derives a profit from one’s funds or instruments of wealth without actual, positive and personal work” (1842, 528). 62 Sorel was an exception. In a series of two papers, “La religion d’aujourd’hui” (Revue de métaphy­ sique et de morale, March and May 1909), he stated that for him religion was simply Catholicism.

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authors who refused both established religions and the Saint-Simonian theocracy – with whom this Prelude concludes. References to God and religion are numerous in Pecqueur’s writings, and he devoted an entire book to the question: De la république de Dieu. Union religieuse pour la pratique immédiate de l’égalité et de la fraternité universelles (Pecqueur 1844). Like Benjamin Constant, he insisted on the positive role of the religious sentiment, a feeling alien to animals but always present in human beings and inde­ pendent of the various external forms of religion. He referred constantly to “the morals of Jesus Christ” based on charity and love of humanity – Jesus was not a god but a prophet and, with Confucius, the founder of morals. The point is that “the economy of a society rests essentially on the moral and religious beliefs of its members” (1842, 25). It is true that the material progress of societies creates the conditions for a better morality. But the main link is the other way round, and the establishment of a just, socialist society needs a prior moral reform of all its members. “Undoubtedly, the integral association of the faculties of men is desir­ able, but this boils down to the question of perfect and universal brotherhood. . . . Make brothers, and universal association will be accomplished or possible” (1839, I, 445–6). Let us remember . . . that an organisation of labour which no longer admits the individual appropriation of the instruments of labour . . . nor the interest of capital, supposes in the multitude of peoples a high degree of morality and devotion: before attempting the realisation of such a regime, therefore, it must be made possible; it is necessary to discipline generations accordingly, which can only be the slow work of centuries. (1839, II, 18–19) Pecqueur also wanted to show that an economy based on charity, love and sacrifice is more efficient than one based on selfishness. Interestingly, his argument is simi­ lar to the one that Charles de Coux was developing at the same time: whenever a person sacrifices his or her well-being for the benefit of others, he or she benefits in turn from the sacrifices made by others. In this way, Pecqueur writes, “although sacrifice seems to negate happiness, we can say that the happiness of each person is a direct result of the sacrifices of all, and vice versa” (1842, 41). Not only will egoism then have its share, it will have it at the maximum. . . . For [each] will have given all the devotion that the satisfaction of other ego­ isms requires of him, and he will have received . . . all the fractions of devo­ tion that others owed him, in order to develop his own egoism. So that he will give infinitely less than he will receive. (1840, 316) Leroux thought that the essence of socialism lies in the respect of the dignity and individuality of each human being within the society of which he or she is neces­ sarily a member. “It is his dignity, it is his quality of man, it is his independence,

Prelude II 239 that the proletarian claims”, he wrote in “De l’individualisme et du socialisme” ([1834] 1850, 372). This claim is best expressed by the Republican motto “Lib­ erté, égalité, fraternité”, which Leroux preferred to change, however, into “Liberté, fraternité, égalité” – to which he usually added “unité” – to mean that, in between liberty and equality, fraternity is the essential cog in the machine for achieving at the same time the unity of society and the individuality of its members. For some years now, we have become accustomed to calling socialists all those, whatever their principles and plans, who invite men to come out of anarchy and to reconstitute the social order. In this respect, we ourselves, who have always fought against individualism, but who have not fought less against any false doctrine that sacrifices individuality to the collective soci­ ety, are today designated as socialist. We are socialist without a doubt, if socialism means the doctrine that will not sacrifice any of the terms of the formula: Liberty, Fraternity, Equality, but which will reconcile them all. (Leroux [1838] 1846, iv) If the emphasis is placed on “equality” alone, society runs the risk of being authoritarian, squashing citizens under an all-powerful State: society will be all and individuals nothing. Conversely, if the emphasis is placed on “liberty” alone, society explodes under the pressure of the selfishness of its members: the weak are exploited by the strong, individuals are everything, society nothing. In this con­ text, liberty and equality are, according to Leroux’s celebrated phrase, “two pistols loaded against each other” ([1834] 1850, 378). This is the reason why “fraternity” is an essential middle term, allowing the harmonious coexistence of liberty and equality. It must be developed through a secular religion. This approach, which focused both on education and the preservation of individuality, was in particular stated by Leroux in 1838 in his article “Culte” of the Encyclopédie nouvelle, repub­ lished as a book in 1846 with the title D’une religion nationale, ou du culte. We are looking for u nity, and we demonstrate the possibility of establishing it. What is the reason why unity has not been established? Because it has not yet been understood that it is possible to reconcile authority and liBerty, to have a national cult without religious despotism, a complete society where man is complete. We . . . demonstrate that the antinomy of the individual and society can cease to exist; that there is not an invincible duality between the rights of man and the rights of society. ([1838] 1846, viii) The idea of a civil religion was admittedly not new. It had already been stated by Jean-Jacques Rousseau in 1762 in the penultimate and much discussed chapter of Du contrat social. However, Leroux was critical of Rousseau and more in line with Spinoza ([1838] 1846, Chapter XV in particular).63 63 On Leroux’s secular religion, see Peillon (2021a).

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Five decades later, and with no direct reference to Leroux, Émile Durkheim developed related ideas in a paper published in Revue bleue (Durkheim 1898). He tried to confer a positive meaning on the word “individualisme” (too often confused, he wrote, with selfishness and utilitarianism): individualism, insisting on the dignity of men, demands morals. Contrary to utilitarianism, it is the “religion of humanity”. It consists “in turning our eyes away from what concerns us personally . . . in order to seek only what is called for by our human condition, such as we share it with all our fellow men”. The human person . . . is considered sacred, in the ritual sense of the word. . . . It has something of that transcendent majesty which the Churches of all times lend to their Gods; it is conceived as invested with that mysterious property which makes the void around holy things. . . . Such a morality . . . is a religion of which men are, at the same time, the faithful and the God. But this religion is individualistic, since it has man for object. (1898, 8)64 References Audier, Serge. 2010. La pensée solidariste. Aux sources du modèle social républicain. Paris: Presses Universitaires de France. Baubérot, Jean. 1995. “Charles Gide et l’École de Nîmes, entre christianisme social et laïcité”. In Jean Baubérot et al., Charles Gide et l’École de Nîmes. Une ouverture du passé vers l’avenir. Nîmes: Société d’histoire du Protestantisme de Nîmes et du Gard, pp. 109–21. Baubérot, Jean, et al. 1995. Charles Gide et l’École de Nîmes. Une ouverture du passé vers l’avenir. Nîmes: Société d’histoire du Protestantisme de Nîmes et du Gard. Beecher, Jonathan. 1986. Charles Fourier. The Visionary and His World. Berkeley: Univer­ sity of California Press. Beecher, Jonathan. 2001. Victor Considerant and the Rise and Fall of French Romantic Socialism. Berkeley: University of California Press. Bellet, Michel. 2018. “The Reception of Marx in France: La Revue Socialiste (1885–1914)”. The European Journal of the History of Economic Thought, 25 (5), 1154–99. Bénichou, Paul. [1977] 2004. Le temps des prophètes. Doctrines de l’âge romantique. In Paul Bénichou, Romantismes français, I. Paris: Gallimard, pp. 443–986. Bertrand, Louis. 1909. César De Paepe: sa vie, son œuvre. Brussels: Librairie de l’Agence Dechenne. Bestor, Arthur E. 1948. “The evolution of the socialist vocabulary”. Journal of the History of Ideas, 9 (3), 259–302. Bidard, Christian. 2014. “Maurice Potron and his times: State, Catholisicm and economic modelling”. Rivista internazionale di Scienze Sociali, 122 (2), 139–60. 64 Man’s dignity does not come from his individual character: if this were the case, Durkheim stated, “one might fear that it would enclose him in a kind of moral egoism which would make any solidar­ ity impossible”. This dignity comes “from a higher source, which is shared by him with all men. If he is entitled to this religious respect, it is because he has something of humanity in him. It is humanity that is respectable and sacred” (Durkheim 1898, 9).

Prelude II 241 Bidard, Christian, and Guido Erreygers. 2016. “La foi et l’économie: Maurice Potron, pré­ curseur de l’analyse input-output”. Cahiers d’économie politique/Papers in Political Economy, no. 71, 91–125. Bidard, Christian, Guido Erreygers, and Wilfried Parys. 2009. “ ‘Our daily bread’: Maurice Potron, from Catholicism to mathematical economics”. The European Journal of the His­ tory of Economic Thought, 16 (1), 123–54. Binaut, Louis-Auguste. 1831. “De la misère publique”. Revue européenne, 2 (4), 34–66. Blanqui, Adolphe-Jérôme. 1837. Histoire de l’économie politique en Europe. Paris: Guillaumin. Bonald, Louis-Gabriel-Ambroise de. [1796] 1859. Théorie du pouvoir politique et religieux dans la société civile, démontrée par le raisonnement et par l’histoire. In Œuvres com­ plètes de M. de Bonald, I. Paris: J.-P. Migne, col. 121–954. Bonald, Louis-Gabriel-Ambroise de. [1810] 1859. “De la richesse des nations”. In Œuvres complètes de M. de Bonald, II. Paris: J.-P. Migne, col. 307–18. Borgetto, Michel. 1997. La devise “Liberté, égalité, fraternité”. Paris: Presses Universi­ taires de France. Bouchet, Thomas, Vincent Bourdeau, Edward Castleton, Ludovic Frobert, and François Jar­ rige. 2015. Quand les socialistes inventaient l’avenir, 1825–1860. Paris: La Découverte. Bourdeau, Vincent. 2018. “Les mutations de l’expression ‘exploitation de l’homme par l’homme’ chez les saint-simoniens (1829–1851)”. Cahiers d’économie politique/Papers in Political Economy, no. 75, 13–41. Boutry, Philippe (ed.). 1997. Rerum novarum. Écriture, contenu et réception d’une encyclique. Rome: École française de Rome. Bowman, Frank Paul. 1987. Le Christ des barricades, 1789–1848. Paris: Les Éditions du Cerf. Branca-Rosoff, Sonia, and Jacques Guilhaumou. 1998. “De ‘société’ à ‘socialisme’: l’invention néologique et son contexte discursif. Essai de colinguisme appliqué”. Lan­ gage et société, no. 83/84, 39–77. Cahen, Jacqueline. 1994. “La réception de l’œuvre de Karl Marx par les économistes fran­ çais”. Mil neuf cent. Revue d’histoire intellectuelle, no. 12, 19–50. Chambost, Anne-Sophie. 2009. Proudhon. L’enfant terrible du socialisme. Paris: Armand Colin. Chanial, Philippe. 2009. La délicate essence du socialisme. L’association, l’individu & la République. Lormont: Le Bord de l’Eau. Claeys, Gregory. 1986. “ ‘Individualism’, ‘socialism’ and ‘social science’: Further notes on a process of conceptual formation, 1800–1850”. Journal of the History of Ideas, 47 (1), 81–93. Constant: see Constant de Rebecque. Constant de Rebecque, Benjamin. 1825. “Coup d’oeil sur la tendance générale des esprits dans le dix-neuvième siècle”. Revue Encyclopédique, 28, 661–74. Constant de Rebecque, Benjamin. 1826. Review of Charles Dunoyer’s L’industrie et la morale considérés dans leur rapport avec la liberté. Revue Encyclopédique, 29, 416–35. Constant de Rebecque, Benjamin. 1829. Mélanges de littérature et de politique. Paris: Pichon and Didier. Constant de Rebecque, Benjamin. [1824–31] 1999. De la religion considérée dans sa source, ses formes et ses développements. Arles: Actes Sud. Constant de Rebecque, Benjamin. [1806–10] 2015. Principes de politique, applicables à tous les gouvernements, Étienne Hofmann (ed.). English translation by Dennis O’Keeffe. Principles of Politics, Applicable to All Governments. Indianapolis: Liberty Fund.

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Prelude II 243 Fourn, François. 2014. Étienne Cabet ou le temps de l’utopie. Paris: Vendémiaire. Fournière, Eugène. 1898. L’idéalisme social. Paris: Félix Alcan. Fournière, Eugène. 1901. Essai sur l’individualisme. Paris: Félix Alcan. Fournière, Eugène. 1904. Les théories socialistes au XIXe siècle, de Babeuf à Proudhon. Paris: Félix Alcan. Fournière, Eugène. 1907. L’individu, l’association et l’État. Paris: Félix Alcan. Fournière, Eugène. 1910. La sociocratie. Essai de politique positive. Paris: V. Giard & E. Brière. Frobert, Ludovic. 2014. “What is a just society? The answer according to the socialistes fraternitaires Louis Blanc, Constantin Pecqueur, and François Vidal”. History of Political Economy, 46 (2), 281–306. Frobert, Ludovic, and Michael Drolet. 2022. “D’une philosophie économique barbare: vie­ œuvre de Jules Leroux (1805–1883)”. Introduction to Jules Leroux, D’une philosophie économique barbare. Lormont: Le Bord de l’Eau, pp. 5–92. Gaillard, Chantal, and Georges Navet (eds). 2011. Dictionnaire Proudhon. Brussels: Aden. Gans, Jacques. 1957. “L’origine du mot ‘socialiste’ et ses emplois les plus anciens”. Revue d’histoire économique et sociale, 35 (1), 79–83. Gengembre, Gérard. 1989. La contre-révolution, ou l’histoire désespérante. Paris: Imago. Gerbet, Philippe. 1836. “Discours préliminaire”. L’Université catholique, 1, 9–53. Gide, Charles. 1882. “Les doctrines économiques de M. Charles Périn”. Journal des écono­ mistes, 4th series, 19 (7), 30–40. Gide, Charles. 1891. Review of the first edition of Benoît Malon’s Le socialisme intégral. Revue d’économie politique, 5 (5–6), 542–6. Gide, Charles. [1886–1904] 2001. Coopération et économie sociale, 1886–1904, Patrice Devillers (ed.). Paris: L’Harmattan. Gide, Charles. [1904–1926] 2005. Coopération et économie sociale, 1904–1926, Patrice Devillers (ed.). Paris: L’Harmattan. Giordani, Tommaso. 2015. The Uncertainties of Action. Agency, Capitalism, and Class in the Thought of Georges Sorel. PhD thesis. Florence: European University Institute, https://cadmus.eui.eu/handle/1814/34826 (accessed 10 May 2021). Grandjonc, Jacques. 1989. Communisme/Kommunismus/Communism. Origine et dével­ oppement international de la terminologie communautaire prémarxiste des utopistes aux néo-babouvistes, 1785–1842. Trier: Schriften aus dem Karl-Marx-Haus. Grünberg, Carl. 1909. “L’origine des mots ‘socialisme’ et ‘socialiste’”. Revue d’histoire des doctrines économiques et sociales, 2, 289–308. Haubtmann, Pierre. 1982. Pierre-Joseph Proudhon. Sa vie et sa pensée (1809–1849). Paris: Beauchesne. Haubtmann, Pierre. 1988a. Pierre-Joseph Proudhon. Sa vie et sa pensée, 1849–1865. Vol. I: Les grandes années: 1849–1855. Paris: Desclée de Brouwer. Haubtmann, Pierre. 1988b. Pierre-Joseph Proudhon. Sa vie et sa pensée, 1849–1865. Vol. II: Les grandes années: 1855–1858. Les dernières années: 1858–1865. Paris: Desclée de Brouwer. Isambert, Gaston. 1905. Les idées socialistes en France de 1815 à 1848. Le socialisme fondé sur la fraternité et l’union des classes. Paris: Félix Alcan. Jouffroy, Théodore. 1825. “Comment les dogmes finissent”. Le Globe, journal littéraire. Supplement to the 24 May issue, 565–8. Jourdain, Édouard. 2018. Proudhon contemporain. Paris: CNRS Éditions. Lafarelle-Rebourguil, François-Félix. 1839. Du progrès social au profit des classes popu­ laires non indigentes, ou Études philosophiques et économiques sur l’amélioration maté­ rielle et morale du plus grand nombre. Paris: Maison.

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Prelude II 245 Pecqueur, Constantin. 1844. De la république de Dieu. Union religieuse pour la pratique immédiate de l’égalité et de la fraternité universelles. Paris: Charpentier, Ebrard, Paul Masgana et chez l’Auteur. Pecqueur, Constantin. 1849. “Qu’est-ce que le socialisme?”. Le salut du peuple, no. 1, 9–20. Peillon, Vincent. 2003. Pierre Leroux et le socialisme républicain. Une tradition philos­ ophique. Latresne: Le Bord de l’Eau. Peillon, Vincent. 2008. La Révolution française n’est pas terminée. Paris: Éditions du Seuil. Peillon, Vincent. 2018. Liberté, égalité, fraternité. Sur le républicanisme français. Paris: Éditions du Seuil. Peillon, Vincent. 2021a. “Une démocratie religieuse. ‘Organiser religieusement une société laïque’”. In Pierre Leroux, D’une religion nationale, ou du culte. Lormont: Le Bord de l’Eau, pp. 5–133. Peillon, Vincent. 2021b. Une théologie laïque? Paris: Presses Universitaires de France. Pénin, Marc. 1998. Charles Gide (1847–1932). L’esprit critique. Paris: L’Harmattan. Périn, Charles-Henri-Xavier. 1839. “Du progrès des idées religieuses en économie poli­ tique”. Revue de Bruxelles, June, 101–29. Périn, Charles-Henri-Xavier. 1849. Les économistes, les socialistes et le christianisme. Paris: Jacques Lecoffre. Périn, Charles-Henri-Xavier. 1850. “Du socialisme dans les écrits des économistes”. Le Correspondant, 26, 705–26. Périn, Charles-Henri-Xavier. 1861. De la richesse dans les sociétés chrétiennes. Paris: Jacques Lecoffre. Périn, Charles-Henri-Xavier. 1879. Le socialisme chrétien. Paris: Victor Lecoffre. Périn, Charles-Henri-Xavier. 1880. Les doctrines économiques depuis un siècle. Paris: Vic­ tor Lecoffre. Périn, Charles-Henri-Xavier. 1886. Le patron: sa fonction, ses devoirs, ses responsabilités. Lille: Desclée, De Brouwer and Co, Paris: Victor Lecoffre. Périn, Charles-Henri-Xavier. 1891. L’économie politique d’après l’encyclique sur la condi­ tion des ouvriers. Paris: Victor Lecoffre. Périn, Charles-Henri-Xavier. 1895. Premiers principes d’économie politique, suivis d’une étude sur le juste salaire. Paris: Victor Lecoffre. Pétré-Grenouilleau, Olivier. 2001. Saint-Simon. L’utopie ou la raison en actes. Paris: Payot. Picon, Antoine. 2002. Les saint-simoniens. Raison, imaginaire et utopie. Paris: Belin. Picon, Antoine. 2003. “La religion saint-simonienne”. Revue des sciences philosophiques et théologiques, 87 (1), 23–37. Prélot, Marcel, and Françoise Gallouédec-Genuys. 1969. Le libéralisme catholique. Paris: Armand Colin. Prochasson, Christophe. 1997. Les intellectuels et le socialisme. Paris: Plon. Prochasson, Christophe. 2005. Saint-Simon, ou l’anti-Marx. Paris: Perrin. Proudhon, Pierre-Joseph. [1848] 1868. Solution du problème social. Paris: Librairie interna­ tionale, and Brussels: A. Lacroix, Verboeckhoven and Co. Proudhon, Pierre-Joseph. [1849] 1869. “Aux citoyens rédacteurs du Populaire”. In P.-J. Proudhon, Mélanges. Articles de journaux, 1848–1852. Paris: Librairie internationale, and Brussels: A. Lacroix, Verboeckhoven and Co. Reynaud, Jean. 1832a. “De la société saint-simonienne”. Revue encyclopédique, 53, 9–36. Reynaud, Jean. 1832b. “De la nécessité d’une représentation spéciale pour les prolétaires”. Revue encyclopédique, 54, 1–20. Ring, Mary Ignatius. 1935. Villeneuve-Bargemont, precursor of modern social catholicism. Milwaukee: The Bruce Publishing Company.

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Riot-Sarcey, Michèle. 2016. Le procès de la liberté. Une histoire souterraine du XIXe siècle en France. Paris: La Découverte. Rognon, Frédéric. 2012. “L’éthique protestante et l’esprit du solidarisme. L’exemple de Charles Gide”. Revue d’histoire et de philosophie religieuses, 92 (1), 187–203. Rouanet, Gustave. 1887. “Le matérialisme économique de Marx et le socialisme français”. La revue socialiste, 5, 395–422 (May), 579–603 (June); and 6, 76–87 (July), 278–94 (September), 507–31 (November). Rousseau, Louis. 1841. Croisade du XIXe siècle. Appel à la piété catholique à l’effet de reconstituer la science sociale sur une base chrétienne. Suivi de l’exposition critique des théories phalanstériennes. Paris: Debécourt. Sand, Shlomo. 1985. L’illusion du politique. Georges Sorel et le débat intellectuel 1900. Paris: La Découverte. Say, Jean-Baptiste. [1828–29] 2010. Cours complet d’économie politique pratique. Vari­ orum edition. Paris: Economica. Secondat de Montesquieu, Charles Louis de. [1721] 1964. Lettres persanes. In Secondat de Montesquieu, Œuvres complètes. Paris: Le Seuil, pp. 61–151. Simonde de Sismondi, Jean-Charles Léonard. 1826. “Revue des progrès des opinions reli­ gieuses”. Revue encyclopédique, 29, 21–37, 349–65, 621–37. Simonde de Sismondi, Jean-Charles Léonard. [1827] 2015. Nouveaux principes d’économie politique ou De la richesse dans ses rapports avec la population, variorum edition. Vol. V of Sismondi, Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier (eds). Paris: Economica. Sismondi: see Simonde de Sismondi Sorel, Georges. 1899. “Y a-t-il de l’utopie dans le marxisme?”. Revue de métaphysique et de morale, 7 (2), 152–75. Sorel, Georges. 1910. La décomposition du marxisme, 2nd ed. Paris: Marcel Rivière. Staël: see Staël-Holstein. Staël-Holstein, Germaine de. 1799. De la littérature, considérée dans ses rapports avec les institutions sociales. Paris: Crapelet. Staël-Holstein, Germaine de. 1810. De l’Allemagne. Paris: H. Nicolle. Staël-Holstein, Germaine de. [1798] 1979. Des circonstances actuelles qui peuvent terminer la Révolution, et des principes qui doivent fonder la république en France. Paris and Geneva: Droz. Steedman, Ian (ed.). 1995. Socialism and Marginalism in Economics, 1870–1930. London and New York: Routledge. Steiner, Philippe. 2017. “Religion and the sociological critique of political economy: Altruism and gift”. The European Journal of the History of Economic Thought, 24 (4), 876–906. Touchard, Jean. [1968] 1998. Aux origines du catholicisme social, Louis Rousseau (1787– 1856). Paris: Librairie Armand Colin. Reprinted, Le Mans: Université du Maine. Viard, Bruno. 2007. “Introduction”. In Bruno Viard (ed.), Anthologie de Pierre Leroux, inventeur du socialisme. Lormont: Le Bord de l’Eau, pp. 7–65. Villeneuve-Bargemont, Jean-Paul-Alban. 1834. Économie politique chrétienne ou Recherches sur la nature et les causes du paupérisme en France et en Europe et sur les moyens de le soulager et de le prévenir. Paris: Paulin. Villeneuve-Bargemont, Jean-Paul-Alban. 1836. “Cours sur l’histoire de l’économie poli­ tique”, first lesson. L’Université catholique, 1, 83–90. Villeneuve-Bargemont, Jean-Paul-Alban. 1837. “Cours sur l’histoire de l’économie poli­ tique”, ninth lesson. L’Université catholique, 3, 14–26.

Prelude II 247 Villeneuve-Bargemont, Jean-Paul-Alban. 1840. “Discours de M. le vicomte Alban de Villeneuve-Bargemont, député du Nord, dans la discussion du projet de loi relatif au tra­ vail des enfants dans les manufactures, prononcé dans la séance du 22 décembre 1840”. L’Université catholique, 10, 459–71. Villeneuve-Bargemont, Jean-Paul-Alban. 1841. Histoire de l’économie politique. Paris: Guillaumin. Vincens, Émile. 1836. “De l’organisation sociale, et en particulier de l’organisation industri­ elle”. Revue mensuelle d’économie politique, 5, 1–14; 49–61; 97–116; 145–73; 209–42; 289–311. Vincent, Gilbert. 2002. “Ethos protestant, éthique de la solidarité”. Revue d’histoire et de philosophie religieuses, 82 (3), 307–30, and 82 (4), 417–41. Vincent, K. Steven. 1992. Between Marxism and Anarchism: Benoît Malon and French Reformist Socialism. Berkeley: University of California Press. Weill, Georges. 1909. Histoire du catholicisme libéral en France, 1828–1908. Paris: Félix Alcan. Wernick, Andrew. 2001. Auguste Comte and the Religion of Humanity. The Post-Theistic Program of French Social Theory. Cambridge: Cambridge University Press. Whitham, William. 2019. “César de Paepe and the ideas of the First International”. Modern Intellectual History, 16 (3), 897–925.

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Jean-Charles Léonard Simonde de Sismondi Pascal Bridel

“Indeed? [For Mr Ricardo], wealth is everything, men are absolutely nothing”. (Sismondi 1827, 474; 1991, 563)1 The “disciples of Adam Smith in England have departed from his doctrine [by] mov­ ing totally in the opposite direction” [and] “we are so aware that we walk another route”. (Sismondi 1827, 52–4; 1991, 54–5)

History is almost always written by the victors and the history of ideas is no exception. Despite the central part played by Jean-Charles-Léonard Simonde de Sismondi (1773–1842) in the general glut controversy (one of the fiercest and most incon­ clusive debate in the history of economic theory), his relegation to the fringe of Classical economics first by David Ricardo, Jean-Baptiste Say and John Ramsay McCulloch and then by most economists down to recent historians of economic thought, rests essentially on selective readings of a massive oeuvre reaching fields far beyond narrow economics (Faccarello et al. 2014). A brief re-consideration of the logical framework of such a colossal output should help understand the rea­ sons why, armed with an intellectual construction pre-dating Ricardo’s Principles (and despite frantic analytical efforts), Sismondi failed to convince the then nas­ cent economic profession about the relevance of his approach. The origin of the under-consumptionist theory he tried to frame in the language of political econ­ omy in order to refute Ricardo and Say is not to be found within the narrow con­ fines of political economy as such but also in his political philosophy based on his much earlier Republican creed. Hence, his failure to invalidate the theoretical foundations of Ricardian economics is not to be uncovered only in his supposed analytical weakness but mainly in his political philosophy heavily influenced by Jean-Jacques Rousseau and Adam Smith. In other words, Sismondi’s ultimate 1 Except for the Nouveaux principes d’économie politique, for which references to both the 2015 French variorum edition and the 1991 American Richard Hyse translation are given, other references are from Sismondi’s six-volume Œuvres économiques complètes (see References) and translated by the present author. DOI: 10.4324/9780429202407-11

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failure to invalidate Say’s law results simply from the fact that his central critical argument is not to be found in his political economy alone. Inventing with his Principles the mode of thinking economists still use today, Ricardo heralded the declaration of independence of economics from political phi­ losophy. As a matter of fact, the advent of the so-called “Ricardian vice” (to use Schumpeter’s quip) marks the much-bemoaned divorce between what Sen calls economics as ethics and engineering economics (1987). For Smith, market never stood alone while the Ricardian approach gave nearly exclusive pride of place to market in the pursuit of wealth and happiness. This chapter on Sismondi’s econom­ ics is an attempt to illustrate the modernity of his central argument according to which [this] error . . . which confuses the increase in production with that of wealth, this error on which the whole system of modern chrematistics is based [con­ sists in] erecting one’s fortune on the destruction of one’s fellow men. (1836–38, 686) This chapter falls into five sections. Section 1 examines Sismondi’s crucial Genevan intellectual formative years as a post-Smithian economist before Ricardo. Sec­ tion 2 describes some elements of his crucial Republican creed. Using Sismondi’s shifting appreciation of the concept of market and his price theory (following clearly the Continental tradition), Section 3 illustrates his critical approach to “the chrematistics of the English School”. In the light of this re-assessment of Sismon­ di’s over whole intellectual construction, Section 4 offers an outline of Sismondi’s position within the general glut controversy. The concluding remarks suggest a few comments on Sismondi’s alleged heterodoxy. 1. The Geneva formative years Sismondi’s family2 belonged to the middle class of the aristocratic Geneva Republic. From a well-to-do small business family, her mother had some means notably the family estate in the Geneva countryside. His father, a clergyman, was a member of the Conseil des Deux-Cents, the legislative body particularly in charge of electing the government. Sismondi benefited from an excellent pri­ vate education to which was soon added the benefit of family reading sessions. Jacques Necker, Hugh Blair’s sermons, David Hume’s History of England and, of course, Rousseau were the favourites of these family gatherings. Within the family circle, one should mention Pierre Prevost and the Pictet brothers. Trans­ lator of Thomas Robert Malthus’s Essay on the Principle of Population into French, the former is Sismondi’s first professor of political economy; the latter 2 During his stay in Pescia (Tuscany), Jean-Charles added to his initial patronym (that is, Simonde) the name Sismondi (borrowed from an aristocratic Pisan family famous at least since the eleventh century) bizarrely convinced that he was a somewhat distant descendant. Aftalion (1899) and Salis (1932) remain to this day Sismondi’s two classic biographies.

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are cofounders in 1796 of the Bibliothèque britannique, a journal offering its readers 4,000 pages of annual translations of British articles on sciences, litera­ ture and agronomy. The French Revolution struck financially the Sismondi family quite brutally. A substantial part of the family wealth had been invested in French Treasury bonds (the so-called Necker bonds) that got wiped out by the collapse of the French monar­ chy. Moreover, Sismondi’s father having taken side with the counter-revolutionary government during the Geneva 1782 troubles, the family was hounded by the 1792 Geneva revolutionaries. Frightened by the revolutionary unrest, the family decided to leave in February 1793 for England. For a Geneva family, the choice of England is easy to understand: through its religion and institutions, the Genevese intelligentsia felt very close to England. Striking example of this proximity, one of the most able contemporary analysts of the British constitution was Jean-Louis Delolme, a long-time Genevese émigré to England. Sismondi himself wrote somewhat later that Geneva is “an English town on the Continent, an advanced post for political and religious enlightenment . . . a town where people think and feel in English but speak and write in French” (1814, 4 and 7). During this year-long stay in England, Sismondi bought a copy of the Wealth of Nations, read James Harrington and studied constitutional issues with the help of Delolme, William Blackstone and Richard Wooddeson. His reading notes bear testimony of his assiduous efforts the fruits of which are his Recherches sur les constitutions des peuples libres (Sismondi 1798 [1965]). These simultane­ ous ventures into constitutional studies and political economy are the first testi­ mony that both are the two main branches of the “science of government”, or, in other words that the “principles of legislation” are inseparable from their “rules of applications”. In 1794, back from England, the Sismondi family discovers a much worst polit­ ical situation than expected. The Genevese terreur (daughter of that of Paris) is at its peak: wealth and fortunes are impounded, aristocrats imprisoned and some even sent to the guillotine. Father and son (barely 20) are briefly detained. The decision is taken to leave Geneva again this time to seek refuge in Tuscany. It is only five years later, in 1800, that Sismondi returns to his beloved home town. And Geneva had profoundly changed. In fact, since 1798, Geneva was occupied and annexed to France. The economy was on the verge of collapse. The bank­ ruptcy of the Ancien Régime together with the revolutionary wars and the Conti­ nental blockade induced a severe contraction of the international trade from which Geneva obtained a very large part of its income. Eventually, by exciting one part of the population against the other, the terreur left deep wounds endangering the unity of the city. This second return to Geneva is crucial in Sismondi’s life. In December 1802, a few months before the publication of De la richesse commerciale in 1803 and thanks to Germaine de Staël (Necker’s daughter), he becomes a member of the Cercle de Coppet, a bastion of liberal thought opposed to Napoléon. He takes care of family properties, tries unsuccessfully to start a business as a printer with his future editor Paschoud and even plans in vain to get married.

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During the years following his return, and by way of his involvement in vari­ ous committees trying to find remedies to the sorry state of the Geneva economy, Sismondi starts in earnest to study political economy. Reading most of the bur­ geoning economic literature in French and in English, he plans to devise a book mainly addressed at demonstrating the ineptitude of the French economic policy, and in particular its tariff component. While Sismondi was busy writing his De la richesse commerciale, the Continental blockade was not yet effective but the Con­ sulat was following with greater rigour the policies prohibiting the so-called “Eng­ lish trade” started against Britain by the Convention and the Directoire. Moreover, the Napoleonic tariff policy was disrupting regional exchanges (Alpine area, Rhine valley and Switzerland) so vital to Geneva external trade. The origins of Sismondi’s strong free trade creed and his violent critique of government interventions are no doubt closely linked to these early Geneva years (Bridel 2022). As often with Sismondi, he started his inquiries with a real-world problem to move on rapidly to a more theoretical approach. Started as a tract for the time, Richesse commerciale ended up as his first analytical contribution displaying also his trademark methodology. However, Richesse commerciale should not be read in isolation. 2. Sismondi’s republican creed3 In Recherches sur les constitutions des peuples libres, Sismondi indicates as the main and essential goal of any political constitution the realisation of freedom. Freedom as a whole revolves around civil liberty, democratic freedom, and finally political freedom. Civil liberty is made up of all the rights, faculties and interests that citizens retain when they enter society. This civil liberty is exercised in par­ ticular through productive capacities: it requires that each individual be recognised with their own rights to exercise creative capacities, as well as the right to access markets in order to be able to produce his own wealth (through a valorisation pro­ cess which is realised in the exchange). Democratic freedom is defined through the relationship between the nation and the government, and is achieved through everyone’s participation in the life of the city. The constitution must reflect the plurality of interests by guaranteeing each of the parties in society a fair share in sovereignty. In full agreement with Geneva Republican tradition which had found in Rousseau an illustrious representative, Sismondi sees in the active participation of the citizens the source, continually to be renewed, of virtue. It is only through the constant presence of civic virtue that a nation can aspire to become ever more united in its diversity and independent of arbitrary powers. Political unity results not from the hegemony of a particular class, but rather from the expression of a plurality of wills and interests which must be recognised first in an attempt to over­ come them later. This central argument of power as a negotiated representation of

3 On Sismondi’s own brand of republicanism, see Bridel (2022) and, above all, Romani (2005).

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wills and interests cuts across all of Sismondi’s thinking until his Etudes sur les constitutions des peuples libres (1836), first volume of his Etudes sur les sciences sociales. From Richesse commerciale, the purpose of the theoretical elaboration of political economy for Sismondi is to illuminate the way in which man can pur­ sue and achieve the highest degree of wealth, the greatest individual freedom and the greatest happiness. The Nouveaux principes d’économie politique (New Principles of Political Economy) mark a new stage in the attempt to synthesise these three areas that Sismondi has been exploring tirelessly for nearly twentyfive years. The first edition of Nouveaux principes dates from 1819, the second from 1827. To these two versions of the same book one should add the article “Political economy”, written from Autumn 1816 to Summer 1817 for the Edin­ burgh Encyclopaedia. In fact, this book-length article4 contains the essentials of the logical structure and the argumentation of the Nouveaux principes; and can be considered as a first version of this work dating back to the years immediately following Waterloo. Written in parallel with Nouveaux principes, Histoire des républiques italiennes au moyen âge (The History of the Italian Republics in the Middle Ages) and His­ toire des Français (History of the French) illustrate past manifestations of freedom to enlighten contemporaries through experience in their march towards this muchdesired modern freedom. Political philosophy and its study of political institutions examines the “constitutions of free peoples” with the idea of improving the politi­ cal structures guaranteeing this individual freedom. Likewise, the third component of this systematic interweaving of the human sciences, political economy is a study of the progress of civilisation in relation to the progress of wealth. But this increase in production and wealth cannot be the goal of political economy; rather a simple means to contribute to the happiness of all. In opposition especially with British economists, for Sismondi, the progress of society is both moral progress through the exercise of individual freedom and a progress of civilisation in which the eco­ nomic variable plays an essential role. The political economy of commercial wealth also borrows from Republi­ canism its central theme: it is indeed to the market and to the price mechanism that the resolution of the opposition plurality/synthesis of economic interests is entrusted, not by suppression and exclusion of differences, but by their fusion, that is to say by the composition and the balancing of antagonisms and plurali­ ties. By switching to political economy, Sismondi thus retains his contractualist approach. From this perspective, we grasp the capital importance of the price system: prices must in principle sanction the plurality and independence of the divisions of society. They must allow the free expression of capacities and the deepening of the division of labour, being itself the expression of the tensions and dynamics of civil society.

4 For more details, see in Œuvres économiques complètes, the editors’ introductions to “Political Econ­ omy” (IV, 25–34) and to Nouveaux principes (V, xiv-xvi).

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3. Market and price theory: from an emancipating to a despotic market In early nineteenth-century Europe, the debate on industrialism5 would tear econo­ mists apart. For some, breaking with the Smithian tradition, the extension of the logic of market coordination to a large part of social activities necessarily gives pri­ ority to a “natural” and decentralised harmonisation of the interests of agents. For the others, as an extension of the principle of sympathy and the Smithian “system of natural liberty”, the promotion of “altruistic” values in economic and social rela­ tions implies a social engineering linked to an economic system in which markets would be organised to varying degrees by political authority. In this debate, Sismondi plays a unique role, which originated in Richesse com­ merciale. Passing on the encompassing vision of Smith, he defends an aprioristic and quasi-Ricardian approach to economic theory while insisting on the absolute necessity of linking this catallactic approach to economics as ethics within the framework of its integration into a historical analysis of the development of institu­ tions as guarantor of individual freedom.6 He refuses to consider political economy as an exclusive science of wealth, a mere chrematistics. Like most British and Continental economists of his time, Sismondi intended to “modernise” and adapt the encompassing approach of his revered master Smith to the need of the fast-evolving British and Continental economies. Hence, the matrix of the Wealth of Nations always remained for Sismondi the ultimate reference in political economy. Sismondi’s formative years (1800–1816) and early publications (1803) bear testimony of this towering influence. In opposition to the path sub­ sequently followed by Ricardo and what Sismondi calls “the chrematistics of the English School”, Sismondi refused point blank to be dragged into this direction. What would be the point, he argues, to set up an economic analysis in order to maximise the level of production if such a system were to lead to the annihilation of the first two components of his beloved trilogy liberté-bonheur-richesse (free­ dom, happiness, wealth). It would be a sheer confusion between ends and means: “The greater part of the [English] nation, as well as the philosophers, seems to forget that increased wealth is not the goal of political economy, but the means it has to procure happiness for everyone” (1827, 4; 1991, 8) – what is expressed in even stronger terms in the 1838 Études: “something so absurd and revolting which consists in considering as a progress the destruction of happiness and liberty, of the very existence of a nation, for the benefit of wealth” (1836–38, 373). Using an approach to prices borrowed from Nicolas-François Canard’s Princi­ pes d’économie politique (1801), Sismondi abandons Smith’s theory of prices in favour of a theory based largely on the dual idea of supply and demand (Bridel 5 For Sismondi, this term groups broadly together all those contemporary economic theories asserting that society should be organised by and for production exclusively (see Eyguesier 2020). 6 In parallel with Das Adam Smith Problem raised by German economists (the apparent contradiction between The Theory of Moral Sentiments and The Wealth of Nations), the traditional interpretation of Sismondi’s contribution could be seen as Das Sismondi Problem! (see, e.g. Gislain 1996 and 2013).

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2014, 2021). Hence, in Richesse commerciale, his concept of market is a social mechanism which frees the economic agents from the status economy of the Ancien Régime. In what is for Sismondi an exchange economy based on a contractual pro­ cedure guaranteeing – through competition – a low degree of asymmetry in the relative strength of the trading bodies, the market determines the distribution of sur­ plus between the various participants in the production process. This competitive mechanism guarantees the conformity of the consumer’s interest (a class which, according to Sismondi, encompasses “the universality of agents”) with the national interest: “the national interest is the same as the consumer interest” (1803, 177). The society that Sismondi describes in Richesse commerciale is not structured by the conflict between capital and labour, but between producer and consumer. The idea that competition can take place at the expense of wages is not yet central. In an industrial economy (a concept which appears in 1817 in “Political Econ­ omy” and reaches its theoretical peak in Nouveaux principes), the market becomes an asymmetric mechanism which, through the despotism exercised by a minority of owners of capital, enslaves the majority of agents whom he defines for the first time as proletarians (thus inaugurating the divorce between labour and property). From his initial idea in 1803 of an ideal competitive market mechanism between agents of equivalent strength, in the space of fourteen years, Sismondi was among the very first to express reservations about the efficiency and stability of coordi­ nation by prices in an industrial society characterised by imperfect competition between unequal agents. Hence, distancing himself from Smith in the realm of price theory, Sismondi was nevertheless convinced that a simple and straightforward adoption of a price coordination mechanism was not only unjust (Smith would have agreed) but also largely inefficient. In contrast to Ricardo’s Principles, in his Nouveaux principes Sismondi cast serious doubts on the co-ordinating abilities of the price mechanism within a system of natural liberty: Let us beware of this dangerous equilibrium theory that re-establishes itself of its own accord! . . . Let us beware of believing that it does not matter on which side of a scale one puts or takes away a weight, because the other will quickly adjust itself! . . . It is true that a certain equilibrium will re-establish itself in the long run, but this will be by great suffering. (1827, 412; 1991, 487) In other words, and even before Ricardo’s declaration of independence of eco­ nomic theory from political philosophy, doubts were already, and very seriously cast upon the self-adjusting abilities of decentralised market economies via a price system. When faced with the rapid evolution of the British industrial system, Sismondi began to denounce with increasing severity the intolerable brutality of a market system characterised by “une concurrence illimitée” (unlimited competi­ tion) based on a wage system and a price mechanism unable to bring some sense of order (in particular intertemporal) to a largely anarchic and oppressive production system (Bridel 2021).

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From liberator, the market has become enslaving through industrialism which reduces the wage earner to a status inferior to that of a subservient population. Despotism in the labour market has nothing to envy the multiple political tyran­ nies with which history is replete. The potentially liberating virtues of the market are thus diverted by the industrialist system for the benefit of a minority. Sismondi does not hesitate to assert very strongly that, in the “English system”, in the labour market, “never more absolute power has been given to man over man, and never has it been exercised more harshly” (Études, 178). In addition, Sismondi clearly links this type of inequality with the resulting inequality in political status. A cer­ tain degree of political and social equality cannot be achieved without a balance between the trading bodies on the markets. For Sismondi, already considered by Smith as the least bad of the possible sys­ tems, the concept of market and the socially and economically regulating virtues of a price mechanism were supposed to accomplish once in place exactly what Sismondi would quickly denounce as its most violently questionable characteris­ tics. Where the exchange promoted equality and mutual recognition between men, each enjoying considerable civil liberty, production divides and distances them from each other. In the space of fourteen years, from liberating, the market, through the establishment of wages and unlimited competition, has become despotic. This unlimited freedom of industry “deprives [the workers] of work and food” (1838, 754). In terms recalling his writings of the years 1798–1803, it seems that, for Sismondi, the unlimited freedom of industry and the unconditional pursuit of wealth advocated by British economists destroy civil liberty which was, however, in the Italian Republics as in his beloved Republic of Geneva, at the very origin of the initial increase in wealth. Economic freedom should only be a means and not an end in itself. A necessary condition for economic growth, civil liberty (or the free­ dom of the Moderns, as Benjamin Constant called it) thus ends up being destroyed by the unlimited freedom of industry represented by the incessant, obsessive and exclusive pursuit of wealth advocated by Ricardo and, more broadly, by the “chre­ matistics of the English school”. Armed with an intellectual construction largely pre-dating Ricardo’s Principles (and despite frantic analytical efforts), Sismondi failed to convince the then nascent economic profession about the relevance of his approach.7 And his ultimate failure to invalidate the dominant price theory results probably from the fact that his cen­ tral critical argument is not to be found in his political economy alone. The conclu­ sions reached by Sismondi on the price system are no mean feat and run against what was (and still is) the dominant wisdom. For him, a market order is neither efficient, nor natural or spontaneous and political economy is not ethically neutral. 7 During his lifetime, Sismondi would frequently complain that his “flag has never been carried by anyone”. To his dismay, one of his rare disciples, Théodore Fix, let him down by eventually joining the very liberal Journal des économistes. Similarly, the dominant French liberal school carefully avoided integrating any of his works into the Collection des principaux économistes published by Guillaumin between 1840 and 1848. All in all, Eugène Buret can probably be considered as Sis­ mondi’s only direct intellectual heir (Eyguesier 2012, 348–52).

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Unconstrained self-interest of each does not lead to the interest of all. If natural liberty and unlimited competition in industrial societies could, in principle, pro­ duce plenty, Sismondi felt that in terms of what binds people together, it is likely to end up in failure for most individuals. Even if some adjusting properties could be attributed to the price system, the negative influence it would have on most agents’ liberty and happiness would turn it into a “deception by nature”. The acquisition of material wealth is not a substitute for moral behaviour and natural liberty, which may allow the greatest accumulation of material well-being, could hardly be seen as the right form of social organisation. 4. Sismondi’s position during the general glut controversy From Nouveaux principes onwards, discussions on macroeconomic equilibrium are central for Sismondi and are the consequences of the serious doubts he entertained on the coordinating abilities of the price system. His contributions to the general glut controversy together with Ricardo, Say and Malthus are those which will have the greatest impact on his contemporaries and successors (Sowell 1972). Without delving into the complex (and still unsolved) 1820s intellectual exchanges, this section intends to revisit briefly Sismondi’s own peculiar position.8 In this debate, Sismondi argues fundamentally that an increase in the volume of production does not necessarily guarantee an increase in income. Among the new principles of political economy, I have thought to establish [that] there is one that offends more than the others conventional wisdom, which nevertheless appears to me more important than any other to acknowl­ edge, because it explained the violent crises that have without end plagued industry for ten years, and which would make a start in preventing their return. I have endeavoured to prove that increases in the production of all objects of our needs and desires are a blessing only when they are followed by an equivalent consumption; that similarly savings in all factors of pro­ duction are a social benefit only if everyone who contributes to production continues to obtain from it an income equal to what he received before such savings had been introduced; this can only be done by selling more products. I have therefore concluded that increases in production, in a given nation, could be a benefit or an evil, depending on circumstances, whereas all other writers on political economy [in particular Say and Ricardo] have regarded them invariably as a benefit. (1827, 497; 1991, 595) The fact that aggregate supply tends to be greater than aggregate demand is directly associated with distributional issues. Explicitly (and understandably) largely 8 In his reconstruction of Sismondi’s crises theory, Arena (2013) argues rightly in favour of (1) a conti­ nuity from Richesse commerciale to Études (with the addition of surprisingly modern elements linked to money and credit) and (2) that, despite the integration of various real-world features, this evolution does not undermine his thoroughly Classical framework.

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ignored by the other debaters, this particular aspect of Sismondi’s position is shown to be linked to the different consumption/investment programmes related to the asymmetries between the rich (a word Sismondi uses for “capitalists”) and the poor (meaning wage earners). Stemming from the mathematical sequential model of Richesse commerciale (1803, 80–2), the central idea that production at the source of income might not be demanded in the form of consumption (or investment) is at the origin of his under­ consumptionist theory of crises: “If [the] annual products brought to the market for which they were intended did not find any consumers there, the nation would ruin itself” he wrote already in 1817 (1816–17, 50). The Smithian9 macroeconomic bal­ ance between production, income, consumption, saving and investment is in doubt: supply does not create its own demand. Starting from a hypothetical family economy, in which the paternal author­ ity adjusts expenses (and in particular the volume of its capital) to the size of its income, Sismondi explains that when wages and capital are introduced into agri­ cultural and manufacturing productions, this proportionality is made practically impossible. In an industrial society, rich and poor have widely different (and irrec­ oncilable) consumption programmes. To avoid insolvency and bankruptcy, the rich must sell. To sell he must lower prices. It does this only by reducing wages and resorting to technical progress. Both solutions decrease the purchasing power of the wage labour force; moreover, the second increases unemployment. The machine replacing man, the population in industrial countries is too large. If technical pro­ gress and investment are to continue, the size of the working population has to be reduced. The population being too important, reducing it by increased misery and famine, however, is hardly a civilised solution. Yet this is the wrong path on which chrematistic political economy leads the society. For Sismondi, the general crisis of overproduction is an empirical fact. Too much is produced in relation to needs.10 Furthermore, given the overabundant supply, it is impossible to increase aggre­ gate demand, for at least three (sometimes rather counterintuitive) reasons. First, beyond their vital consumption, workers aspire only to leisure. They prefer free time to the consumption of luxury items. Second, the improvement in the quality of goods does not provide them with any additional satisfaction. Third, the lower prices made possible by technical improvements do not lead to an expansion of the labourers’ consumption. Thus, unless the distribution of income between rich and poor is altered, the problem is insoluble. Unlike Smith, for whom savings essentially feed the wage fund, Sismondi, like Ricardo, comes up clearly against the “problem of machines” and industrialisa­ tion: mechanisation induces a substitution of labour by capital; the accumulation no longer induces an increase in the demand for labour. In addition, a slowdown in the rate of increase in the capital stock (as in the aftermath of the Napoleonic wars) causes a contraction in the demand for labour. These two phenomena separately, 9 “What is saved annually is as regularly consumed as what is spent annually, and it is also spent almost at the same time, but it is consumed by another class of people” (Smith 1776, 337–8). 10 More than once, Sismondi tends to confuse an insufficiency of needs with that of effective (and solvent) demand (see, e.g. 1827, 237, 1991, 278 and 287/338).

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or cumulatively, cause a fall in the wage rate, a fall in overall demand and unem­ ployment. Just like Ricardo in his revised chapter on machines in the third, 1821, edition of his Principles, Sismondi argues much earlier in his explanation that by introducing a machine which reduces gross product (and the number of employ­ ees), the employer increases the net product (and consequently his rate of profit). The development of machinery thus causes a decrease in employment not off­ set by the decrease in prices enjoyed by consumers. Whereas Ricardo sees in it a self-correcting phenomenon of short period, Sismondi considers it as a crippling tendency of the capitalist system. The division of labour combined with technical progress therefore introduces a new instability in the Smithian model. Due to the imperfect mobility of factors, an increase in fixed capital, in giving movement to new labour, though it does not destroy the balance between production and consumption, renders it much more complex. The new produce thus obtained must, at last, find a consumer; and though it may be generally affirmed, that to increase the labour is to increase the wealth, and with it in a similar proportion the revenue and the consumption; still it is anything but proved, that by too rapid an increase of its labour a nation may not altogether deviate from the proper rate of consumption, and thus ruin itself by economy as well as prodigality. (1816–17, 56) In other words, the acceleration of the level of production resulting from the increase in the rate of accumulation of fixed capital does not necessarily create the income necessary for its consumption. By investing, the rich “replace” more capi­ tal and less labour than the poor do: a wealthy manufacturer or farmer invests an ever-larger amount of his income in fixed capital to the detriment of the wage fund. The problem is, in Sismondi’s opinion, that a raising number of workers cannot permanently be employed in the production of capital goods.11 Only the production of commodities of everyday use could bring about full employment. Despite frequent allusions to what was later to be called Keynesian shortages of effective demand, Sismondi never suggested against Ricardo and Say the pos­ sibility of economic policies aimed at closing the gap between aggregate supply and aggregate demand: “one always sees that a consumption increase may alone determine an increase in reproduction, and that on its part consumption can only be determined by the income of the consumers” (1827, 94; 1991, 107). The diagnostic is crystal-clear, even if alternatives to a redistribution of income are sorely lacking. As a matter of fact, for Sismondi, shortfalls in aggregate demand can only be tackled by changing the distribution of income, which itself works through of a more equitable distribution of property, the only way to guarantee, in his opin­ ion, a stable and predictable income. In the agricultural sector as in manufacturing industries, the breaking of the link between property and income, the increasing 11 Put slightly differently, the capital intensity of the productive goods sector seems to be higher than that of final consumption goods.

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difficulties of coordination between production and consumption imply that “the increase in material wealth . . . produces for the whole of society only an increase in embarrassment and misery” (1835, 626). The price mechanism only reveals overproduction: unable to anticipate with certainty their future prices and incomes, producers seek only a “random profit” (“un profit de jeu”; 1836–38, 791) and not a real profit. Competition strengthens an unequal distribution of income which rein­ forces the inadequacy of production for consumption, and the quantity produced takes precedence over the quality of goods. All these elements ultimately reinforce the “random chances” of the functioning of the economic system. Postulated by Smith and widely taken up by Ricardo and McCulloch, the almost permanent trend stability of macroeconomic equilibrium is nothing less than certain for Sismondi. And for him, everything is played out on the labour market populated by employ­ ees who are the sole owners of their labour power. In this market, the employee is dependent on the production decisions of the rich. The asymmetry of the forces involved forced him to adapt to the fall in wages and/or the increase in working hours dictated by competition. The rapid increase in production, far from being advantageous to the working classes, implies a sacrifice of its free time, its material well-being and, ultimately, of its happiness. However, and once again, Sismondi’s position rests on the questionable assumption that the lower prices made possible by technical progress do not lead to an expansion of the labourers’ consumption. Even if the rich increase their capital by diminishing their consumption, the labour­ ers might not benefit, because it is not certain that there is a demand for the new production. Finding its paroxysm in overproduction crises, unlimited competition threatens society in its foundations. Sismondi thus places at the centre of his reflection the problem of the distribu­ tion of the increase in production linked to division of labour and technical pro­ gress between the different social classes. The income inequalities characterising capitalism do not reduce the bundle of goods consumed by a community, but, in determining its composition, are a major contributing factor to unemployment and depression. He saw with great acuity the need to support aggregate demand through a re-distribution of income: “It is the diffusion of wealth, not its accu­ mulation, that increases consumption”. In addition, this distribution responds to a principle of justice because only is admissible “an increase in wealth which is accompanied by the increase in wealth of the most numerous class”; because “human society . . . is shaken in its foundations whenever one of its members is crushed” (1816–17, 56, 84). In short, the deficiency of aggregate demand which is at the origin of the crises can only be prevented by a modification of the distribution of income, itself a func­ tion of a new distribution of property, the only source in Sismondi’s eyes of a stable and predictable income. 5. Concluding remarks “Among the new principles of political economy I have thought to establish . . ., there is one that offends more than the others conventional wisdom” wrote Sismondi

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about his critique of Say’s law. Does this opposition to conventional wisdom repre­ sented here by Say and the economists of the British school make Sismondi neces­ sarily a heterodox economist? The early period during which he structured his way of thinking should press the reader to accept Sismondi’s opinion (mentioned above as an epigram) that he was, in fact, following another route than that subsequently taken by Ricardo, the British Classical school and the French Liberal School. To make a long story short, the main building blocks of Sismondi’s analytical frame­ work were conceived and put down in writing before the publication of Ricardo’s Principles. As a matter of fact, the book-length article for the Edinburgh Ency­ clopaedia should be considered not as an answer to Ricardo but as a pre-print of Sismondi’s 1819 New principles. And the word “new” in the title does not refer to Ricardo’s 1817 volume but to a reconsideration of or even an improvement on the Smithian corpus. Hence, between Adam Smith and David Ricardo, Sismondi stands at a crucial crossroad; and the fact that he chose to follow another route does not make him necessarily a heterodox economist but rather a balancing alternative to what was soon to become for the best parts of two centuries the dominant wis­ dom in economic theory.12 The fact that Ricardo completely eclipsed Sismondi in the field of economic theory should not blind the modern reader to the permanent importance of various Sismondian themes until today. The modernity of the three elements discussed in this chapter should help consider Sismondi and Ricardo as complementary thinkers rather than in opposition. First, the much-lamented divorce between economics as ethics and engineering economics was certainly not initiated by Sismondi. For him, markets never stood alone in the pursuit of wealth and happiness: economic theory and political phi­ losophy are, and should remain, two closely connected branches of a broader social science. The acquisition of material wealth is not a substitute for moral behaviour; and natural liberty, which may allow the greatest accumulation of material well­ being, could hardly be seen as the correct and exclusive form of social organisation (Bridel 2020). Second, anticipating the fatal critiques brought about during the second half of the twentieth century on the stability of a general competitive equilibrium and the incompleteness of markets, Sismondi already denounced with increasing severity the intolerable brutality and the inefficiency of a market system characterised by unlimited competition based on a wage system and a price mechanism unable to bring some sense of order (in particular intertemporal) to a largely anarchic and oppressive production system. Third, the pride of place Sismondi gave (for better or worse) to distributional effects, in particular during the general glut controversy, has never stopped being an underlying and much-neglected argument in economic theory. The very recent 12 Sismondi and Ricardo are the only two economists quoted by Karl Marx in the Manifesto. Marx’s enthusiasm for Sismondi’s critique of nascent capitalism did not however deter him from using simultaneously the Ricardian model to analyse the dynamics of capitalist society within which exac­ erbated industrialism is precisely the main engine and the harbinger of the proletarian revolution.

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renaissance of such a topic at the junction between history, economic theory and political philosophy demonstrates once again that questions related to growth and income distribution are still as unsolved today as they were during Sismondi’s lifetime. Travelling along “another route” than that followed by the disciples of the “con­ ventional wisdom”, Sismondi never grew tired of hoping and working for a con­ vergence of these two complementary ways of understanding economic systems. And for standing at this crucial junction, hopelessly waving at other economists in an intellectual hurry, he might just, but only just be considered as a heterodox economist. References Aftalion, Albert. 1899. L’Œuvre économique de Simonde de Sismondi. Paris: Pedone. Arena, Richard. 2013. “Sismondi et l’analyse des crises économiques”. Œconomia, 2–3, 179–97. Bridel, Pascal. 2014. “Origines et détermination du ‘prix de chaque chose’: la Richesse commerciale entre le coût de production de Smith et la ‘catallactique’ de l’offre et de la demande de Canard”. In Jean-Pierre Potier (ed.), Les marmites de l’histoire. Mélanges en l’honneur de Pierre Dockès. Paris: Classiques Garnier, pp. 93–104. Bridel, Pascal. 2020. “Liberté des anciens, liberté des modernes et ‘liberté illimitée de l’industrie’ chez Sismondi: une critique de la ‘concurrence universelle’ de la chrématis­ tique ricardienne”. Cahiers Benjamin Constant, 45, 37–53. Bridel, Pascal. 2021. “Sismondi’s Price Theory: From a Liberating to a Despotic Market”, History of Political Economy, 53 (4), 697–720. Bridel, Pascal. 2022. “Les origines genevoises de l’économie politique sismondienne”. In Sismondi: les facettes d’une pensée. Lausanne: Institut Benjamin Constant et Société d’histoire de la Suisse romande, pp. 31–57. Eyguesier, Nicolas. 2012. La notion de progrès chez Sismondi. PhD dissertation. Lausanne: University of Lausanne. Eyguesier, Nicolas. 2020. “Was Sismondi a ‘Smithian’ critic of industrialization?”. History of Political Economy, 52, 341–66. Faccarello, Gilbert, and Masashi Izumo (eds). 2014. The Reception of David Ricardo in Continental Europe and Japan. London: Routledge. Gislain, Jean-Jacques. 1996. “Sismondi: naissance de l’hétérodoxie”. Economies et sociétés, 30 (9), 45–51. Gislain, Jean-Jacques. 2013. “La conversion de Sismondi”. Cahiers d’économie politique, no. 1, 111–34. Romani, Roberto. 2005. “The Republican Foundations of Sismondi’s Nouveaux principes d’économie politique”. History of European Ideas, 31 (1), 17–33. Salis, Jean-René de. 1932. Sismondi, 1773–1842. La Vie et l’Œuvre d’un cosmopolite phi­ losophe. Paris: Champion. Sen, Amartya. 1987. On Ethics and Economics. Oxford: Basil Blackwell. Simonde de Sismondi, Jean-Charles Léonard. 1798 [1965]. Recherches sur les constitutions des peuples libres, Marco Minerbi (ed.). Geneva: Droz. Simonde de Sismondi, Jean-Charles Léonard. 1801 [2018]. Tableau de l’agriculture toscane et autres écrits. Vol. I of Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan and Nicolas Eyguesier (ed.). Paris: Economica.

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Simonde de Sismondi, Jean-Charles Léonard. 1803 [2012]. De la Richesse commerciale ou Principes d’économie politique appliqués à la législation des douanes. Vol. II of Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier (eds). Paris: Economica. Simonde de Sismondi, Jean-Charles Léonard. 1814. Considérations sur Genève dans ses rapports avec l’Angleterre et les États protestants. Suivies d’un discours sur la philoso­ phie de l’histoire prononcé à Genève. London: John Murray. Simonde de Sismondi, Jean-Charles Léonard. 1816–17. “Économie politique”/“Political Economy”, published in 1825 in the Edinburgh Encyclopaedia. Original French text in Sismondi, Écrits d’économie politique, 1816–1842, vol. IV of Œuvres économiques complètes, edited by Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier. Paris: Economica, 2015, pp. 35–160. Simonde de Sismondi, Jean-Charles Léonard. 1827 [2015]. Nouveaux principes d’économie politique ou De la richesse dans ses rapports avec la population, 2nd ed. Variorum edi­ tion, vol. V of Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier (eds). Paris: Economica. Simonde de Sismondi, Jean-Charles Léonard. 1835. “Du revenu social”, Revue mensuelle d’économie politique, 4, 193–222. As in Sismondi, Écrits d’économie politique, 1816– 1842, vol. IV of Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier (eds). Paris: Economica, 2015, pp. 611–30. Simonde de Sismondi, Jean-Charles Léonard. 1836–38 [2018]. Études sur les sciences sociales. vol. VI of Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier (eds). Paris: Economica. Simonde de Sismondi, Jean-Charles Léonard. 1838. “Esclavage et traite”, review of Agénor de Gasparin’s Esclavage et traite. Paris: Joubert. Bibliothèque universelle de Genève, 17, 5–26. As in In Sismondi, Écrits d’économie politique, 1816–1842, vol. IV of Œuvres économiques complètes, Pascal Bridel, Francesca Dal Degan, and Nicolas Eyguesier (eds). Paris: Economica, 2015, pp. 747–66. Simonde de Sismondi, Jean-Charles Léonard. 1991. New Principes of Political Economy. Of Wealth in Its Relations to Population. Translated and annotated by Richard Hyse. London: Transaction Publishers. Sismondi: see Simonde de Sismondi. Smith, Adam. 1776 [1976]. Inquiry into the Nature and Causes of the Wealth of Nations. Oxford: Clarendon Press. Sowell, Thomas. 1972. “Sismondi, a Neglected Pioneer”. History of Political Economy, 4 (1), 62–88.

10 Claude-Henri de Saint-Simon and the Saint-Simonians Ragıp Ege

The writings of Claude-Henri de Saint-Simon (1760–1825) – who after 1815 simply signed himself Henri Saint-Simon – form an important point in the devel­ opment of economic ideas, reinforced by the work of those who later identified themselves as Saint-Simonians. While these followers pursued their own path, and not without differences, they attracted attention because they proclaimed an idi­ osyncratic new religion. While aspects of this scandalised the public, the ideas of Saint-Simon and of the Saint-Simonians would diffuse through French society beyond their original context; the phrase “Saint-Simonian” is still used today for a voluntaristic and technocratic approach to economic activity, or “industry”. Some of their basic positions are analysed in this chapter. Further developments, espe­ cially on justice and taxation, are to be found in the next chapter, devoted to the first associationists and socialists. 1. “A new reign is coming in Europe” The work of the Saint-Simonian movement was driven by a consistent belief: that a new reign was emerging in Europe (Gouhier 1941, 274). Saint-Simon called it “industrialism” – a word of his invention.1 As was then usual, the concept of “indus­ try” was not limited to a particular sector of economic life; it covered the totality of human productive activities, of material production as well as scientific, spiritual and artistic activity. Saint-Simon frequently used the plural when talking of work­ ers and professionals, as in “industrials”, referring to a specific set of actors: entre­ preneurs, technicians, engineers and workers. But “industrialism”, in the sense of the reign of material and spiritual creation and innovation, refers to a social reality more comprehensive than this restricted meaning. According to Saint-Simon and the Saint-Simonians, modern European society was the theatre in which a process of transition, of mutation, was occurring: a transition from a separated, divided, dispersed society towards an ever more linked, unified and interdependent society. 1 The only reliable edition of the complete works of Saint-Simon was published in 2012: Œuvres Complètes – four volumes including thorough introductions, notes and comments – edited by Juliette Grange, Pierre Musso, Philippe Régnier and Franck Yonnet, Paris: Presses Universitaires de France. DOI: 10.4324/9780429202407-12

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Within this process the status of politics changed, becoming a positive science of observation in the sense that human beings, becoming ever more autonomous, no longer needed an external authority to control and lead them. Political power was progressively limiting its action to the administration of things, and administration was replacing the government of individuals.2 In this context, Saint-Simon and the Saint-Simonians believed that their essential mission was to accelerate this crucial transition in European society,3 promoting in this way the advent of a new society. Saint-Simon

Claude-Henri de Saint-Simon enlisted in the army at the age of 17 and left for North America, where he served under George Washington and Gilbert du Motier de La Fayette. After the War of Independence he traveled in North America and also visited Mexico, where he suggested to the king that a canal be dug linking the Pacific and the Atlantic oceans. He continued traveling in Europe and, while in Madrid, likewise suggested to the king of Spain that the city be linked to the sea by a canal. This interest in urban and national planning, and the role of canals, was consistently developed by Saint-Simon and his followers. Back in France, he devoted himself to financial speculation in property, through which he acquired significant wealth, of which he then decided to make good use for the cause of science. He became acquainted with contemporary scholars such as Monge and Lagrange, and started studying physics at the École Polytechnique, where he financially supported the most promising students. His purpose was to review the knowledge of his time, aiming at a philosophical synthesis of all the sciences. After one very grueling phase of moral and financial distress – he practically lost all of his fortune – he decided to limit his studies to political matters. Thanks to the support of a few benevolent sponsors he appointed talented secretaries such as Augustin Thierry (1795–1856) and Auguste Comte (1798–1857), who in their own contributions substantially augmented their master’s work. 2 In 1817, in the second volume of L’industrie, Saint-Simon wrote: Governments will no longer lead the people, their functions shall be limited to preventing the disturbance of useful work. They will have at their disposal little power and little money, since little money and little power is sufficient to achieve this aim. ([1816–18] 2012, 1488) The editors of the Œuvres complètes (see note 1), remark (pp. 1780–81, endnote 219) that the celebrated sentence: “the government of persons is replaced by the administration of things, and by the conduct of processes of production” is not to be found in Saint-Simon, but in Friedrich Engels’ Anti-Dühring. 3 For the Saint-Simonians the history of mankind is a constant transitive and progressive process: the present is but a point in space, an instant in time; it is the elusive link between past and future; but we know it contains the summary of the former and the germ of the latter; we know it is the middle term which we are living in . . . and that it is within and through it that we are ceaselessly marching towards a better future. (Bazard et al. 1831, 119)

Claude-Henri de Saint-Simon and the Saint-Simonians 265 Saint-Simon’s work is rich in original ideas and imagination, inspiring a fol­ lowing dedicated to the continuation of a process of creation and innovation. He published his first syntheses in 1803, Lettres d’un habitant de Genève à l’humanité and Lettres d’un habitant de Genève à ses contemporains (Letters from an Inhabit­ ant of Geneva to Humanity and Letters from an Inhabitant of Geneva to his Con­ temporaries). These were followed by several books, sometimes co-written with his secretaries Augustin Thierry and Auguste Comte. Most important among them are Introduction aux travaux scientifiques du XIXème siècle (An Introduction to the Scientific Work of the 19th Century) (1808), Réorganisation de la société euro­ péenne (The Reorganisation of European Society) (1814), L’industrie (Industry) (1816–18), L’Organisateur (The Organiser) (1819), Du système industriel (On the Industrial System) (1821–22), Catéchisme des industriels (The Industrialists’ Cat­ echism) (1822–24) and Nouveau Christianisme. Dialogues entre un conservateur et un novateur (New Christianism. Dialogues between a conservative and an inno­ vator) (1825). Astonishingly prolix and replete with redundancies, these works are typically liberal in tone: a tribute to the victory of the Enlightenment, of the rational organisation of society, of social relationships ruled not ruled by status, but by con­ tract, promoting a spirit of progress and the domination of nature over medieval obscurantism and warmongering. It is a spirit which is finally at peace for having found in political economy the positive science of the social fact: the science for which Saint-Simon had longed for, and which he called “social physiology”. The Saint-Simonians

Soon after Saint-Simon’s death the group of disciples that gathered around him founded a newspaper, Le producteur. Journal philosophique de l’industrie, des sci­ ences et des beaux-arts. Beside Augustin Thierry and Auguste Comte, we should mention the brothers Olinde (1795–1851) and Eugène Rodrigues (1807–1830), Saint-Amand Bazard (1791–1832), a former “carbonaro”, Émile Barrault (1799– 1869), and in particular Prosper Enfantin (1796–1864), a former student at the École Polytechnique. A man of strong and charismatic character, Enfantin played an essential part in transforming the movement into a full-scale Church with a rig­ orous hierarchy: a college of “fathers” at the top, then “sons” at successive levels. All these followers were convinced that Saint-Simon’s work, his “industrialised” social doctrine, provided the elements of a modern faith which could efficiently replace an older Catholic morality or liberal utilitarian ideals. In 1830 the SaintSimonians, led by Pierre Leroux (1797–1871), took over the liberal newspaper Le Globe, replacing Le Producteur. The centrepiece of Saint-Simonian theoretical work was a series of lectures organised between 1828 and 1830 to develop and dif­ fuse their master’s doctrine (Doctrine de Saint-Simon, Exposition). Bazard lectured to the elite, including Ferdinand de Lesseps (1805–1894), Armand Carrel (1800– 1836), Hippolyte Carnot (1801–1888), the Pereire brothers – Jacob Rodrigue Émile Pereire (1800–1875), Isaac Pereire (1806–1880) – and Michel Chevalier (1806– 1879). The mystical and religious aspect of the movement became entrenched, but in 1832 the sect fractured, due to a theoretical and moral conflict between the two

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“fathers” of the Church, Bazard and Enfantin. Bazard left the group with some others; Enfantin remained, and appropriated the title “Supreme Father”.4 2. Saint-Simon’s vision: towards a scientifically organised society Saint-Simon’s philosophy of history (particularly as in Du système industriel, 1820–22) is important for an understanding of what Saint-Simon thought a scien­ tifically organised society would be. History, and notably European history, was seen as the succession of two phases: one “organic”, the other “critical”. This fun­ damental distinction was developed later by his followers (Bazard et al. 1831, 79; 138–41). An organic phase is characterised by harmony, consistency and peace. Indi­ viduals spontaneously subscribe to the values and principles of the whole. There is no conflict, no contradiction whatsoever between society’s moral foundations and individual beliefs, convictions and aspirations. Individuals as a whole share the same approach to public interest, to common wealth and happiness. By contrast, a critical phase of history is characterised by a spirit of opposition and contradiction: protest and dispute spread in society, and individuals are less and less inclined to share the common values of the whole. Doubts and challenging questions intensify and undermine the basis and usefulness of the leading principles of society, initiat­ ing a process of disintegration. While the organic phase represents a “synthetic” moment in history, the critical phase represents an “analytical” moment (Picon 2002, 51). For Saint-Simon, in modern times European society had been engaged in an analytic process favouring the advent of industrialism. For Saint-Simon, a “feudal and theological system” emerged in the eleventh century ([1819–20] 2012, 2165), placing temporal power in the hands of the “nobility of the sword”, while spiritual power was held by the Christian clergy. Political power was enforced by the military, by brute force, and spiritual power rested on “metaphysics”, a form of thinking fundamentally opposed to experimen­ tal knowledge. However, another system was concealed within feudal society: if initially extremely weak and inactive, its potential for development was limitless: in the eleventh century, just when the old system was becoming thoroughly established, the components of a new social organisation had appeared. These involved the industrial capacities (related to the emancipation of towns) of temporal power; and the scientific abilities (result from the introduction of positive sciences into Europe by the Arabs) of spiritual power. ([1819–20] 2012, 2168) These new powers progressively replaced those of the ruling European feudal orders. Furthermore, during this transition the very concept of power was replaced by that of “ability”, that is, the entire set of an individual’s non-interchangeable 4 For further historical accounts of Saint-Simon and the Saint-Simonians, see Charléty (1896), Walch (1967), Picon (2002), Coilly and Régnier (2006), Musso (2020).

Claude-Henri de Saint-Simon and the Saint-Simonians 267 competences, talents and skills. In the emerging new system human relationships were no longer based on the logic of domination: instead, the logic of association prevailed. Individuals become associated beings; they learn to combine, and asso­ ciate their particular abilities in a movement towards “universal association”. Soci­ ety becomes more active, more dynamic. Saint-Simon talked of a transition from a “solid” status to a “fluid one” (Musso 2020, 42–6). As he noted in his Introduc­ tion aux travaux scientifiques du XIXe siècle (1807–1808), “all phenomena result from the struggle between solids and fluids” ([1807–1808] 2012, 374). During the transition process (fluidification), society had to overcome the rigidities (solidities) which divided its components (the abilities) in the older organisation and prevented them from associating. In this transition process all abilities find increased oppor­ tunities for communication and combination. Of course, such a fluidification process is extremely long. The first signs of the emerging system had been present since the eleventh century. However, the transition process really began with the introduction of positive sciences into Europe: “The Europeans rejected the Arabs’ politics but accepted their scientific leadership” ([1807–1808] 2012, 391). This constituted a first step towards a society where, progressively, reason replaces force and labour prevails over conquest. “For a nation as well as for an individual, there are only two goals for activity: either conquest or labor, together with their spiritual counterparts: blind belief, or scien­ tific demonstration based on positive observations” ([1820–22] 2012, 2347). From the sixteenth century onwards European society sank into a violent and destructive phase of criticism: the analytic approach to reality, the will to analyse, to confront and challenge its political, moral, spiritual choices. Saint-Simon considered “labour versus conquest” to be one of the greatest dilemmas mankind had ever faced. The very foundations of the former system, based on force and conquest, were confronted by reason and labour. The French Revolution, with its “Terror” phase, is presented as the apex of this painful but nec­ essary process. He argued that Modern Europe could now replace the nobility and the military with industrial entrepreneurs, and the clergy with scientists and artists. From this point of view the achievement of the Revolution proved to be completely emancipatory, overcoming the errors, superstitions and illusions of the past. But this achievement remained a purely negative one: analytic work alone is unfruitful. A society cannot survive long when its foundations are constantly chal­ lenged. Time had come to fill the “abyss of revolutions” (a widely used phrase at that time), to put an end to this analytic phase and achieve the synthetic endeavour for which Europe was eagerly waiting. Saint-Simon and the Saint-Simonians believe they had been called by God himself to build this new organic society. It was however a delicate issue. The concern was not a refusal of the analytic moment. The scien­ tific approach is fundamentally analytic, and understanding a phenomenon calls for the separation and distinction of its inner components. The revolutionary period had ignored the need for synthesis, the need for bringing together what had been separated. The critical phase failed to acknowledge the vital importance of religion (see below). Non-violence was the basic principle in a transition towards a new organic soci­ ety, without conflict or destruction. The only weapons to which Saint-Simon and the

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Saint-Simonians admitted recourse were “persuasion” and “demonstration” ([1825] 2012, 3219).5 Shifting towards a world ruled by reason and science by means of violent acts, of revolutions and rebellions, was contradictory. Reason and science should be the obvious choice, one perfect truth unlikely to be challenged. The shift “from heavenly to earthly morals” ([1816–18] 2012, 1577) must be achieved through general consent. The Saint-Simonian movement was always against revolutionary and authoritarian socialism. Even the democratic regime was not to their liking; a scientifically organised society needs no public debate, since debate involves conflicting interests. No such conflicting interests are likely within a social context where the rulers and the ruled are equally informed and enlightened by science. Science renders any contradiction between public and private interests irrelevant and impossible. Saint-Simonians could conceive of the existence of industrialism within a monarchy, since the respective inter­ ests of sovereign and manufacturers are unlikely to differ if both have been enlightened by science. “His Majesty will necessarily come to the conclusion that there is no other way to quietly apply royal power in France than governing for the manufacturers and with the manufacturers” ([1820–22] 2012, 2367). What will the political structure of the new organic system – industrialism – be like once the transition process is fully achieved? First of all, the British system – its House of Commons – should be the new model for the state, after “correcting” the “radical flaw” ([1819–20] 2012, 2314) in its composition. Instead of being idle landowners or civil servants, the members of this House – the essential task of which would be to vote on taxation – must be active and creative citizens. It is in the nation’s interest that the members of this House be men whose personal interest lies in making taxes as light as possible, however the great majority of the members of the English House of Commons is more inter­ ested in increasing rather than reducing taxes. . . . [Therefore] the mem­ bership of the House of Commons should be composed of the leaders of different kinds of industrial labour, since they are those most interested in thrifty public expenditure, and are the most opposed to arbitrariness. ([1819–20] 2012, 2134–5) Two specific Houses should be created within the House of Commons. The first one would be called the House of Invention, composed of three hundred worthy members divided into three sections: one of “two hundred civil engineers”, another 5 Saint-Simon’s doctrine, like all new general doctrines, certainly does not suggest keeping or super­ ficially changing that which exists; its purpose is to profoundly and radically change the system of feelings, ideas and interests. Yet it does not call for social upheaval. The word upheaval is always linked to an idea of blind, brute force whose aim is destruction, and such characteristics are remote from Saint-Simon’s doctrine. This doctrine does not possess, nor recognizes, any forces other than persuasion or conviction for leading men; its objective is to build and not to destroy; it is always ori­ ented to order, harmony and construction, either producing an idea in its purely speculative worth, or calling for the material edification which this idea determines. Saint-Simon’s doctrine does not wish to cause upheaval or a revolution; it aims to predict and accomplish a transformation, an evolution; it brings to the world new education and final regeneration. (Bazard et al. 1831, 211–12)

Claude-Henri de Saint-Simon and the Saint-Simonians 269 of “fifty poets and other inventors in literature”, and the last of “twenty-five paint­ ers, fifteen sculptors or architects and ten musicians” ([1819–20] 2012, 2136). In its first year this House should propose one ambitious “public works project undertaken in order to increase France’s wealth and improve its inhabitants’ lot regarding all aspects of utility and pleasure” ([1819–20] 2012, 2137). In addition to its primary mission, this House should also develop several projects for public celebrations, such as festivals of “hope” and “remembrance”. The second House – called the House of Examination – should be of three hun­ dred members: two hundred physicists and one hundred mathematicians ([1819– 20] 2012, 2138). It would be charged with examining the projects proposed by the House of Invention, and developing a general project for public education in all matters useful for future citizens – apart from religion, which was to be left to the free choice of individuals ([1819–20] 2012, 2139). Like the House of Inven­ tion, it would also propose projects for public celebrations, such as “festivals for men, for women, boys, girls, fathers and mothers, children, foremen, and workers”. Finally, this House “shall be in charge of setting up taxes and having them col­ lected” ([1819–20] 2012, 2140). Obviously, this new Constitution expresses Saint­ Simon’s main concern: that the sciences and arts should move forward hand in hand to create a new, scientifically organised, society. Saint-Simon was aware that the hope for such a rationally organised society might sound utopian. This was because, he noted, any superficial appraisal is inca­ pable of seeing what is hidden behind the immediacy of reality. On closer consid­ eration, it seems that this new system is “the necessary result of the path mankind has been following for seven to eight centuries . . . it is no utopia” ([1819–20] 2012, 2140). Here we see again Saint-Simon’s approach to history as a ceaseless transition process. Modern European history, through its own developments, progressively sets the conditions for the new system. All of the innovations required to establish the new system are to be found in the evolutionary process of modern history.6 There is no such thing as creating a system of social organisation: we notice a newly arising chain of ideas and interests and make it conspicuous, noth­ ing more . . . I, for one, have not built up the Constitutional project, of which I have shown the fundamentals. It has been achieved by the work of all Euro­ pean people during the eight preceding centuries. Not everyone might have yet seen this because the facade of the still-existing ancient social structure continues to conceal it. ([1819–20] 2012, 2202) Saint-Simon was convinced that the new system he announced followed the logic of historical necessity. The epigraph of Le producteur is his: “The golden age, which blind tradition has hitherto placed in the past, lies before us”. 6 Here we can point to one contradiction found in the way many nineteenth-century reformers con­ ceived history. Saint-Simonians see history as an uninterrupted transition process: yet they dream of a perfectly organised society, which implies an “end” to history (on this paradoxical vision, see Picon 2002, 63).

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3. Coordinating abilities, needs and resources: the banking system and the railway network Replacing conquest with labour is therefore the principal characteristic of modern times. The time had come to give prominence to the real producers of the material and spiritual conditions of life: to manufacturers, scientists and artists. As Saint­ Simon’s famous parable puts it: Let us suppose that France would suddenly lose its fifty leading physicians, its fifty leading chemists, its fifty leading physiologists, its fifty leading mathema­ ticians, its fifty leading poets, its fifty leading painters, its fifty leading sculp­ tors, its fifty leading musicians, its fifty leading men of letters . . . mechanics, civil and military engineers, cultivators, blacksmiths, arms manufacturers, tan­ ners, dyers, miners, drapery manufacturers, . . . printers, engravers, jewellers and other metal-workers, masons, carpenters . . . and the hundred other people of various occupations. ([1819–20] 2012, 2119–20) What would have become of France? “Since these are the Frenchmen . . . most use­ ful to their country . . . the nation would turn into a soulless body at the very moment it loses them”. Replacement of these specific, non-interchangeable abilities would span “at least one full generation”. We may now imagine another scenario: Let us suppose that France would keep all its outstanding men of sciences, fine arts and arts and crafts, but on the same day unluckily loses Monsieur, the king’s brother, his Lordship the Duke of Angoulême, his Lordship the Duke of Berry, his Lordship the Duke of Orléans, his Lordship the Duke of Bourbon, her Ladyship the Duchess of Angoulême . . . and simultaneously all of the Crown’s first officers, all State ministers . . . all of its marshals, car­ dinals, archbishops, bishops . . . all prefects and assistant prefects, all minis­ try staff, all judges and in addition the ten thousand most wealthy landowners among those who lead the life of a noble.7 ([1819–20] 2012, 2120–21) What would happen in France? Undoubtedly French people would be afflicted by the loss of these individuals known to France’s most powerful persons, but there would be no harm to France as a nation. These people’s abilities can be replaced at once at no real cost to the nation, because they are interchangeable. Needless to say, the author of this parable almost paid a high price for it: he was brought before a court and narrowly escaped being found guilty. Saint-Simon thus considered two different components in the nation: the “national” and the “anti-national” (updating another parable, of the hornets and the bees). The first consists of “those who carry out works useful to society”, and 7 The “life of a noble” refers to those living on their lands with no other occupation than warfare.

Claude-Henri de Saint-Simon and the Saint-Simonians 271 the second of “those who consume, and produce nothing” ([1819–21] 2012, 1947). The authorities must be quickly replaced, shifting from the hands of the “anti­ national party” (the “hornets”) to those of the “national party” (the “bees”). Since “these days political science essentially consists in producing a good budget”, only the industrials, who have “the ability to administrate”, can be entrusted with power ([1819–21] 2012, 1950). The new system’s essential task should consist in manag­ ing “abilities”. Abilities and property

For Saint-Simonians “ability” refers to the whole set of non-interchangeable com­ petences, talents, skills and know-how an individual acquires during their educa­ tion and personal experiences. Each individual is unique. Such is the significance of the Saint-Simonian credo: “All privileges acquired by birth shall be abolished, without exceptions, each individual shall acquire a position according to his abili­ ties and be rewarded according to his achievements” (Bazard et al. 1831, 54). This is why the great social, political, economic and ethical issue addressed by modern times becomes the coordination of the nation’s abilities. How to extract abilities from the confinement to which the static and rigid ancient system had condemned them for centuries? How to guide individuals to open up to the world, to meet, interact with and support each other, building a “fluid” and ceaselessly progressing society? How to establish the basis for a “universal association”? This aim can be achieved only if effective instruments for interaction within the system are avail­ able. Fortunately, in modern times two such instruments have already been estab­ lished: the banking system and the railway network. The rational management of abilities requires that they be provided with the appropriate tools for production – Saint-Simonians called them “work instruments” or sometimes “industry instruments” – and that the concept of property be ques­ tioned. According to general prejudice, property is an “unvarying fact” throughout history since it is “the very basis of the political order” (Bazard et al. 1831, 179). But this prejudice is seriously mistaken: like any other human institution, property rights change over time. Owning a human being had for example become totally unacceptable (1831, 181); however, in times of slavery it had given rise to no out­ rage, and was seen as totally natural. Today the institution of property needed to be thoroughly reconsidered and reformed once more in accordance with the require­ ments of the new system, especially because of the technological developments. In modern societies “working tools” – “inanimate servants” – had evolved, becoming much more complex and extensive. The property system had become a major issue as a result: “who shall have these inanimate servants available, whose property shall they be, to whom shall they be handed over?” (1831, 180). Distributing such precious “servants” through the institution of inheritance was pure nonsense: this would mean that resources within a rationally organised society would be allo­ cated “blindly” (1831, 92). Does an owner’s son have the education, the profi­ ciency, the knowledge, in short, all the abilities needed to use the instruments of his father’s company scientifically, rationally? Existing inheritance laws only led

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to the distribution of the property of “productive powers” into “the idlers’ hands” (1831, 186). The Revolution had abolished all privileges by birth, but had left “the most immoral of privileges” – inheritance – untouched. In the new system such a “fate of birth” (1831, 92) shall be forever abolished: “the State, no longer the fam­ ily, shall inherit the accumulated wealth since it constitutes what economists call the productive fund” (1831, 183). However, this legal provision should not be mistaken for “sharing goods in common” (Bazard et al. 1831, 183), with communism, a regime which abol­ ished all inequalities. Quite the contrary, the Saint-Simonian system carefully maintains those inequalities that are inherent to the movement’s basic credo: everyone will be rewarded according to their work. Concern about achieving the best possible distribution of those instruments at the lowest possible cost to the nation is the reason for providing the State with the right of inheritance over work instruments. The issue of disposition over production instruments goes far beyond the mere motive of inheritance. When examining the conditions under which resources are granted during the failing system of the critical period, it appears that the pro­ tagonists involved are “isolated individuals, ignoring both industrial needs and the men and means likely to provide for them” (Bazard et al. 1831, 192). The ill-fated failure in communication between needs, abilities and resources is typical of such a system. The purpose of political economy is thus “to determine the social condi­ tions in which the work instruments, the products of work and the workers them­ selves would best be combined and divided, in a word, ORGANISED” (Enfantin [1831] 2010, 19). The banking system

Previously the owner of capital, who does not invest his assets himself but instead rents them to a business owner, had no or very little trustworthy information about the borrower’s real abilities and working conditions. Capital is “blindly” trans­ ferred from the former to the latter. The system is prone to waste and counterproductivity, caused by the lack of communication and trust between economic agents. Fortunately, the new organic period invented an institution capable, at the national level, of building a bridge between individual owners and workers, and, still more fundamentally, between abilities, needs and resources: the banking system. In the midst of the disorder . . . we can see instinctive efforts . . . trying to restore order by leading towards a new organisation of material work; here we see an industry which may be considered as new given its particular nature and its considerable recent expansion, namely the BANKING industry. . . . [The bankers] by their habits and their contacts are much better positioned to evaluate both the needs of industry and the ability of industrials than idle, isolated individuals; the use of capital which goes through their hands is both more useful and fair. (Bazard et al. 1831, 201–202)

Claude-Henri de Saint-Simon and the Saint-Simonians 273 Thanks to banks, society is able to accurately assess its abilities, resources, actual needs and potential creativity. As intermediary agents, banks overcome the distrust and isolation which had paralysed the ancient system and contribute to making economic and social relations more fluid. This facilitates and increases credit oper­ ations between owners and workers, particularly through reducing the regulated rates of interest (Jacoud 2010, 19–21). However, the immediate benefits for society and the working class expected from the banking system should not be overestimated, especially as regards an effi­ cient transfer of resources from idle hands into capable ones. Thanks to the advent of these new organisations, society was experiencing “a rough draft of the indus­ trial institution” (Bazard et al. 1831, 203). On the one hand, even though banks made economic life more efficient than before, they were still institutions obeying the logic of profit. As the distributor of resources they were “constantly pressed to levy the highest tithes on the product of work” (1831, 203). On the other hand, significant transactions between idlers and workers still took place outside banking institutions, subordinating the weak worker to the capitalist’s will in a violent and arbitrary transaction. The “exploitation of man by man” – a phrase coined by the Saint-Simonians – was inevitably occurring in modern society. A radical reform of banking organisation was required. This is what Enfantin clearly announced: The most important conceivable political action today would be the creation of new banks, some of them more specialised, progressively limiting their patronage to a specific industrial branch which they would increasingly over­ see and direct; others on the contrary would become more and more general, linking up the special banks and imposing a unity of purpose; thus, in each locality, each significant branch of industry would have its special bank; and all these special banks would be grouped into a general bank presiding over material work as a whole. (Enfantin [1830] 2010, 111) This new organisation of banking should have a dual purpose: both increasingly specialised and increasingly centralised, following the two requirements for a sci­ entifically organised society. This would in turn require gathering highly detailed and accurate knowledge about the needs, resources and real abilities of the nation. Such an ambition could only be achieved through the constant expansion of the network of “special banks”8 throughout the national territory. Only those at the head of these extremely specialised institutions, the bankers, would be able to acquire the particular knowledge that would make efficient production possible. Saint-Simonians always insisted on this type of knowledge and on the evolutionary aspect of industrial information. An efficient disposition of resources could only be achieved if it was based on such particular and relevant knowledge.9 8 The special banks are dedicated to only one industrial sector, and charged with the collection of knowledge related to this sector. 9 Ironically enough, Hayek’s concept of “knowledge of the particular circumstances of time and place” (Hayek 1945, 521) bears a striking resemblance to this Saint-Simonian approach.

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The degree of urgency of the various needs in society was also to be addressed. The private secondary banking network alone has no access to such knowledge. The efficient disposal of resources calls for an institutional mecha­ nism other than that ruled by the logic of profit, namely the “central bank representing the government” (Bazard et al. 1831, 206), located at the top of the hierarchic system of the reformed banking institutions. The special banks would be at the bottom of this hierarchy; in the middle would be the “general banks”, consisting of several special banks and consequently several indus­ trial sectors in a given area. At the third level would stand the central bank, which should bring all general banks together. This overall system is designed to organise the feedback of all information about abilities, needs and resources regarding all industrial sectors. In possession of relevant information about the nation’s economic life, the central bank should be capable of rationally allo­ cating resources to all specific and relevant abilities, according to the order of priorities it has established among the various needs of the nation. Any action which might lead to the centralisation of generalist banks, to the specialisation of specific banks, and to linking them up with each other hierarchically will necessarily lead to a better understanding of the means of production and the needs of consumption; which supposes both a more precise classification of workers and a more enlightened distribution of the tools of industry, a better appreciation of work and a fairer reward for work. (Bazard et al. 1831, 204–205) The rational reform of the banking system thus involved the rational organisa­ tion of the lending system: granting resources to appropriate abilities is achieved through an efficient mechanism for advancing credit. Resources can be rationally allocated only if credit is granted by a central organisation possessing relevant knowledge of the “interests of all”. Only such an institution, enlightened by reason and scientific information, can bring justice, peace and prosperity to the nation. At the head of the social body are commanders whose function is to show each man the most important place that he should occupy, both for himself and for others. If credit is refused to a branch of industry it is because, in the interests of all, the capital has been judged capable of being better used; if a man does not receive the work instruments he requested, it is because com­ petent managers consider him more suited to another function. Error is no doubt inherent in human imperfection, but it must be admitted that superior abilities, occupying a general standpoint and freed from the fetters of spe­ ciality, must present as little risk of error as possible in making the choices with which they are entrusted, since their feelings, their personal desires, support them and make them directly interested in giving as much prosperity to industry as is possible, and in each branch as many work instruments to individuals as the state of wealth and human activity requires. (Bazard et al. 1831, 209)

Claude-Henri de Saint-Simon and the Saint-Simonians 275 In short, when Saint-Simonians declared that it is “the State, and no longer the family, [which] shall inherit accumulated wealth”, they presumed that the central bank was the most rational actor capable of allocating capital to work – a kind of central planning institution ante litteram. They consequently opposed “unlimited competition”: Let us look at the society around us. Numerous crises and dreadful catastro­ phes smite industry daily; a few people have started to notice [them], but they do not realise the cause of such great disorder, they do not see that this disorder is the result of the implementation of the principle of unlimited competition. (Bazard et al. 1831, 200) This does not mean that they were completely opposed to the logic of profit. They were however convinced that the market is unable to solve the critical issue of coordinating abilities, needs and resources. They were opposed to “unlimited competition” since they thought that, in a system totally deprived of regulation, competition necessarily leads society towards anarchy and the perpetuation of the exploitation of man by man. Such are the Saint-Simonians’ ideas as exposed in the Doctrine during their two initial years (1828–30). These general ideas would be practically developed by bankers who were adherents, such as the Pereire brothers, Émile and Isaac. As early as 1831 the latter argued that the organisation of industrial society according to the terms announced by Saint-Simon could only be achieved through reforming and developing the credit system. To begin with, economic life should be set free from rules obstructing the creation of money. As a matter of fact, in Europe, the bill of exchange had long replaced money in external relations. This practice of “substitut­ ing money with paper” should be extended within national economies themselves, through vigorous encouragement of the use of “bills and promissory notes” (Pereire 1831, 5). Pereire thought that credit was created by these instruments, “since by using these bills producers made available all the working instruments held by the idle” (1831, 6). Therefore, in order to secure trust between agents and ensure the sol­ vency of those holding bills, bankers have one essential task: discounting. The more resolutely bankers support the task of boosting trust within economic life, the more that bills will become “securities” which “will create a spiritual community, a real religion strongly binding workers of all countries together” (1831, 14). Based on these convictions, the Pereire brothers contemplated the foundation of a special bank for the rational organisation and centralisation of credit within soci­ ety. The instruments of production would be removed from the hands of the idle and given to workers: this would become Crédit Mobilier. In April 1854 the first gen­ eral assembly of this institution published a report which argued that the institution “stems from the need to provide the market with a steady flow of new capital which can contribute to developing public and industrial credit”. It went on to state that it shall also serve the need to centralise the financial and administrative dealing of large companies, especially those of railway companies; and in

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particular to use in this way, to the greatest advantage of all, the capital over which each successively disposes, so as to manage common resources both for the benefit of the companies and that of their numerous shareholders. (quoted by Yonnet 2000, 207) This profoundly Saint-Simonian project of transforming the society into “one large ‘association’ granting general access to the instruments of production” (Yonnet 2006, 129) suffered a severe crisis during the Second Empire. Nonetheless, this bold and original financial experiment would form the template for the expansion of European banking. The railway network

For the Saint-Simonians the railway network, together with the bank system, should contribute to the construction of modern society. Just like banks, railways are among the major innovations of modern Europe. Railways achieve at a territo­ rial level what banks do at the economic level. They enable individuals to meet and communicate. Thanks to the network woven by European railways, individuals and regions, knowledge, innovations and products escape their isolation, furthering a cooperative society. Their ceaseless expansion and intensification fosters Euro­ pean and continental communication, which in turn enables man’s emancipation: the railway network contributes to the advent of universal association. In this context, one can even speak of a “religious cult of networks” (Musso 1997, 7 and 173). Human history moves towards the constant and ever more inten­ sive interpenetration of the most various and dispersed human experiences, within any given nation and throughout the world. A series of articles by Michel Chevalier, titled “The Mediterranean System” and published in January and February 1832 in Le Globe, is here significant. He expounded an idea particularly precious to SaintSimonians: the need for a spiritual and material unification of the Orient with the Occident,10 where the latter (the Occident) is the “male” (“solid”) and the former (the Orient) the “female” (“fluid”) component of our world. Industry was supposed to be able to achieve this worldwide unification without any kind of recourse to violence, simply through the peaceful development of the banking and railway networks. He wrote that “Industry consists of production centres which are materi­ ally brought together through transportation routes, as well as spiritually, through banks”, adding that “considering the material aspect, the railway most perfectly symbolises universal association. The railway will change the conditions of human existence” (Chevalier [1832] 2008, 119) and bring about harmony. The means to achieve this harmony is of course the advent of industry. It will eventually create awareness that it is time to put an end to absurd wars and so that, in peaceful cooperation and solidarity, all might enjoy the opportunities offered by nature. For the Saint-Simonians, “taking advantage of nature” is definitely 10 The symbol and centre of such global unification should be the Mediterranean, which “shall become the Orient’s and Occident’s wedding bed” (Chevalier 1832, 116).

Claude-Henri de Saint-Simon and the Saint-Simonians 277 mankind’s destiny: the “globe [will be] considered as mankind’s great landed estate” (Enfantin 1825, 100). “Exploitation of man by man, such was the condition of human relations in the past; man associated with man and exploiting nature, such is the picture offered by the future” (Bazard et al. 1831, 162). The second volume of the Doctrine de Saint-Simon shows how modern Europe gradually emancipates itself from its preoccupation with warfare. The banking and railway networks are leading towards an “irrevocable organic status” of society (Bazard and Carnot 1832, 7). Is it not now the time, O my Lord, for all of your children to learn how to bless Thee with one name only . . ., for a new religion to eventually unify mind and substance, science and industry, theory and practice, Orient and Occident, hitherto destined for fighting and antagonism, henceforth in sol­ emn matrimony. (Barrault [1832] 2008, 94) Chevalier proposes an immense railway network forming the “Mediterranean Sys­ tem”, linking Spain, France, England, Italy, Germany, European Turkey, Russia, Asian Turkey, Asia and Africa. The endeavour would establish “eternal peace” on Earth. Where could the resources be found for such a huge and costly endeavour? All peoples, all nations, all men, Chevalier states, would be convinced by the ben­ efits conferred with the advent of industry. They would be aware of what peace­ ful cooperation throughout the world could bring about, for well-being, prosperity, happiness, quality of life, scientific progress and capacities for moral and spiritual emancipation. They would therefore cease waging ruinous wars (Chevalier [1832] 2008, 130). In such a peaceful socio-political context there would be no need for armies. In 1822 Saint-Simon had stated that “the removal of permanent armies will bring about the biggest possible saving in public expenses” ([1820–22] 2012, 2780). For Chevalier, the financial and productive resources freed by such worldwide sav­ ing would be sufficient to develop this immense network without costing the citi­ zen a single penny. Chevalier’s enthusiasm for the railway – but also for all types of canals and transport routes linking together the furthest and most remote areas of planet Earth – is further expressed in his 1838 work Des intérêts matériels en France (On Material Interests in France), as well as his article “Chemins de fer”, published in 1852 in the Dictionnaire de l’économie politique. He retained a lifelong and unwavering faith in the civilising and pacifying mission of the railway network. There also existed “a different, less ambitious and less mystical idea” of the railway, as Ribeill puts it. It was shared by another group of Saint-Simonian engineers: Gabriel Lamé (1795–1870), Émile Clapeyron (1799–1864), Stéphane Flachat (1800–1884) and Eugène Flachat (1802–1873). Their conception of pub­ lic works was less costly and more limited than that of Chevalier. “Instead of . . . claiming to cover three continents in a few years” they intended to “ensure con­ nection within a general system of internal communications” (Ribeill 2006, 132). Another Saint-Simonian engineer, Paulin Talabot (1799–1885), undertook another initiative worth noting: constructing a railway between a coal basin and the Rhine

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“led in 1857 to the establishment of the very prestigious railway company linking Paris with Lyon and the Mediterranean” (Ribeill 2006, 134). 4. The ethical dimension of Saint-Simonianism “There is a science”, Saint-Simon stated, “far more important for society than physical and mathematical knowledge: it is the science . . . on which society is based: moral science” ([1825] 2012, 3223). Later Enfantin tried to update an old theme metaphorically: “today our endeavour shall consist in applying algebra and geometry to Morals” (in Barrault et al. [1832–33] 1991, 66). Saint-Simon and his followers, as already noted, thought that human society could not forever exist in a state of social criticism – a regime in which men and women do not accept society’s institutions, do not agree with the principles and values which are the moral and political basis of their community. This attitude had only a short-lived utility. Critical times, in the past, were . . . a vital condition [of] progress, being indeed the way to shift from one organic period to another. Destruction was necessary before thinking about construction and it has hitherto been plain that the overall endeavour to carry out this task was, when necessary, far from superfluous. (Bazard and Carnot 1832, 6) But negativity meant turning one’s back on religion, insofar as religion is what links individuals with each other: “To bring man together with what is not him­ self, such is the purpose of any religion, as shown by the etymology of this word” (Bazard and Carnot 1832, 225). Critical periods are “non-religious” (Bazard and Carnot 1832, 5). The spiritual bond with the past is broken, as well as that between individuals. Industrial society is in absolute and very urgent need of a new religion to create a single synthetic, “organic” social life. Saint-Simon’s last and unfin­ ished book, Nouveau christianisme, certainly had a great deal of influence on his followers. Following Saint-Simon and in his name, we hereby declare that mankind has a religious future, that the religion of the future shall be greater, stronger than that of the past. . . . It shall not only dominate the political order, but the political order shall as a whole be a religious institution. (Bazard et al. 1831, 334) Saint-Simon persisted in calling his new religion Christianity. However, he thought this new religion should be linked universality, with the future fundamental char­ acteristic of an organic society. He saw no contradiction in this at all, since he con­ sidered that Christianity had originally possessed that universal dimension. Jesus was addressing mankind as a whole when he declared that men shall behave like brothers towards each other. The new religion entirely adhered to this “sublime

Claude-Henri de Saint-Simon and the Saint-Simonians 279 principle” [which] “contains all of Christianity’s divine dimension” ([1825] 2012, 3184). All humans can identify with such a universal principle, and can therefore convert to the new religion. “Jesus trusted his apostles with the sublime mission of organising the human species in the interest of the poorest class” ([1825] 2012, 3202). This approach to a future society that “shall strive to improve the moral and physical condition of the poorest of classes” ([1825] 2012, 3216) recurs in the pages of Nouveau christian­ isme, and then later in Saint-Simonian writings and homilies. As for this new reli­ gion, it would essentially be based on two fundamental principles: brotherhood and “the social happiness of the poor” ([1825] 2012, 3226). For the Saint-Simonians this was their master’s major message. They recommend the abolition of all privi­ leges of birth, notably inheritance, according to these two principles. Like SaintSimon, they were convinced that “true Christianity shall not only make men happy in Heaven, but on earth” ([1825] 2012, 3204). Religion, however, was a relevant issue in a far more decisive way for the SaintSimonians. They organised themselves into a rigorously hierarchical “real church with its dogma, apostles and priests” (Picon 2004, 10). This led to their being called a “sect”, but they rejected this. The word sect refers to secessionist opinion: but we are no secessionists, we are of the future. . . . It is the power of Saint-Simon’s doctrine’s to bring together all of today’s divergent feelings, ideas, interests into a general doc­ trine, a Religion. (Bazard and Carnot 1832, 17) This religion was also granted a character that made it different from its original form, and entirely suitable for the spirit of industrial times: the reconciliation of mind and body (or matter). It was the perfect time to free oneself from the idea that suffering was inevitable. In the past, since suffering was the rightful retribution for a previous sin, he [man] would accept the pain and submit to it in resignation, maybe joyfully, rather than consider that it indicated the need for some progress, so that a better condi­ tion be brought about, for his own good. (Bazard and Carnot 1832, 235) This situation was the result of the powerlessness of human beings in the face of nature, matter’s almighty power. But thanks to the development of new “material activity”, industry, humans can free themselves from being doomed to “slavery”. Thanks to industry they can create the material and spiritual context within which they can submit nature to their will and desire. Men must become aware of their lasting ability to innovate and develop their material living conditions. They must become aware that “perfectibility” is the fundamental requirement of human history.11 11 On the Saint-Simonian religion, see, for example, Zenkine (2002).

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At first sight, the strongly hierarchical structure of the Saint-Simonian church may seem to be in complete contradiction with the principle of brotherhood, according to which all individuals are equal. But for Saint-Simonians equality is perfectly compatible with hierarchy and inequality. Everything depends on the existence or absence of “love” – they often write this word in capital letters – between superiors and inferiors, and also between all individuals considered as associates of the new society. In the Saint-Simonian world, “love” means “union”. This general idea was expressed in sophisticated texts of a high philosophical and poetical level, addressing this idea in books, articles, homilies and letters (Barrault et al. [1832–33] 1991). The Saint-Simonian approach to hierarchy radically opposes the domination and exploitation regime prevailing during critical times. Humans are instead united in love. Yet there are relations of superiority and inferiority between individuals; between priests and believers, or fathers and children. However, this does not reflect a reversion to power relationships, but that some are more capable of loving than others. The inequality of equality appears paradoxical only for those who are unable to see this difference. Those who become leaders – priests, apostles, fathers – are those who love more than others. “Supporters of equality! Saint-Simon tells you that men are not equal, but he also tells you that the only difference between them shall be how strongly they will be LOVING, knowledgeable and industrious” (Bazard et al. 1831, 55). Enfantin sees the priest as “the man who shall be the great­ est, the most beloved and the most loving one”. He then adds that “the priest links the spiritual and the temporal, the spirit and the flesh, he therefore unifies science and industry in the same desire for mankind’s progress” (Enfantin [1830–31] 2004, 93, 97). In such a context there can be no relationships of domination and exploita­ tion between chiefs and subjects. For the Saint-Simonians the highest form of love, the most sacred of unions, is the love and union between man and woman. With regard to women the SaintSimonians proved as revolutionary as their contemporary Charles Fourier (Le BrasChopard 2019, 169–72, Perrot 2019, Riot-Sarcey 1998, 160–5, Delvallez 2006). Like other nineteenth-century social reformers, they condemned the exploitation of man by man, but did not forget to denounce “the exploitation of woman by man”. Women should not wait for the emancipation of the working class to also free them­ selves, as other socialists presumed. Freeing women is the condition for freeing mankind. “It is written”, says Chevalier, “that the woman shall someday crush the head of the snake, that is, of war and slavery” (in Barrault et al. [1832–33] 1991, 7). In terms of ethics and anthropology, all confrontation between men and women must once and for all be left behind. For Saint-Simonians the reality of mankind is essentially twofold. “Men and women attract one another to conceive and make the union of TWO beings into ONE only being” (Enfantin [1830–31] 2004, 57). The human being exists and must exist as a couple. Considering that we are in God and God is in us, God himself incorporates both sexes: “God is androgy­ nous” says Enfantin ([1830–31] 2004, 57). “Women, we are telling you that you belong to the temple, that it is time you be forever emancipated, that your lord has become your spouse” ([1830–31] 2004, 97–8). In the Saint-Simonian universe the

Claude-Henri de Saint-Simon and the Saint-Simonians 281 idea of a “Female Messiah” (“la Femme-Messie”) derived from such metaphysical concerns. As is the case with God’s androgynous nature, the Father of the SaintSimonian Church must also mate with a woman to perfect his nature. Numerous believers were also convinced that the “Female Messiah” – the “Mother”, their Father’s wife – did exist somewhere in the world. Saint-Simonians, particularly Enfantin, considered that limiting the improve­ ment of women’s conditions to political, economic and legal matters was insuf­ ficient for their effective emancipation. Women’s sexual liberation was also necessary. Women had to have control over their own body, thus freely choosing their partner. Such a revolutionary purpose required a radical reconsideration of the institution of marriage. Just like human institutions obey the law of evolution, so should marriage adapt to the modern world. Its rules should be reformed, taking the variety of desires and passions into account. Some individuals are “immobile” and others are “mobile”: “The same man with the same woman for a lifetime, this is one form of the religion. Divorce and a neW union with a neW husband, that is a new form of the religion” (Enfantin [1831] 1872, 195) Despite Enfantin’s strong protestations to the contrary, many adherents of the Church suspected that the idea or desire for the “community of women” lurked behind this idea of “mobility”. Enfantin’s orientation to liberal political positions and hedonism with regard to morals had long been irritating to Bazard, rigorous in his approach to political and ethical matters. The vision of women’s emancipa­ tion was the last straw. In 1831 the movement experienced a great schism between the two Fathers. Bazard, along with many believers, left the Church and Enfantin remained the sole supreme father of the temple. He was shaken by the schism, which was exacerbated by the increasing pressure of police surveillance. He decided to retreat, along with about forty followers, to the hill of Ménilmontant, located in a large estate surrounded by gardens and located in a Bohemian neigh­ bourhood north of Paris. This “Retreat to Ménilmontant” very much affected the future development of the movement. The purpose of the retreat was to escape from the codes of conduct of the old society in order to adopt a form of existence worthy of the forthcoming industrial society – a brotherly existence without any servants. Everyday material tasks were undertaken by the “brothers” in a spirit of strict equality. The supreme value of the community was loving solidarity. This even went as far as jackets buttoning at the back so that each would be compelled to call for a brother’s help in putting them on or taking them off. However, the “fatherly hierarchy”, the inequalities due to the variety of abilities, was preserved. Each apostle had his name and duty written in large letters on his shirt. The organi­ sation and rhythm of everyday life was extremely rigorous and ascetic, as in an austere convent. For the Saint-Simonians, this retreat was a place for prayer and work in order to maintain their philosophical, political, economic and ethical think­ ing on social and individual existence, and about the form of the future society.12 It 12 The manuscripts of the homilies, speeches, letters, texts which were delivered and debated during the everyday working sessions were for the first time collected and published by Philippe Régnier and titled Le Livre Nouveau des Saint-Simoniens (Barrault et al. [1832–33] 1991). There is indeed

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was also a place for the education of believers and ordinary visitors for whom the Saint-Simonians would every week organise sessions of readings and preaching, accompanied with music and songs. Sessions of public preaching, developing revolutionary ideas about universal association, the abolition of privileges of birth, the end of the exploitation of man by man, the emancipation of women, all of this was appealing to an increasing number of visitors. For the authorities, this began to go beyond anything tolerable. Eventually, after only eight months, the police put an end to the retreat. The school was dissolved, and Enfantin and Chevalier were sentenced to a year’s imprison­ ment. Followers dispersed. However, one group of believers, strongly encouraged by their supreme Father and under Barrault’s authority, accepted to convert and became “Companions of the Woman” (“Les Compagnons de la Femme”) in order to travel to the Orient, looking for the “Female Messiah”. After lengthy travels (Le Bras-Chopard 2019), the Saint-Simonians returned to France – via Cairo, where they suggested to Viceroy Mehmet Ali that a canal be constructed linking the town of Suez to the Mediterranean13 – and integrated back into civil society, pursuing their careers since they felt comfortable within the world of industry and business. Michel Chevalier, for example, firmly opposed to the prevailing powers during the Ménilmontant period, had a dazzling career and became one of France’s most dis­ tinguished liberal economists. Over a period of twenty years, he was appointed as official economic counsellor first to Louis-Napoléon Bonaparte, then Napoléon III (see Walch 1975; Coilly and Régnier 2006, 173). Enfantin continued with his pas­ sion for the Orient and colonial issues. Between 1839 and 1841 he went to Algeria and, as the outcome of his stay, wrote Colonisation de l’Algérie (1843).14 5. Concluding remarks When looking back at the Saint-Simonian moment in European history, seeking to understand it in relation to our own historical moment, what captures our attention? First of all, we must acknowledge that Saint-Simon was right when he declared that the new system he was foreseeing was no complete utopia. In a way, with regard to the development of telecommunications technology, the present can be considered as Saint-Simonian. Musso’s work emphasises this point, leaping from Michel Chevalier’s 1832 text to “writings during the 1980s–90s on the control of communication networks”, which he dubs “from Saint-Simon to internet” (Musso 1997, 7). Indeed, the intensification of networks within networks in our world is making the Saint-Simonian dream come true. Saint-Simonians were convinced

good reason to refer to this weird and fascinating book as “the Genesis and Gospel of the SaintSimonian religion” (Picon 2006, 74) On this adventure and the content of this “text which was not written to be published”, see Régnier (1991). 13 The Suez Canal was built between 1859 and 1869 by another Saint-Simonian, the engineer and diplomat Ferdinand de Lesseps. 14 Much has been written about the Saint-Simonian’s ambiguous attitude towards colonialism. See, for example, Levallois and Moussa (2006).

Claude-Henri de Saint-Simon and the Saint-Simonians 283 that the salvation of mankind depended on the unending development of com­ munication. The interpenetration and reciprocal fertilisation of worldwide capaci­ ties was supposed to improve the means for an ever more efficient exploitation of nature. But Saint-Simonians did not see the dark side of this process: the disastrous consequences of considering nature as a submissive reserve of endless resources subjected to man’s will and unlimited use. The worldwide expansion of commu­ nication networks and the domination over nature through technology are one and the same process, which Musso refers to as the concept of “industrial technocracy” (Musso 2020, 86). The violent imprisonment of nature brought about by technol­ ogy and the results of this unrestrained domination remain the Saint-Simonian “unthought”. Given the disasters created by an “industrial technocracy”, which for the Saint-Simonians consisted of mankind’s ultimate destination, we might wish their dream had nowadays not been as fully realised. The Saint-Simonian wish for a world where men would become mature enough and would no longer need to be ruled remains one of the most sublime political visions: to move beyond the exploitation of man by man. But it is doubtful that the scientific and managerial approach of Saint-Simonians would solve the social issue and render public debate outdated. However, Saint-Simonians passionately sup­ ported non-dogmatic egalitarianism, admitting inequalities due to different abili­ ties. From this point of view, it could be said that themes such as the “abolition of all privileges of birth” and “the social happiness of the poor” remind us of Rawls’ principles of justice (Rawls 1971). Picon emphasises the two sides of the Saint-Simonians, preparing for the advent of socialism as well as the establishment of the Second Empire’s authoritarian capitalism (Picon 2006, 69). The issue of organising European countries as one political entity was also of major concern for Saint-Simon and his followers. In 1814, together with his secretary Augustin Thierry, Saint-Simon published a text, De la réorganisation de la société européenne, ou de la nécessité des moyens de rassembler des peuples de l’Europe en un seul corps politique, en conservant à chacun son indépendance nationale.15 Before Proudhon, the Saint-Simonians strongly advocated a politically unified Europe. It is hardly necessary to highlight how clearly the Saint-Simonian commitment to the European issue reflects today’s concerns (see also Saint-Simon, Trois essais sur la révolution européenne, 1823). Last but not least, Saint-Simonian revolutionary ideas about women contributed to the struggle for women’s emancipation. To conclude, let us quote this assessment by the philosopher Jacques Rancière: This poor carpenter, one will say, will let himself be lured by the words of love seeking to make him forget about fighting; behold, the other will say, such delusions are the price he pays for his entry to the disciplinary realm of the pioneers of the modern industrial order. But where do they get the idea

15 On the reorganisation of European Society, or of the necessity of means for bringing the European Peoples together as one political entity, while maintaining the independence of each nation.

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that one cannot love the bourgeois and fight them at the same time, that one cannot abandon oneself to the Saint-Simonian love of the Father, of the Ori­ ent or of Woman, and at the same time shun the Saint-Simonian empire of the rail? (Rancière [1981] 2017, 33) References Barrault, Émile. [1832] 2008. “L’Orient et l’Occident”. In Pierre Musso (ed.), Le SaintSimonisme: l’Europe et la Méditerranée. Paris: Manucius, pp. 85–97. Barrault, Émile, et al. [1832–33] 1991. Le Livre Nouveau des Saint-Simoniens. Manuscripts by Emile Barrault, Michel Chevalier, Charles Dunoyer, Prosper Enfantin, Charles Lambert, Léon Simon and Thomas-Ismayl Urbain. Philippe Régnier (ed.). Tusson: Du Lérot. Bazard, Saint-Amand, Prosper Enfantin, and Hippolyte Carnot. 1831. Doctrine de Saint-Simon. Exposition. Première année, 1828–29. Third, revised ed. Paris: Au Bureau de L’Organisateur. Bazard, Saint-Amand, and Hippolyte Carnot. 1832. Doctrine de Saint-Simon. Exposition, 2ème année, 1829–30 [with “Cinq discours aux élèves de Polytechnique”]. Paris: Au Bureau de L’Organisateur et du Globe. Charléty, Sébastien. 1896. Histoire du saint-simonisme (1825–1864). Paris: Librairie Hachette. Chevalier, Michel. 1838. Des intérêts matériels en France. Travaux publics, routes canaux, chemins de fer. Paris: Charles Gosselin and W. Coquebert. Chevalier, Michel. [1832] 2008. “Le Système de la Méditerranée”. In Claude-Henri de Saint-Simon, Augustin Thierry, and Michel Chevalier, Le saint-simonisme, l’Europe et la Méditerranée. Pierre Musso (ed.), Paris: Manucius, pp. 99–133. Chevalier, Michel. 1852. “Chemins de fer”. In Charles Coquelin and Gilbert-Urbain Guillaumin (eds), Dictionnaire de l’Economie Politique, vol. 1. Paris: Guillaumin, pp. 337–61. Coilly, Nathalie, and Philippe Régnier (eds). 2006. Le siècle des saint-simoniens. Du Nou­ veau Christianisme au canal de Suez. Paris: Bibliothèque Nationale de France. Delvallez, Sophie. 2006. “Les voix et les voies de la liberté des femmes”. In Nathalie Coilly and Philippe Régnier (eds), Le siècle des saint-simoniens. Du nouveau christianisme au canal de Suez. Paris: Bibliothèque Nationale de France, p. 52. Enfantin, Prosper. 1825. “Considérations générales sur l’industrie”. Le Producteur. Journal philosophique de l’industrie, des sciences et des beaux-arts, 97–105. Enfantin, Prosper. [1831] 1872. “Lettre LXXXVII”. In Œuvres d’Enfantin, vol. 7. Paris: E. Dentu, pp. 191–202. Enfantin, Prosper. [1830–31] 2004. Lettres sur la Vie Éternelle. Paris: Le corridor bleu. Enfantin, Prosper. [1830] 2010. “Letter to a banker”. In Gilles Jacoud (ed.), Political Econ­ omy and Industrialism. Banks in Saint-Simonian Economic Thought. London: Routledge, pp. 108–14. Enfantin, Prosper. [1831] 2010. “Économie politique. Les oisifs et les travailleurs. Fer­ mages, loyers, intérêts, salaires”. Le Globe, 7 March 1831. English translation in Gilles Jacoud (ed.), Political Economy and Industrialism. Banks in Saint-Simonian Economic Thought. London: Routledge, pp. 65–9. Gouhier, Henri. 1941. La jeunesse d’Auguste Comte et la formation du positivisme, vol. 2: Auguste Comte et Saint-Simon. Paris: Vrin, 1970. Hayek, Friedrich August von. 1945. “The Use of Knowledge in Society”. The American Economic Review, 35 (4), 519–30.

Claude-Henri de Saint-Simon and the Saint-Simonians 285 Jacoud, Gilles (ed.). 2010. Political Economy and Industrialism. Banks in Saint-Simonian Economic Thought. London: Routledge. Le Bras-Chopard, Armelle. 2019. Les pérégrinations des Compagnons de la Femme. Des saint-simoniens à la recherche de la Femme-messie. Dijon: Editions Universitaires de Dijon. Levallois, Michel, and Sarga Moussa (eds). 2006. L’orientalisme des saint-simoniens. Paris: Maisonneuve and Larose. Musso, Pierre. 1997. Télécommunications et philosophie des réseaux. La postérité paradoxale de Saint-Simon. Paris: Presses Universitaires de France. Musso, Pierre. 2020. Saint-Simon et le saint-simonisme. Paris: Manucius. Pereire, Isaac. 1831. Leçons sur l’Industrie et les Finances. Paris: Au Bureau du Globe, 1832. Perrot, Michelle, 2019. Foreword to Armelle Le Bras-Chopard, Les pérégrinations des Compagnons de la Femme. Des saint-simoniens à la recherche de la Femme-messie. Dijon: Éditions Universitaires de Dijon, pp. 9–13. Picon, Antoine. 2002. Les saint-simoniens. Raison, Imaginaire et Utopie. Paris: Belin. Picon, Antoine. 2004. “La vie Éternelle au siècle de l’Industrie”. Foreword to Prosper Enfantin, Lettres sur la Vie Éternelle. Paris: Le corridor bleu, pp. 7–32. Picon, Antoine. 2006. “L’Utopie spectacle d’Enfantin. De la retraite de Ménilmontant au procès et à l’année de la Mère”. In Nathalie Coilly and Philippe Régnier (eds), Le siècle des saint-simoniens. Du nouveau christianisme au canal de Suez. Paris: Bibliothèque Nationale de France, pp. 68–76. Rancière, Jacques. [1981] 2017. La nuit des prolétaires. Archives du rêve ouvrier. Paris: Fayard. Reprinted, Paris: Pluriel. Rawls, John. 1971. A Theory of Justice. Oxford: Oxford University Press, 1999. Régnier, Philippe. 1991. Introduction to E. Barrault et al., Le Livre Nouveau des SaintSimoniens (1832–1833), Philippe Régnier (ed.). Tusson: Du Lérot, pp. 7–54. Ribeill, Georges. 2006. “Les chemins de fer: de la doctrine aux réalisations”. In Nathalie Coilly and Philippe Régnier (eds), Le siècle des saint-simoniens. Du nouveau christian­ isme au canal de Suez. Paris: Bibliothèque Nationale de France, pp. 131–5. Riot-Sarcey, Michèle. 1998. Le réel de l’utopie. Essai sur la politique au XIXe siècle. Paris: Albin Michel. Saint-Simon, Claude Henri de. [1807–1808] 2012. “Introduction aux travaux scientifiques du XIXème siècle”. In Henri Saint-Simon, Œuvres Complètes, Juliette Grange, Pierre Musso, Philippe Régnier, and Franck Yonnet (eds), vol. 1. Paris: Presses Universitaires de France, pp. 231–426. Saint-Simon, Claude Henri de. [1816–18] 2012. L’Industrie, ou Discussions politiques, morales et philosophiques dans l’intérêt de tous les hommes livrés à des travaux utiles et indépendants. In Henri Saint-Simon, Œuvres Complètes, Juliette Grange, Pierre Musso, Philippe Régnier, and Franck Yonnet (eds), vol. 2. Paris: Presses Universitaires de France, pp. 1444–645. Saint-Simon, Claude Henri de. [1819–20] 2012. L’Organisateur. In Henri Saint-Simon, Œuvres Complètes, Juliette Grange, Pierre Musso, Philippe Régnier, and Franck Yonnet (eds), vol. 3. Paris: Presses Universitaires de France, pp. 2117–237. Saint-Simon, Claude Henri de. [1819–21] 2012. Le Politique par une société de gens de let­ tres ou Essais sur la politique qui convient aux hommes du XIXème siècle. In Henri SaintSimon, Œuvres Complètes, Juliette Grange, Pierre Musso, Philippe Régnier, and Franck Yonnet (eds), vol. 3. Paris: Presses Universitaires de France, pp. 1833–988. Saint-Simon, Claude Henri de. [1820–22] 2012. “Du système industriel”. In Henri SaintSimon, Œuvres Complètes, Juliette Grange, Pierre Musso, Philippe Régnier, and Franck Yonnet (eds). Paris: Presses Universitaires de France: “Première et deuxième partie”, vol. 3, pp. 2323–524 and “Troisième partie”, vol. 4, pp. 2753–91.

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Saint-Simon, Claude Henri de. [1825] 2012. Nouveau christianisme. Dialogues entre un conservateur et un novateur. In Henri Saint-Simon, Œuvres Complètes, Juliette Grange, Pierre Musso, Philippe Régnier, and Franck Yonnet (eds), vol. 4. Paris: Presses Universi­ taires de France, pp. 3167–226. Walch, Jean. 1967. Bibliographie du Saint-Simonisme, avec trois textes inédits. Paris: Vrin. Walch, Jean. 1975. Michel Chevalier, économiste saint-simonien (1806–1879). Paris: Vrin. Yonnet, Franck. 2000. “De l’utopie politique à la pratique bancaire. Les frères Pereire, le Crédit mobilier et la construction du système bancaire moderne sous le Second Empire”. In Pierre Dockès, Ludovic Frobert, Gérard Klotz, Jean-Pierre Potier, and André Tiran (eds), Les traditions économiques françaises. Paris: CNRS Éditions, pp. 203–16. Yonnet, Franck. 2006. “La structuration de l’économie et de la banque sous le Second Empire: le rôle du Crédit mobilier des Pereire”. In Nathalie Coilly and Philippe Régnier (eds), Le siècle des saint-simoniens. Du nouveau christianisme au canal de Suez. Paris: Bibliothèque Nationale de France, pp. 124–9. Zenkine, Serge. 2002. “L’utopie religieuse des saint-simoniens: le sémiotique et le sacré”. In Philippe Régnier (ed.), Études saint-simoniennes. Lyon: Presses Universitaires de Lyon, pp. 33–60.

11 Associationists and socialists The first debates Clément Coste and Ludovic Frobert

In a now famous article on the development of political economy, Amartya Sen calls for connections to be made between its two fundamental dimensions – “economics as engineering” and “economics as ethics”, and the significance of the second dimension to be reappraised. In the history of thought, this invitation leads us to re-read and re-assess the contribution of the early socialists, too often stigmatised for their alleged economic disagreement. In this presentation, we attempt to highlight the wealth of their contributions to “economics as ethics” and to point out that the radical stringency they showed with regard to the question of “just, good and beautiful” also led them to progress in the field of “economics as engineering”. 1. Three generations of authors The socialist landscape of the time can be described using various criteria, intel­ lectual generations being the most obvious. For convenience’s sake, we identify at least three generations in France. The first is that of the founders, with Charles Fourier (1772–1837) and Claude Henri de Saint-Simon (1760–1825) – or Henri Saint-Simon as he signed his writings from 1815 onwards. While this first generation was contemporary with the unfolding of the 1789 Revolution and its direct aftermath, the second generation, which we could call its first heirs, saw the industrial and social revolution begin more distinctly and, on a more political level, was truly awakened by the Revolution of 1830. The SaintSimonians, under the leadership of Barthélemy-Prosper Enfantin (1796–1864) and Saint-Amand Bazard (1791–1832), went through a theoretical period (1825–32), published the collective manifesto Doctrine de Saint-Simon. Exposition (1829– 30) before multiple schisms led them to part ways. Political liberalisation now made it possible to air one’s views in newspapers. As much as the technical dimension, the media dimension of their calls for social transformation was crucial (Bouchet et al. 2015). During the first half of the 1830s, while the Saint-Simonians still faith­ ful to Enfantin published their opinions in Le Globe – a newspaper that was origi­ nally liberal – the dissidents established their own newspapers. In the footsteps of Philippe Buchez (1796–1865), the school publishing in L’Européen asserted itself. For their part, the Saint-Simonians who were sympathetic to the Republican DOI: 10.4324/9780429202407-13

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idea1 – for example, Pierre Leroux (1797–1871), Hippolyte Carnot (1801–1888) and Jean Reynaud (1806–1863) – wrote for the Revue Encyclopédique, while Étienne Cabet (1788–1856), Republican and not yet Socialist, wrote in Le Populaire and François-Vincent Raspail (1794–1878) spread his ideas for work­ ers in Le Réformateur. A Fourierist school formed under the leadership of Victor Considerant (1808–1893) and his first follower Just Muiron (1787–1881), publish­ ing in the newspaper La Réforme industrielle/Le Phalanstère (Beecher 2001). We can also identify a third generation whose particularity was to anticipate and, partially, become a reality – albeit fleetingly – during the “People’s Spring” in 1848. In France, this period was foreshadowed in the early 1840s by social movements and waves of strikes, demands for electoral reform, the rise of an early communism inspired by Robespierre and Babeuf, and the publication of seminal studies such as Pierre Leroux’s De l’Humanité, Le Voyage en Icarie by Étienne Cabet, and Théorie nouvelle d’économie sociale et politique by Constantin Pecqueur (1801–1887), as well as contributions from younger men, such as Organisation du travail by Louis Blanc (1811–1882), Code de la communauté by Théodore Dézamy (1808–1850) and Qu’est-ce que la propriété ? by Pierre-Joseph Proudhon (1809–1865). The criteria of sociological and even geographical differentiation should also be taken into account. Although Paris was indisputably the hub, discussions were also taking place in the provinces, with original and significant theoretical and practical contributions from men such as Ange Guépin (1805–1873) in Nantes, Barthélemy Arlès-Dufour (1797–1872) in Lyon and Joseph Rey (1779–1855) in Angers and later Grenoble. The main socio-economic categories of the principal contribu­ tors to these original socialisms can be identified. Most of them were doctors and hygienists, engineers, lawyers and entrepreneurs. However, this list obscures a crucial aspect of the question because it is notable that, championed by intellectu­ als, this early socialism was also expressed through the voices of dominated and censored categories. In fact, this socialism was contemporary and complicit with an early feminism demanding new civil and political rights for women – rights diminished in France by the 1804 Civil Code – offering them the hope of emanci­ pation. From the early 1830s, Saint-Simonians Jeanne-Désirée Véret (1810–1891), Jeanne Deroin (1805–1894), Claire Demar (1799–1833) and Suzanne Voilquin (1801–1877) expressed their desire for emancipation in La Femme Libre, while in Lyon Eugénie Niboyet (1796–1883) published Le Conseiller des femmes. Around 1840, with the Le Compagnon du Tour de France, George Sand (1804–1876) began her cycle of socialist novels while Flora Tristan (1803–1844) left for prosperity L’Union Ouvrière, calling for a new alliance between the two main oppressed cat­ egories, workers and women.

1 On this moment in Republicanism, see the dated but precious clarification by Gabriel Perreux (1931). See also the manifesto of these republican societies by Pierre Leroux and Jean Reynaud (1833). We could consider that during the period 1830–1848, to borrow the John Dewey’s later terms (The Public and its Problems, 1927), the republic was both the hope for a regime – guaranteeing popular sover­ eignty – and the expression of an idea – to promote each person’s self-determination, not only on a State level but also on other levels or in other sectors of society (especially with regard to labour).

Associationists and socialists 289 This socialism was intertwined with the rise in working-class thought, which did not involve workers in the strictest sense but above all the urban craftsman, educated and politicised, best represented by the typographer. It is, in fact, some­ what artificial to attempt to distinguish between the intellectual and the craftsman: Proudhon was a typographer, as was Leroux. The first ephemeral workers’ expres­ sion appeared in the aftermath of the Trois Glorieuses of July 1830,2 when Arti­ cle 7 of the new Constitutional Charter enshrined freedom of expression: the first enduring newspaper emerged in Lyon among the canuts (silk weavers) who pub­ lished the weekly L’Echo de la Fabrique from 1831 to 1834. Although at the dawn of the 1840s, communist pamphlets and single-issue tracts appeared everywhere, workers following Buchez’s thought expressed their views in L’Atelier (1840–50), while Saint-Simonian workers published La Ruche Populaire. And lastly, this early socialism developed in relation to the interests and expressions of the populations living in the first colonies (the conquest of Algiers and the constitution of French colonial territory began in 1830). Although all of them denounced colonialism in the way that was being carried out, some, however, saw it as a nuanced response to the social question in the metropolitan suburbs and as a laboratory to test associa­ tions in concrete terms,3 such as Buchez’s project. Denouncing the system of slav­ ery, some became abolitionists, including Victor Schoelcher (1804–1893), author of De l’Esclavage des Noirs et de la Législation Coloniale in 1833, and perhaps more significantly, because of his mixed-race origins, Ismaÿl Urbain (1812–1884) who, along with Gustave d’Eichthal, wrote Lettres sur la race noire et la race blanche and later, L’Algérie pour les Algériens (1861). 2. Economy and society: a coherent theoretical approach Against “ideological economics”

Although in France around 1800 the term “ideology” was championed by a liberal generation heir to the eighteenth century (the “Idéologues”), the real fortunes of the word – although in a very different sense – came with Karl Marx to denounce liberal political economy: the discrepancy between the reality and the discourse around it did not stem from a somewhat scientistic illusion but a political desire for dissimulation. It was in this sense that the early socialists considered political economy in their time as an ideology, the two pillars of which were individualism and market competition. Economists presented the market as a neutral mechanism freely expressing indi­ viduals’ choices and ensuring nations’ wealth. Socialists denounced it as a system to ensure the reproduction of inequalities and domination, generalising confrontation and war where, in a better organised institutional context, cooperation, agreement and mutual assistance would naturally emerge. Considerant wrote that economics 2 This refers to the three days of revolution, the 27–29 July 1830. 3 This involved, for example, especially in Algeria, encouraging an experiment with progressive and cooperative forms of associations between the new settlers and local populations – in contrast with what the military were going to do and their plans for colonies.

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is “their science of the wealth of nations that are starving to death” (Considerant 1833, 26) and, in Organisation du Travail, assessing the commercial and indus­ trial chaos, Louis Blanc wrote that the competitive regime constituted a “system of extermination” for the people, a “cause of ruin for the Bourgeoisie” and a catalyst for “war to the death” among European nations. Considering the recurring commercial crises and the paradox of the parallel growth of industry and poverty, according to the original socialists, the competitive regime was causing the twofold problem of efficiency and equity. Competition proved to be an inefficient process: the balance between supply and demand could not be achieved in an unregulated system, and competition therefore produced periodic crises. Furthermore, the system was instable since it placed antagonism at the heart of economic and social transactions. Then, because of the cumulated imbalances of power between agents, competition inevitably led to monopolies that put profitability above efficiency and the interests of a minority of individuals above the collective wealth of society. Ultimately, the competitive regime – a short-sighted, ill-thought out system – was not conducive to the major innovations needed for social evolution. Competition also went hand-in-hand with injustice. Far from being a phenome­ non independent of other social phenomena, competitive trade occurred in an insti­ tutional environment dominated by private and inherited property. In this context, the antagonism that competition placed at the heart of social relations involved individuals and groups unequally endowed with wealth and power, property own­ ers and non-owners. It was an intolerable situation. Firstly, the origin of endow­ ments (and their later accumulation) was not justified. Then, in an unregulated context, inequalities could only be exacerbated, affecting, for example, increasing numbers of categories (with the bourgeoisie and middle classes soon facing ruin because of “industrial oligarchs”). Lastly, this unbalanced situation was leading to extreme social and moral consequences (“the extermination” of the poor and the generalisation of “exploitation of man by man” that we hear from the SaintSimonians and Blanc) that any civilised society could only reject: poverty, impov­ erishment, prostitution, corruption and crime. This criticism of competition was closely linked to criticism of private and inherited property. But what socialists more distinctly reproached of partisans of the competitive regime was their capitulation of the project to govern society and improve its development. Economists were criticised because their doctrine led them to capitulate to the facts and to defend, as Pecqueur highlighted “the mon­ strous idea that everything that is, is good”, and to trust in the “God of Chance”. This capitulation was possible for these authors because of their lack of faith. If they put their trust in chance and market forces, it was – when not purely and sim­ ply betrayal and prostration before the allied powers of money, the State and the Church (Plutocracy, as Pierre Leroux would say)4 – that they did not believe in the existence of rational principles of societies’ government. However, the aim of these early socialists was to point out that these principles existed and that it was also 4 For the early socialists, the Church had forgotten or betrayed the spirit of the original Christianity.

Associationists and socialists 291 possible to examine them within the framework of a broad science of society – the “social science” or “socialism” so dear to Constantin Pecqueur (1849b) – and to make use of them to arrange a society that until then obeyed the laws of antago­ nism and chaos. In what sense were the French socialists “Utopians”?

These early socialists were soon accused of being Utopians. From both sides of the ideological divide, they were stigmatised for their inability to uncover the “true” laws of social organisation, evolution and history. In his Harmonies Econom­ iques, Frédéric Bastiat made a distinction between “natural social organisations” expressing the true laws of the mechanism of a complex, modern social world – natural laws based on the motive of interest and total freedom for the agents – and “artificial social organisations”. Although at the time, Adam Smith remained the uncontested father of a political economy whose mission it was to uncover and study these natural arrangements (above all the market), Jean-Jacques Rousseau can be said to be at the root of the opposite tradition of which the different social­ ist and communist schools were the most recent expression at the time Bastiat was writing (1850, 39). For their part, in the Manifesto of the Communist Party, a text contemporary with the Harmonies Economiques, Karl Marx and Friedrich Engels pointed out that these Utopians could not, in the social movement of their time, uncover what was radically changing the history of humankind: the growing class struggle, exacerbated antagonism between the proletariat and the bourgeoi­ sie, workers and capitalists, and the historical mission of the proletariat. Unable to anticipate this concealed driving force of history, the Utopians “seek a new social science, new social laws, that are to create [the] conditions” for the emancipation of workers, whom they saw only as suffering individuals and not as a class capable of revolting and acting. Passionate about “fantastic” conditions that claimed to associate and unite all classes, they proposed “an organisation of society especially contrived by [themselves]”. Counter to the historical movement, they thus mis­ guidedly sought “to deaden the class struggle and to reconcile class antagonisms. They still dream of the experimental realisation of their social Utopias” that were doomed to fail (Marx and Engels 1848, 515–16). Incapable of uncovering social laws and a correlative tendency to invent were, according to both Bastiat and Marx, the characteristics of these Utopians. From the 1840s, qualified ironically or viciously as Utopians, our socialists were at first destabilised by the accusation before reappropriating the adjective, assum­ ing it and laying claim to it. In 1840, Étienne Cabet published his Voyage et aven­ ture de Lord William Carisdall en Icarie anonymously in England (which, under the author’s name, became Voyage en Icarie in 1842). Echoing Saint-Simon’s opin­ ion that “the golden age that blind tradition has hitherto placed in the past is ahead of us” (Saint-Simon 1825, epigraph), Pecqueur wrote “living with ideals, in a Uto­ pia, is to live in the future”.5 Blanc echoed this: “Utopias? But Utopia is a militant idea; it is often tomorrow’s truth, and consequently the revolutionary truth” (Blanc 5 Pecqueur archives, Bibliothèque de l’Assemblée Nationale, envelope 44.

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1873, 129–30). And George Sand, writing to the mason and poet Louis-Charles Poncy, magnificently told him: This is how Utopias are achieved. It is always different and better. . . . Some­ body conceives an idea; we laugh about it and forgive him, saying: that’s beautiful, but too beautiful. Then time goes by, the facts come to pass, and the ideal is outmoded. And so men compare, and look back smiling on the prediction. They are amazed to find it so timid and then forgive its limited scope because of the good intentions. But this does not prevent them, chil­ dren that they are, from again scoffing at any new predictions. (Sand 1970, 187) This is only partly true; these Utopians, some of them heirs to the eighteenth cen­ tury and the idea of natural laws, developed their ideas alongside positivism in its earliest version by Auguste Comte, Saint-Simon’s former secretary. They therefore sometimes claimed to uncover laws or imperative codes of history that differed from those later uncovered by Marxism or liberalism. Nevertheless, many modern inter­ pretations of these Utopians, from Ernst Bloch to Paul Ricoeur, Miguel Abensour and Pierre Macherey, for example, chose to examine precisely what was often reproached of them: their capacity for invention. But far from associating the term invention with confabulation, they linked it to creativity and positive imagination. From this perspective, the socialism of 1848 was part of a doctrine claiming to uncover the new social, economic and political truth, but also, in part, a doctrine claiming to imagine and trying to create it. Creation and imagination encouraged all kinds of audacity because, with the scientific and technical promises available and offered to all political, social and moral hopes, the impossible became possible in a few measures to experiment with. Charles Fourier explained that to gain access to the paths of the impossible, Cartesian “passive doubt” should be overcome: it was “necessary to adopt doute aCtif [active doubt], and operate by means of éCart aBsolu [absolute deviation]” – and for it to champion contradiction everywhere and to imagine a “mechanism [thas is, a society in Fourier’s sense] in contrast to our own” (Fourier 1835, 51–2). The path to this new world to be uncovered should, then, use happiness as a compass: “Happiness”, continued Fourier, “consists in having many passions and many means to satisfy them”. Developing “social science”: two visions of a just society

It could be said that, for these socialists, this creation primarily required – thanks to the new “social science” synonymous with socialism – a wide-ranging discus­ sion about justice. This discussion constantly bridged two levels: first of all, giv­ ing a rigorous and as succinct as possible response to the question “what is a just society?” And then, demonstrating that this ideal model of a just society made it possible, in the present chaos, to experiment with practical solutions to try and achieve the desired improvements. The question of “transition” was crucial, and Fourier’s followers summed this up perfectly when they professed in La Réforme

Associationists and socialists 293 Industrielle, based on their leader’s theory of society, to have in industrial asso­ ciation, a “means of engaging with what is, order or disorder” (Considerant and Lechevalier 1832, 2). “For society to be possible, a principle to regulate human relations, something akin to what we call Justice, is necessary” wrote Proudhon in De la justice dans la Révolution et dans l’Église. Auguste Blanqui was saying the same thing at the same time (Blanqui 1885, 58–9). During the early nineteenth century that gravitated around the years of revolution (1830–1848), socialists were contemplating crite­ ria for justice. Their ideas were varied and at times antagonistic but one element united them: their opposition to the model they all perceived in liberal political economy. A model, or rather a counter-model, in that it emerged by chance from the endowments of capital, labour and talent, without questioning the legitimacy of its origins through morality or politics, and ultimately promoted strength as a value by sanctioning – to the point of charity – inequalities and social hierarchies. In the age of industry and socialism, of progress and perfectibility, this attitude was seen by socialists as, at best, capitulation and at worst, a betrayal, given the very obvious ills of the time. Why, in material terms, is there this inequality of wealth among men? Why are those who work so poor? Why is there this struggle between machines and workers? Why are our hearts moved by the sight of such things? (Leroux 1833, 532–3) Against these issues, the socialists set a voluntarist and constructivist perspective. Objectives for justice needed to be defined for this new world and introduced into institutions. Broadly speaking, two models for justice that included different con­ ceptions of politics, economics and socialism emerged, blended and sometimes contradicted each other. One placed almost all the emphasis on the criterion of equity, and the other covered this equity criterion but explained that it should be surpassed by a radical criterion of equality. 3. The project of an equitable society The first model esteemed that, with the old hierarchies having collapsed during the 1789 Revolution, the question of re-founding an ordered, well-run, efficient and equitable society culminated in the quest for social organisation guaranteeing the most rigorous equal opportunities, leaving only the clearly identified and selected abilities and wills of individuals to come into play. In other words, this involved realising that, in terms of social trajectories, all individuals, whatever their race, social origin, gender, etc., could compete on an equal footing in the vast social contest of the newly arranged society. This tradition can be linked to Enfantin’s Saint-Simonianism. However, just as there are thousands of Marxisms, there are undoubtedly hundreds of Saint-Simonianisms, and even more receptions and fili­ ations. Enfantin’s Saint-Simonianism, which can be qualified as orthodox in the period studied here, can be linked to the names of Michel Chevalier, Isaac and

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Émile Pereire and a handful of other Saint-Simonians who went on to become the pioneers of France’s great industrial (railways), financial (banks) and media (press) capitalism, particularly during the Second Empire. In the early 1830s, Enfantin, “father” of the Saint-Simonian Church, wrote that the well-run administration of the new industrial and associated world would have to respect the idea that “each shall be ranked according to his ability and rewarded according to his works” (Enfantin 1832, 103), thus encapsulating their formula for social justice. The first part of this slogan states that capital – the instrument of production – should not only shift from the hands of the idle to those of the “industriels” (indus­ trial class) – and by “industrial class”, they meant everyone who produces goods and services – but also that, among these producers themselves, instruments should be meticulously distributed according to ability: in this way, as in any rational workshop, if not the ownership, at least the disposal of instruments would be pro­ portionate to ability. This principle of optimal production was intrinsically linked to a principle of distribution, which leads to the second part of the slogan, “to each ability according to its works” – in this world where everyone would be a producer, but unequally, the best endowed, the most capable must be rewarded in close rela­ tion to their contribution. In this proportionality and pyramid logic lie the condi­ tions to improve the lot of the largest number and the poorest people. This is the expression of socialist equal opportunity. In Le Globe of 24 April 1831, we can also read that “absolute equality” is more than an error, it is a demagogic “lie”, and that the objective is quite different: “There is only one possi­ ble and equitable equality in the interests of all, and that is the equality of opportu­ nity, ranking according to ability, whatever one’s birth”. Realistic socialism should strive to organise this equality that, as a condition for the production of wealth, must tolerate a significant level of inequality as long as this inequality stems only from the abilities of each individual and enables the overall improvement of every­ one’s lot, especially the less able. These Saint-Simonian socialists moved at their own pace towards this equality that inevitably included acceptable inequalities, starting out from a liberal situa­ tion of inequalities deemed unacceptable because they were unfounded and unor­ ganised. It was this process of clarification itself to isolate the objective part of inequality, a solid and healthy pillar of the social order, at least as much as the asymptotic quest for equality, which really mattered. For, in the eyes of its most orthodox partisans, one of the beneficial consequences of this quest was to deprive politics of its classic mission – from then on, it was the economy that, in addition to its usual missions (the production, circulation and distribution of wealth) would be largely responsible for politics’ function by organising according to an indisputable hierarchical logic the new industrial hierarchies of the future social order. Instead of abolishing aristocratic ranks and distinctions, let us therefore seek a new hierarchy that would be a true aristocracy, in other words, power devolved to the most worthy according to a new conception of the human and social dignity that we bear within us. (L’Organisateur, 2 April 1831)

Associationists and socialists 295 The Saint-Simonians summarised this progress in organising society by calling for the potential substitution of an archaic and arbitrary practice of “the govern­ ment of men” by an objective and rational “administration of things”.6 The obsolete “government of men” integrates the conflict of interests and hence, explained these orthodox Saint-Simonians, man’s arbitrary domination and exploitation of man. As soon as the obsolete conflict between the idle class and the industrial class had been overcome, in the Saint-Simonian workshop creating wealth from the top down, con­ flicts within the industrial class would disappear, transformed into love and recogni­ tion, especially from the lower abilities towards the dominant abilities, who would be naturally benevolent. From then on, during this period, the orthodox version of Saint-Simonian socialism deviated from the Republican idea that was experiencing a revival: it was unnecessary, in a society devised as a large industrial workshop rationally organised from above, to mention diverging interests. Here, there would no longer be any divergence but instead fusion in the “common interest”, with the less well-endowed, if well-educated and diverted from their idle tendencies, enthu­ siastically supporting this rational arrangement of modern industrial life. The above paragraphs should not make us underestimate the innovative vision expressed by these Saint-Simonians, or this project for a just and therefore equita­ ble society, for, first of all, this clarification of the principle of equity superseded certain earlier dominant visions that naturalised social hierarchies based on criteria of blood, birth, caste, gender and race. And secondly, it countered the assertion of a providentialist vision of the economy that led, by chance and strength, to the spon­ taneous upsurge of hierarchies, inequalities and thus industrial and commercial dominations; here, the Saint-Simonians explained that, on the contrary, it should be supervised and organised according to certain values. And thirdly, this orthodox Saint-Simonian vision could be made more flexible by relaxing the constraint of strict proportionality between contribution and reward, ability and rank, and also by making stronger demands, notably in terms of guarantees, concerning what SaintSimon had first designated as the most numerous and poorest class. Moreover, this relaxation was supported by many Saint-Simonians who were less orthodox and therefore more sensitive to the values of solidarity and fraternity. 4. The hope for radical equality Joseph Rey, the man most responsible for bringing the work of Robert Owen to France, pointed out that, faced with liberal abdication of responsibility and 6 The conflict between the “administration of things” and the “government of men” was set out by Engels in his Anti-Dühring. However, it should be noted that Enfantin pointed out that in the SaintSimonian ability-based workshop (“atelier capacitaire”), the banker hierarchises differential abili­ ties by endowing them with credit and thus inaugurates a new form of politics; “for him [i.e. this new industrial governor of which the banker is the perfect model], this entails not only administrat­ ing things but also governing men”. The new governance (let us use this term here) therefore, for Enfantin, combined government and administration, and differed from former, obsolete forms of government whose model was not the banker but the lord (“le seigneur”), mimicked by the current upholders of “constitutional politics”, that Enfantin set against “industrial politics”; but “the lord does not govern, he commands, which is very different” (Enfantin 1832, 111–12).

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betrayal, two just and benevolent models to organise future society had emerged amongst socialists. About the first model, that of the Saint-Simonians and follow­ ers of Fourier (in Fourierist phalanstery, distribution was carried out in proportion to the contributions in work, talent and capital of each member7) he commented: Some thought it would suffice to find a combination so that there was an association of productive work, but maintaining the inequality of sharing the products according to certain rules that seemed to them more in line with equity than those of the current situation. (Joseph Rey Archives, Mémoires Politiques, vol. 3, Bibliothèque Municipale de Grenoble) Equity as well as equality

Rey was a proponent of another option that Owen had developed in Britain, but which, in France, he also connected to the tradition supporting a radically egalitar­ ian conception of the Republic: notably the one supposedly from Gracchus Babeuf (1760–1797) that Philippe Buonarotti (1761–1837) brought back to public atten­ tion by publishing a far-reaching Histoire de la conspiration pour l’égalité, dite de Babeuf. This tradition was restored to its former glory at the dawn of the 1840s when Cabet published his Voyage en Icarie and communism was expressed in the works of Dézamy (Code la communauté), De la loi sociale (1841) by Richard Lahautière (1813–1882) and especially numerous newspapers: L’Humanitaire, L’Egalitaire, and la Fraternité. Cabet and these early Communists were not alone in their goal of radical equality, and the idea could also be found in the work of other authors such as Pierre Leroux and his circle. For these men from fairly diverse schools of thought, equity could not fulfil socialist ambitions for justice: a more ambitious conception of social equality needed to be devised. The second socialist tradition was based on a very different point of view. It slated liberal political economy, “a transcendent theory of strength and chance”, as François Vidal put it (1846): the market selects by chance and validates the strength of the winner. According to this second tradition, Saint-Simonian social­ ism, although it had the merit of abolishing chance, enshrined to an even greater extent than the savage market principle the guiding value of strength in the organi­ sation of the emerging industrial world. For this second socialism, the socialist equality of opportunities announced by Saint-Simonianism should be considered a floor rather than a ceiling. Socialism’s mission begins at this level. The emerging world – a world of the division and evolution of labour, and therefore of required human qualities that were neither comparable nor classifiable, a world in which 7 In Fourierist phalanstery where association followed the rules of passionate attraction and allowed for the distribution of labour, the rule for the distribution of wealth remained linked to merit, but also to the initial endowment. This distribution provided for 4/12ths for capital, 5/12ths for labour and 3/12ths for talent. On these issues and the history of Fourier and Fourierism, see the classic studies by Jonathan Beecher (1986, 2012).

Associationists and socialists 297 political and social civic rights now needed to be asserted – rather than finding the path of objective inequalities, should instead study new fundamental bonds. The bonds of fraternity and solidarity traced the outlines of a far more radical egali­ tarianism than mere equality of opportunity and encouraged experimentation with other, more evolved forms of cooperation encapsulated in the still vague notions, sometimes interchangeable and sometimes exclusive, of association and commu­ nity. It was a socialism that set itself the task of inventing rather than uncovering the future and that sometimes progressed in its investigation alongside a republi­ canism that, during those same years, developed, in some cases, the ideas of par­ ticipation and deliberation at least as much as classic ideas of representation and national sovereignty. This radical egalitarianism was expressed in different ways. There is a fairly precise formulation of it in the related studies of Louis Blanc, Constantin Pecqueur and François Vidal. It should be kept in mind that one of the early movements of this original socialism was to reject the Malthusian refrains about the inevitability of misfortune, suffering, scarcity and toil. As early as 1834, the Fourierist Clarisse Vigoureux superbly attacked the faint-hearted, fatalistic and dolorous “science of old men” (principally economics), challenging them: “Have they never realised, have they never dared suggest THAT HAPPINESS WAS A RIGHT?” (Vigoureux 1834). For socialists, a society is fair when it leads to happiness – a goal now imaginable in a society of scientific, technological, political and social progress – a notion that Vidal summarised as follows: happiness, for the individual and for the species, is the total satisfaction of all needs that are natural, and consequently legitimate, moral and physical; in addition, it is the gradual and harmonious development of all the faculties, all the elements, that constitute human nature. (Vidal 1846, 22) Happiness was, then, firstly the negation of the unhappiness announced by all doc­ trines on resignation: it contained the idea of properly organised human beings’ extensive power over the natural and social environment. It was time to go back to the drawing board with the task first defined by Saint-Simon in 1825 in Le Nou­ veau Christianisme, which Pecqueur explained by noting that “true social progress in history is synonymous with a great improvement in the fate of the largest and poorest class” (Pecqueur 1840, 64–5). Liberty, equality and fraternity

There were two conditions for society to be fair and happy: firstly, the values of liberty, equality and fraternity,8 established and enshrined with many variants and sometimes additions since 1789, should be correctly redefined and all respected; and secondly, these three values must be simultaneously present and properly connected. 8 During the 1789 Revolution, this triptych became the motto of the French Republic.

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Liberty. Pecqueur, Blanc and Vidal all accused the 1789 Revolution of being inconsequential with regard to liberty. Individual, bourgeois liberty, recognised as a right in 1789, was, in reality, nothing but the substitution of a new tyranny – by proprietors – for an old tyranny – the tyranny of kings and aristocrats. Pecqueur, denouncing economists’ unrestrained use of this notion of freedom-as-a-right, observed that “unlimited freedom is chaos; it is savagery, it is anthropophagy” (Pecqueur 1850b). The notion of a right conferred to the individual should be replaced by the notion of power guaranteed by society; “with the word ‘right’”, wrote Blanc, “liberty is nothing but a vague theory, while power tends to make it something real” (Blanc 1849a, 4). He therefore suggested the following defini­ tion of liberty: “liberty consists not in the right but in the power given to each person to develop his faculties” (Blanc 1849a, 77), which Pecqueur explained by emphasising that “being free is the power to do what one wants”. True liberty, “intelligent liberty” (Pecqueur), could be defined using Pierre Leroux’s terms as the “power to act”,9 and therefore consisted in a set of moral and physical conditions that a society’s institutions would guarantee equally to every indi­ vidual. Socialists therefore altered the prevailing discourse on the idea of indi­ viduals’ natural ability found in various forms in 1830–1840s’ France, from the elitist liberalism of François Guizot10 to the orthodox Saint-Simonians’ project for a hierarchised industrial society. For Vidal, Pecqueur and Blanc, it was not so much necessary to get an elite to emerge, capable of rationally and hierarchically configuring society, as to make, through social guarantees in terms of labour or education, all individuals capable of functioning and participating, each accord­ ing to his or her abilities, in society’s development. It was thus that, insisting on the need for equal access to the conditions for development, Pierre Leroux exclaimed “If I believe in liberty, it is because I believe in equality!” (P. Leroux 1843b, 609–70). Equality. In his study on distributive justice, Vidal began by critically review­ ing the theories of economists from Physiocrats to the disciples of Say, and then reviewed the positions of the different schools of socialism. In their logic of abil­ ity (“each according to his ability and to each ability according to its works”), the Saint-Simonians preferred a strict proportionality between contribution and remuneration while the Fourierists suggested remuneration in proportion to labour, capital and talent. Reasoning in terms of “absolute justice”, Vidal preferred the socialists of the “egalitarian” school, especially Blanc and Pecqueur who had cho­ sen as distribution principles “the goodwill and the needs of the individual” (Vidal 1846, 452). In the closing lines of his Organisation du Travail, Louis Blanc pointed out that even during the reform and reorganisation of society by the associations and the State, individuals’ states of mind and levels of education would allow a certain level of inequality to persist for a long time. Nevertheless, he added that the pure principles of distributive justice should, in a future organised society, cause

9 On this point, see Riot-Sarcey (2016). 10 On this point, see Jaume (1998).

Associationists and socialists 299 these discrepancies to disappear and lead to equality in the distribution of wages and advantages. He wrote: the day will come when it is acknowledged that he who has received more strength or intelligence from God owes more to his fellow men. It will then be up to the genius, and this is worthy of him, to establish his legitimate empire not by the size of the tribute he will levy on society, but by the mag­ nitude of the services he will render. For it is not to inequality of rights that inequality of abilities must lead, but to inequality of duties. (Blanc 1841, 92–3) Responding a little later to Michel Chevalier’s criticism, he insisted that “although hierarchy by ability is necessary and fruitful, this is not the case for remuneration by ability” (Blanc 1847, 141). Pecqueur also explained that in a perfectly organ­ ised society, “with each person appropriately fulfilling the duties of his function, each, without exception, has the right to the equality of remuneration or share in the product and social advantages”; indeed, “equality consists in each individual obtaining the equivalent satisfaction of his basic needs in relation to everyone. This equivalence is always possible, for the basic needs of life are more or less the same for every individual” (Pecqueur 1842, 667–8). The distribution rule for these socialists was, then, “From each according to his strengths and abilities; to each according to his needs” (Pecqueur 1849a, 4) or “From each according to his faculties, to each according to his needs” (Blanc 1849b, 224). Again, their position led, in the idea of a pure theory of distributive justice, to overturning the prevail­ ing discourses about the relation between ability and remuneration. A just society should understand that it was the weakest people who had the greatest needs and most needed social guarantees for their development: the highest income should go to the least capable individuals. But equality as a condition of extensive freedom as the power to act could not work without the support of a sentiment of fraternity, which was then imposed as a rule of action. Fraternity. The definition of fraternity seemed to introduce a difference of opinions, and disagreement, especially between Blanc and Pecqueur. While Blanc explained metaphorically that fraternity meant “equality enshrined, poeticised, sanctified and maintained by love”, Pecqueur adopted a more advanced position: Fraternity alone is the generating social principle par excellence. Equality and liberty define and clarify fraternity; they are, in a way, its weight and measure. Upon equality and liberty one can only build egoism, rights and federalism; on to fraternity one can graft dedication, duty and unity. (Pecqueur 1842, 3) What can explain this ostensible difference that made Blanc sanction equality while Pecqueur sanctioned fraternity? It could be suggested that, on this level, the two men had a difference of perspective, with one of them, Pecqueur, seeking more clearly the foundations of his ideas on social and ethical justice in theology, a

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theology that had been rethought and republicanised after the evolutions of Félicité de Lamennais (1782–1854) and his momentous Paroles d’un croyant (1834), and the other, Blanc, in philosophical anthropology. This did not, however, prevent either of them from dipping into the neighbouring register, socialism being for Blanc “gospel in action” (Blanc 1849b, 3), for example. This was a constant for this generation of reformist thinkers who intertwined the religious and the political in a thousand ways. Nonetheless, one difference remained. For Pecqueur, fraternity was a guiding principle because duty was “the obligation to carry out the will of God”, and right was “all that man has the liberty to do or not to do without thwart­ ing the will of God, or rather fulfilling his duty” (Pecqueur 1842, 21). For Blanc, while fraternity is only “a poetic exhibition of solidarity” (Blanc 1880, 145), this was because it was principally the institutional conditions achieving liberty and equality that shaped behaviours and made it possible to achieve fraternity. The institutions of an organised society gradually reveal the nature of human behaviour. Consideration is an important ingredient, but to a far lesser extent than dedication. As its dominant activity, organisation leads to government, and implies the partici­ pation of everyone, at all levels of society in the Republic, in government func­ tions. And, as Blanc stated several times, “governing is dedication” (Blanc 1849a, 20). In an organised, functional society, every person governs to some extent, and dedication will thus inevitably flourish everywhere. On this last point, Blanc again showed himself to be in debt to the doctrines of his times, with this idea of dedica­ tion stemming from, on one hand, a classic Republican source sympathetic to the virtues of the citizen, and on the other, a religious source and the Christian dedica­ tion praised by authors such as Buchez and Lamennais. Blanc’s position perhaps appears more modern than Pecqueur’s, weighed down as it was with theological arguments. But it could also be said that Pecqueur’s position proves more radical with regard to justice. By placing fraternity above equality and liberty, he claimed he would never reintroduce into the pure equa­ tion of justice any catalyst for legitimised inequalities: neither in terms of ability, as preached by the Saint-Simonians, nor in terms of talent, sometimes used by Fourierism, nor even in terms of virtue or will – and this is what could happen, in Pecqueur’s opinion, with Blanc’s position (as well as that of a certain Republican­ ism). From Blanc’s perspective, if institutional guarantees in terms of liberty and equality were fully respected, then only the more or less dedicated, virtuous behav­ iour of individuals would come into play: and a hierarchy could be reconstituted, the hierarchy of virtues. However, reminding us that fraternity lies beyond liberty and equality, Pecqueur averted this risk, pointing out that socialism relies heavily on the unavoidable demands of equality and liberty but can only be accomplished by achieving fraternity, in other words, “the sentiment of solidarity, the relatedness and unity of humankind” (Pecqueur 1849b, 12). There are, then, two significant things that emerge from these discussions about the three cardinal values: the radical reformulation of the values of liberty and equality, and discussion on how the three values of liberty, equality and fraternity link together. However, these theories produced by social science then needed to be made real in practical propositions and social reforms.

Associationists and socialists 301 5. The institutions of a just society Following in the footsteps of Jean-Paul Alban de Villeneuve-Bargemont (Écono­ mie Politique Chrétienne, 1834), on the cusp of the 1840s, in their extensive social surveys, social observers Louis-René Villermé in his Tableau de l’état physique et moral des ouvriers employés dans les manufactures de laine, de coton et de soie (1840), Eugène Buret, author of De la misère des classes laborieuses en Angleterre et en France (1840) and Antoine-Honoré Frégier who published Des classes dan­ gereuses de la population dans les grandes villes et des moyens de les rendre meil­ leures (1840) revealed the extent of working-class poverty and destitution. However, in France, for the rulers of the July Monarchy the situation was due to nothing more than the behaviour of improvident, irresponsible proletarians. Charles Dunoyer, an economist and ideologist of the July Monarchy, explained that “the result of the industrial system is to destroy false inequalities, but this bet­ ter highlights natural inequalities”. He continued: it is a good thing that there are places in society where misbehaving families may fall, and from which they can only rise again if they behave well. Poverty is a dreaded hell. It is an unavoidable abyss, placed next to the madmen, the squanderers, the debauched, and all kinds of vicious men, to contain them. (Dunoyer 1845, 457) In total contrast, the Socialists explained that the poverty affecting nine-tenths of the population was not the inevitable consequence of a natural process to select behaviours adapted to the transactions of industry and trade, but instead the effect of flawed institutions. Louis Blanc observed that “corrupt human nature is blamed for all our ills [when in fact] the vice of social institutions is at fault” (Blanc 1847, 179), and Pecqueur also concluded that “the ills lie less in Man than in institutions” (Pecqueur 1849b). Therefore, achieving principles of social justice required, as Vidal also remarked, “a radical transformation of the institutions that govern us” (Vidal 1846, 479). For all these socialists, the first institution to reform was private and inher­ ited property: it was this form of ownership that led to man’s domination of man, economic, political and cultural domination, the emergence of a chaotic world shaken by crises, a “society in ruins” (Pierre Leroux) composed of unequal, rival, unconnected individuals, and the opposite of an advanced society that new science, philosophy and religion should organise. In Doctrine de Saint-Simon. Exposition (1829–30), it is explained that property is nothing but a “convention” and can there­ fore be “perfected”. All the socialists of the 1830s believed that the main stumbling block was the present constitution of this property. This was, for the main part, where the confrontation with the traditional economic approach unfolded. Property manifests itself in the unchecked growth of unchecked power that simultaneously poses a problem of efficiency (loss of yields, waste) and equity (social domina­ tion and vulnerability). Property should therefore become “social” (Pecqueur 1844, 233) but not necessarily managed from the centre (which was only one option

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among many available to social decisions): (1) property would be in each specific case the consequence of a choice made in common to share as fairly as possible the use of tools in proportion to the productive abilities of each person, and without prejudice to the contribution that each person should receive in return; (2) with the entire “industrial class” being producers, all would participate in this distribution, which would allow them to “live [well] through labour”: everyone would therefore be associates in economic and social life; (3) for all those who could not participate in the production of wealth – old people, children and the infirm – guarantees and insurance would be offered by society. Naturally, since ownership and therefore social organisation would need to be totally transformed, concrete proposals for reform flourished exuberantly with vari­ ous industrial, financial, social, cultural and architectural plans – with, once again, a general, overall, completed level and an intermediate level of more localised, hybrid proposals that would have to be put into action immediately to improve the current environment. On a general level, there were the Fourierist phalansteries and Icar­ ian communities; on a more intermediate level, the multiple proposals concerned mutual companies, the first production and consumption cooperatives and projects for banking and financial modifications, such as Proudhon’s Bank of the People. Proudhon’s significance among nineteenth-century French socialists, combined with his uniqueness – he was known as the “enfant terrible of socialism” (Chambost 2009) – makes it important to describe in a few words his famous banking project. In a letter addressed to Marx in 1846, Proudhon poses the problem as follows: “to bring into society through one economic combination, the wealth that has left society through another economic combination” (Proudhon, Letter to Marx, 17 May 1846). The problem as it appeared to Proudhon concerned currency circulation rather than the organisation of the workshop. The challenge was to reform credit so that work­ ers could possess the instruments of their labour, in other words, the right to use them and to reap their fruits, without falling back into the vice of private property, which is exclusive in nature. Considering that labour alone creates value, Proudhon esteemed that labour itself could – and should – finance labour without resorting to capitalists or the State – Proudhon thus distanced himself from the 1848 socialists (Blanc, Vidal and Pecqueur) who recommended that credit should be managed by the State. The idea was to guarantee currency circulation through the intermediary of free credit. To this end, Proudhon proposed establishing genuine mutual credit using paper money. Members of the Banque du Peuple (there were 20,000 subscribers in 1849 before the project was aborted) would have to order non-remunerated shares as collateral for the issue of “circulation bonds”. This currency would be recog­ nised among the circle of Banque du Peuple members and could thus freely circulate among workers. The circulation of bonds was voluntary: each member was either a producer or a consumer, and each pledged to accept the bank’s paper and to purchase goods as a priority from its members – the project inspired Silvio Gesell’s Die natür­ liche Wirtschaftsordnung durch Freiland und Freigeld (1916) and, closer to our day and age, the various local currency projects springing up almost everywhere. If we look for a connection between all these proposals, we can see that for all these socialists, the unjust system of property (based on which market mechanisms

Associationists and socialists 303 functioned poorly, both in terms of efficiency and equity) needed to be regulated and even abolished by the growth of two institutions: the State (except for Proud­ hon) and associations. By associations, we usually mean here producers’ coopera­ tives. Social science led to an economic policy based on these two new institutions. Now, two main forms or combinations seem destined to encompass, in a way, the new social relations. On the one hand, association, the principle of every strength and every economy; on the other hand, the disinterested intervention of the State, the principle of all order, all distributive justice and all unity. (Blanc 1849a, 89) This was the common denominator, but naturally, projects and expressions dif­ fered. Once again, it is interesting to look to Blanc, Vidal and Pecqueur and how they expressed the early socialists’ general orientation. Their example is particu­ larly significant in that they proposed a social theory and then attempted to make it a broad, concerted policy in the spring of 1848 and as part of the Luxembourg Commission, together with the workers’ representatives of the major Parisian urban trades.11 The Commission, they noted, had to act urgently, but its aim was also to “gather material for the future”, to propose directions that would transform “a vicious social order”. What was needed was overall reform, a general, coordinated plan for transformation. This plan comprised two distinct sections: “on one hand, social workshops for agriculture and industry to be organised on the new bases of asso­ ciation and solidarity, and on the other, institutions to be founded, altered or trans­ formed” (Blanc 1849a, 93). The first section involved the guidelines for social workshops (the term thus described cooperatives, mostly of producers) presented by Blanc in his Organisation du Travail; he also attempted to incorporate Vidal’s vision for agricultural colonies. [The plan] consisted simply in throwing into the middle of the current social system the foundations of another system, the cooperative system, giving the latter the nature of a large national experiment carried out with the assistance of and controlled by the State. (Blanc 1880, 164)

11 Louis Blanc’s arrival in the apathetic Provisional Government set up in the aftermath of the Febru­ ary 1848 Revolution was imposed by the people (just like that of the “worker Albert” (whose real name is Alexandre-Albert Martin)). In line with the themes of his classic Organisation du Travail, Blanc called for the creation of a Minister of Labour, but this was rejected. By way of “compen­ sation”, at the Palais du Luxembourg, a Commission, a real “Parliament of Labour” (Blanc) was created, where representatives of the various trades of the urban trade industry sat, and where econo­ mists from different sectors of opinion were also consulted (from Frédéric Le Play to Victor Consid­ erant, Louis Wolowski, Constantin Pecqueur, François Vidal, etc.). “Social workshops” were tested on a large scale: they were cooperative projects, very different from the “national workshops” that the rest of the provisional government, in reaction to Blanc’s project, entrusted to Alexandre Marie, the Minister of Public Works. The Commission sat for a few weeks in spring 1848 and was halted by the insurrectional movements of 15th May and 22nd–26th June.

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The transformational institution was primarily the association, which Blanc imag­ ined as a vast cooperative bringing together varied activities and productions; the proliferation of these rationally organised model institutions would bring social progress. However, the State (Blanc had in mind the democratic State representing the interests of everyone, of which the establishment of universal male suffrage in spring 1848 would herald the existence) also had several major roles to play in this development. It was the “supreme regulator” of production: it had to provide the original funds to create the social workshops, and also protect their initial growth in a competitive environment, notably by sponsoring the association. It was also responsible for teaching the association the principles of good government, setting out to establish the rules of democracy, representation, election and discussion in the workshop. It still had to encourage the utmost respect for equality (need rather than merit), and verify that, in terms of labour and education guarantees, the work­ ers, who had become the collective owners of the association, and particularly any new entrants, respect the principles of genuine liberty – equality and liberty being essential to develop fraternal behaviours. The State also had to establish associa­ tions’ rules to allow for the development of a broader solidarity among the asso­ ciations themselves and, beyond that, among industries themselves. This second section of the global reform plan therefore corresponded more clearly to the role the State should play in the economy as a whole. As for the State, it is clear that, if it has a social function, it is to intervene as a pacifist protector wherever there are rights to balance and interests to guarantee; it is to put all citizens in equal conditions of moral, intellectual and physical development. This is its law. And it can only accomplish this law by reserving the right to distribute credit and supply the instruments of labour to those who lack them in order to make accessible to everyone the lifeblood of wealth. (Blanc 1849a, 89) The problem was to endow the State with the resources likely to help found asso­ ciations without resorting massively to borrowing; and the way to do this was to transfer to it the administration of entire sections of the national economy. The solution envisaged by Blanc, Vidal and Pecqueur exceeded the initial issue, giv­ ing the State a far larger role in managing the economy. In this second section, we see the State gradually becoming the leading institution for social transformation. In the overview text La Révolution de Février au Luxembourg, the three socialists explained that while the State should encourage the multiplication of social work­ shops, it should also buy up struggling factories and “create new labour and pro­ duction centres” for every industrious population in difficulty. The adopted method involved buying up the railways, mines and canals. The State should found and run agricultural colonies all over the country. The project also planned to “transform the systems of banks and insurance in national institutions” and place all trade and commerce under State control by setting up warehouses and bazaars. These

Associationists and socialists 305 transformations would make it possible to allocate the State with a budget to fund the associations. However, they would also lead to making the State the economy’s main agent, a funder but also a producer. This second section of the institutional reform plan corresponded more closely to the predictions envisaged by Pecqueur, especially in his study Théorie nouvelle d’économie sociale (1842). And in this area, Vidal appeared very similar to Pecqueur: the nine main points of the general social reform plan he presented in Vivre en Travaillant (1848) after the Luxem­ bourg experience above all pointed to the growth of the State in the economy. 6. The fiscal challenge One of the ways in which to summarise the “[economic] reality of Utopia” is to observe how these socialists engaged in certain key debates in the nineteenth cen­ tury. Challenging the way in which wealth was distributed, the socialist projects examined the fiscal question and how the State was funded. Where could the finan­ cial resources for the socialist project be found? Who should pay, in order to meet the dual principle of economic efficiency and social justice? When we mentioned above the issue of distributive justice, we observed that it ultimately led to “the inequality of duties”. The socialist formulas for the distribution of wealth can thus be inversed and used to identify their recommendations for contributions to the State budget. These socialists were all in favour of progressive tax in the name of the principle of the “ability to pay”, supported, among others, by John Stuart Mill. They accused the fiscal system at the time – a system known as the quatre vieilles (four taxes) that relied heavily on indirect taxation – of ultimately contributing to a “regressive or backward progressive” tax system.12 This was at the heart of Émile Pereire’s criticism (1832) of the July Monarchy’s first budget and echoed the republican socialists during the 1848 Revolution who called for a single tax on income and capital before envisaging an eventual tax-free society. Progressive property, income and inheritance taxes

Perceived as a measure for the State to build up its financial power, tax was con­ sidered by Saint-Simon as a negative form of currency circulation that all too often prevented the development of “industry” to the benefit of idle interests. Regretting, with regard to taxation, that “laws have always been made by owners and capital­ ists, and always reduced to results favourable to their authors” (Decourdemanche 1831, 856), disciples – essentially Enfantin, Émile Pereire, Decourdemanche and the young Michel Chevalier – retained Saint-Simon’s two proposals in their developments on taxation. The challenge was not only to fund the State through fair taxation based on ability to pay but also to see taxation in its capacity to guide the circulation of capital. In addition to taxation’s budgetary function, the Saint-Simonians anticipated its economic functions aiming to guide economic

12 Constantin Pecqueur Archives, Bibliothèque de l’Assemblée Nationale, 17 (17).

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behaviours, and its social functions to reduce inequalities. They thus adopted a very functionalist conception of taxation that can be summarised in six points. (1) Taxation should leave the necessary free, and “sanction” the superfluous by virtue of the capability principle (rather than by virtue of an egalitarian prin­ ciple): “if taxation is to be properly assessed, it must be levied only on those who can pay it, without reducing what is necessary, since the State must not aim to equalise well-being brutally, but to relieve the miseries of life” (Pereire 1832, 35). Giving primacy to consumption taxes was, according to Decourdemanche (1831, 955–6) “the worst rule of distribution” since these taxes were more onerous for working-class populations. From the 1830s, the young SaintSimonians therefore called for the abolition of so-called “consumption” taxes – on salt, tobacco and beverages – as well as customs duties. Exempting low incomes was the first principle of tax justice. (2) The loss of income caused by the abolition of these taxes could be compen­ sated by a surcharge on land tax whose successive reductions were regretted by Decourdemanche and Émile Pereire, among others: “at no other time has the weight of public taxes been lighter for large landowners” (Pereire 1832, 24). The Saint-Simonians considered land tax to be the most legitimate tax. (3) The Saint-Simonians simultaneously recommended that fiscality should not hinder production and that it should accelerate the circulation of capital. Stimulating production required rethinking the patente (professional levy) and contribution personnelle mobilière (personal property tax). Also, to be effective, taxation should also be thought of in terms of guiding economic behaviours. On this point, Decourdemanche considered that a high tax (the timbre or stamp) on registered securities (especially commercial bills) was an infallible way to increase the conversion of registered securities into bearer bonds. Left unencumbered, these converted securities would circulate widely and be easily exchanged. According to Decourdemanche, providing such an incentive from a fiscal point of view was a way of reducing the cost of capital and eventually ensuring that “he who brings forth a new production from matter [receives] a greater share in that production than the idler who merely lends the raw material” (Decourdemanche 1831, 635).13 (4) So that taxation could target each person’s ability to pay, the SaintSimonians suggested that tax should be directly assessed through income.14 This tax should be calculated on the previous year’s income to attain assured values and avoid eating into the capital intended for reproduction. At the time, precise knowledge of each taxpayer’s income was perceived as inquisitorial, but Decourdemanche brought attention to the merits of the 13 The conversion of registered securities into bearer bonds managed by a financial intermediary should lead to significant deposits of capital in the banks, which should then lead to a proportional reduction in their cost. 14 We could also mention the suggested income tax formulated by Proudhon in July 1848 in the Assemblée Nationale (Proudhon 1848).

Associationists and socialists 307 English income tax system in which “taxpayers are taxed only according to the income that they themselves declare” (Decourdemanche 1831, 993–4). This opened up a host of horizons destined to make the tax authorities aware of the income of each category of individual – landowners, civil servants, the industrial (worker) class and capitalists. The main aim was to tax non-labour income, and this was then partly enshrined by the use of a progressive scale. (5) Progressive income tax was thus justified by the Saint-Simonians to take into account how the income had been obtained. The source of the income and the social function of the taxpayer were decisive in establishing the tax scale. Although progressive taxation was largely ignored by Adolphe Thiers, then Minister of the Interior for whom proportionality was the unsurpassable limit of taxation, the Saint-Simonian project of progressive taxation, despite the low rates advised,15 re-established the earlier recommendations of Montes­ quieu, Condorcet, Say and Sismondi. (6) The Saint-Simonian fiscalists also recommended applying progressive tax­ ation on inheritance as a way of countering the heredity of ownership – a principle encompassing “all the institutions that enshrine the exploitation of the worker by the idler” (Enfantin 1831a, 292) – and moving towards the Saint-Simonian ideal in which “the only right to the instruments of labour will be the ability to use them” (Barrault et al. 1830, 115). The Saint-Simonians interpreted property and its mode of transmission as social conventions, and not in terms of natural rights. While liberal economists considered that inheritance, an integral part of the right to property, was a powerful driver of economic activity – imposing hardships and shaping savings (Steiner 2008) – and that it would be dangerous to ignore this sentiment of family solidarity, L’Organisateur emphasised social antagonism by responding that “[the] right to property enshrines [admittedly] a hereditary privilege for idle­ ness [but] condemns the working-class masses to indigence and debasement” (L’Organisateur 1830, 121–8).16 In particular, it was because the distribution of national wealth – especially land – could not be abandoned and left to the chance of filiation that “enregistrement17 (stamp acts) intervenes in all the changes that property undergoes, only to take, for the benefit of society, a share of the advantages that possession of the land confers” (Pereire 1832, 33). To be more precise, the Saint-Simonians were already calling for the progressive taxation of inheritance.

15 The final rate of 25% does indeed some very modest compared with Jean-Joseph Graslin’s early proposal to establish a marginal rate at 75%. See Orain (2006). 16 Inheritance structured nineteenth-century society: the inheritance of people inheriting in 1830 rep­ resented a quarter of the resources they could use throughout their life. Access to inheritance thus made it possible to obtain a much better standard of living than what could be obtained through labour – Thomas Piketty notes that from 1820 to 1840, the inheritance flow did not follow the trend that should logically have be imposed by the economic flow (2013, 604). 17 “Enregistrement” is the tax on (among other things) the transmission of property.

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The progressive scale needed not only to be applied to the amount of the inher­ itance but should also take into account the degree of kinship – transmissions between collateral heirs and non-relatives should be taxed more. One particularity of the Saint-Simonian project was that it precluded any succession beyond the sixth degree: at this stage, the inheritance became the property of the State and was thus socialised. Here again we should note how ahead of its time Saint-Simonian thinking was: in France, it took almost a century for the progressive taxation of inheritance to be institutionalised. For a capital tax: the compensatory theory

In calling for a tax on assets (via the land tax) and their transmission (via inher­ itance tax), the Saint-Simonians wished to prevent the industriel (worker) from turning into a rentier (annuitant). Inequalities arising from the luck of one’s birth, totally unrelated to an individual’s intrinsic abilities, could be reduced by applying a progressive scale. Taxation was once again a burning issue during the 1848 Rev­ olution. The Luxembourg socialists aligned themselves with the Saint-Simonian arguments in favour of progressive taxation, and Pecqueur justified this progres­ sive taxation with the argument for liberty borrowed from Montesquieu: with tax being a function of the liberty enjoyed by individuals – its rate should increase in proportion to subjects’ increased liberty and decrease in proportion to their increased servitude – it was the liberty to live without working that the tax should target as a priority. In Qu’est-ce que le socialisme? Pecqueur explained that by enshrining the appropriation of land and the monopoly of instruments of labour, society had granted “free, perpetual social credit to certain families with the right to arbitrar­ ily hand down [their assets] and with this privilege given to capitalists, to estab­ lish a very onerous private credit on these instruments of labour”. If society had freely conceded to some people the use of capital, it should do so for the benefit of everyone: taxation was thus considered from a compensatory perspective18 as funding a social debt. It was from this perspective that Pecqueur introduced cap­ ital tax into his fiscal reflection. But in doing so, at the same time, he distanced himself from the definition given by Émile de Girardin (1802–1881), an insur­ ance tax theorist, which in his view enshrined individualism:19 “taxation trans­ formed into voluntary insurance” wrote Pecqueur, “implies the bold negation of any social progress, any solidarity and any justice on Earth: it is the apotheosis of savage egoism!”20 From a different perspective, Pecqueur justified capital tax 18 Pecqueur was thus very much part of the “compensatory theories” school of thought described by Seligman (1894). 19 Emile de Girardin saw taxation as a question of insurance. Those who possessed nothing had noth­ ing to insure and therefore had no tax to pay; those who possessed capital (land, assets or other) should insure it and therefore pay tax “to insure themselves against all risks liable to disturb their possession or enjoyment” (Girardin 1849, 120). 20 Constantin Pecqueur Archives, Bibliothèque de l’Assemblée Nationale, Paris: 17.

Associationists and socialists 309 by pointing out that capital “bestows rights”: it is security for those who possess it. Because it guarantees the full ownership of one’s right to exist and conditions for development, capital endowment is a privilege that should be extended to all. Otherwise, explained Pecqueur, those endowed with capital would improve their conditions for development by condemning the chances of development of those who do not have it and on whom the usury of capital weighs heavily. Capital tax was therefore a way of reconfiguring material endowments by rein­ tegrating those who were excluded from social credit. Capital tax as a “compen­ sation for all proletarians’ deprivation of any share in the use and fruits of the land” would thus become, wrote Pecqueur, a veritable “institution of solidarity” (Pecqueur 1850c, 37). Anticipating the conception of taxation specific to solidarity at the end of the century, Pecqueur was more innovative than the Saint-Simonians for whom taxa­ tion was better understood from the angle of economic efficiency and “merito­ cratic” justice than from the rhetoric of solidarity and equality. However, both traditions considered that inequalities were the result of an economic organisation based on private property passed down through inheritance. They therefore sug­ gested using tax to limit property rights and the constitution of private incomes. But, ultimately, these positions on taxation were only transitional phases: socialist reflection went beyond the mere question of tax and also covered borrowing and, ahead of its time, social contributions. 7. Beyond tax Élie Halévy (1906) insisted on the idea that socialism should not be reduced to the fiscal expropriation of capitalists. The early socialists effectively envisaged alternative projects for circulating capital to radically alter social organisation and encourage associations. Socialisation through public borrowing and a perpetual public debt

For Enfantin, while the task of public finance was to deduct money where it could be found to fund the industrial transition, borrowing was preferable to taxation. The industrial worker initially without capital and obliged to rent it had to deduct from the wealth he created enough to pay interest on the capital and the tax demanded of him. Enfantin therefore suggested that the State attract the superfluous capital of the idle through public borrowing. He insisted on two points: (a) deductions from idle capital should be favoured over draining productive and circulating wealth and (b) the funding of public spending should be borne by those who “with regard to the present distribution of property and the products of labour, have the most disproportionate income in relation to the share enjoyed by other members” (Enfantin 1831b). By delegating to the most capable industrial workers the realisation of major works, the industrial state, judge of social needs, would thus regulate the possession of instruments

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of production. Borrowing was thus devised as a measure for the circulation and socialisation of wealth: [it is] the most powerful lever that can be employed by a moral, enlightened and shrewd government to extend to the poorest and most numerous class the use of capital concentrated among the class privileged by birth; we put this forward as the transaction most conducive to popular welfare. (Enfantin 1831b, 58) It made it possible to “break the social bonds that oppress the poor” and to replace them with “new bonds that, without violently dispossessing those privileged by birth, would allow those whom birth disinherited and who have the taste and ability for work, to benefit from the tools possessed by the idle rich” (Enfantin 1831b, 58). It was from this angle that the young Saint-Simonians entered debates about the framework and funding of public debt. Believing that one should only worry about servicing interest (debt arrears) and not about the nominal amount of the debt, the Pereire Brothers, Enfantin and the young Chevalier (1831) denounced the use of a debt redemption fund that vainly pursued the hope of extinguishing public debt: according to them, this measure was a retrograde policy consisting in “returning to the hands of the idle the capital lent by them to the workers” (Enfantin 1831b, 58). Pereire underlined the inefficiency of the process: “for every effort that we make to achieve this aim [debt reduction], we find ourselves further away. Each repurchase leads to new issues, the State buys back more dearly than it issues, and instead of paying off, it is constantly falling behind” (Émile and Isaac Pereire 1913 [1831–35]). He concluded that, since they cared little about being reimbursed for the capital they had advanced, annuitants were only interested in receiving inter­ est payments. Pubic debt could therefore be declared truly perpetual. Rather than debt retirement (par value capital), the Saint-Simonians argued for the conversion of annuities with a reduction of the nominal interest paid to its creditors: convert­ ing annuities amounted to repaying a debt that was incurred at a certain interest (through the intermediary of 5% annuities) to contract a new one at a lower interest rate (e.g. an average of 4.5% annuities), with the alternative of repayment always offered to creditors who refused the conversion (and the loss of income it entailed). The reduction in annuities, the stated aim of which is to reduce the income that labour pays to idleness, is the latest method invented and put into prac­ tice by industrial engineering to avoid and combat a legislation of property marked by feudal immobility, which prevents the instruments of labour from reaching the hands of the man who wishes to and will know how to use them. (Enfantin 1832, 58–9) The conversion of annuities presented three, interlinked benefits. It allowed for (1) capital movement, with reimbursed capital able to be placed elsewhere: it therefore involved directing the circulation of capital by offering an incentive so that this capital was invested elsewhere (in private firms) if holders refused to

Associationists and socialists 311 accept the reduction in their income caused by the conversion. It then represented (2) savings for taxpayers. Lastly, (3) the conversion of annuities should lead to a reduction in rent on capital in all spheres of industry. The Saint-Simonians saw in borrowing and truly perpetual public debt a possible solution to the problem of the distribution of capital. The Saint-Simonian line on debt employed the flagship val­ ues of the Doctrine: the promotion of industrial workers’ individual abilities, the fight against idleness and the extensive development of public works. The SaintSimonians were thus opposed to unalterable taxation – according to them, the widespread development of public credit and the regular reduction of debt servic­ ing and capital rent by annuity conversion made the operation financially viable. However, this system depended on raising the price of public securities. Any fall in stock prices financially would compromise the State and the distribution of capital to the most able. Against the Utopia of unlimited public credit: social property

Among the third-generation socialists, Jules Leroux strongly condemned the “Uto­ pia of unlimited public credit” in that it left the doors of the stock market open, abandoning to the market (even if it were supervised) the task of governing the economy and distributing capital. He also criticised it for ignoring the power rela­ tions inherent in any system of public borrowing based, on one hand, on the law of supply and demand, and, on the other, the “duality of sovereign power”21 (J. Leroux 1843a). Whilst recognising the Saint-Simonians’ ambition, Leroux explained that the emancipation of the workers (the “proletarians”) would be compromised by the tutelage the bourgeoisie exercised over both the State and the proletariat through the public borrowing system. In the world of the governed, a small number, tempted by the lure of the loan transaction, opens their wallets to the governors; a small number, friends of the first or simply enemies of the greatest number, vote for the tax that must pay the interest of this loan; and there is nothing left to say – the thing takes place. (J. Leroux 1843a, 757) Unlike the Saint-Simonians, he highlighted the extent of the interest established and the power relations likely to influence the effectiveness of economic policies designed to change social antagonisms. It was, therefore, preferable to remove from the market the distribution of capital considered indispensable for individual development. For Pecqueur, it was precisely this failure of industrial organisation that justi­ fied the tax: a substitute therefore had to be found. While progressive taxation of income and capital were temporarily necessary, Pecqueur feared a battle that labour would lose in advance: “capital is a phoenix perpetually arising from its 21 Executive power that spends the budget, and legislative power that votes the revenue budget.

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ashes” (Pecqueur 1850c, 37), that would always claw back from labour what was deducted through taxation. It would therefore be preferable to establish an association between capitalists and workers in the joint own­ ership of the instruments of labour by means of expropriation with com­ pensation rather than building a new world alongside the old one with the resources from a tax on capital, since these two worlds are antagonistic and incompatible. (Pecqueur 1850c, 38) Pecqueur was building the scaffolding for the architecture of an “Economic Republic”22 in which he made a distinction between “national property” – includ­ ing “all the instruments of labour, land and other capital, all the material conditions of production and all the wealth necessary for services and social functions” – and “material and private property” corresponding to “the share of consumable wealth privately allocated to each according to their function” (Pecqueur 1850a, 26). In these new conditions of capital and labour, the question of taxation is quite simple. There is no longer any tax in the big national company, nor is there any tax in the small railways and other companies. The expenses required for the good management of the general interest are deducted from the gross products of the association. . . . So there are no longer two purses, two treas­ uries, or two interests, those of the citizens and those of the State. (Pecqueur 1850a, 27) Rather than taxing an individual’s income or capital, it was now a question of a social “contribution” deducted from “the gross product of the association”, which should be used “1° to preserve each and every one of us from the una­ voidable vicissitudes that may befall us in the course of our lives, and 2° to meet the common needs of all, such as education, road maintenance etc.” (Pecqueur 1844). The Saint-Simonian’s views of the State as a banker, or of hierarchical workshop contrasted with Pecqueur’s social State. In Pecqueur’s philosophy, this Economic Republic should represent the closing phase of history, where “social credit will be free, where few people will own the instruments of labour, and where each citizen will have no other property than the income from his labour”.23 8. Concluding remarks In 1853, in the Dictionnaire de l’économie politique’s entry for “socialism, social­ ists”, Louis Reybaud rejoiced in the fact that “socialism is now extinct, and,” he continued, “speaking of it is somewhat akin to giving its eulogy” (1853, 629). 22 Constantin Pecqueur Archives, International Institute of Social History: 13 (2), Amsterdam. 23 Constantin Pecqueur Archives, Bibliothèque de l’Assemblée Nationale: 17, Paris.

Associationists and socialists 313 Echoing these words, but from the opposite end of the doctrinal spectrum, Engels formalised the distinction between scientific socialism – Marxism – and Utopian socialism, announcing that the latter was definitively outmoded. It should, however, be noted that in his Critique of the Gotha Programme (1875), Marx himself outlined “a higher phase of communist society” in which labour, liberated at last from suffering, subordination and toil thanks to the full development of collectively controlled productive forces, will have become “the primary vital need”. Marx continued, observing that “the narrow horizon of bour­ geois right”, always seeking more or less justified inequalities – including amongst employees – would be definitively replaced by the demand for justice expressed in the slogan “From each according to his abilities, to each according to his needs!” (Marx 1875, 87). Many modern critics have pointed out the utopian dimension always present in Marx’s thinking, and have thus relativised the distinction seized upon by many later Marxists between scientific socialism and utopian socialism, and indicated that a strong and appropriate utopian tradition has been upheld in modern social­ ism. This tradition, duly recognising scientific and technical advances, bravely imagined a just society, the gateway to even broader and bolder thinking, towards a society characterised by beauty and happiness – a tradition that has also studied the means, from the most gradual to the most radical, to trigger, uphold and even accelerate the transition to this world. References Barrault, Émile, Barthélemy-Prosper Enfantin, Carnot Hippolyte, Charles Duveyrier, and Henri Fournel. 1830. Doctrine de Saint-Simon. Exposition, 2nd ed. Paris: Au bureau de L’Organisateur. Bastiat, Frédéric. 1850. Harmonies économiques. Bruxelles: Meline, Cans et Cie. Beecher, Jonathan. 1986. Charles Fourier. The Visionary and His World. Berkeley: Univer­ sity of California Press. Beecher, Jonathan. 2001. Victor Considerant and the Rise and Fall of French Romantic Socialism. Berkeley: University of California Press. Blanc, Louis. 1841. Organisation du travail. Paris: Administration de la librairie. Blanc, Louis. 1847. Organisation du travail, 5e éd. Paris: Bureau de la société de la librairie fraternelle. Blanc, Louis. 1849a. La révolution de février au Luxembourg. Paris: Michel Lévy frères. Blanc, Louis. 1849b. Catéchisme des socialistes. Paris: Au bureau du nouveau monde. Blanc, Louis. 1873. Questions d’aujourd’hui et de demain, vol. I. Paris: Dentu. Blanc, Louis. 1880. Histoire de la révolution de 1848, vol. 1. Paris: Marpon et Flammarion. Blanqui, Auguste. 1885. Critique sociale. Paris: Alcan. Bouchet, Thomas, Vincent Bourdeau, Edward Castleton, Ludovic Frobert, and François Jarrige (eds.). 2015. Quand les socialistes inventaient l’avenir (1825–1852). Paris: La Découverte. Bourdeau, Vincent. 2012. “Le marché des égaux: un aspect socialiste de l’échange républic­ ain”. Revue de philosophie économique, 13 (2), 3–23. Chambost, Anne-Sophie. 2009. Proudhon: l’enfant terrible du socialisme. Paris: Armand Colin.

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Chevalier, Michel. 1831. “Politique industrielle. Politique de déplacement. Politique d’association. Amortissement. Appel”. Le Globe, journal de la religion saint-simonienne, 8 (90), 357–8. Considerant, Victor. 1833. “La civilisation ruinant les pauvres. Exemple de l’Angleterre”. La Réforme industrielle, ou le phalanstère. Journal des intérêts généraux de l’industrie et de la propriété, 18 January, 2 (3), 25–28. Considerant, Victor, and Jules Lechevalier. 1832. “Introduction”. La réforme industrielle, ou le phalanstère. Journal des intérêts généraux de l’industrie et de la propriété, 1 June, 1 (1), 1–7. Decourdemanche, Alphonse. 1831. Aux industriels: lettres sur la législation dans ses rap­ ports avec l’industrie et la propriété. Paris: au bureau du Globe, [Excepted from Globe, n. 213, 1st August 1831]. Dunoyer, Charles. 1845. De la liberté du travail ou Simple exposé des conditions dans lesquelles les forces humaines s’exercent avec le plus de puissance. Paris: Guillaumin. Enfantin, Barthélemy-Prosper. 1831a. “Economie politique. Les oisifs et les travailleurs. Fermages, loyers, intérêts, salaires”. Le Globe, journal de la doctrine de Saint-Simon, 7 (73), 292. Enfantin, Barthélemy-Prosper. 1831b. “Du crédit public”. Le Globe, journal de la doctrine de Saint-Simon, 7 (15), 57–8. Enfantin, Barthélemy-Prosper. 1832. Economie politique et politique. Paris: Au bureau du Globe. Fourier, Charles. 1835. La fausse industrie, morcelée, mensongère, répugnante et son anti­ dote, l’industrie naturelle, combinée, attrayante, véridique, donnant quadruple produit. Paris: Bossange. Girardin, Émile de. 1849. Le socialisme et l’impôt. Paris: Michel Lévy. Halévy, Élie. 1906. “Les principes de la distribution des richesses”. Revue de Métaphysique et de Morale, 14 (4), 545–95. Jaume, Lucien. 1998. “A l’origine du libéralisme politique en France.” Esprit, June, 37–60. Leroux, Jules. 1833. “Économie politique. De l’économie considérée comme science”. La Revue Encyclopédique, 57 (3), March, 529–43. Leroux, Jules. 1843a. “Emprunt”. In Pierre Leroux and Jean Reynaud (eds), Encyclopédie Nouvelle, vol. IV. Paris: Charles Gosselin, pp. 753–62. Leroux, Pierre. 1843b. “Égalité”. In Pierre Leroux and Jean Reynaud (eds), Encyclopédie Nouvelle, vol. IV. Paris: Charles Gosselin, pp. 609–70. Leroux, Pierre, and Jean Reynaud. 1833. Exposé des principes républicains de la Société des droits de l’homme. Paris: Herhnan. L’Organisateur. 1830. “Prédication du 14 novembre: l’hérédité”. L’Organisateur, 2 (16), 121–8. Marx, Karl. 1875. “Critique of the Gotha Programme”. In Karl Marx and Friedrich Engels, Collected Works, vol. 24. London: Lawrence and Wishart, 1989, pp. 75–99. Marx, Karl, and Friedrich Engels. 1848. “Manifesto of the Communist Party”. In Karl Marx and Friedrich Engels, Collected Works, vol. 6. London: Lawrence and Wishart, 1976, pp. 477–519. Orain, Arnaud. 2006. “ ‘Équilibre’ et fiscalité au Siècle des lumières. L’économie politique de Jean-Joseph Graslin”. Revue économique, 57 (5), 955–81. Pecqueur, Constantin. 1840. Réforme électorale. Lyon: Boursy. Pecqueur, Constantin. 1842. Théorie nouvelle d’économie sociale et politique. Paris: Capelle. Pecqueur, Constantin. 1844. De la République de Dieu. Union religieuse pour la pratique immédiate de l’égalité et de la fraternité universelle. Paris: Charpentier.

Associationists and socialists 315 Pecqueur, Constantin. 1849a. “Introduction”. Le Salut du peuple, journal de la science sociale, no. 1, 10 December, 4–9. Reprinted, Le Salut du peuple, nos 1–6. Paris: J. Ballard, 1850. Pecqueur, Constantin. 1849b. “Qu’est-ce que le socialisme?” Le Salut du Peuple, journal de la science sociale, no. 1, 10 December, 9–20. Reprinted, Le Salut du peuple, nos 1–6. Paris: J. Ballard, 1850. Pecqueur, Constantin. 1850a. “Qu’est-ce que la fonction sociale?” Le Salut du Peuple, jour­ nal de la science sociale, no. 2, 10 January 1850, 24–32. Reprinted, Le Salut du peuple, nos 1–6. Paris: J. Ballard, 1850. Pecqueur, Constantin. 1850b. “Qu’est-ce que la liberté?” Le Salut du Peuple, journal de la science sociale, no. 3, 10 February, 3–16. Reprinted, Le Salut du peuple, nos 1–6. Paris: J. Ballard, 1850. Pecqueur, Constantin. 1850c. “Vrais fondements de l’impôt sur le capital. Insuffisance de ce moyen”. Le Salut du Peuple, journal de la science sociale, no. 4, 10 March, 35–8. Reprinted, Le Salut du peuple, nos 1–6. Paris: J. Ballard, 1850. Pereire, Emile. 1832. De l’assiette de l’impôt. Examen critique du travail de la commis­ sion de la chambre des députés sur le budget des recettes. Paris: Au bureau de la Revue Encyclopédique. Pereire, Émile, and Isaac Pereire. 1913 [1831–35]. Œuvres d’Émile et Isaac Pereire: ras­ semblées et commentée par Pierre-Charles Laurent de Villedeuil, et augmentées d’une introduction, d’une biographie des auteurs, de remarques, de tables et d’un choix de documents contemporain. Série D: Le crédit public moderne et la politique française. Paris: Alcan. Perreux, Gabriel. 1931. Au temps des sociétés secrètes. La propagande républicaine au début de la Monarchie de Juillet (1830–1835). Paris: Hachette. Piketty, Thomas. 2013. Le capital au XXIe siècle. Paris: Le Seuil. Proudhon, Pierre Joseph. 1848. Proposition relative à l’impôt sur le revenu, présentée le 11 juillet 1848 par le citoyen Proudhon, suivie du discours qu’il a prononcé à l’Assemblée Nationale le 31 juillet 1848. Paris: Garnier frères. Reybaud, Louis. 1853. “Socialisme. Socialistes”. In Charles Coquelin and Gilbert-Urbain Guillaumin (eds), Dictionnaire de l’économie politique, vol. II. Paris: Guillaumin, pp. 629–41. Riot-Sarcey, Michèle. 2016. Le procès de la liberté. Paris: La Découverte. Saint-Simon, Claude-Henri de. 1825. Nouveau christianisme. Dialogues entre un conserva­ teur et un novateur. Paris: Bossange. Sand, George. 1970. Correspondance, vol. VII. Paris: Garnier. Seligman, Edwin R. A. 1894. Progressive Taxation in Theory and Practice. Baltimore: American Economic Association. Steiner, Philippe. 2008. “L’héritage au XIXe siècle en France: Loi, intérêt de sentiment et intérêts économiques”. Revue économique, 59 (1), 75–97. Vidal, François. 1846. De la répartition des richesses ou de la justice distributive en écon­ omie sociale: Ouvrage contenant l’examen critique des théories exposées soit par les économistes, soit par les socialistes. Paris: Capelle. Vidal, François. 1848. Vivre en travaillant ! Projets, voies et moyens de réformes sociales. Paris: Capelle. Vigoureux, Clarisse. 1834. Parole de providence. Paris: Bossange.

12 Fin-de-siècle socialisms Vincent Bourdeau

1. Introduction The first volume of Karl Marx’s Das Kapital was published in Germany in 1867, but it was not until 1875 that a French translation was published.1 It has not been uncommon for observers to see in the book’s minimal and belated impact in France a reason to denounce the intellectual backwardness of French socialists compared with other European socialists of the same period. This has frequently led some to castigate the provincialism of the French workers’ movement and its regrettable propensity to exhume figures from the national past like Gracchus Babeuf, Charles Fourier, Pierre Leroux, Étienne Cabet and Pierre-Joseph Proudhon. Among the prin­ cipal figures associated with the different expressions of socialism in nineteenthcentury France, some were still active militants during the fin-de-siècle era and passed on to younger generations accounts of their concrete experience of socialist advocacy and militancy, notably their diverse participation in mutual aid socie­ ties, utopian communities, advocacy for the right to work (le droit au travail), the Revolution of 1848 and their experience of political repression during the Second Republic, the Second Empire and the 1871 Paris Commune. The Commune and its violent demise especially left an obvious mark on French socialist theorists writing towards the end of the century. In the wake of the Commune, some socialists died, others were imprisoned or deported, and many were forced into exile. This was the case, for example, for the two future directors of the intellectually influentional Revue Socialiste, Benoît Malon (1841–1893) and Georges Renard (1847–1930). The dramatic denouement of the Paris Commune explains in large part the long silence in French socialist output for at least a decade (1871–79), in striking con­ trast to the often cacophonous and verbose agitation of earlier generations. In reality, the end of the century witnessed a renewal of vitality amongst social­ ists on both a theoretical and militant level. Once the definitive establishment of the Third Republic had been ratified (1879), socialist-inspired parties and trade unions emerged and played an increasingly significant role in the country’s social and political life. This rebirth of vitality expressed itself in a profusion of debates 1 Prior to the 1875 translation, Le Capital had been circulating in pamphlet form since 1872. In 1887, an abridged and simplified version of the work was published for left-wing militants (Deville 1887). DOI: 10.4324/9780429202407-14

Fin-de-siècle socialisms 317 and tensions originating, on the one hand, in the concern shown by each to find a theoretical basis for socialism, especially for its economic component, and, on the other, the desire to identify an effective political strategy for bringing about a socialist society. This took place against a backdrop of huge political, economic and social upheavals. Socialist discussions from the early years of the Third Republic inherited some of the Second Empire’s heated debates regarding the transformation of labour, the critique of wage labour, the emergence of syndicalism, the revival of associations in the form of cooperatives and the importance of exchange and circulation. They were also additionally enriched by two aspects that this chapter examines. Firstly, the circulation and discussion of Marx’s economic thought in France was critical from the outset (Bellet 2018). Secondly, far from being associated only with Marx’s economic texts, the plural thinking of French socialists was inspired by multiple sources and should be contextualised within those debates which contributed to the constitution of economics as an academic discipline in France. Once economics was introduced into law faculties (1877), orthodox liberals’ violent opposition to socialism began to fade. The historical approach, the advantages of social obser­ vation and careful study of social issues, the analysis of legal forms of ownership and the history of economic legislation became part of teaching the discipline (Le Van-Lemesle 2004). For these reasons alone, it is worth re-examining the canon of socialist economics from a plural perspective, one which does not reduce it merely to that thematic triptych of Marxist economics: the labour theory of value, the centralised organisation of the economy and the collective ownership of the means of production. The background to this intellectual vitality was the creation of a new indus­ trial world (Fressoz 2009, 2012) and the novel ways in which it was challenged (J. Vincent 2020). If, in keeping with the Saint-Simonian motto, French socialists wanted to move from the exploitation of man to the exploitation of things, it was hard to imagine transitioning from one to the other in a spontaneous, smooth and obvious movement. Although different varieties of French fin-de-siècle socialism attempted to offer solutions for improving industrial production, drawing on the influential legacy of the Saint-Simonian imaginary, the perspectives they envis­ aged cannot be reduced to a single, homogeneous conception of abundance such as was conveyed by the guardians of the dominant social order. The progressive abolition of slavery in Western Europe and North America over the course of the nineteenth century (England, 1833; France, 1848; United States, 1865) and the abolition of serfdom in the Russian Empire (1861) sparked a few debate about labour’s place in modern societies as it became clear that the end of slavery did not mean the end of either forced or alienated labour. Forced labour continued in the colonies as well as in larger cities for entire swathes of the working-age population – especially for agricultural workers and women (Stanziani 2020). New approaches to grappling with the concepts of political economy took shape during this era which were careful not to confine themselves to dogma, refusing in particular to limit the analysis of labour to the question of exploitation, often instead considering work in terms of its relation to the means of production

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and those natural resources necessary for production which were intrinsic to the milieu in which labour was conducted. Socialist authors formulated theories about production which sought to understand how the work environment constrained labour and maintained forms of domination suffered by labourers.2 Emancipat­ ing production was at the centre of all those discussions departing from the more limited Marxist focus on the theory of exploitation and the labour theory of value (Bourdeau 2018). Thematically this goal often overlapped with liberal preoccupa­ tions with “unbridled” industrialisation (Fressoz 2015, 378). French socialists dis­ tinguished themselves by considering labour as a process involving miscellaneous elements (machinery, natural resources, labour), the combination of which could be made fluid enough to allow for a new form of cooperation. The latter term even became the era’s watchword, even if it lent itself to a number of different defini­ tions (Ferraton 2007). The trajectories of three socialist economists in particular – Benoît Malon (1841–1893), Georges Sorel (1847–1922) and Adolphe Landry (1874–1956) – illustrate the economic eclecticism of their time, as they appropriated the concep­ tual apparatus of classical and neoclassical political economy not to reiterate a Marxist economic orthodoxy but to amend or even sometimes to contest it. These three economists reflect three ways of being a French socialist at the end of the nineteenth century. Malon represented the party activist, the tireless propagandist devoted to spreading knowledge about socialism in various publishing venues he directed (La Revue socialiste, the Bibliothèque Socialiste). He also represented the reformist current of socialist thought, intent on integrating socialist doctrines within the larger political and social context of the Third Republic. Sorel chose the unionist, revolutionary and anarchist path (“anarchist” in the sense given to the word by his favourite philosopher, Pierre-Joseph Proudhon). For these reasons, he criticised the dominant political reformism promoted by Jean Jaurès which aimed at creating a unified Socialist Party. Erudite and not averse to polemic, Sorel was on the margins of the more establishment socialism then conquering certain aca­ demic disciplines (sociology, philosophy and, to a lesser extent, law and econom­ ics) where a French-style “socialism of the chair” was taking shape. Landry was closer to academia and completes a tableau in which we deliberately leave in the background the Marxist militancy of Jules Guesde, less innovative on a theoretical level although very active on a practical political one. The first author under consideration, Malon, developed a socialist political economy which contested the commodification of what he called “social utilities”, defined as the instruments accumulated by the labour of society as a whole as well as those resources offered by nature, which he believed should not be subject to pri­ vate appropriation. The second, Sorel, considered economics to be the study of the general milieu of production and the identification of those conditions necessary for undominated creative labour. His conception of the environment requisite for 2 Domination is understood here in the classic republican sense of the word: an arbitrary interference in an individual’s sphere of action by another person (dominium) or by a public institution (imperium), whether by the state or by some other institutional administrative apparatus (Pettit 2004).

Fin-de-siècle socialisms 319 production referred to everything which immersed labour, all that labour needed to be effective and all that should be put in its service rather than the other way around. If Sorel linked the issue of milieu to that of domination, it was specifically because he believed that an environment most conducive to labour would be one which was free from arbitrary interference (whether from individuals or institu­ tions such as the state) disrupting the smooth functioning of production. Lastly, Landry showed that competition, contrary to what its liberal advocates claimed, opened the door to a frantic quest for maximising income and profits by the own­ ers of capital or land, causing a corresponding reduction in the total production of social wealth which could benefit the greatest number. In keeping with the spirit of Saint-Simonianism, all three men examined indus­ trial society’s resources to describe the conditions needed to “emancipate” produc­ tion. While workers’ emancipation, a major rallying cry in 1848, implied the desire to abolish any subjugation of workers to their employers, emancipated production, the new preoccupation of Third Republic socialism from the 1880s until the out­ break of World War I, expanded the goal to include all those concrete relations of production which developed between labour and its environment. Each of the three socialist theorists discussed here imagined fluid relations between workers and all the various components of production (machinery, natural resources and human participants), and all three writers sought to reveal the complex connections that workers simultaneously forged with nature and society. 2. Benoît Malon, political economy and social economy Born into a very poor peasant family, Benoît Malon’s education was frequently interrupted by his family’s need for him to work as a farmworker. He owed his formal education to the support of his brother Jean, a schoolteacher, and what he did receive enabled him to pursue his secondary studies in Lyon for a time. In 1883, the year Karl Marx died, Malon published a Manuel d’économie sociale, which represented his first incursion in the field of political economy. At the time, he was not yet the chief editor of the Revue socialiste (founded in 1885), but already he championed the pluralist socialism later advocated at the Revue. His was a socialism which refused to confine itself to a purely economic interpreta­ tion of social issues devoid of any account of the necessarily moral dimension to human emancipation (Gacon et al. 2011; K. Vincent 1992). Malon was a propo­ nent of what he would soon term “integral socialism” (Malon 1890). This con­ ception highlighted the moral dimensions shaping the social world (Malon 1890, Chapters 5 and 7), as well as the legislative (Malon 1890, Chapter 6) and political ones (Malon 1890, Chapter 10). Malon’s rural background encouraged him to consider political economy as inextricably linked to the birth of the bourgeois city, the spread of factories and industrial society. If it very much used the descriptive language of the new world of the nineteenth century (Malon 1883, 1), however, the term “political economy” often, but not systematically, designated an uncriti­ cal idiom supporting and promoting industrialism which, Malon believed, should be discarded.

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In his Manuel, Malon began by conducting a historical survey to show that the “laws” of economics were the fruit of successive historical contexts and the accompanying social forms and relations in which wealth was accumulated – thus consciously situating himself within an earlier socialist tradition (running from Saint-Simon3 to Marx via Leroux and Proudhon) whilst nevertheless adopting the methodological requirements then spreading in French universities where the his­ torical method, dominant in Germany, was gaining ground. He pursued this histori­ cal contextualisation of political economy in two chapters, one devoted to the four market “evangelists” (Smith, Say, Malthus and Ricardo) who made economics a “theology of industrialism” (Malon 1876, IV), and the other to the interventionists, also known as “charitistes”, a neologism derived from the French for “charity” (charité) (Malon likewise chose four figures to represent this group: Sismondi, Adolphe Blanqui, Joseph Droz and Eugène Buret). Unfortunately, despite trying to distance themselves from uncritically promoting the virtues of a free market and pointing out the stalemates of industry in a regime of laissez-faire, members of the latter group made do for their criticisms of classical liberal political economy with only a smattering of philanthropy and a handful of moral contrivances.4 The second section of the Manuel took the more classic form of a treatise on political economy. This section, titled “Critical Presentation of Economic Laws and Social Trends”, was divided into eleven chapters in which Malon contrasted the principles of “social economy” with those of “political economy”, which in his view were unable to explain poverty in the context of industrial development other than by underscoring the moral flaws of its principal victims. Pluralist socialist economy

Malon cited several major socialists – without specifically aligning himself with any – to support his analysis of the main themes of “social economy”. In his opin­ ion, those themes consisted of the genesis of capital, capitalist rents and profits, wages, machinery, public taxes and debts, population, competition and value. Malon drew a line between the science and the non-science of political economy. He used the phrase “social economy” instead of “political economy” because, in his view, the latter term was often and incorrectly used to describe supposedly natural phenomena. He was thus equally dismissive of both “utopian” socialists and scientistic economists: Political economy is a social science. . . . And social science inevitably implies progressive, mobile and modifying science, a science that in many ways touches upon art. In short, social economy is a science of observation and experimentation, and experimentation inevitably implies intervention. (Malon 1883, 164–5) 3 Saint-Simon’s alleged “socialism” was largely a reconstruction by some of his followers in the years following his death (Régnier 2015). 4 Here, Malon quotes and summarises the developments made in La Question sociale. Histoire critique de l’économie politique (Malon 1876).

Fin-de-siècle socialisms 321 Because political economy could only be understood as a “social science”, it must be considered as “social economy”. It was thus closely related to “scientific” social­ ism whose aim was to comprehend society’s material and economic resources in order to understand the forms it should take and, above all, to understand what needs to be changed for these forms to be more open to the ideals of equality, freedom and cooperation. In short, if the analysis of society and its “natural laws” offered by liberal political economists were correct, there would be little opportu­ nity to change society. Scientific socialism – at least since Marx, but in reality since Saint-Simon and his followers – was about trying to understand how the evolu­ tion of societies could lead to improvements which could and indeed needed to be accompanied by human action and will. The abstract division of society into economic functions – to produce, consume and save – made by classical political economy thus naturalised social roles, and should be resituated in the socio-historical context of capitalism where two social groups confronted each other, “those who make others work and those who work; the capitalists and the employees” (Malon 1883, 178). The law of wages (that wages tend to be set by simply reproducing the cost of the labour force) is the main cause of capital growth in a capitalist regime and maintains the working class in poverty. On this point, Malon echoed Marx and Ferdinand Lassalle, albeit without taking into account the antagonism between the two theorists regarding Lassalle’s famous conception of an “iron law of wages” – Malon personally found Lassalle’s thesis to be “excessive” and preferred to speak of a “strong tendency” in place of an “iron law” (Malon 1883, 233). Malon had no difficulty incorporating and combining in his eclectic source references Proudhon, Marx, Émile de Laveleye, César De Paepe, Constantin Pecqueur, Lassalle, Nikolay Chernyshevsky and Karl Rodbertus, and he had no difficulty either recognising that any one theory could prevail over another in the analysis of contemporary society. For example, with regards to the role played by machinery in economics, Malon noted the conver­ gence not only of Marx, Lassalle and Proudhon, but also of John Stuart Mill with them, whilst insisting on Marx’s greater foresight (Malon 1883, 270). At the same time, he also pointed out Proudhon’s misplaced faith in the sole mechanism of free credit to rid labour of the burden of unearned capitalist levies. In short, his was a synthetic approach. Nevertheless, Malon’s pluralism made reference only to a narrow circle of socialists and economists deemed in touch with social reality – for example, the Manuel did not evoke the names of either Cabet or Fourier, whose doctrines he considered out of date on an economic level. Although “social economy” was not a natural science, it was not a leap into the unknown either, as it was for the “uto­ pian” socialists. By Malon’s own admission, “social economy” was clearly part of a Belgian tradition in which the work of César De Paepe (1841–1890), a physician, economist and socialist advocating theoretical pluralism, played a foundational role. Like De Paepe, Malon believed that a non-pathological economic state pre­ supposed the end of individual forms of monopoly over the means of production. As production became increasingly complex and as machines were used more and more frequently, workers were excluded from access to resources and subjected to those who acted as the “customs officers of production”. The latter’s revenues

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were seen as taxes on tools which should be more openly and easily accessible for workers. The fundamental elements of production (natural resources and tools needed for production) should therefore be protected from any individual or pri­ vate expropriation preventing natural forces and accumulated labour from playing their role as assets offered to all in the exercise of labour itself. Their accessibility was necessary were individuals ever to be able to make their activity a vehicle for their personal fulfilment. In his Socialisme intégral, Malon recognised, like JeanBaptiste Godin, the founder of the Familistère of Guise, that any wealth produced is dependent on “social utilities”, that is to say, on “the intervention of nature and the State” as a condition of production itself (Malon 1890, 423–4). This idea was clearly expressed in the following passage from Godin’s La République du travail et la réforme parlementaire: Those who find excessive this 50 percent estimation of the value of contribu­ tions made by social utilities in creating fortunes need only realise the low degree of affluence that the strongest, most gifted, most intelligent man can attain when he has no other means of production and exchange than his indi­ vidual action; he will assuredly never make his fortune. (Godin 1889, 219–20) Everything which could be done to socialise the instruments of labour – land, machinery and credit – should therefore be incorporated within a larger program aiming to transform society and guide it towards socialism. Malon made a nonexhaustive list of the driving forces of this transformation: A single and progressive income tax . . . a tax on inheritance rights . . . the immediate socialisation of the Bank of France, the mines, canals and rail­ ways, credit for workers’ associations, the progressive socialisation of all the companies of financial feudalism, and the gradual abolition of public debt. (Malon 1883, 297) Exchange, the distribution of income and “social utilities”

For Malon, wealth was the product of collective labour and cooperation, the essence of which had too often been obscured by the history and violence of social relations. This essence was made invisible by the existence of profits, rent and interest. Malon’s analysis of value was the key to understanding his economic theory. For Malon, value was as much an explanatory principle for economics as a whole as a moral horizon for healthier production. In Chapter 15 of his Manuel, following Ricardo and Marx, he defined the “value” of a commodity as the quan­ tity of labour needed to produce it, and he called “price” its market price (Malon 1883, 326, n.1), the exchange ratio determined by supply and demand. Although Malon ignored the theoretical distinction between labour value and the “price of production” – the two classic and alternative theories of natural prices – which had

Fin-de-siècle socialisms 323 posed so many problems for Ricardo,5 he nonetheless observed that if the market price differed from genuine value, it was not only because of fluctuations in supply and demand but also because of the existence of profits, interest and rent. Marx’s theory of surplus value was not used by Malon to account for profit and interests (as for rent, it was seen from a Ricardian rather than the Marxian perspec­ tive found in the manuscripts reconstituted by Engels as Volume 3 of Das Kapital – a work which, in any case, had not yet been published). Malon’s Manuel merely underlined the fact that the worker does not receive the entire product of his labour and that income other than wages is unpaid labour. This was because, unlike in the writings of Ricardo and Marx, Malon’s theory of distribution did not depend on a theory of value, despite the Marxian vocabulary he used. His approach was simple: the worker does not have access to the entirety of what he produces because other categories of people – parasites who do not participate in production – mediate between him and the result of his productive activity. This was especially true for the capitalist who possesses the tools of production and the landowner who monopolises the land. Profit, interest and rent unjustly collect a share of the product, and the share of labour was regularly reduced to a minimum because of additional factors that maintained or increased competition between workers and put downward pressure on wages. These factors were population growth, increased levels of mechanisation putting producers out of business, and the threat of mass immigration from Asia, a “yellow peril” threatening civilisation itself (Malon 1883, 240, n. 1). Only once the socialisation of the land and the means of production brought about the elimination of profits, interest and rents, would the entire product belong to the workers. In this sense, the labour theory of value represented an ethical goal for Malon: “the harmony of price with the quantum of labour is an ideal that only socialism will achieve, because this alone will socialise natural forces and social acquisi­ tions” (Malon 1883, 342). Nevertheless, a problem remained: owing to inevita­ ble fluctuations in supply and demand, just because the entire product of labour belonged to workers did not mean that exchange would take place according to the quantity of labour incorporated into the product. Nevertheless, the author, citing Schäffle, was rather confident that organising a socialist society would limit these fluctuations: [the] influence of supply and demand will diminish as labour becomes socially organised, and in the same proportion the price of value [sic] will approach the quantum of labour incorporated in it [the production], although it will never reach it. (Malon 1883, 341, n. 1) This led Malon to give a description and definition of value distinguishing between two forms of wealth, one which could not be appropriated, and the other which could. He made a distinction between the “utility” contained within goods which 5 A distinction that Marx discussed in Volume 3 of Das Kapital, published posthumously in 1894, and therefore unknown to Malon.

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cannot be appropriated – “the contribution of nature and society in production, the share of the thing that can neither be appropriated nor exchanged” (Malon 1883, 344) – and “value” proper, “the contribution of individuals, free and responsible producers, the only share of the thing which can be appropriated and exchanged” (Malon 1883, 344). Thus, what Malon called “utility” (raw materials, natural resources and those social forces enveloping labour) was distinct from labour itself: “All economic subversion stems from the fact that utility is appropriated and thrown into circulation, much to the detriment of the workers, the only pro­ ducers of value” (Malon 1883, 344). This critique of capital was mostly drawn from Lassalle’s 1864 Herr Bastiat-Schulze von Delitzsch, der ökonomische Julian, oder Kapital und Arbeit – which Malon had translated into French in 1880 shortly before writing his Manuel. However, his insistence on the overall labour environ­ ment which needed to be socialised and the productive activity to be accomplished by producers was more generally inspired by the work of César De Paepe. The connection between César De Paepe and Benoît Malon should be understood within a wider intellectual context which left its mark on various fin-de-siècle social­ ist economic theories in France and those reformist economic policies then in circu­ lation which Guesde pejoratively described as “possibilist”. De Paepe promoted a “social medicine” challenging hygienism, the powerful current which tried to impose its particular understanding of the health of modern societies. By placing the burden of social pathologies on individual responsibility, hygienism, along with classical political economy and geology, participated in the creation of a mundus œconomicus during the early nineteenth century (Fressoz 2015). This new world was the result of industrialism based on the triple endorsement by liberal political economists of the new place occupied by machinery in production, a new earth science examin­ ing in both theory and practice the idea of a subsoil synonymous with the energy reservoir of the new industrial world, and the hygienism which had dethroned Hip­ pocratic medicine and which blamed health defects on individual behaviour. De Paepe’s conception of “social economy” (De Paepe 1875–76, 1911; Jousse 2019) was analogous to his conception of “social medicine” and was designed to identify the pathologies of economic concentration that an alternative socialisation of things and people could remedy.6 Malon supported this conception of social economy and wanted to re-involve nature and machinery in human cooperation in such a way that their integration would be in keeping with a theory of wealth distinguishing between utility and value. Socialisation was thus conflated with the description of that economic and social milieu most favourable to workers’ self-expression, where, as in De Paepe’s work, a theory of “public services” had took centre stage. This com­ mon program was translated in a very particular fashion by Georges Sorel, another socialist intent on describing the proper context for production. Sorel made it a more systematic topic in his economic writings, but he addressed similar problems, albeit in ways that radically differed from Malon’s conclusions. 6 It is important to note that De Paepe’s economic ideas had their initial inspiration in debates about collectivism in Belgium and how to interpret Proudhon’s work in the early years of the International Workingmen’s Association. See Castleton (2017) and Whitham (2019).

Fin-de-siècle socialisms 325 3. Georges Sorel and the proper context for production Georges Sorel’s trajectory was very different from Malon’s. As an engineer trained at the prestigious École Polytechnique and the Ponts-et-Chaussées, he was head of the water administration of the department of Pyrénées-Orientales before he became a socialist publicist. His concrete administrative experience as a hydraulic engineer brought him into contact with a wide array of public actors and insti­ tutions (the civil court, the prefectural administration, ministerial administration, local elected officials, agricultural associations, landowners and farmers), and he managed a natural resource which, because of its scarcity, could not be treated as a free gift from nature and whose use (when the water was located on private land) was subject to private law rather than to public management. Alice Ingold (2014) has shown the significance of his career as an engineer in the genesis of Sorel’s thinking and how both it was responsible for inspiring his conviction that it was necessary to safeguard economic activity from requirements not based on local skills, and it shaped his belief that every constraint on production imposed from outside the workers’ intimate knowledge of their trade tended to be counterproduc­ tive. Sorel did not see the work environment as merely the backdrop to labour, as Malon did, but instead as a composite set of elements affecting labour itself, one producing cognitive knots which could only be untangled by the workers actually involved in production and not by those experts arbitrarily assigned to oversee it. In this reinterpretation, the scarcity of natural resources became a powerful factor determining labour organisation and the functionality of the economic environ­ ment of production. In the 1890s, Sorel stopped working as a civil engineer, and he embarked on a series of studies exploring the social and historical state of modern societies. He began the decade by publishing a study of the Bible (1889), followed by philo­ sophical essays on Proudhon, Socrates, Aristotle and Vico. This period was marked above all by his in-depth study of Marx’s thought, informed by subsequent discus­ sions with Italian socialist exegetes and also, from around 1898 onwards, German exegetes in the context of the so-called Revisionist Controversy, which had divided Karl Kautsky and Eduard Bernstein. It was during this time that he moved closer to socialist schools of thought and, after collaborating with Jaurès’s reformist current, notably in the fight in favour of Alfred Dreyfus, he produced an original theory promoting – in line with Proudhon (1865) – worker autonomy and distrust of state intervention to meet the needs of labour (Rolland 1989). Sorel the economist can therefore be described by the two main orientations of his economic thought: on the one hand, a theoretical orientation in which his Marxist heterodoxy was forged, and on the other, a practical orientation in which his revolutionary, anarchist-inspired syndicalism was built (Sorel 1898, 612). In his strictly economic writings, Sorel abandoned theoretical discussions and the debate over the scientific status of Marxism,7 drawing principally from Marx 7 Sorel (1897a) maintained that Marx, in his fragmented and unfinished work, described different economic spheres whose connections he tried in vain to understand: the sphere of value, examined

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a suggestive way for describing economic reality. He considered that although Marx empirically described the dynamics of the capitalist economy, he struggled to account for it in theoretical terms. Marx’s theory, moreover, ignored the superprof­ its which “play a huge role in contemporary society” (Sorel 1900, 10). In Sorel’s eyes, it was the environment in which labour was accomplished rather than labour itself which deserved special attention since the milieu of production was precisely what could explain the emergence of superprofits. The quest for more efficient economic organisation – already at the heart of Sorel’s practical rural economics – became the common thread of his conception of a modern economy in which, in contrast to Malon’s, the rural fabric and its organisation anchored in age-old cus­ toms seemed to be the catalyst for a modern socialist economy. This modern econ­ omy arose from the course of intellectual development made by Sorel in the late 1880s. Sorel’s theory can be summarised as follows: rather than providing a radical critique of private property, Sorel – like the late Proudhon (1866) – wanted to iden­ tify the conditions for society fully to develop economically. A middle way had to be found between the systematic transformation of all private property into commu­ nist property, and its illusory preservation at all costs when synonymous with estab­ lished rights and the windfall (aubaine in Proudhon’s vocabulary) they allowed to private individuals, that is say with the sort of “speculative property”, which had little to do with the maximal deployment of productive forces and which allowed for such profits. To do this, a distinction had to be made between the “domain of property” and that of the “economic milieu” in which production took place (Sorel [1903] 1922, 11–2) in order then to discover how the proper “socialisation of the milieu can give rise to a large number of reforms which do not harm property” (Sorel [1903] 1922, 11–12). Sorel understood this milieu to be “an arrangement of possibilities offered to individual activities” (Sorel [1903] 1922, 143).8 Labour as creation

Sorel’s 1903 Introduction à l’économie moderne can be considered an overview of different labour environments whose ideal model could be found in agricultural work. The idea that workers should be the masters and possessors of their labour was no longer dependent on a labour theory of value. “[I]nspired by Proudhonian principles” (Sorel [1903] 1922, ii), Sorel’s Introduction was made up of three parts. through the lens of the hypothesis of a “homogeneous capital”; the sphere of price addressing the equalisation of the rates of profit in a context of heterogeneous organic compositions of capital; and the sphere of the “realised” economy integrating the question of distribution and rent. He saw the pas­ sage from one sphere to another as metaphysics: what Marx offered was less a “true theory of value” than a “theory of economic equilibrium reduced to the case of a prodigiously simplified society” (Sorel 1900, 266). For background on Marx’s reception in the 1890s, see Giordani (2015). For Sorel’s discussion of economic analysis, especially Pareto’s political economy, see Sorel (1896, 1897b). 8 For an overview of the question of “milieu” – a term often used during the period – in organising society in the nineteenth century (one which ignores, however, the alternative redefinitions of milieu and environment put forward by socialist schools of thought, including Sorel’s, despite a chapter devoted to Auguste Comte), see Taylan (2018, especially Chapter 7, 137–74).

Fin-de-siècle socialisms 327 The first was an in-depth examination of the rural economy and jurisprudence in which law was understood not only to be the guardian of ancient practices and local knowledge validated in positive legal form but above all an attempt to synthesize these practices and knowledge in light of their economic efficiency. The second part, titled “Socialisation dans le milieu économique”, discussed the conditions in which labour was undertaken: namely, the circumscribed environment requisite for productive activity. The third part, “Le système de l’échange”, examined the milieu of production in the broadest sense, examining the framework (that of the material or immaterial circulation of goods) in which productive units operated. Sorel put forth an ethical model rooted in the practice of agricultural labour. The latter was treated by Sorel as the criterion for all economic activity since, in his idealised con­ ception, he perceived agricultural labour to be the ethical form of labour insofar as it entailed the mastery of certain skills, the relative independence and autonomy of workers in the act of production, and their relative control over the milieu in which their labour was exerted. The foreword to the third edition (1919) of his Introduction shed greater light on the intentions which originally inspired Sorel in 1903. In his foreword, Sorel asserted that the law was not just a set of codified rules which made it possible to organise social life but also the legal sentiment specific to a given activity and to a group of men who act as its spokespersons. The right to work – a concept debated at length during the Revolution of 1848 in France – was, for the proletarian con­ sciousness, the equivalent of what property rights had been and still were for bour­ geois consciousness. Property rights implied a certain kind of relationship with productive activity and a particular form of commercial organisation (the market) in relation to bourgeois public institutions (the state). It was likely that a different kind of division of labour would result from the institutionalisation of the right to work as the new pivot for the social order (one in which labour exchanges and trade unions would replace the market and the state). Sorel’s concern with labour as the catalyst for individual and social life, described in the book’s appendix, “Théorie de la douleur”, addressed the material processes at work in production – that which Sorel called “the concrete economy” (1922 [1903], 31). He championed “a modern science, based both on the direct observation of facts and on the knowledge of abstract theories enabling one to understand the use to which concepts can be put” (1922 [1903], 31). The reference to Le Play and his model of thorough investiga­ tion buttressed Sorel’s explicit aim of addressing the practical dimension of eco­ nomics. Despite its title, Les Ouvriers européens (Le Play 1855), the Le Playsian survey focused mainly on agriculture (Sorel [1903] 1922, 55, 67), and for this reason, it offered an appropriate analytical framework for Sorel. Sorel shared Le Play’s vision of productive society as a living organism whose creative dimension was especially worth studying. Unlike the approach then domi­ nant in economics, he refuted the idea that large-scale industry could serve as a model: the latter implied mechanised, homogenised production, a realised abstrac­ tion which could give the illusion of a natural functioning of the economy, but only if by “nature” one meant something “mechanical”. This kind of functionality might become the norm in the future, but it was not yet a reality in actual economic practice.

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Economics understood as a “social physics” (Sorel [1903] 1922, 33) was a path to be avoided. On the other hand, farming (especially intensive farming)9 included certain key components of a “biological industry” far better able to take into account the specific requirements of productive activity (Sorel [1903] 1922, 36): To study the concrete economy, it is necessary . . . to turn to what is most complex, to agriculture which has long been neglected: we should ask what is full of variety for an explanation of reality. . . . Research should begin with agriculture, even if it means completing the picture by looking for any spe­ cific differences in factories. (Sorel [1903] 1922, 37) These “specific differences” presume that the model for measuring “creative labour” would be based on the example of agricultural labour. Concrete economics therefore paid special attention to three orders of reality (Sorel [1903] 1922, 68): “equipment”, or concrete material including the resources and tools used in production; “uses” (usages), or the moral code implied within the customary practices of productive labour; and “legal dispositions”, or the posi­ tive legislative forms framing the previous two orders (through inheritance laws, professional laws or regulations, etc.). The description of mechanised labour in factories, particularly that found and popularised in Marx’s account, separated this customary productive activity from any moral code. What Sorel wanted to promote were precisely those internal feelings and ideals attached to productive activity itself: namely a work ethic based on the activity of labour, one which was more noticeable in agriculture than in modern industry. This ethic, ubiquitous in the rural class of peasant freeholders, revealed itself in “the care he [the worker] invests in his work, the love he has for a job well done, and the desire he feels in becoming an independent force” ([1903] 1922, 69). For Sorel, there was a world of difference between the creative, independent peasant and the “unskilled factory labourer per­ forming predetermined actions” ([1903] 1922, 70): it was the former who should serve as the general model for any “producer interested in perfect manufacturing success” ([1903] 1922, 70). Popular legal sentiment was none other than this positive perception that the worker could have of himself. It was very different from the identities assigned by social (and sometimes socialist) observers who believed they understood the nature of the work better than workers themselves. It was up to “serious social­ ism” (Sorel [1903] 1922, 131) not to lose sight of its mission to rehabilitate labour and the work ethic. The economic basis for the “popular legal consciousness” which Sorel underscored was “a set of conditions that put the worker in a position 9 For Sorel, intensive farming did not mean agricultural production “modelled on large factories” and based on the massive reliance on chemicals, which he explicitly rejected in the art of cultivating the soil. By intensive farming, he meant, on the contrary, a “biological industry” embracing the particular qualities of the productive milieu, presenting “extreme variety” that cannot therefore be standardised in that it escapes “any general law” (Sorel [1903] 1922, 36).

Fin-de-siècle socialisms 329 to consider himself as the entrepreneur” ([1903] 1922, 95). The essence of this awareness was not private property but the right to work, as Sorel pointed out in a footnote ([1903] 1922, 95, note 1) he added in the 1919 foreword to his Introduc­ tion. It did not necessarily imply purely and simply abandoning private property, although Sorel did redefine private property within a framework prioritising the right to work rather than the acquisitive preoccupations with exclusive ownership found in bourgeois law. An economic milieu free from domination

Sorel was not hostile to private property so long as it was directly used by its owner and not rented out. To this extent, he embraced the distinction suggested by Proud­ hon between possession and ownership. In accordance with the Proudhonian defi­ nition of possession, Sorel redefined legitimate ownership as “concrete property”, the object of which was “the concentration of efforts towards an inner goal” (Sorel [1903] 1922, 163). He believed it was important to differentiate clearly between production and the milieu in which it was conducted ([1903] 1922, 163): The milieu seems to be best constituted when there is such a combination of diverse powers that no domination can emerge; equilibrium is then assured, and neutralisation achieved. The State must not intervene to pursue an ideal, nor to create profits for itself; it intervenes to remove [particular] wills that are hindering movement, and not to substitute its will for others. Neutralis­ ing the economic milieu can be likened to eliminating friction in a machine. ([1903] 1922, 149) Sorel advocated neutralising the economic environment in the name of freeing labour from any form of domination. He understood domination in the very classic sense of the arbitrary intervention of another in one’s labour. This was why Sorel combined the term with the expression “private masters” when writing of “the dom­ ination by private masters” (Sorel [1903] 1922, 163). The absence of domination required a rigorous regulative administration aware of its role in safeguarding the public interest. One form of regulation was socialising the environment most req­ uisite for facilitating unhampered production and preserving the forms of property most associated with that kind of production. Sorel thus specified that it was neces­ sary to make distinctions, clearer than those previously made by various socialist schools of thought, between what was liable or not liable to be socialised: “it is cru­ cial to distinguish very clearly between that which involves transport, which is so easily socialised, from that which involves production, whose socialisation raises problems of a completely different kind” ([1903] 1922, 255, n. 1). It was on this specific level that the state could legitimately intervene. The state’s role and func­ tion Sorel intended to minimise in order to prevent private masters – actors of the dominium – being replaced by a single overarching master – an actor of the impe­ rium. Sorel’s idea stressed the need for flexible regulation of economic life through law. Guided by his ethics of the virtuous civil servant, such regulation should be

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preserved and granted relative independence from the fluctuations of public opin­ ion and mercurial electoral outcomes in order to prevent administrative functions from being transformed into elective functions. Instead, one should rely on citizens and their legal capacity to control administrative action: “popular actions” in court and “citizen monitoring” ([1903] 1922, 159) were thus the tools of a decentralised political life seeking to preserve a functional economic environment for production. This essentially regulative monitoring role would be the same as the one entrusted to “administrators” for private economic activity ([1903] 1922, 160). With regards to industry, Sorel echoed this understanding of what constituted a healthy milieu for production based on agricultural activity and applied it to the network of Labour Exchanges. These were then promoted by Fernand Pelloutier (1867–1901), for whose posthumously published study, Histoire des bourses du tra­ vail. Origine – Institutions – Avenir (1902), Sorel wrote a preface. Pelloutier’s path among the various socialist schools of thought was fairly similar to Sorel’s. Having been a militant in Jules Guesde’s Parti Ouvrier for a time, Pelloutier became involved in organising workers’ autonomy, particularly in Labour Exchanges (Bourses du travail), whose activities he coordinated for several years as their general secretary (1895–1901). In the organisation of Labour Exchanges, Pelloutier believed he had found the best way to combat forms of domination existing in the economic world and thereby to republicanise labour by making the absence of domination part of social relations themselves. In this, he was aligned with the ideals conveyed by the Chevalerie Française du Travail (less popular and influential in France than the Knights of Labour in the United States or its affiliate group in Canada) of which Pelloutier was an active member (Dommanget 1967; Gourevitch 2015). Sorel was convinced that Labour Exchanges were conducive to fostering the decentralised administration of productive activities. They constituted places focused on reappro­ priating the emancipatory possibilities of labour since they offered relief assistance, employment offices, workers’ libraries and evening classes. In his preface, Sorel explained that “the Exchanges can easily become administrations of the developing Commune Ouvrière” (1902, 32). Sorel situated this limited milieu in the broader one of the general circulation of goods and wealth including both transport and credit. Here, again, he underscored criterion of neutrality, synonymous with the absence of domination. The same end goal applied to the state’s takeover of the railway companies, insofar as they “are not always sufficiently stimulated to promote the progress of traffic” (Sorel [1903] 1922, 168–9). Favourable tariffs transporting people rather than goods belonged to a similar register of obstacles to productive development ([1903] 1922, 170). An analogous juxtaposition between parasitic “masters of credit” and useful pro­ ducers could be observed in Sorel’s critique of usurious capitalism – whose ten­ dency to persist, even in a capitalist regime, was significant ([1903] 1922, 171). For Sorel, both credit and money issuance were instruments of production which needed to be socialised and placed under public control short of socialising produc­ tion as a whole. Thus transformed, they would cleanse the productive environment by allowing workers better access to those means of production most conducive to exercising their free activity as labourers. The “means of transport, credit and

Fin-de-siècle socialisms 331 sale” were included in the “means of exchange” and were part of Sorel’s attempt to outline how to develop a healthy economic environment most conducive for production ([1903] 1922, 223; 225 contd.). This would be one in which the state could legitimately intervene in order to encourage or facilitate production only, and herein Sorel echoed many of the ideas found in Proudhon’s mature work. The society described in Sorel’s vision of a “concrete” economy was a society centred on localised spaces of production made up of real connections between individuals and guided by their cooperation: “the idea of a bronze chain binding everything in an absolute manner is replaced by the idea of islands, of independent cells, each having its own life floating in a milieu” (Sorel, [1903] 1922, 189). In favour of the meticulous study of experiments, going so far as to reject “anything that is not the product of reflection on institutions, customs, and empirical rules that have acquired well-defined forms in practice” ([1903] 1922, 390), Sorel did not always suggest a clear boundary distinguishing between what related to the milieu of production and what related to production – a boundary which neverthe­ less seemed intrinsic to his concrete approach and in the spirit of the very definition of the sort of socialism he always championed: “Socialism is not a doctrine, a sect or a political system; it is the emancipation of the working classes which organise themselves, educate themselves and create new institutions” (Sorel 1898, 612). However, Sorel presented a theory faithful to this pragmatic definition, one com­ mitted to demonstrating that the milieu in which labour was exerted must be social­ ised so that fully emancipated spaces of production could emerge. Although he criticised the labour theory of value, he did not lose sight of the fact that socialism should defend the value of labour. As shall now be shown, despite very different theoretical resources combining abstract economics and mathematical formalisa­ tions, Adolphe Landry’s approach was somewhat similar. 4. Productivity versus profitability: Adolphe Landry, marginalism and socialism Born in 1874, Adolphe Landry studied philosophy in the 1890s at the École Normale Supérieure (ENS) in Paris. During his studies there, he became attracted to socialist ideals, probably under the influence of Lucien Herr, the École’s char­ ismatic librarian and a disseminator of socialist ideas. Landry’s book, L’utilité sociale de la propriété individuelle (Landry 1901a), based on his doctoral thesis, was dedicated to Charles Andler (1866–1933), a professor at the ENS (and later at the Sorbonne and the Collège de France) and a philosopher, Germanist and a socialist militant close to Herr and Jaurès. The year L’Utilité came out, Landry published an article titled “Quelques réflexions sur l’idée de justice distributive” (1901b) in the intellectually influential Revue de Métaphysique et de Morale. His work aimed to enrich socialist thinking by incorporating the latest advances in economic science.10 10 Recent studies (Maupertuis and Romani 2000) have drawn attention to the use of marginalism to criticise capitalism in Landry’s work, specifically his insistence on the conflict between profit

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The influence of Otto Effertz: productivity, profitability and natural resources

Landry encountered how to address these issues when he attended Charles Andler’s lectures on the “Décomposition du marxisme” at the Collège Libre des Sciences Sociales in 1896–97. Some of these lectures (Landry 1906, 602) were on the Ger­ man philosopher and economist Otto Effertz (1856–1921), whose early socialist theories had been presented in numerous articles since the publication of Arbeit und Boden (Effertz 1889), revised and abridged in a French translation (Effertz 1893–94). Effertz spent many years of his life in France along with a large number of exiled socialists who turned Paris into an internationalised, militant and erudite hub of radical left-wing thought (Rappoport 1991). Effertz enjoyed the support of economists such as Charles Gide and Landry himself when, penniless, he returned to Paris before World War I after spending some years in Mexico. From his earliest studies, Effertz made the opposition – or what he called the “economic antago­ nisms” (Effertz 1906) – between productivity and profitability the key to under­ standing economic phenomena. Landry’s initial economic research focused on the question of the production of wealth and the ways to increase the material well-being of all: “the problem of maximum productivity, in other words the problem of the rational organisation of production, is . . . in a sense the unique problem of political economy considered as a normative science” (1901a, 252). However, “losses . . . necessarily result, for society, from the present system of ownership” (1901a, vii). In short, Landry’s aim was to show that private property and its expansion in modern society was “con­ trary to the public interest” (1901a, vii) since “the producer is not always interested in using his property or regulating his production according to the social interest” (1901a, viii). There was, as Effertz had observed, a conflict between “profitabil­ ity”, “the principle of private economy” and “productivity” (1901a, viii), a prin­ ciple of social economy. Profitability was a principle of private economy in the sense that it depended on the strict maximisation of the entrepreneur’s income and not on the maximisation of production. Nevertheless, although production was no more than an adjustment variable in the entrepreneur’s calculation and not a social goal, genuine productivity should be understood in terms of the social interest in maximising the creation of goods and wealth for the benefit of all. Landry’s ambition was to “find the distribution formula which would bring about the highest level of social welfare”, in other words, which would promote productivity over profitability (Landry 1901a, viii). Other economists paved the way for this investigation, including Cournot, who had adopted the notion of “inventory value” to describe the profitability mechanism – a value that equals, for each possible price of a good, the product of that price and the corresponding

and interest found more in his work, L’intérêt du capital (Landry 1904) than in his thesis (Landry 1901a). Focusing instead on Landry’s interpretation of Effertz in his L’utilité sociale de la propriété individuelle, Arena and Hagemann have pointed out these exegetical shortcomings – particularly with regard to “pure” Walrasian economics – while noting Landry’s faithfulness and rigour com­ pared to Effertz’s writings on this point (Arena and Hagemann 2012).

Fin-de-siècle socialisms 333 quantity demanded. For Landry, this definition complied with the characteristics of value recently outlined by other contemporary economists like Léon Walras who had emphasised the “final degree of utility” (Landry 1901a, 3, note; Walras 1965, vol. III, 82–3 and 196–7).11 With these analytical tools, Landry stressed that pro­ ducers seek to obtain maximum income, synonymous for them with profitability, and set production levels accordingly: quantities are therefore not intended to be maximal, except when this maximum corresponds to maximum profitability. For this reason, it may be in the producer’s interest to overproduce or to underproduce, the latter more common than the former. Landry later developed this critique in his studies on profit and interest, where he examined the conflict between capitalists and entrepreneurs, which hampered the production of social wealth (Maupertuis and Romani 2000, 836–7). A large number of phenomena made the conflict between productivity and prof­ itability more complex, whatever the type of market: the variability of production costs depended on the quantities produced, for example, or “the mutual relations of producers” (to use Cournot’s expression borrowed by Landry) that assumed that the price of a good was determined in part by the strategies of those who supplied intermediate goods or services (e.g. transport) and who sought to maximise their own income in the process. Landry believed it was also necessary to take into account the social morphology produced by private ownership that, in a vicious circle, reinforced its shortcomings and perverse effects: within this framework, fortunes were inevitably unequal, so that “some can offer much, and others little for the same goods, hence the fact that profitable limits on production become possible for a very large quantity of goods” (Landry 1901a, 25). In short, “[t]he phenomenon, in order to emerge, simply supposes that the producer can, by raising his prices, increase his profit” (1901a, 35). Landry found in Effertz’s work if not entirely satisfactory responses to the social question, at least a way of formulating in economic terms the problems which char­ acterised it. He sought to expand and improve upon Effertz’s claims. According to Effertz, the way in which we organise production and exchange goods must take into account wealth’s dual characterisation by its “primary factors”, labour and land (or natural resources, as we would say today) (Landry 1906, 604). This meant measuring, in particular, what Effertz called the labour/land quotient (the ratio of nature to labour in each good). The greater the “natural” proportion, the closer the good was to a “food product”; conversely, when the proportional input of labour dominated in the constitution of a good’s value, the latter was considered a “prod­ uct of culture” as opposed to the agricultural “products of nature”. 11 This involved resolutely basing his theory on marginalist reasoning: “The value of a good is meas­ ured by the utility of the fragment of that good that will be sold last, multiplied by the number of times that fragment is contained in the whole” (Landry 1901a, 3). Although Walras, Cournot and Jules Dupuit were the only “recent” economists quoted in the study, a later article summarising notable publications (Landry 1907) revealed that Landry meticulously read diverse works in his discipline, notably those written by Irving Fisher and Alfred Marshall. For Landry’s relationship to “pure” Walrasian economics, see Arena and Hagemann (2012, 87–93).

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While Landry understood the economy to be concerned with production and humankind’s relationship to matter through transformative work, he also believed that its sphere encompassed questions of exchange and acquisition. A society can “obtain goods only through production”, but the same was not true of individuals: “individuals do not need to produce goods; they need only acquire them” (Landry 1906, 606). Antagonisms emerged from interpersonal relations, taking the form of power struggles (for the exploitation of some people by others) or struggles for destruction (for the elimination of some people by others). Symbiosis, competition and parasitism were the forms these antagonistic interactions took: 1° either each of the two adversaries struggles to dominate the other, and there is symbiosis; 2° or each of the two adversaries struggles to destroy the other, and there is competition; or 3° one of the adversaries wishes to dominate the other and the latter, for his part, seeks to destroy the former, and there is parasitism. (Landry 1906, 609) Therefore, an appropriate symbiosis between capitalists and workers needed to be found insofar as if the capitalist destroyed the last worker, this would endanger his existence, just as the elimination of capital would endanger the possibility of work for the worker. Characterising products (their labour/land quotient) involved measuring dis­ tinct forms of relations insofar as the relation to land was one of exclusion (what I consume from nature cannot be consumed by another) whereas the relation to labour was one of rivalry/co-operation (what I consume from labour involved a rival or co-operative relation with others). Thus, consuming a “product of culture” meant dominating the other; consuming a “product of nature” involved excluding or destroying the other. For Effertz, then, “any man, if he wishes to live morally, should ask himself when he consumes goods, what these goods cost to produce” (Landry 1906, 611). In other words, he needed to ask himself to what extent the goods to be consumed depended on nature or labour, given that to consume labour or natural resources implied some form of consumption in terms of what it pre­ vented others from doing or what it enabled them to do. Landry concluded from Effertz’s analysis that: Ideally, each of us should consume as labour only a quantity equal to that which we supply, abstaining, moreover, from any consumption that would involve the producer in the loss of his health or honour. And we should only consume as land the quotient of the total land divided by the population, or better still a proportionate share to the labour we supply. (1906, 611–12) Thus, determining the value content in exchange implied regulating resource extraction in accordance with the total given population and its capacity to exploit these resources (Vatin 2013). If individuals in such a population were in a position

Fin-de-siècle socialisms 335 to maximise their interest to the detriment of social utility and the common good, competition would exacerbate rather than mitigate antagonisms. Counterproductive competition

The question of the antagonism between individuals became even more pertinent when seen from the perspective of complementary antagonisms pitting individuals against society, or profitability against productivity. If the theoretical aim of a well­ organised society was to increase total social wealth to its maximum, then society must eliminate all forms of waste in labour or land caused by individual private owners’ quest for maximum net income. From this perspective, it was important for socialist economists not to consign Marx to oblivion (although sometimes it seemed as if Landry were tempted to do so) but to redefine value and put forward a more comprehensive theory of value than Marx had done. The labour theory of value had unfortunately left “the notion of utility in the shadows” (Landry 1901a, 255). Although Marx showed that “a thing that has cost labour is worth nothing if it is without utility” (Landry 1901a, 255n), he regrettably did not draw from this statement any insights into how to formulate a more compelling theory of value. Nonetheless, Marx’s remark suggested that “[t]he problem . . . exists, even for followers of Marxist theory” (Landry 1901a, 255n). Utility made it possible to homogenise different aspects of the question, and to define productivity not in a purely physical way but rather in terms of (to use a later vocabulary) opportunity costs since, as Landry put it, “production [always] costs what it prevents from being produced” (Landry 1901a, 258): In order to know the cost of a production, one should take into account the sum of the utilities which would be created by the labour necessary in this production if it were not spent in this way; ultimately, immediate consump­ tion would be reduced whenever a momentary deprivation would seem to result in a greater increase of social income in the future. There is no need to speak of the expenditures that tend only to displace wealth: they would become impossible. . . . We could get closer and closer to this limit of maxi­ mum production. (Landry 1901a, 293) However, this limit could only be reached by a public reorganisation of the econ­ omy, protecting against too excessive an application of the principles of private economy. Attentive economists found numerous examples of this in modern society – forest usage and rail transport being the most obvious examples. Landry quoted Cournot, who in his Revue sommaire des doctrines économiques (Cournot 1877, 36) had observed that: the management that is most likely to produce the greatest annual output in cubic metres of wood, and therefore the most useful to society, and the most advantageous from the point of view of exploiting the resources of the

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atmosphere and the soil in the interests of mankind, is a centuries-old man­ agement that no private individual could adapt to. (Landry 1901a, 246) But there was a long way to go from this observation to the practical resolution it called for. Landry cited, for example, the Théorie de l’aménagement des forêts by Louis Noirot-Bonnet (1842). Noirot-Bonnet had noted that “production in kind and production in money are so repulsive to each other that one of these elements can­ not rise without the other immediately obeying an absolutely opposite tendency”. Nonetheless, having established this, he did not call for a reform of forest owner­ ship and management (1901a, 245, note 1). In contrast to Noirot-Bonnet, Landry argued that private property fostered com­ petition, which in no way corresponded to the ideal of harmonious private interests. Drawing from the Saint-Simonianism which inspired much of early nineteenthcentury socialist thought, he explicitly contrasted the organising potential of social­ ism with regimes of “formal freedom” (1901a, 487). But, by defining socialism as “social productivity” (1901a, 487), Landry addressed the problems not only of his own era but also (albeit without seeing it with the same lucidity which led him to criticise wasted labour) of ours. His treatment of the profitability of the soil invites us to think about what a socialist economy of nature might look like, one which, in the late nineteenth century, was partly rendered invisible by the Saint-Simonian legacy of identifying socialism chiefly with an economy of production. 5. Conclusion The economic theories of fin-de-siècle French socialists like Malon, Sorel and Landry were perhaps doomed from the start not to become easily integrated within the social imaginaries of militants since they openly embraced the complexity of reality in order to envisage social transformation. They were not suitable for politi­ cal sloganeering, which can be useful in the heat of action but must be seen for what it is: brandishing the sorts of “social myths” useful for mobilising contesta­ tion which Sorel wrote about (Sorel 1902; [1908] 1990). To this extent, topics like workers’ rights to the integral product of their labour, the labour theory of value, class struggle and state control over the means of production were all motivational slogans, the harshest criticism of which could often be found in serious socialist writings at the time. Thus, the economic thought of fin-de-siècle socialists – such as Benoît Malon, who translated Die Quintessenz des Sozialismus (Schäffle [1874] 1880) – was much broader in its scope than that found in the idiom of militants. Ideas always reflect complex material and epistemic approaches, and it is dif­ ficult – if not pointless – to try and mechanically link a discipline or analytical method (e.g. marginalism) to a political ideology. This is as true for socialism (which one spontaneously tends to link to sociology) as it is for economics (which seems naturally linked to liberalism) (Karsenti and Lemieux 2017). Thus, for the socialist approaches described above, the concern was not with understanding how a single law operated in reality, but rather with how to grapple with constantly

Fin-de-siècle socialisms 337 changing economic realities producing the very laws one first needed to under­ stand were these realities ever to be sufficiently explained such that they might be changed. From the former farmworker like Malon to the philosophy student turned economist and, later in the 1930s, Labour Minister like Landry via the idiosyn­ cratic and iconoclastic hydraulic engineer who was Sorel, this chapter has limited itself to examining the economic thought of three French socialist figures, even if, admittedly, the period’s intellectual variety cannot be reduced to these necessar­ ily limited examples. While Malon, Sorel and Landry certainly had very different views of what political economy was and should be, they all shared an attachment to some variant of socialism, which in France had both a Saint-Simonian, industri­ alist background and also a liberal branch (Tribe 2015). Unlike the liberal branch, however, Malon, Sorel and Landry sought, each in their own way, to define an emancipated production for which the focus on labour would once again become the driving force for improved social organisation. They all wanted to replace profitability with productivity and profiteers with workers. The emancipated pro­ duction they wanted was as far from unbridled industrialism as, in their eyes, pro­ ductivity was from profitability. Although they shared a Saint-Simonian vision of exploiting the planet, they recognised its limitations, without, however, offering all the answers (especially ecological answers) that contemporaries of our own day and age might wish for. Yet their theories focused on the general environment in which the creative act of production takes place, and in doing so, they outlined an economic world very different from the one designed by their liberal rivals. For this reason, their theories deserve to be rescued from the oblivion to which they have been relegated by existing histories of both economic and socialist thought. References Arena, Richard, and Harald Hagemann. 2012. “Adolphe Landry and Otto Effertz: Lessons from a Debate”. History of Economic Thought and Policy, 2, 77–94. Bellet, Michel. 2018. “The reception of Marx in France: La Revue Socialiste (1885–1914)”. The European Journal of the History of Economic Thought, 25 (5), 1154–99. Bourdeau, Vincent. 2018. “Les mutations de l’expression ‘exploitation de l’homme par l’homme’ chez les saint-simoniens (1829–1851)”. Cahiers d’économie politique, 75 (2), 13–41. Castleton, Edward. 2017. “The origins of ‘collectivism’: Pierre-Joseph Proudhon’s con­ tested legacy and the debate about property in the international workingmen’s association and the league of peace and freedom”. Global Intellectual History, 2 (2), 169–95. Cournot, Antoine-Augustin. 1877. Revue sommaire des doctrines économiques. Paris: Hachette. De Paepe, César. 1875–76. L’économie sociale, contenant le cours d’économie sociale du Dr César De Paepe et des conférences de MM. Denis, De Greef, Janson, Robert, etc. Verviers: Piette. De Paepe, César. 1911. Objet de la science économique. Extrait inédit d’un cours d’économie sociale. Foreword by Cam-Huysmans. Gand: Société coopérative Volksdrukkerij. Deville, Gabriel. 1887. Le Capital de Karl Marx, résumé et accompagné d’un aperçu sur le socialisme scientifique. Paris: C. Marpon and E. Flammarion.

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Dommanget, Maurice. 1967. La Chevalerie du travail française, 1893–1911. Contribution à l’histoire du socialisme et du mouvement ouvrier. Lausanne: Editions Rencontre. Effertz, Otto. 1889. Arbeit und Boden. Kritik der theoretischen politischen Oeconomik. Ber­ lin: Puttkammer. Effertz, Otto. 1893–94. Travail et terre. Nouveau système d’économie politique, Vol. 1. Arn­ hem: chez l’Auteur, 1893; vol. 2, Paris: Marchal et Billard, 1894. Effertz, Otto. 1906. Les Antagonismes économiques. Intrigue, Catastrophe et Dénouement du Drame social. Paris: V. Giard et E. Brière. Ferraton, Cyrille. 2007. Associations et coopératives. Une autre histoire économique. Paris: Érès. Fressoz, Jean-Baptiste. 2009. “Circonvenir les circumfusa. La chimie, l’hygiénisme et la libéralisation des ‘choses environnantes’: France, 1750–1850”. Revue d’histoire moderne et contemporaine, 56–4, 39–76. Fressoz, Jean-Baptiste. 2012. L’Apocalypse joyeuse. Une histoire du risque technologique. Paris: Seuil. Fressoz, Jean-Baptiste. 2015. “Mundus oeconomicus: révolutionner l’industrie et refaire le monde après 1800”. In D. Pestre, K. Raj et H. Ottosibum (eds), Histoire des sciences et des savoirs, vol. 2. Paris: Seuil, pp. 369–89. Gacon, Gérard, Claude Latta, Jean Lorcin, and René-Michel Bourdier. 2011. Benoît Malon et la Revue socialiste. Lyon: Jacques André éditeur. Giordani, Tommaso. 2015. The Uncertainties of Action. Agency, Capitalism, and Class in the Thought of Georges Sorel. PhD thesis. Florence: European University Institute. Godin, Jean-Baptiste André. 1889. La République du Travail et la réforme parlementaire. Paris: Guillaumin et Cie. Gourevitch, Alex. 2015. From Slavery to the Cooperative Commonwealth. Labor and Republican Liberty in the Nineteenth Century. Cambridge: Cambridge University Press. Ingold, Alice. 2014. “Penser à l’épreuve des conflits. Georges Sorel ingénieur hydraulique à Perpignan”. Mil neuf cent. Revue d’histoire intellectuelle/Société d’études soréliennes, 1 (32), 11–52. Jousse, Emmanuel. 2019. “Le cas César De Paepe (1841–1893). Réflexions biographiques sur une histoire transnationale du socialisme”. Sociétés d’études jaurésiennes/Cahiers Jaurès, 4 (234), 57–88. Karsenti, Bruno, and Cyril Lemieux. 2017. Socialisme et sociologie. Paris: Éditions EHESS. Landry, Adolphe. 1901a. L’utilité sociale de la propriété individuelle. Paris: Société nou­ velle de librairie et d’édition. Landry, Adolphe. 1901b. “Quelques réflexions sur l’idée de justice distributive”. Revue de métaphysique et de morale, 9 (6), 727–48. Landry, Adolphe. 1904. L’intérêt du capital. Paris: Giard et Brière. Landry, Adolphe. 1906. “Un économiste méconnu: Otto Effertz”. Revue d’économie poli­ tique, 20 (8/9), 601–29. Landry, Adolphe. 1907. “Quelques travaux récents de théorie économique”. Revue d’économie politique, 21 (10), 687–711. Le Play, Frédéric. 1855. Les Ouvriers européens. Travaux, vie domestique et condition morale des populations ouvrières. Paris: Librairie Impériale. Le Van-Lemesle, Lucette. 2004. Le Juste ou le riche. L’enseignement de l’économie politique 1815–1950. Paris: Comité pour l’histoire économique et financière de la France. Malon, Benoît. 1876. La Question sociale. Histoire critique de l’économie politique. Lugano: Ajassi and Berra.

Fin-de-siècle socialisms 339 Malon, Benoît. 1883. Manuel d’économie sociale. Paris: Derveaux, libraire éditeur. Malon, Benoît. 1890. Le Socialisme intégral. Paris: Félix Alcan. Maupertuis, Marie-Antoinette et Paul-Marie Romani. 2000. “Des antagonismes entre renta­ bilité et productivité chez Adolphe Landry. Quand le marginalisme sert la critique du capitalisme”. In P. Dockès, L. Frobert, G. Klotz, J.-P. Potier, and A. Tiran (eds), Les tradi­ tions économiques françaises. 1848–1939. Paris: CNRS Éditions, pp. 823–40. Noirot-Bonnet, Louis. [1840] 1842. Théorie de l’aménagement des forêts. 2nd ed. Paris: Bouchard-Huzard. Pelloutier, Fernand. 1902. Histoire des bourses du travail. Origine, institutions, avenir. Paris: Schleicher frères. Pettit, Philip. 2004. Républicanisme. Une théorie de la liberté et du gouvernement. Paris: Gallimard. Proudhon, Pierre-Joseph. 1865. De la capacité politique des classes ouvrières. Paris: E. Dentu. Proudhon, Pierre-Joseph. 1866. Théorie de la propriété. Paris, Bruxelles: Librairie interna­ tionale A. Lacroix, Verboeckhoven & Cie. Rappoport, Charles. 1991. Une vie révolutionnaire: 1883–1940, les mémoires de Charles Rappoport. Paris: Éditions de la Maison des sciences de l’homme. Régnier, Philippe. 2015. “Les premiers journaux saints-simoniens ou l’invention con­ jointe du journal militant et du socialisme. Le Producteur d’Enfantin et Rogrigues et L’Organisateur de Laurent et Bazard”. In T. Bouchet, V. Bourdeau, E. Castleton, L. Frobert, and F. Jarrige (eds), Quand les socialistes inventaient l’avenir. Presse, théories et expériences, 1825–1860. Paris: La Découverte. Rolland, Patrice. 1989. “La référence proudhonienne chez Georges Sorel”. Mil neuf cent. Revue d’histoire intellectuelle (Cahiers Georges Sorel), 7, 127–61. Schäffle, Albert Eberhard Friedrich. [1874] 1880. Die Quintessenz des Sozialismus. French translation by Benoît Malon, La Quintessence du socialisme. Paris: Librairie du Progrès, 1880. Sorel, Georges. 1896. “Compte-rendu. V. Pareto. Cours d’économie politique professé à l’Université de Lausanne, tome I”. Le Devenir social, Mai, 468–74. Sorel, Georges. 1897a. “Sur la théorie de la valeur marxiste”. Journal des économistes, 30 (2), 222–31. Sorel, Georges. 1897b. “Compte-rendu. V. Pareto. Cours d’économie politique professé à l’Université de Lausanne, tome II”. Le Devenir social, Mai, 463–73. Sorel, Georges. 1898. “La crise du socialisme”. Revue politique et parlementaire, XVIII, December, 597–612. Sorel, Georges. 1900. “Les polémiques pour l’interprétation du marxisme: Bernstein et Kautsky”. Revue française de sociologie, VIII, 262–84 and 348–69. Sorel, Georges. 1902. “Préface” to Fernand Pelloutier, Histoire des Bourses du travail. Origine – Institutions – Avenir. Paris: Schleicher Frères, pp. 1–32. Sorel, Georges. [1903] 1922. Introduction à l’économie moderne. 2nd ed. Paris: Librairie Marcel Rivière. Sorel, Georges. [1908] 1990. Réflexions sur la violence. Paris: Éditions du Seuil. Stanziani, Alessandro. 2020. Les métamorphoses du travail contraint. Une histoire globale XVIIIe-XIXe siècles. Paris: Presses de Sciences Po. Taylan, Ferhat. 2018. Mésopolitique. Connaître, théoriser et gouverner les milieux de vie (1750–1900). Paris: Éditions de la Sorbonne. Tribe, Keith. 2015. The Economy of the Word: Language, History, and Economics. Oxford: Oxford University Press.

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Vatin, François. 2013. “Le produit de la nature et le temps des hommes: Don, service et rendement”. Revue du MAUSS, 2 (42), 221–45. Vincent, Julien. 2020. “Les écologies du xixe siècle: un diorama (Spitzberg, 1841)”. Romantisme, 3 (189), 5–18. Vincent, Kenneth Steven. 1992. Between Marxism and Anarchism. Benoît Malon and French Reformist Socialism. San Francisco: University of California Press. Walras, Léon. 1965. Correspondance of Léon Walras and Related Papers, William Jaffé (ed.). Amsterdam: North Holland. Whitham, William. 2019. “César De Paepe and the Ideas of the First International”. Modern Intellectual History, 16 (3), November, 897–925.

13 The sociological critique of liberal political economy Philippe Steiner

In nineteenth-century France those thinkers who contributed to the development of sociology and took an interest in political economy had a background in phi­ losophy (Émile Durkheim, François Simiand), law (Gabriel Tarde) or engineer­ ing (Auguste Comte, Frédéric Le Play). They were thus significantly distinct from the European founders of sociology: Vilfredo Pareto, a mathematician by training, was a renowned economist before becoming a sociologist, and Max Weber taught commercial law in Berlin before being appointed to posts in political economy in Freiburg and Heidelberg. Sociological argument in France in part developed through a critique of politi­ cal economy. There were of course exceptions, as was the case with Charles Letourneau and Gustave Le Bon, who recognised the existence of different social sciences, or even tried to associate them within the Association internationale de sociologie (International Sociological Association), as René Worms would do. We must also take into account the fact that Herbert Spencer, who was very influential until the end of the century, developed a sociology whose utilitarian influences made it acceptable to many political economists. The French peculiarity can be explained in two ways. In the early nineteenth century political economy and sociology identified the notion of society and tried to understand its laws of operation. Since political economy was a broad church for much of the century – as with the French Académie des sciences morales et politiques (moral and political sciences academy), or Adam Smith’s triptych: jurisprudence, moral philosophy and political economy – these two fields of knowledge clashed because their respective fields of enquiry overlapped. In France, sociology became a major opponent to political economy; in Germany (Bruno Hildebrand, Wilhelm Roscher, Karl Knies, then Gustav Schmoller) and in Great Britain (Thomas Cliffe-Leslie), the historical approach played this role; whereas in the United States, at the end of the century, it was the institutional­ ism of Thorstein Veblen that would become dominant. Ultimately, sociologists emphasised the historical dimension of economic activity and stressed the role played by behaviour that was based on tradition, norms and values, in contrast to economists, for whom self-interested behaviour remained the key principle of action. DOI: 10.4324/9780429202407-15

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For these reasons, this chapter argues that the sociological critique of political economy in France has direct affinities with the critique of political economy that was emerging with the Historical School in Germany and England, and with Amer­ ican institutionalism. Of course, there are also specificities on which this chapter focuses, notably the movement towards an economic sociology which, at the turn of the nineteenth and twentieth centuries, assumed an international dimension, with contributions from leading sociologists and economists (Gislain and Steiner 1995, Swedberg 1998, Steiner 1995, 2010) and an attempt at institutionalisation around the Institut international de sociologie and the Revue internationale de sociologie established by René Worms in 1893. This chapter begins with the critique of classical political economy deployed in the first half of the nineteenth century by Auguste Comte, following ClaudeHenri de Saint-Simon. It then gives an account of the way in which Frédéric Le Play’s empirical and conservative sociology rejected the industrial world, seen as a danger to the stability of society, while developing an approach based on pre­ cise empirical surveys. The last part focuses on the critique of political economy developed by Gabriel Tarde on the one hand, and by Émile Durkheim on the other. Their followers, especially François Simiand, continued their work and created an economic sociology under the name of “économie positive” (positive economics) in the 1920s and 1930s. 1. Comte, sociology and the critique of political economy After 1814 Claude-Henri de Saint-Simon (1760–1825) – he later signed himself Henri Saint-Simon – was seduced by political economy, in which he saw a new political science. However, he soon changed his mind, deciding that industrial society could not be based on egoism alone. He asked his new young secretary – Auguste Comte (1798–1857) – to devote some time to the critique of political economy. They both emphasised the moral dimension, presuming that a stable social order requires a common moral doctrine: An enduring society cannot exist without common moral ideas; this is as nec­ essary on a spiritual level as a community of interests is on a temporal level. These ideas cannot be common if they do not have as their base a philosophi­ cal doctrine universally adopted in society. This doctrine is fundamental: it is the link that unites and consolidates all parties. (Saint-Simon and Comte, 1821, in Saint-Simon 2012, 51) Consequently, the core message of the Saint-Simonian school, as stated by SaintAmand Bazard and Barthélemy-Prosper Enfantin (1829), can be summarised as follows. Contemporary political and social instability was thought to be rooted in the duality of human agency: In two words, calculation or reasoning, science, applied to material interests, is not the sole factor motivating human action; we also act on the sympathy

The sociological critique of liberal political economy 343 which fine arts arouse and favour; we are men of reason, but we are also impassioned, we are self-interested, but nonetheless we know how to devote ourselves to the highest generosity. (Bazard and Enfantin 1829, 27) A commitment to the well-being of other people and to other-oriented action was inscribed in a new religion, and the historical method finally emerged as a powerful way of explaining how religion could once more take its place in industrial society. Later Comte followed a similar path, stressing the methodological importance of history – that is, Comte’s law according to which any form of knowledge passes through three successive steps (theological, metaphysical and positive) – to build a new science, creating a hierarchical procession of the sciences culminating with sociology. The methodological critique

Comte devoted the 47th lesson of his lengthy Cours de philosophie positive – “Some philosophical reflections on the nature and the topic of political economy” (Comte 1830–42, II, 92–8) – to a critique of some thinkers who had taken some steps in the same direction: notably Montesquieu’s politics, Condorcet’s social mathematics and, finally, economists. His criticisms were mainly methodological. Firstly, economists were thought to be wrong to isolate their science from political science; secondly, since they had been educated as men of letters and lawyers, economists did not have the scientific training necessary to build a new science – an exception was made for Adam Smith, particularly because Comte had studied Smith’s History of Astron­ omy very closely. Thirdly, political economy was said to be highly metaphysical, since it supposed that economic actors were perfect calculators of their own inter­ est. The language of science (mathematics) used by some economists – Comte had in mind Destutt de Tracy’s long introduction to his Traité d’économie politique – appeared meaningless to him because it was tainted by metaphysical conceptions of psychology. At this point, his critique of political economy and his comments on Franz Joseph Gall’s phrenology (or “science of the brain”) converged. Both approaches attributed a superiority of reason over the passions, a position deemed erroneous by Comte. In fact, according to Comte, men followed a unique passion: “egoism commanded by the intellect”. This emphasis upon reason was at the root of a misconception of human beings: “Hence man has been portrayed, against all evidence, as an intellectual being, processing continuously, unconsciously, a large number of imperceptible calculations, without any form of spontaneity, from his most tender childhood” (Comte 1830–42, I, 856). A few pages later, targeting Helvetius’s utilitarian views on ethics, he rejected the idea of “egoism treated as the necessarily unique principle of ethics, it being not necessary to stress here the considerable danger of this view” (Comte 1830–42, I, 862). He favoured instead the Scottish school of Hume, Smith and Ferguson, notably because they took account of both egoism and sympathy. Fourthly, there was no progress in political

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economy: economists wasted their time in endless polemics over value, utility, production, etc. Fifthly, and this was more political or sociological than methodo­ logical, Comte rejected free trade on the grounds that it employed an unproven theory to legitimate a lack of market regulation. Consequently, political economy was condemned for systematising the contemporary state of (economic) anarchy under the name of competition. Comte finally criticised the economists’ view of the machinery question and maintained that economists should not neglect issues related to time and the nature of transitions when dealing with the substitution of labour by machines. This very negative assessment of political economy did include one enduring favourable comment: political economy paved the way for positive philosophy, since it rightly emphasised and explained the role of the division of labour. Econo­ mists were therefore praised for their explanation of the solidarity between various interests within society (Comte 1830–42, II, 95–6). French economists did not react publicly to these criticisms, and it is possible to suppose that, had the Journal des économistes been founded earlier than December 1841, they would have swiftly answered and rebutted Comte’s strictures on the method of political economy. Altruism and the Comtean economic sociology

Later, in his Système de politique positive, Comte came back to economic issues. The previous methodological criticisms were not repeated, since now Comte’s aim was to provide an idea of what an altruistic society would look like. The economic dimension of social life is dealt with in Chapter 2 (“Sociological assessment of the human problem, or positive theory of material property”) and this provides what can be thought of as a Comtean economic sociology. The material strength of society follows two “economic laws”: (i) man can pro­ duce more than he needs for his own consumption; and (ii) products can be stored. These two laws make possible the accumulation of wealth: a surplus may exist, and it can be stored because some goods are durable. These processes of production and accumulation require that products can also be appropriated since, according to his theory of mind, the industrial instinct, which is a sub-category of “interest”, belongs to the egoistic dimension of man. Private property is therefore necessary to prompt the energetic instinct of improvement. However, property rights were not here central, and Comte gave no more detail on this point. He emphasised instead the role played by a third process: the transmission of accumulated wealth. He had a broad and unusual view of the transmission process, dividing it into four different forms – gift, (market) exchange, inheritance and conquest – distin­ guishing between forcible and voluntary transmission on the one hand, and disin­ terested and interested transmission on the other (Comte 1852, II, 155). Inheritance and exchange were said to be common within industrial society, while conquest and gifts were matters of the past. Positive philosophy claimed that war had no real place in industrial society, and so Comte thought there was no reason to attribute any importance to conquest as a mode of transmission. The provision of a gift was a completely different thing since, as a disinterested and voluntary form of

The sociological critique of liberal political economy 345 transmission, this “oldest and noblest form of material transmission will be more helpful to industrial reorganisation than anything related to the useless metaphysics of our crude economists” (Comte 1852, II, 156). At this point, Comte came back to his positive remarks on the division of labour, which he identified in his Cours de philosophie positive as the great discovery of modern economists. He explained that voluntary transmission was instrumental in the accumulation of capital, and therefore important to the division of labour that brought “each active citizen to function essentially for others” (Comte 1852, II, 159). This collective dimension of economic activity, exemplified by the division of labour, became the central tenet of Comte’s approach to altruism in industrial society. He suggested that the division of labour be considered as both a given point in time, and as something that occurred through succeeding generations (Comte 1852, II, 405). Hence the importance he attributed to the law governing bequests, as a gratuitous form of transmission that is as important as gift-giving in realising the idea of altruism. Comte asked why, if such solidarity objectively exists, con­ temporary citizens are unable to understand what they actually do, and why they conceive their exchanges and the division of labour in terms of self-interest. This discrepancy arose from “modern anarchy” – the lack of any regulatory apparatus in the economic field and the spread of an individualistic way of thinking – and the absence of “a systematic doctrine of pacific behaviour, so that the latter is performed without giving each participant a just feeling of social dignity” (Comte 1852, II, 161). The issue of altruism was thus bound up with a critique of political economy. Nevertheless, in his Système Comte was eager to explain how disinter­ ested behaviour occurs in industrial society, even in its present unsatisfactory and incomplete form. Two social institutions were brought centre stage: the family and the clergy. According to Comte’s sociology, society is not composed of individuals but of families. Therefore, the chapter on material wealth is followed by a chapter dealing with the functioning of the family and, more specifically, with the way in which altruism is realised within a family. The three dimensions of altruism – veneration, attachment and kindness – are successively relevant to any living person: a child develops veneration for the parents who take care of her, and particularly for the mother; wife and husband develop attachment when they marry; and finally, par­ ents experience kindness when they care for their children. Having successive positions within the family creates a system in which there is reciprocity between the veneration of the children and the kindness of the parents, a reciprocity which overlaps from generation to generation, and which is at the root of the feelings linked to the transmission of wealth through the law of inheritance. Nevertheless, familial altruism is tainted with egoism whenever parents have an egoistic view of their own children. These situations give birth to what Comte calls “domestic ego­ ism”, a situation that he suggests can be resisted by giving fathers an absolute free­ dom to make bequests which, associated with the possibility of adopting a child, weakens the biological links between father and sons and, at the same time, raises the level of efficiency in the transmission of capital whenever the adopted child has abilities and capacities greater than those of biological offspring.

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A second institution is necessary to solve the “great human problem, the sub­ ordination of egoism to altruism” (Comte 1852, II, 204): spiritual power, which is a combination of the intellectual power that “wise men and priests”, with their knowledge of Comte’s positive philosophy, have in the political domain, and the moral power of women within the family (Comte 1851–54, II, 311). Here Comte made clear the importance he attached to Charles Dunoyer’s distinction between industries that apply their art to things, and industries that apply their art to human beings (Dunoyer 1845). The former are the usual industries that one can find in Say’s Traité d’économie politique – manufacture, commerce, agriculture – while the latter are divided into industries acting on the body of men (physical educa­ tion) and those operating on affective faculties, intellectual faculties, moral habits and religion. Apart from that point of agreement, Comte disagreed with Dunoyer’s praise of competition, and rejected this “state of anarchy”. Instead, in the subse­ quent chapter, Comte explained how a sociocratic clergy can “aspire to the modi­ fication of human will” thanks to the scientific and moral knowledge systematised in his own positive philosophy. The impulse at the root of the education provided by this clergy is to “prepare everybody to live for others in order to live in others” (Comte 1852, II, 371); these are according to Comte the two faces of altruism – objective and subjective. The objective face is nothing other than the division of labour, whereas the subjective face relates to the cult of Humanity, according to which the salient elements of the life of the dead are remembered by the living. The major issue with which the clergy has to deal is the anarchy that reigns in the material dimension of contemporary society: in other words, the economy required a regulatory power founded upon new principles. Two of these principles can be considered here. Firstly, still in line with Dunoyer, Comte endorsed an unrestricted freedom to make bequests. As noted above, this freedom of bequest is necessary to weaken the “domestic egoism” that appears within the family; it is also useful in order to achieve the efficient transmission of wealth from one generation to the next, since this freedom of bequest makes it possible to go beyond the family circle when transmitting accumulated capital. Secondly, Comte developed his “reli­ gious theory of wages”. Labour, he argued, understood as a service to humanity, cannot be properly compensated by a wage; the only proper remuneration for this service is to be found in the work itself, that is, the reward deriving from altruistic action. However, there must be a wage to buy the goods consumed during the performance of the service and, quite probably, for the training of the person performing the service. This payment applies only to workers or prole­ tarians, who should receive from the capitalists a minimum living wage – plus an additional sum related to their actual performance so that they might be able to own a minimum amount of property: accommodation, furniture, and the like. The other social classes do not receive any wage: the clergy is paid through gifts offered to them as evidence of veneration; women are cared by their husbands; and finally, capitalists are prevented from expanding their share because of the “healthy competition” existing between them, and because they wish to gain the approval of the remainder of society. If this were not enough, Comte relies

The sociological critique of liberal political economy 347 on the unspecified possibility of discharging inefficient and greedy capitalists (Comte 1852, II, 417, 419). This leads to an industrial world in which altruism prevails over egoism. The latter instinct is still present, since the alimentary instinct must be satisfied; this is the task of men entering the market so that they can provide their wife and children with food, clothing and housing. Egoism is still present among the capitalist class, but is moderated by the “healthy competition” that Comte noted, without actually explaining what it really means. Beyond that, altruism rules: in the family, thanks to the affective power of women; in society, thanks to the clergy spreading the gospel of the Religion of Humanity, and receiving gifts in remuneration; in industrial relations, since the wage relation shrinks; finally, altruism also rules in intergenerational rela­ tionships, since the law of inheritance and policy favouring adoption bypass “domes­ tic egoism” and permits greater efficiency in the transmission of accumulated capital. These “altruistic economic ideas” were, to say the least, at odds with the con­ temporary development of political economy. One might expect that political economists would not be very interested in Comte’s idiosyncratic views. But while Mill criticised Comte’s views on altruism in harsh tones, some economists and sociologists took an interest in them. Beyond Herbert Spencer, prominent contem­ porary economists – such as Francis Ysidro Edgeworth in England and Paul LeroyBeaulieu in France – did indeed do so. In this sense, Comte’s sociology played a role in the development of the European political economy (Steiner 2017). 2. Le Play: a sociological reaction against industrialism Frédéric Le Play (1806–1882), an engineer trained at the École Polytechnique and the École des Mines, was an important French social reformer of the second half of the nineteenth century.1 Founder of an inductive approach – the method known as “workers’ budgets” – which he developed under the name of social science, he is one of those who, following in the footsteps of social Catholics (Faccarello 2014), criticised political economy for its moral and political consequences. By contrast with Saint-Simon and Comte, this criticism can be considered conservative, even reactionary; Le Play asserted “that there is nothing to be invented” (Le Play 1879, xv, 12) and that one should return to the lost tradition of patriarchy and the Ten Commandments. Like many of his fellow students, during the later 1820s Le Play became aware of the influence of the Saint-Simonians, especially during his first European walk­ ing tours in 1829; but he did not associate himself with them. His desire to create his own particular social science dates from this period. His lectures on metallurgy at the École des Mines from 1840 to 1856 emphasised the human factor in industry, and he encouraged engineers to study society and take account of the social and economic dimensions of their future profession. This is an important point, since there is a tendency to associate French engineers with the 1 See Brooke (1970) for a comprehensive biography of Le Play, and Kalaora and Savoye (1989) for a synthetic view of Le Play’s sociology and how it was transformed by his followers.

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development of mathematical economics with the so-called “engineer-economists” (Etner 1987, Mosca 1998). Le Play’s own approach, and that of some of his disci­ ples who shared his background, indicates another current of thinking that placed the study of society at the forefront of intellectual and professional considerations. Made aware of the problems caused by industrialisation by his extensive Euro­ pean travels, Le Play saw social science as a solution to what he conceived to be a social evil (Le Play 1870, 188–220; 1879, xv, 12). What was the origin of this evil? On the one hand, there was the abandonment of tradition and custom follow­ ing criticism by eighteenth-century philosophers, the French Revolution and then nineteenth-century thinkers who valued novelty; on the other hand, there was the “abuse of material desires” (Le Play 1879, 165). This is the classic theme of con­ servative thinkers of the time. But there were more specific problems at the level of work organisation that Le Play discovered as an engineer and mine manager. He concluded that the eighteenth century had bequeathed two beneficial inven­ tions: Watt’s steam engine and Arkwright’s loom. But this was unfortunately spoiled by a third, harmful innovation: the political economy of the “Économistes” and Turgot, which Adam Smith had systematised: Completely unfamiliar with any knowledge of workshops, for ten years he used his writing skills and “sound reasoning” to develop the logical conse­ quences of the “fundamental error” of the 18th century. . . . His attractive book on the “Wealth of Nations” has over the past century persuaded succes­ sive generations that patronage [i.e. a paternalistic system of employment] is an unnecessary complication. This doctrine, convenient for the master, perni­ cious for the factory worker, quickly replaced stability and peace in the work­ shops with trouble and discord. It contains the seed of the ruin of Europe. (Le Play 1879, 124) Le Play’s critique of political economy became more precise when he connected what happens on the shop floor to the functioning of the labour market. While list­ ing the factors that made “England’s invasion by evil” possible, he first noted an excessive division of labour, which he believed was incompatible with tradition. The second cause was the excessive importance given to manufacturing, since the English overestimated the advantages of the accumulation of wealth without con­ sidering “the disadvantages attached to the sudden accumulation of populations periodically delivered to the malaise, subjected to a cruel instability, worked with feelings of antagonism irreconcilable with any social order” (Le Play 1870, 200). Finally, the third cause was the functioning of the labour market itself: The third cause is the exaggeration of certain doctrines relating to labour management. This evil comes from several writers who, having ignored the practice of prosperous workshops, have established a systematic distinction between economic order and moral order. . . . They have disregarded the recip­ rocal duties imposed on masters and workers by age-old customs. . . . Thus, for example, they have assimilated the social laws which fix the wages of workers to the economic laws which regulate the exchange of commodities.

The sociological critique of liberal political economy 349 In so doing, they have seeded disorganisation into the labour system, for they have led the masters to exempt themselves, in all conscience, from the most salutary obligation of Custom. (Le Play 1870, 201) In this series of assertions, Le Play linked political economy to the ruin of tradition, a dissociation between economy and morality with the labour market functioning as its operator. Le Play here rejected the idea that harmony in the productive world could be established on the basis of a labour market functioning according to the law of supply and demand. Associated with the instability of industrial activity, this economic organisation transferred much of the risks to workers, who would lose their jobs and incomes in times of economic crisis. This practice led to social antagonism and wrecked traditional morality, a situation that Le Play associated with the relation of master to worker. Policy based on the relationship of master and servant would have a countercyclical effect: when the economy is booming masters should refrain from increasing their production and hiring more workers; and conversely, they should retain their workers in period of economic crisis. Le Play conceded that this moral view would limit the growth of the economy, and importantly the rise of large manufactures, but it would increase the well-being of the lower classes and maintain social peace (Le Play 1867, II, 413–4). Hence the social science that he developed from the 1850s onwards2 aimed to strengthen the link between morality and economy by returning to the sound tra­ ditional practices obliging masters to take care of workers and their families dur­ ing hard times. Based on the observation of the Ten Commandments, this moral regulation of economic activity was the means of maintaining harmony between social groups within the framework of industrial society. Even though Le Play was enthusiastic about socialist approaches at the beginning of the 1848 Revolution, he rejected both these and the laissez-faire advocated by classical economists (Le Play 1879, 42). Using his scientific training and his own observation, in his first book – Les ouvriers européens (Le Play 1855) – Le Play based his social science on a precise empirical foundation: the meticulous study of workers’ budgets. This monographic approach, directly examining the material conditions and the intellectual, moral and religious life of a working-class family, became for him the scientific basis for his social and political views. The monographic method provides every man who takes the trouble to apply it with the means of knowing what share is given to the two needs, corre­ sponding to the moral and the material life of each family. It shows the dura­ bility of the two basic constitutional elements essential to prosperous peoples. (Le Play 1879, 217) 2 Le Play founded the Société internationale d’études pratiques d’économie sociale in 1856. This new institution is in friendly terms with the social catholic movement, notably those who belongs to the Société d’économie charitable. Many members of these societies joined as well Le Play’s new society, such as Augustin Cochin, Armand de Melun, Charles Dupin, Louis René Villermé.

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This monographic method had a strong impact on the disciples of Le Play, who adopted it; but it also had a significant impact on economists seeking a more empirical approach to economic thinking, relying on statistics, as with one of the most eminent among them, Émile Cheysson (1836–1910). An engineer trained at École Polytechnique and École des Ponts et Chaussées, he taught economics of industry at École des Mines from 1885 to 1905, as well as political economy and then social economy at the École libre des sciences politiques from 1882 to 1906. The study of budgets was also adopted in Britain, supported by the Royal Statistical Society and developed especially by Charles Booth in his studies on poverty in London. Seebohm Rowntree’s study of York (1901) built extensively on this work. 3. Tarde, Durkheim and the Durkheimian school From the later nineteenth century to World War I sociological work began to develop in France (Mosbah-Natanson 2017). The process of institutionalisation began with the appointment of Gabriel Tarde (1843–1904) to the Collège de France, followed by Émile Durkheim (1858–1917) at the Sorbonne. Beyond these major sociologists there were many other authors who consid­ ered the relations between sociology and political economy without the critical tone adopted by Tarde and Durkheim. For example, in his ethnographical approach to sociology Charles Letourneau (1831–1902) limited himself to some comments about property rights in different parts of the world, and concluded his evolutionary approach by explaining that the present European form was unique, and subject to change in the future since property is a social fact (Letourneau 1880, 415). After a short review of contemporary economic thinkers, he concluded by favouring John Stuart Mill’s proposal to limit bequests (Letourneau 1880, 419). One year later, Gustave Le Bon (1841–1931) also took an evolutionary approach. Considering the social unrest spreading among the working classes, he vehemently rejected social­ ism and communism, and dismissed the working classes as morally inferior, some­ thing that some economists had already done – he quoted Gustave de Molinari at length (Le Bon 1881, II, 405). He concluded by outlining a scheme that would turn members of the working class into petty capitalists by creating low-value shares (of between 5 and 10 francs). The need to save in order to purchase these shares would insulate them from the socialist gospel and its errors. The organicist sociol­ ogy introduced by René Worms (1869–1926) was likewise not opposed to political economy, being a science that dealt in terms of the nutrition of the social body (Worms 1896, Chapter 9). This is confirmed by the significant number of econo­ mists who became member of his Institut international de sociologie (International Sociological Association), notably Lujo Brentano, Charles Gide, Robert Giffen, Alfred Marshall, Carl Menger and Gustav Schmoller. These three examples demonstrate that sociologists could endorse a variety of opinions regarding the relationship between sociology and political economy. However, at the end of the nineteenth century, the two principal French sociologists had a more critical view of political economy.

The sociological critique of liberal political economy 351 Gabriel Tarde and psychological approach to economic phenomena

Gabriel Tarde was academically successful in his lifetime; he was widely read and honoured with a professorship in the Collège de France. But he was an isolated scholar, and his legacy in sociology and in economic sociology remains weak, even if he published a lengthy book on economic psychology (Tarde 1902)3 two years before he passed away. Tarde was at the time famous for his views on imitation, a social process that he considered as a foundation stone of social life. Opposition and invention were two further processes added to his sociological framework, then used to reconsider the achievements and shortcomings of political economy. In his Psychologie économique he organised the economic dimension of his sociology into three parts – repetition, opposition and adaptation – cover­ ing the three processes constitutive of his social thinking. He was dissatisfied with the classic tripartite division of political economy into production, distribu­ tion and consumption. Economic repetition dealt with the reproduction of labour and desires, and the circulation of money; economic opposition was about the confrontation between utility and needs, but also competition, strikes and com­ mercial wars; finally, economic adaptation was mainly about invention and the critique of previous inventions. His wish to bring political economy into the big tent of sociology was linked to his ideas about the status of political economy as a separate science. Was political economy a universal science? No, said Tarde (1902, 67). Politi­ cal economy was directly connected to all the other social sciences, and if the latter should learn from political economy, then the reverse was also true. Fur­ thermore, Tarde endorsed a broad view of value, claiming that this term had three different meanings: economic, scientific and aesthetic. Value can be related to utility, to truth and to beauty; nevertheless, in each case, value can be measured according to the number of people who desire, who are convinced or who are pleased, socially weighting these valuations in terms of purchas­ ing power, scientific nature, or aesthetic reputation; and finally according to the intensity of their desires, their beliefs or their aesthetic emotion. It should be emphasised that Tarde was not opposed to quantification. In this sense, he was favourable to the Austrian subjective theory of value, provided that these economists acknowledged the social dimension of desires and beliefs and would accept statistical measures, or psychological statistics (Tarde 1902, 142; Boudon 1971). He went on to explaining that all the basic concepts of political econ­ omy – exchange, competition, money, property, labour – should be reconsidered along the same lines. Like Comte, Le Play and Durkheim, Tarde rejected the homo œconomicus, the central character of political economy. The economists’ focus on a psychology of 3 Tarde reviewed political economy in two papers published in the Revue d’économie politique in 1888, and then in Chapter 8 of his Logique sociale (Tarde 1893). Among the few recent commenta­ tors, see for example Latour and Lépinay (2008).

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pain and pleasure, and of material wealth, rehabilitated greed. This was owed to the fact that economic man has no heart and lacks any form of social connection (Tarde 1902, 101–2). Instead, Tarde developed the idea that leisure should be a very important component of political economy. First, the social distribution of leisure is important for the well-being of the population, and even for the economic performance of workers; second, leisure is a necessary condition for invention, including the economic inventions of entrepreneurs; third, our understanding of society would be incomplete without taking account of leisure, when men are seek­ ing to create mutual pleasure, complementing their working relationships through the division of labour. Contemporary economists did not pay much attention to Tarde’s ideas, even if he had some influence on Joseph Schumpeter’s view of the entrepreneur. He was an isolated scholar, with no disciples to spread his economic ideas. The situation was significantly different with Émile Durkheim and his school. Durkheim’s critique of political economy

At the beginning of his intellectual career, Durkheim took economic issues very seriously. His dissertation was devoted to the division of labour (Durkheim 1893), and then the last chapter of his study of suicide (Durkheim 1897) was devoted to professional groups, a specific form of trade union. However, his critique of politi­ cal economy was mainly theoretical. In line with Comte’s views, Durkheim was critical of the reductive perspec­ tive of political economy. The critique was directed to one particular feature: political economy, mistakenly, sought to achieve the status of an independent science by separating itself off from moral and social perspectives. This faulty approach was related to the education and training of French economists who, as lawyers, businessmen or public officials, were unfamiliar with biological and psychological knowledge and so lacked the kind of scientific training required to develop economics in the mould of the other natural sciences. Accordingly, Durkheim placed emphasis upon the “great economic error” (Durkheim 1886, 208) of “reducing society to no more than the simple juxtaposition of individu­ als”, so that “man and society as conceived by economists are pure imaginary entities without any correspondence to the real world” (Durkheim 1886, 212). This conception prevented economists from properly defining their object and led them to overlook the role, importance and conditions of existence of social solidarity. Hence the problem presented by the status of abstraction in the social sciences and in political economy. To avoid dealing with facts that were too complex, economists isolated eco­ nomic facts from other facts; they isolated the economic activity of a “logical man” from the entirety of actions performed by a “real man” immersed in society (Durkheim 1887, 279). Durkheim did not question the procedure of abstraction itself, which he thought legitimate, but he contrasted two kinds of abstraction: one is a legitimate instrument for scientific work and isolates one part of reality so that it might be studied according to the principles of experimental science; the other,

The sociological critique of liberal political economy 353 on the pretext of isolating a part of reality, substitutes for that reality ideas. He rejected this second procedure since it does not deal with a problem but simply substitutes ideas for reality: Whether one likes it or not, whether it is a good thing or a bad thing, socie­ ties exist. Economic activity takes place within constituted societies. Logic is powerless if confronted with a fact that complicates a problem, but which cannot be excluded by abstraction. (Durkheim 1886, 208) As a consequence of this process of faulty abstraction, economists denatured their contribution to the creation of the social sciences – by recasting the conception of an economic law: Economic laws, and more generally, social laws, are not therefore very gen­ eral facts that the scientist derives inductively from observation of societies, but instead logical consequences that he deduces from the definition of an individual. The economist does not say: things happen in the way established by experience; but instead: they have to happen like this because it would be absurd if it happened in any other way. The word natural has therefore to be replaced by the word rational. (Durkheim 1888, 84) The second chapter of Les règles de la méthode sociologique made a strong distinc­ tion between science and common-sense notions that arise in social life through the need for action. This distinction had to be made because science had to take the social fact itself as the object of study. However, ideological analysis disrupted two particular branches of the social sciences: ethics and political economy. Instead of an experimental science, he argues, the economist simply engages in introspection, coupled with a few facts selected for illustrative purposes. Consequently, scientific procedure as Durkheim understood them is largely absent from the economist’s practice, while the normative dimension is preponderant. Durkheim then takes up the law of supply and demand, a principle that is never established inductively, which is never subjected to comparative methods that might demonstrate that things actually happen in this way: All that could be done . . . has been to demonstrate by dialectical argument that individuals should act in this way if they perceive what is in their best interest; any other course of action would be harmful to them, and if they followed it, it would indeed constitute an error of logic. . . . But this entirely logical necessity in no way resembles the one that the true laws of nature reveal. These express the relationships whereby facts are linked together in reality, and not the way in which it would be good for them to be linked. (Durkheim 1895, 26)

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Durkheim thus envisaged the economic fact in the same terms as the social fact, in that it could be invested with an institutional form, the crystallisation of opinion, and assume a moral character: the two ideas being closely related. He defined eco­ nomic sociology in terms of economic institutions: Finally, there are the economic institutions: institutions relating to the pro­ duction of wealth (serfdom, tenant farming, corporate organisation, pro­ duction in factories, in mills, at home, and so on), institutions relating to exchange (commercial organisation, markets, stock exchanges, and so on), institutions relating to distribution (rent, interest, salaries, and so on). They form the subject matter of economic sociology. (Durkheim 1909, 150) Durkheim himself did not develop this economic sociology, since the sociology of religion became his main interest in the last two decades of his life. Durkheimian economic sociology became the domain of one of his followers: François Simiand and, later on, Maurice Halbwachs. Simiand and the development of the Durkheimian economic sociology

François Simiand (1873–1935) edited the “economic sociology” section of L’Année sociologique, Durkheim’s sociological periodical, from the beginning to the end of the first series (1897–1913). His task was to develop a sociologi­ cal approach to economic activity, and he therefore read widely in European and American economic literature before gaining his doctorate in political economy. After World War I, he was appointed professor of political economy in the Con­ servatoire national des arts et métiers and became a member of the editorial com­ mittee of the Revue d’économie politique. He ended his career at the Collège de France (1931–35), lecturing on the economic crisis and on money (Gillard and Rosier 1996; Frobert 2000). In L’Année sociologique he wrote several critical reviews of the German His­ torical School, which was for him too descriptive, together with vigorous criti­ cism of “traditional” or “orthodox” economics. “Traditional” economics meant for Simiand French liberal economics (exemplified for instance by Clement Colson), the Austrian school associated with Eugen von Böhm-Bawerk, Joseph Schumpeter, and the new mathematically-based economics of Vilfredo Pareto, Irving Fisher, Stanley Jevons and Alfred Marshall. The main thrust of his critique is methodolog­ ical. He followed the route taken by Durkheim, but he possessed an understanding of the material that Durkheim never had. Simiand argued that economists had eliminated the social and historical dimen­ sion from economic reality: this is one of the principal criticisms that Durkheim had already directed at economists. Then Simiand showed that economists made two strong and implicit hypotheses. Whether involving the hypothetical case of Robinson Crusoe on his island, or the laws of supply and demand, Simiand opened up for examination everything that economists assumed about social life, the knowledge

The sociological critique of liberal political economy 355 of objects and their qualities, expressed in the classroom examples of which they were so fond: “He [the ideological theoretician] is compelled to assume an island for Robinson Crusoe, and then on this island trees, coconuts, a river for the canoe made from a tree trunk, etc.” (Simiand 1912, 69). These assumptions took a more institutional turn with exchange: This theory assumes: prior appropriation, alienable property, alienable accord­ ing to the wishes of proprietors, the institution of contract to mediate between such wishes, and especially of the contract for exchange and for sales. (Simiand 1912, 92; see also 200–203) Simiand added to these remarks a series of others concerning the knowledge of the world that the behaviour attributed to the homo œconomicus demands. This cogni­ tive socialisation, one might say, concerns the capacity attributed to individuals enabling them to assess without problem the quality of the objects with which they are surrounded, and also the future. Taking an example from daily life, Simiand raises the problem of the appreciation of the quality of a product: “What precisely will be, for the consumer, the best quality? Of the many elements which go to make up the quality of a good, many are such that the ordinary buyer is entirely incompe­ tent to appreciate them” (Simiand 1912, 16). It is the same when homo œconomicus seeks to look into the future: But why not include in the hypothesis the man who does not know whether his needs will decrease or whether his resources will increase. . . . So it is said that the case is unreal? On the contrary, it is something that can be observed on a daily basis; but that is of no concern to this method. Is it said that nothing new will appear? That is to be seen. That nothing in this case can be fore­ seen? But is not this lack of determinacy exactly what the theory of interest should deal with? (Simiand 1912, 64–5) These are telling criticisms, since economic theory was to be significantly modified in the course of the twentieth century by the introduction of uncertainty in respect of the qualities of a good on the one hand, and in respect of the future on the other. Simiand went on to criticise the way in which abstractions are generated within economic theory. The economist makes assumptions so that the models with which he works might function, but why does the ideological theorist stop short with a particular model when an infinity of alternative models exists? Simiand suggests that this happens because the economist arbitrarily reintroduces social and histori­ cal reality when selecting possible hypotheses, choosing those which, in his view, coincide most closely with the stylised reality which he wishes to explain. From that, he infers the pseudo-scientificity of economic theory: confounded by the pros­ pect of an infinity of all possible hypothetical cases, he implicitly makes a definite but arbitrary selection which is not susceptible to any assessment of its relation to empirical reality.

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This explains Simiand’s choice of a different method of abstraction, respecting an experimental imperative that takes account systematically of empirical givens: All scientific knowledge proceeds on the basis of abstraction . . . and experi­ mental method is itself, in this sense, abstract whenever it opens out a relation. The nature of the method is not therefore determined by the use of abstrac­ tion, but rather by the type of abstraction employed. Instead of abstractions, instead of experimental method . . . constantly submitting themselves to the control of correspondence with facts, . . . the abstractions in this case [in orthodox theory] are ideas. (Simiand 1912, 57–8) The theory of action to which economists adhere is too limited to take account of observed behaviours. Self-interested behaviour finds itself confronted with many possible options. Which will prevail? The economist has no way deducing this from his premises without making use, once more, of uncontrolled allusions that do not satisfy the criteria of experimental science (1912, 21–2). “This method should not therefore be called ‘abstract’, but ‘conceptual’ or ideological” (Simiand 1912, 59). Simiand, however, was too familiar with contemporary theory to overlook the fact that economists did in fact seek to confront their formal results with empirical facts, but he thought that this confrontation was inadequate. For example, when Irving Fisher endeavoured to verify the quantity theory of money developed in The Purchasing Power of Money with statistical and historical studies, Simiand objected that the statistical framework was too narrow (just thirteen years), and that Fisher was indiscriminate in his use of historical material (L’Année sociologique, vol. 11, 532–3). But Simiand took no comfort from Henry L. Moore’s proposal to establish a statistical economics in which pure mathematical theory would draw upon factual elements. He was certainly in favour of the use of statistics, but he intended to give statistics a role other than a subsidiary one, whose task was to verify the abstract theories of political economy developed in isolation from it. It was for this reason that he found Moore’s proposed “statistical political economy” or “substantive mathematics” unconvincing. Having arrived at this point, Simiand left to one side ideological and normative economics and presented the elements of a positive economics which takes on the experimental exigencies of modern science. Two salient elements of it could be mentioned. Firstly, Simiand built his own classification of economic events, distinguishing production and distribution on the one hand, regimes, forms of institutions and economic representations (related to value, prices and money) on the other (Steiner 2010, 63–9). Secondly, focussing on historical data about French workers’ wages, he tried to make sense of these data in terms of a theory of action where bosses and workers were in conflict over the amount of efforts provided and the nominal revenue they received (Simiand 1907). In his final years, through a painstaking elaboration of statistical data and their minute examination, Simiand studied the evolution of modern capitalism. He developed a specific theory

The sociological critique of liberal political economy 357 of price cycles (Simiand 1932) according to which economic progress results from the alternation of rising and then declining prices (Steiner 2010, chapter 4). As a consequence, he endorsed the view that the government should not interfere with the decline in prices and the economic depression that results, because that would nullify the possibility in the long run of achieving a progressive economy. 4. Conclusion During a significant part of the nineteenth century, many French sociologists were critical of political economy. From Comte to Durkheim and Simiand the meth­ odology was a significant medium for these critiques; from a different perspec­ tive, based on an empirical approach or on a psychological interpretation of social life, both Le Play and Tarde pursued the same end. Their solutions were different: history and the new Religion of Humanity for Comte, empirical data, traditional morality and Christian faith for Le Play, experimental science and institutions for Durkheim and Simiand – to which the latter added statistics –, interpersonal psy­ chology for Tarde. Basically, they all tried to change the categories with which economic data should be studied. Each of them puts forward some form of economic sociology, a way to address with their sociology important economic issues related to the growth of industri­ alism and of market exchanges: an altruistic society for Comte, a typology and a patriarchal view of the family and the workshop with Le Play, an institutional approach to economic affairs with Durkheim and the Durkheimians, the imitationinnovation structure with Tarde. Their efforts were important, and their achieve­ ments in sociology were enduring; however, their economic sociology was less successful, with the partial exception of the Durkheimian school. Nevertheless, considered historically, all of them had a significant impact on social science and political economy. As mentioned in this chapter, their books and ideas were discussed by economists, and some of their ideas were consid­ ered valuable even if others were straightforwardly rejected. Mill was influenced by the views developed by Comte in his Cours de philosophie positive. Some close disciples of Le Play were themselves professors of political economy, and the study of workers’ budgets become a normal approach in statistical research; Tarde published his basic ideas in the Revue d’économie politique, and some of his ideas were taken into account by leading economists, such as Joseph Schum­ peter. Finally, Simiand’s critiques were noticed by American institutionalists, since they were so close to the Veblenian critique (Gislain and Steiner 1999); while the Durkheimian approach became absorbed into French political economy of the 1930s, with Simiand’s “économie positive”. In a word, due to the lack of differentiation between disciplines within the social sciences, the work of sociologists was not ignored by economists, especially in the two decades before World War I, when economic sociology had its own momen­ tum, with Worms’ institutional activity and the positive views that major econo­ mists of that time – Jevons, Pareto, Veblen and Weber among others – endorsed because of their uneasiness with the contemporary state of political economy.

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References Bazard, Saint-Amand, and Barthélemy-Prosper Enfantin. 1829. Exposé de la doctrine de Saint-Simon. Paris: Bureau de l’Organisateur. Boudon, Raymond. 1971. “La ‘statistique psychologique’ de Tarde”. In R. Boudon, La crise de la sociologie. Questions d’épistémologie sociologique. Geneva: Droz, pp. 75–91. Brooke, Michael. 1970. Le Play. Engineer and Social Scientist. London: Longman. Comte, Auguste. 1851–54 [1890]. Système de politique positive, ou Traité de sociologie instituant la Religion de l’Humanité, 3rd ed. Paris: Imprimerie Larousse. Comte, Auguste. 1830–42 [1975]. Cours de philosophie positive. Paris: Hermann. Dunoyer, Charles. 1845. De la liberté du travail ou simple exposé des conditions dans lesquelles les forces humaines s’exercent avec le plus de puissance. Paris: Guillaumin. Durkheim, Émile. 1886. “Les études de sciences sociales”. In É. Durkheim, La science sociale et l’action. Paris: Presses universitaires de France, 1970, pp. 184–214. Durkheim, Émile. 1887. “La science positive de la morale en Allemagne”. In É. Durkheim, Textes. Paris: Éditions de Minuit, 1975, vol. 1, pp. 267–343. Durkheim, Émile. 1888. “Cours de sciences sociales: leçon d’ouverture”. In É. Durkheim, La science sociale et l’action. Paris: Presses universitaires de France, 1970, pp. 77–110. Durkheim, Émile. 1893. De la division du travail social. Paris: Alcan. Durkheim, Émile. 1895 [1976]. Les règles de la méthode sociologique. Paris: Presses uni­ versitaires de France. Durkheim, Émile. 1897 [1977]. Le suicide. Étude de sociologie. Paris: Presses universitaires de France. Durkheim, Émile. 1909. “Sociologie et sciences sociales”. In É. Durkheim, La science sociale et l’action. Paris: Presses universitaires de France, 1970, pp. 136–59. Etner, François. 1987. Histoire du calcul économique en France. Paris: Economica. Faccarello, Gilbert. 2014. “From the foundation of liberal political economy to its critique: Theology and economics in France in the Eighteenth and Nineteenth centuries”. In Paul Oslington (ed.), The Oxford Handbook of Christianity and Economics. Oxford: Oxford University Press, pp. 73–93. Frobert, Ludovic. 2000. Le travail de François Simiand (1873–1935). Paris: Économica. Gillard, Lucien, and Michel Rosier. 1996. François Simiand (1873–1935): Sociologie, His­ toire, Économie. Amsterdam: Éditions des Archives Contemporaines. Gislain, Jean-Jacques, and Philippe Steiner. 1995. La sociologie économique: Durkheim, Pareto, Schumpeter, Simiand, Veblen, Weber. Paris: Presses universitaires de France. Gislain, Jean-Jacques, and Philippe Steiner. 1999. “American Institutionalism and Durkheimian Positive Economics: Some Connections”. History of Political Economy, 31 (2), 273–96. Kalaora, Bernard, and Antoine Savoye. 1989. Les inventeurs oubliés. Le Play et ses continu­ ateurs aux origines des sciences sociales. Seyssel: Champ Vallon. Latour, Bruno, and Vincent Antonin Lépinay. 2008. L’économie sciences des intérêts passionnés. Introduction à l’anthropologie économique de Gabriel Tarde. Paris: La Découverte. Le Bon, Gustave. 1881. L’homme et les sociétés. Leurs origines et leur histoire. Paris: J. Rothschild. Le Play, Frédéric. 1855. Les ouvriers européens. Études sur les travaux, la vie domestique et la condition morale des populations ouvrières de l’Europe, précédées d’un exposé de la méthode d’observation. Paris: Imprimerie impériale.

The sociological critique of liberal political economy 359 Le Play, Frédéric. 1867. La réforme sociale en France, déduite de l’observation comparée des peuples européens, 3rd ed. Paris: E. Dentu. Le Play, Frédéric. 1870. De l’organisation du travail selon la coutume des ateliers et la loi du décalogue, avec un précis d’observations comparées sur la distinction du mal et du bien dans le régime du travail, les causes du mal actuel et les moyens de réforme, 4th ed. Tours: Alfred Mame et fils. Le Play, Frédéric. 1879 [1989]. La méthode sociale, Abrégé des Ouvriers Européens. Paris: Méridiens-Klincksieck. Letourneau, Charles. 1880. La sociologie d’après l’ethnographie. Paris: C. Reinwald. Mosbah-Natanson, Sébastien. 2017. Une “ mode ” de la sociologie. Publications et voca­ tions sociologiques en France vers 1900. Paris: Classiques Garnier. Mosca, Manuela. 1998. “Jules Dupuit, the French ‘ingénieurs économistes’ and the Société d’économie politique”. In G. Faccarello (ed.), Studies in the History of French Political Economy. From Bodin to Walras. London: Routledge, pp. 254–83. Saint-Simon, Henri. 2012. Œuvres Complètes. Paris: Presses universitaires de France. Seebohm Rowntree, Benjamin. 1901. Poverty. A Study of Town Life. London: Macmillan. Simiand, François. 1907. Le salaire des ouvriers des mines de charbon en France; contribu­ tion à la théorie économique du salaire. Paris: Cornely. Simiand, François. 1912. La méthode positive en sciences économiques. Paris: Alcan. Simiand, François. 1932. Le salaire, l’évolution sociale et la monnaie. Paris: Alcan. Steiner, Philippe. 1995. “Economic Sociology: A Historical Perspective”. European Journal of the History of Economic Thought, 2 (1), 175–95. Steiner, Philippe. 2010. Durkheim and the Birth of Economic Sociology. Princeton: Prince­ ton University Press. Steiner, Philippe. 2017. “Religion and the Sociological Critique of Political Economy: Altru­ ism and Gift”. European Journal of the History of Economic Thought, 24 (4), 876–906. Swedberg, Richard. 1998. Max Weber and the Idea of Economic Sociology. Princeton: Princeton University Press. Tarde, Gabriel. 1893 [1999]. La logique sociale. Paris: Institut Synthélabo. Tarde, Gabriel. 1902. Psychologie économique. Paris: Alcan. Worms, René. 1896. Organisme et société. Paris: Alcan.

14 Postlude After World War I Alain Béraud and Claire Silvant

After World War I, the specificity of the French tradition gradually faded. How­ ever, this evolution was slow, as slow as the transformation of the relations between economists of different nations. During the inter-war period, Frenchspeaking economists increasingly looked abroad: they had Fisher and Keynes as references, and the future professors who were trained in the seminars of Gaëtan Pirou (1886–1946) at the École Pratique des Hautes Études studied foreign econo­ mists (1928–1938). After 1945, this trend became more pronounced and contacts between economists of different nationalities multiplied. From 1970 onwards, many French economists published texts written with foreign colleagues, so that international cooperation took on another dimension. But even when they looked abroad and their contributions blended with those of other countries, French econo­ mists remained at the vanguard. At the same time, there was a change in the topics covered. Monetary issues, exchange rate problems and the analysis of international transfers, which had been the favourite subjects of economists before World War II, took a back seat after 1945, compared to new research topics which came to the fore. By providing proofs of optimality and the existence of a Walrasian equilibrium, Maurice Allais (1911–2010) and Gérard Debreu (1921–2004) revived interest in general equilib­ rium research. The nationalisation of many companies and the introduction of an indicative planning system led them to work on public economics and growth. World War II marked a shift in the evolution of economic thought in France, around which this epilogue is organised. This chapter is not intended to be a survey of the literature in the history of economic thought on the authors and currents in question, but to give a general overview of French economic thought after 1914 by providing synoptic insights into the hypotheses, methods and results obtained by the French-speaking econo­ mists. In this respect, it will be somewhat different from the other chapters in its orientation and its synthetic form. 1. The interwar period World War I was a major macroeconomic shock for all the belligerent countries, particularly pronounced in the case of France. The human cost was very heavy: of DOI: 10.4324/9780429202407-16

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the 7.9 million men who were mobilised, 1.4 million died and 4.3 million were wounded. Material losses also were severe: the war caused France to lose the equivalent of 11 years of investment. From a financial viewpoint, in 1921 the pub­ lic debt represented 237% of GDP; and still in 1929, out of 100 francs of taxes, 41 were assigned to the service of debt and 16 to war pensions. During the war, money circulation increased fivefold, while wholesale prices increased by 3.4 times, so that by April 1920 the franc had lost two-thirds of its pre-war value in relation to the dollar. The convertibility of the franc to gold was restored in 1928 but with a fivefold reduction in the gold reserves. It is therefore not surprising that the mon­ etary instability in the years following World War I prompted French economists to turn their attention to an analysis of monetary issues. Methodological debates

Debates on economic methodology were also revived in the interwar period, fol­ lowing the contributions of François Simiand (1873–1935) and Jacques Rueff (1896–1978). The idea that economics is a science, that its method is that of other sciences, gradually took hold among French economists. However, they drew dif­ ferent conclusions. In 1912, Simiand published La méthode positive en sciences économiques, a collection of articles in which he rejected both traditional political economy, which he called abstract or pure, and historicism, which he equated with a mere descrip­ tion of facts; to him, science must be developed on the basis of facts.1 His work “On wages, social evolution and money” (1932) is a remarkable illustration of his approach. Simiand presented it as an “experimental theory” of wages. Rueff opposed this position in his book Des sciences physiques aux sciences morales (1922a), advancing the idea that economic science is a rational science. His analy­ sis relied on three propositions: the affirmation of the unity of science, the distinc­ tion between Euclidean and non-Euclidean sciences and the idea that economics is a statistical science. What is meant by unity of science? Sciences differ in their subject matter but their method is the same. John Stuart Mill had argued that economics, because experience is impossible, could only be an abstract science, based on the a priori method. Rueff rejected this argument because, although the economist, like many other scientists, could not conduct experiments, he certainly could make observa­ tions. In contrast, Simiand viewed economics as an experimental science, which “aims at being based on facts and not on ideas; but [which] wants to go beyond the observation of facts and aims at establishing relations likely to explain these facts” (1932, I, x). Rueff considered economics as a rational science. The starting point of scientific reasoning is made up of axioms which are neither synthetic a priori judgements, nor experimental facts; they are conventions. From this it follows that experience or observation should not lead us to affirm that a theory is true or false. Thus, he applied to economics the statements made by Henri Poincaré in La 1 Further developments on Simiand are to be found in Chapter 13 of this volume.

362 Alain Béraud and Claire Silvant science et l’hypothèse (1902), when analysing the various geometries.2 Therefore, for Rueff, there are several logically consistent price theories possible. The Wal­ rasian theory appeared to him, however, more relevant to study an economy with privately-owned means of production than a theory of labour value; it would then be called Euclidean. But it could be that, in other circumstances, the labour theory of value would be more suitable and thus appear as Euclidean. Later, in the introduction to his Théorie des phénomènes monétaires (1927), Rueff even considered political economy as a statistical science,3 using statistical data to develop his ideas, such as the rejection of quantitative theory. But the use of statistical tools did not allow him to test, in the exact sense of the word, the proposi­ tions stated.4 This marked the very beginning of a process by which French econo­ mists were to participate in the creation of the Societé d’Économétrie in 1930. Monetary issues

The attention of French-speaking economists has been focused on several mon­ etary issues, to which they have made specific contributions. Thus, on the matter of exchange rates, Bertrand Nogaro (1880–1950) and Albert Aftalion (1874–1956) gave expectations a central role that hardly appeared in Rueff’s texts. Their frame­ work of price analysis also differed: Charles Rist (1874–1955) followed the tra­ ditional view that the value of money is determined by its supply and demand; Nogaro held to the idea that money prices are set in goods markets, while Aftalion developed a psychological theory of the value of money and exchange. One significant contribution of the interwar period was Rueff’s reformulation of classical monetary theory. His starting point was Fisher’s transaction equation, which he interpreted as an identity. For the general price level to vary like the quan­ tity of money, it is necessary that, for a given volume of transactions, the amount of bank deposits, M’, varies along with the quantity of banknotes, M, while the velocities of the various means of payment, V and V’, have to be constant. Rueff (1927) showed however that this did not actually happen. Other important contributions were made to the theory of exchange rates. In his article titled “Le change, phénomène naturel”, Rueff relied on the theory of purchasing power parity (1922b). In his 1927 book La théorie des phénomènes 2 These geometries rely on different axioms and are logically consistent. It makes no sense to ask whether they are true, since one geometry is not more truthful than another, it may simply be more convenient. 3 Rueff interpreted the idea that economics is a statistical science in a peculiar way. He argued that in order to establish economic laws, it is not necessary to study individual reactions in all their com­ plexity: after all, each person can choose between various possibilities and thus modify the course of events. What interests the economist is the overall effect of these interactions. 4 His practice reflects the reticence of French statisticians towards probability theory. However, in the 1920s, this situation changed. Georges Darmois (1888–1960) published the first French book on mathematical statistics in 1928. But this evolution was only slowly reflected in the work of econo­ mists. Most of time, they limited themselves to representing several time series on the same graph to highlight concomitant variations.

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monétaires, he replaced it with his theory of price disparities, which generalises the gold points mechanism to all commodities: for each good, a price can be defined at which it will be exported and a price at which it will be imported. Rueff showed that, in all the cases he studied, prices remained within the fluctuation zone he had defined. To appraise the stability of equilibrium, one must distinguish between a situation with metallic circulation – say the gold standard – and that of inconvert­ ibility. Suppose that, starting from a situation of equilibrium, a shock causes a deficit; Rueff followed the classical demonstration by indicating that in case of inconvertible currency, the variation of exchange rate would restore the equilib­ rium. The case of a gold metallic standard is more complex: the deficit in the trade balance implies a demand for foreign currency and a rise in the price of foreign currency up to the gold “exit” point. Once this level is reached, the exchange rate stabilises and the deficit is counterbalanced by a transfer of gold abroad, a transfer whose effects are not, according to Rueff, those described by the classics: gold transferred abroad will generally not be removed from circulation but will be taken from the reserves of credit institutions. To prevent their assets from falling relative to their liabilities, credit institutions will reduce the amount of credit they lend, causing the domestic interest rate to rise. This will result in capital inflows and a change in relative prices restoring the overall balance. Rueff relied on this analysis to explore the issue of war reparations. Keynes posed the problem in a very specific way, arguing that the Germans would have to pay reparations twice, as it were: The expenditure of the German people must be reduced, not only by the amount of the reparation-taxes which they must pay out of their earnings, but also by a reduction in their gold-rate of earnings below what they would otherwise be. (Keynes 1929, 4) Rueff replied that the depreciation of the mark would reduce the gold value of German income, but that it did not matter because the prices of German prod­ ucts would fall in the same proportion, leaving the purchasing power of Germans unchanged. So there is no problem of transfer, it is sufficient that the Germans pay taxes so that the State can pay the reparations. Nogaro developed an original analysis of price determination: to him, the price of goods is not determined on the money market. His central idea was that “except in the exchange of one currency for another, the instrument of exchange is not demanded; and only exchange relations between goods and money exist” (1924, 161). The effects of a variation in the quantity of money on the commodity sup­ ply and demand depend on how money is introduced into the economy. When a government finances its expenditure through money creation, it directly or indi­ rectly spreads income, increases spending and causes prices to rise. But if money is issued in return for credits granted by banks to companies, demand is certainly increased, but so is the supply, since the credits allow companies to expand their production; as a result, prices would initially rise and then fall (Nogaro 1924, 168).

364 Alain Béraud and Claire Silvant As for the exchange rate variations, he argued that they do not result from price variations but from speculation: when agents anticipate a depreciation of domestic currency, they buy foreign currencies, causing the former to depreci­ ate. While the theory of purchasing power parity described a causality running from money to prices, and from prices to exchange rate, Nogaro considered that this causality inverted in the case of a crisis (1924, 216). Depreciation, he explained, does not necessarily improve the current account balance, since it does not guarantee that a country will be able to import less, in terms of volume; instead, it imports at a higher cost, resulting in increased prices of domestic products. Aftalion criticised Nogaro’s analysis: to the former, depreciation of the currency is not always followed by a decline in the supply of goods, which the latter believed to be the case. A depreciation will increase prices only if it leads to an increase in demand and therefore an increase in income. Aftalion also introduced the role of expectations in the analysis of money: if an individual anticipates a fall in prices, he will postpone his purchases, thus causing a fall in prices, and vice versa. He thus replaced the theory of income with a psychological theory of money and cur­ rency (1927): the price we are willing to pay for a foreign currency depends on the expected evolution of its exchange rate; the current exchange rate depends on the expected exchange rate. When, as in the gold standard system, there is an expected level of exchange rate, the market is stable; but flexible exchange rates can be prone to instability, which can legitimise state intervention to stabilise exchange rates and prices. The last important contribution to monetary analysis in the interwar period is probably Rist’s non-Ricardian interpretation of quantity theory. As a supporter of the quantity theory of money, Rist emphasised the importance of changes in the gold stock in explaining long-term price movements; but he rejected Ricardo’s interpretation and defended theses close to those of the Banking School. In par­ ticular, he distinguished between inconvertible paper money, viewed as money, and bank notes convertible into gold, viewed as instruments of credit (Rist 1936). The issuance of paper money generates effective revenues, thus increasing the demand for products and raising prices, whereas an additional issuance of con­ vertible notes is only an advance, which has a temporary effect on prices. Rist was a supporter of the gold standard, despite its shortcomings (1934): although price variations could be significant depending on the relative abundance of gold, he believed that it allowed for the regulation of international monetary relations between the major powers. Under the gold standard, central banks were used to adjusting the discount rate to maintain parity. But Marshall, Wicksell and many others went further and suggested that by changing the discount rate, it was pos­ sible to influence prices. Obviously, Rist could not accept such an idea, since he believed that an issue of convertible banknotes would not affect prices. If changes in the discount rate are powerless to stabilise prices under the gold stand­ ard, would they be more effective under another currency arrangement? Rist did not think so, since the influence of the bank rate under a paper money regime

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was small compared to the reactions caused by confidence and variations in the exchange rate.5 Rational economics

The starting point of Jevons, Menger and Walras had been the analysis of individ­ ual choice, while general equilibrium analyses had been Walras’ essential concern. The French economists returned to these two questions during the inter-war period, sometimes to complete the work of their predecessors, sometimes to propose new solutions. They then appeared as defenders of “économique rationnelle” (rational economics). René Roy (1894–1977) – a graduate of École Polytechnique – intended to con­ struct aggregate demand functions (1930, 1933) based on Pareto’s law (1897, II, 304–5) and on the hypothesis of a hierarchy of needs: individuals seek to satisfy their least urgent needs only when their most pressing needs are fully satisfied. The demand functions thus obtained are decreasing; those concerning basic goods show an inflection point. The absolute value of the price elasticity is between 0 and 1. Roy evaluated it by studying the ‘natural experiments’ of changes in the prices of public services. In Walras’ analysis, an individual who makes a choice does not take into account the reactions of others. Following Joseph Bertrand (1889), Émile Borel (1871–1956) challenged this hypothesis by analysing games where one’s gain depends not only on what the others do, but where the behaviour of an agent can reveal information that his adversaries can take advantage of (1921, 1923). Borel considered a twoplayer, A and B, zero-sum game. He wanted to determine if there is a method of play that would be better than the others, that is, that would give the player who adopts it a superiority over any player who does not. A and B have n ways of playing. Rather than always playing the same way, they assign a probability to these ways of playing. Since what A loses is what B wins, he chooses the probabilities so that B’s winnings, assuming he plays at his best, are minimal. B’s behaviour is assumed to be identical to A’s. Borel showed that, for n equal to 3, 5 and 7, these two limits were equal. Von Neumann6 demonstrated this proposition for the general case in 1928, and Ville exposed a simpler version of this theorem (1938). The merit of Borel is to have been the first to set the framework from which game theory was developed. Important contributions to the analysis of equilibrium were also made. François Divisia (1889–1964), first of all, raised the issue of ophelimity of money: how to 5 Keynes (1930, vol. II) advocated influencing long rates by buying securities via open-market opera­ tions, but Rist rejected this proposal, arguing that its only effect would be to cause a rise in the price of securities and thus speculation, the consequences of which are unpredictable. Rist succeeded in con­ vincing the management of the Banque de France, which refused to develop an open-market policy. 6 Von Neumann discussed Borel’s contributions in a comment published in January 1953 in Economet­ rica. Von Neumann recognised that Borel certainly was the first to have introduced the notion of strat­ egy in a game with two individuals but that he did not succeed in proving the “minimax theorem”; he even claimed to have developed the theory of games without having read Borel first.

366 Alain Béraud and Claire Silvant explain that agents may wish to hold money at the end of each period, rather than buying commodities on the futures market? He proposed to consider a stationary equilibrium where the quantity of money held by an individual remains constant (1928, 411); relative prices, independent of the quantity of money, are determined in the real sector, while nominal prices are determined by introducing the circula­ tory equation of money into the system. Thus, the classical dichotomy and the quantity theory of money work well in stationary states. For his part, Robert Triffin (1911–1993) examined unresolved problems of monopolistic competition.7 He showed in his thesis (1940) that these difficulties stem from having been developed within the framework of partial equilibrium, which can logically only deal with pure competition and monopoly. However, to study monopolistic competition, one must reason in the framework of general equi­ librium. The theoretical contribution of Triffin’s thesis was crucial, and the condi­ tions in which it was written illustrated the changing relationship between national traditions on the eve of World War II. Nevertheless, economists who promoted “rational economics” were not nec­ essarily Walrasian. The Guillaume brothers8 epitomised this trend (1932, 1937): they criticised Walras for defining value as an essentially subjective and qualitative quantity. They constructed their “rational economics” by eliminating all subjec­ tive elements so that value appears as a quantity that can be defined objectively and numerically. To do this, they relied on the value conservation principle. In their most basic model, they considered an economy where goods are not storable. Equilibrium is determined by writing two sets of equations. The first states that the quantity of each good produced is equal to the quantities of that good that are inputs into the production of other goods including the production of services, that is, the quantities of goods consumed by labour. The second postulates that the value of the product is equal to the value of inputs used to produce it. This homogeneous system makes it possible, if it has a solution, to calculate relative prices. However, they run into major difficulties when they try to introduce money and the banking system into their scheme. The point of this attempt is to show the possibility of constructing general equilibrium models based on the rational method that radi­ cally differed from that of Walras. Cyclical or permanent unemployment

Singular theories about the nature of unemployment also emerged during the interwar period. In France, unemployment, which was poorly compensated, remained 7 Triffin received his initial training in Belgium. He wrote his thesis at Harvard under the supervision of Joseph Alois Schumpeter, who was sensitive to the charm of Walrasian general equilibrium. The other members of his thesis committee were Vassily Leontief and Edward Chamberlin. 8 Édouard (1881–1959) and Georges Guillaume (1896–1968) were Swiss economists, who were part of a group of engineers formed between 1931 and 1939 (X-Crise, Centre polytechnicien d’études économiques) to investigate the causes of and solutions to the economic crisis (Fischman and Lendjel 2000). X-Crise brought together many former students of the École Polytechnique, both liberals (Rueff or Colson) and socialists (Nicoletis or Jules Moch).

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low until 1931. Yet it increased during the recessions of 1921 and 1927, but once these crises were over, full employment was quickly restored; unemployment was thus viewed as a cyclical phenomenon. It used to be thought that during crises, prices fell faster than money wages and unemployment rose without it being clear whether this was due to rising real wages or falling output. During the crisis of 1921, a similar development was observed in England. But when prices stabilised, money wages remained stable while they should have continued to fall because of the high level of unemployment. Rueff emphasised this point: “It is very curious, and apparently contrary to all economic laws, that the level of wages could remain stable while the labour supply signifi­ cantly exceeded the labour demand” (Rueff 1925, 435). He gave three reasons for this rigidity of money wages: the power of English trade unions, the generalisation of collective contracts and the policies of assistance to the unemployed. In 1931, the facts corroborated the analysis of unemployment Rueff had developed in 1925. As in the previous period, a distinction can be made between temporary unem­ ployment, which is a feature of cyclical crises, and unemployment which persists even though prices have stopped falling. This unemployment is, according to Rueff, characteristic of countries, such as England and Germany, where a relatively generous system of unemployment subsidies has been put in place. These facts form the basis of the thesis developed in his article “L’assurance chômage, cause du chômage permanent” (Unemployment insurance as the cause of permanent unemployment). The reference to the notion of cause gave rise to much debate. It is all the more surprising that Rueff appeared in some passages of his article to be more cautious in 1931 than in 1925. Observing that, in the past, “unemploy­ ment has never varied without variations in the same direction in the wage-price ratio” (Rueff 1931, 219–20), he stressed that this does not imply the existence of a causal link between unemployment and real wages. How then can it be argued that unemployment insurance is the cause of permanent unemployment? It could just as easily be argued that unemployment benefit systems were created in response to high unemployment.9 2. Economic thought during World War II and the “Trente Glorieuses” World War II marked a break in both the structure of the French economy and the evolution of economic thought. During the Trente Glorieuses,10 the French 9 If relying on the modern notion of cause, which is not Rueff’s, and applying to Rueff’s data the mod­ ern tools of econometrics, it appears indeed that the real wage is relevant in explaining the variations of unemployment rate (Prat 2016, 1118). The assertion that unemployment insurance is the cause of permanent unemployment is an intuition suggested by the comparison of the situation in England, France and the United States, but cannot be proved from the data available to Rueff. 10 The expression “Trente Glorieuses” originates from the eponymous 1979 book by Jean Fourastié (1907–1990), Les Trente glorieuses ou la Révolution invisible de 1946 à 1975. It refers to the time period 1946–75, during which France’s economic expansion was sustained by a booming demogra­ phy, an acceleration of technical progress and a situation of full employment.

368 Alain Béraud and Claire Silvant economy developed many traits of a command economy: a large fraction of the banking system and industrial enterprises were nationalised; indicative planning was introduced. In terms of ideas, important works – L’ordre social by Jacques Rueff, the Cours d’économie politique of François Perroux, De l’utilité by René Roy, the Traité d’économie pure by Maurice Allais – were published. Keynes’ Gen­ eral theory was translated into French, then read and discussed. Later, François Perroux (1903–1987) sought to introduce the notion of domination into political economy. Research centres were created, in particular the ISEA (Institut de science économique appliquée) under the direction of Perroux. To carry out its policy, the State created new institutions such as the INSEE (Institut national de la statistique et des études économiques) and the Commissariat au plan. This section focuses on the two main issues addressed by French economists during the period known as the “Trente glorieuses” years. On the one hand, the debates about choices – collective choices, choices under uncertainty – originated in a dialogue initiated between French and American economists during two collo­ quia organised, in 1952, respectively, by the ISEA and the CNRS (Centre national de la recherche scientifique). On the other hand, Allais, in his Traité d’économie pure, raised, without completely resolving them, a series of questions about the existence of equilibrium, its optimality and the pricing of public services. Allais himself and many other economists provided answers to these questions. On both issues, French economists who worked on these problems sometimes taught in foreign universities and collaborated with foreign economists. The idea of a spe­ cifically French tradition in political economy began to gradually lose its meaning. A breakthrough Setting the stage

The human toll of World War II was lower in France than that of World War I – 567 000 dead, including 350 000 civilians –, but material losses were substantial; the overall cost of the damage was estimated at more than a quarter of national wealth. However, reconstruction was achieved quickly: in 1948, production returned to its 1938 level. At the time of the Liberation, the organisation of the French economy was deeply affected. Nationalisation was central to the programme of the Conseil National de la Résistance. From December 1945 to May 1946, the four biggest banks, insurance companies, gas and electricity, and all coal mines were national­ ised by the Constituent Assembly. In 1948, air and sea transport were organised as semi-public companies. French economists were therefore prompted to address the management of public enterprises and, in particular, the pricing of their products and services.11 In the meantime (1946), the Commissariat Général au Plan (General 11 Later, in 1982, the socialist government nationalised large companies in industry, most of the bank­ ing sector and financial holding companies. Thus, in 1983, one in four employees worked in the public sector.

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Planning Commission) was created under the direction of Jean Monnet. The first “plan de modernisation et d’équipement” was adopted in 1947, whose aim was to coordinate the activity of the public sector and to direct reconstruction efforts by defining the objectives for long-term growth. The Commissariat Général au Plan played an important role in promoting research in the economic field until 2006. The role of the French state, via its agencies, was to become progressively more important in the development of economic expertise, as Fourcade showed (2009); she identified a “statist pattern of organization which limited the development of economic knowledge (particularly quantitative knowledge) in the non-state sector” (2009, 187). In 1946, the national statistics service merged with the research departments of the Ministry of the Economy to become the Institut national de la statistique et des études économiques (INSEE), in charge of national accounting and forecasting, particularly for the Commissariat Général au Plan. In 1942, the École d’application de la statistique was created to train the staff of the national statistical service. In 1946, this school became the INSEE application school, and was renamed the École nationale de la statistique et de l’administration économique (ENSAE) in 1960. Many first-rank economists and econometricians were trained at this school. At the same time, the teaching of economics at universities gradually evolved. In 1960, a degree in economics was created within the Law Faculties, whose cur­ riculum included mathematics, statistics and econometrics. The end of the Facul­ ties in 1969 marked the separation of law and economics in many universities. In the meantime, economics had become a major discipline in French universities. Several research institutes were thus created. In January 1944, François Perroux founded the ISEA (renamed ISMEA in 1974) with the support of the Banque de France, the Caisse des Dépôts et Consignations and the École Libre des Sciences Politiques. The ISEA brought together a large number of French economists – Pierre Uri (1911–1992), Gaëtan Pirou, Maurice Byé (1905–1968), Émile James (1899–1992), Jean Marczewski (1908–1990) and, later Georges-Théodule Guilbaud (1912–2008) and Henri Aujac (1919–2009) – and developed close links with foreign economists, such as Thomas Balogh, Michael Kalecki, Jan Tinbergen, Joan Robinson and Edward Chamberlin. The Centre National de la Recherche Scien­ tifique (CNRS) initiated two econometrics seminars, headed respectively by Allais and Roy, and a research unit which was to be led by Divisia but which Darmois finally took over. Allais’ seminar was a natural continuation of the “Groupe de recherches économiques et sociales” he had created in 1944. This seminar followed the French engineering tradition and focused particularly on the utility and effi­ ciency of public spending. Gérard Debreu and Marcel Boiteux (b. 1922), who had been appointed by the CNRS after graduating from the École Normale Supérieure, were assigned by Darmois to Allais’ seminar. Roy’s seminar was more classically academic. It welcomed in particular Edmond Malinvaud (1923–2015), then a stu­ dent at the INSEE application school. In 1964, Malinvaud took over the direction of this seminar, and in 1980 Jean-Michel Grandmont (b. 1939) succeeded him. The ageing Journal des économistes did not survive World War II, while its rival, the Revue d’économie politique, continued its long run under the direction of

370 Alain Béraud and Claire Silvant Rist and Pirou. Three new reviews were launched: Économie appliquée, the Revue économique and Les Cahiers du Séminaire d’économétrie. The first appeared as the journal of the ISEA and was directed by François Perroux. The second was oriented more towards the social sciences, as shown by the presence in the editorial board of historians such as Fernand Braudel (1902–1985) and Ernest Labrousse (1895–1988). The third was directed by Roy and was the expression of the econo­ metrics seminar of the CNRS; in 1986, it merged with the Annales de l’INSEE and took the title Annales d’économie et statistique. The AFSE (Association française de science économique) was founded in 1950 and became the most influential pro­ fessional association of economists in France. French economists during World War II

During World War II, French-speaking economists – notably Roy, Allais, Rueff and Perroux – wrote and published outstanding contributions. René Roy, in a short work on utility (1942), elaborated an indirect utility function and demonstrated what has become known as the “Roy identity”. If, for an income Y and a price vector p, the vector q* maximises the utility U ( q ) of a consumer, one can write, based on the principle of duality, that this utility is a homogeneous function of degree zero of prices and income U ( q *) = F ( p, Y ) . As the indirect utility func­ tion is homogeneous of degree 0, the total utility and the final degree of utility of income only depends on the relative price vector p . Roy (1942, 24) proved Y that the demand for a good qi can be deduced from variations in the indirect util­ ity function induced by a marginal variation in its price on the one hand and by a marginal variation in income on the other. This relation, called the Roy identity, is written: qi = ­

F ¢pi ( p, y ) F ¢y ( p, y )

Rueff, for his part, published a book in 1945 which renewed his vision of market adjustment. Prior to this book, he explained that in a liberal system, equilibrium is ensured by price adjustment and that economic intervention, as long as it allows this mechanism to maintain equilibrium, is not in conflict with liberalism. This idea is complemented by two new statements in L’ordre social: first, “the liberal order is . . . characterised by the owner’s complete freedom within the property owned” (Rueff 1945, 638). This applies, in particular, to government: In a liberal regime, it is . . . the amount of tax which, added to the income of the public domain, fixes at each moment the maximal possible interven­ tion of the State. Within this maximum, the government’s will is almighty; beyond that, it is powerless. (Rueff 1945, 641)

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In the end, liberal intervention is only limited by the amount of tax levied. Second, he opposed two ways of organising society: liberalism and authoritarianism. What differentiates them is not the governmental programmes but the methods of gov­ ernment. The liberal method is that of taxation: the government deprives the owner of part of his rights and allocates them to itself. The authoritarian method consists of compelling the owner to choose the purposes that government plans to impose on him. Perroux’s name is also inevitably associated with this period.12 From an ana­ lytical viewpoint, the main books that he published during the war – his Cours d’économie politique (1939–45) and Le néo-marginalisme (1941) – were seen as expressing a profoundly innovative modern knowledge, their success being evi­ denced by the number of reprints. The ambition of his Cours was to achieve a synthesis between abstract analyses – theories of equilibrium and marginal utility – and concrete historical, sociological and statistical studies. Perroux, referring to the work of von Mises, Hayek, Strigl and Morgenstern, argued that neo-marginalism13 is superior to equilibrium theory, that it is “the only complete synthetic scientific theory of economic phenomena in our time” (Perroux 1941, 45). Lastly, the most important of the works published during World War II from an analytical point of view is certainly the Traité d’économie pure written by Maurice Allais between January 1941 and July 1943. The Traité is dedicated to his masters, Walras, Pareto, Fisher and Divisia; but it is not a simple synthesis of their work, since Allais aspired to go beyond his mentors, by explicitly introducing time into the general equilibrium theory, conceiving a dynamic of equilibrium. In intertem­ poral analysis, agents’ choices depend on current and future prices. Allais elimi­ nated the risk, considering forecast as perfect, which makes it possible to assert that there are as many distinct markets as there are future goods and services. There is no circulating money in his model; prices are settled in a money unit which is free of any material support. Exchanges are centralised: a clearing house records agents’ income and expenditure and registers payments which are made by transfer. With such an approach, Allais defined what would become the general frame­ work for numerous general equilibrium models. The issue he addressed was the stability of equilibrium (not its existence or unicity).14 Assuming an exchange 12 Brisset and Fèvre explore Perroux’s intellectual trajectory, particularly his involvement in the insti­ tutions of the Vichy regime (2020, 2021). 13 Neo-marginalist economists intended to eliminate the objective elements that they saw in Menger and Böhm-Bawerk’s writings. For example, in the second edition of the Grundsätze der Volk­ swirtschaftslehre, Menger made a distinction between real and perceived needs; Mises (1933) dis­ missed this distinction and argued that man builds his appraisal of goods on his perception of their utility. Any good to which – rightly or wrongly – human wants are applied is useful. 14 To study convergence, Allais introduced a characteristic function defined as the sum of the absolute values of the differences between the values of supply and demand. If, for each individual, the value of the demand for any good varies inversely with its price, the value of the characteristic function decreases as its price adjusts and equilibrium is stable. Negishi (1962, 656) showed that the assump­ tions on which Allais relied amount to assuming that goods are gross substitutes: if the price of one good increases while other prices are unchanged, the demand for the other goods increases.

372 Alain Béraud and Claire Silvant economy in which the agents’ utility functions are separable, the adjustment pro­ cess works under four restrictive assumptions, characteristic of a Walrasian model: (i) the price system is unique regardless of whether or not there is an equilib­ rium; (ii) if supply exceeds demand on a market, the price falls and vice versa; (iii) price adjustments do not occur in all markets simultaneously, but successively when switching from one market to another; (iv) no exchange occurs outside of equilibrium. Using the notion of surplus proposed by Pareto in his Manuel (1906, 655–6), Allais laid down in 1943 the two propositions of his “théorème du rendement social” (theorem of social efficiency): any situation of maximum efficiency is a market equilibrium, and any market equilibrium is a situation of maximum effi­ ciency. What can be learned from these statements? Allais rejected both laissez-faire and planning. Maximising social efficiency cannot be achieved in a laissez-faire regime; indeed, in industries with increasing returns, monopoly prevails, a higher price than the marginal cost is charged, thus impeding the achievement of the opti­ mum. In other activities, imperfect competition, including the absence of a market for future goods, leads to a sub-optimal allocation of resources. Planism has the opposite flaws: prices cannot be determined in the absence of markets. Without this mechanism, no rigorous economic calculations can be made. But the question of the ownership of the means of production remained open. Economic organisation must be based on autonomous economic agents, each having the free disposal, for his own part, of economic goods. But . . . one can imagine a society . . . in which the different managements of enterprises could have . . . the free disposal of economic goods, without the ownership of these goods ceasing to be collective. (1943, 663) The reception of Keynes’s ideas in France

As soon as it was published, the General Theory of employment, interest and money was presented and discussed in France (Sampaio 2016); but research on it especially increased after the Liberation. Three types of contributions can be roughly distinguished: some economists, such as Perroux, contributed to the dif­ fusion of Keynes’ ideas without really sharing them, some other economists – Étienne Mantoux (1913–1945), Maurice Halbwachs (1877–1945), Robert Marjolin (1911–1986), Jean Domarchi (1916–1981), Alain Barrère (1910–1995), for instance – wanted to comment, interpret and report on it, while others – Maurice Allais, Claude Gruson (1910–2000) – aimed to develop a different economic theory from Keynes in order to answer the same questions he asked. The second category of reactions to the General Theory focused on three main issues. How to interpret the savings-investment relationship? Should money wages or even prices be taken as given? Is the interest rate an essentially mon­ etary process? While in the Treatise on Money a misalignment between savings and investment was possible and played an essential role in bringing about the

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appearance of pure profit, in the General Theory savings and investment are always equal. In Mantoux’s view (1937, 1565), this difference could only arise from the treatment of windfall profits, which were excluded from income in the Treatise, but included in the General Theory. Instead, Marjolin (1941, 111) argued that while investment and savings are always equal, they are not identical, as savings is not an independent value (agents are not free to determine its level, as it is set by investment). Keynes (1937, 245) described interest as a monetary phenomenon. Marjolin justified this assertion by explaining that every individual receiving income first determines its use, and then chooses the composition of his assets by arbitrating between the liquidity and return of the various securities. If an increased invest­ ment raises the interest rate, it is not because savings are insufficient but because investors need financing for their projects. For his part, Domarchi (1943) inter­ preted Keynes’ view on the basis of Hicks’s formalisation of the liquidity trap (1937, 152), acknowledging that the demand for money only depends on the inter­ est rate. The model is recursive: the quantity of money, as an exogenous variable, determines the interest rate which, in turn, determines income via the equality of savings and investment, without the reader knowing whether it concerns real or nominal income. Mantoux argued that Keynes assumed that workers were not looking at their real wages but at their money wages. Such an idea had already been put forward by French-speaking economists (Simiand 1932, vol. I) but took on a new relevance in the General Theory because of its role in the analysis of unem­ ployment. Mantoux (1937, 570) disagreed, considering that workers are interested in their real wages. Domarchi shifted the reasoning by replacing monetary illusion with the hypothesis of monetary wage rigidity. Finally, Barrère (1952, 642) sought to refine this analysis by showing that Keynes successively adopted three different assumptions regarding the flexibility of wages and prices. In the first four parts of the General Theory, wages and prices are, for the most part, assumed to be con­ stant; but in these same parts, he also proposed an interpretation in which money wage is fixed and prices are flexible. In the fifth part, Keynes studied the effects of a reduction in money wages and argued that it does not increase employment. This appeared to Barrère (1952, 175) as one of Keynes’ most critical conclusions in the General Theory. Allais and Gruson went further in their own interpretation of the Keynesian theory. To Allais (1947, 319), Keynes’ virtue was to have shown the need to revisit the relationship between the classical theory of interest rate and monetary theory. In Économie et intérêt, he elaborated his own analysis of this problem without engaging in a systematic discussion of Keynes’s approach. Allais identified two markets: the financial market where bonds and shares are bought and sold, and the money market where the use of circulating money is traded. To these two markets correspond two interest rates: the financial market rate is the user price of capital, while the money market rate is the user price of money. In a stationary economy, quantities, including the quantity of money, and prices are constant over time. In equilibrium, the different interest rates are equal. Relative prices and the real inter­ est rate are independent of the quantity of money. If money is growing at a steady

374 Alain Béraud and Claire Silvant rate, the endogenous variables are determined in the following order: first, the equilibrium in the financial market determines the real interest rate; the nominal interest rate is equal to the real rate plus the growth rate of the quantity of money. The nominal interest rate then determines real cash holdings and the ratio of the quantity of money to real cash holdings determines the general price level. As long as money is an exogenous variable, the adjustment process is simple: if the financial interest rate exceeds the money rate, the agents reduce their money holdings and buy securities. The financial interest rate decreases, the value of indi­ rect goods increases, which leads to an increase in income and consumption. Thus, the adjustment leads to a rise in prices which increases the demand for nominal cash holdings and leads to a rise in the monetary interest rate, while the increase in investment leads to a fall in the financial interest rate. However, the existence of this adjustment process does not mean that the system is stable (Allais 1947, 329). If the quantity of money in circulation is endogenous, the equilibrium may be unstable. In the process just described, the increase in money demand will not necessarily lead to a rise in the interest rate because banks will only be encouraged to discount more bills at an unchanged rate, which will lead to an expansion of the quantity of money. Of course, this cannot continue indefinitely: when the cover­ age rate of banks is reduced, they will undoubtedly reduce the amount of credit granted. This does not imply stability of the equilibrium, but rather that the expan­ sion phase will be followed by a recession. On this basis, Allais later developed non-linear models of cycles15 in which the variation in aggregate expenditure is proportional to the difference between the supply and demand of money. Unlike Allais, Gruson, who was at the head of the Treasury Department in 1948, and the founder of the “Service des études économiques et financières” (SEEF) of the French Finance Minister,16 presented himself as a Keynesian with some reluc­ tance: he therefore set himself the goal of “introducing more rigour into the intui­ tions of the General Theory” (Gruson 1949, 8). He departed from Keynes in two main respects; instead of deducing the demand for money from agents’ portfolio choices, Gruson believed that the main concern of agents was to manage their cash flow so that their cash holdings were never negative; and money, instead of being exogenous, is viewed as endogenous. While Rueff (1945, 227–71) claimed that price changes restore equilibrium, Gruson (1949, 227–31) argued that this is not necessarily the case. Suppose that an excess supply of goods causes a fall in prices. If entrepreneurs consider this fall to be temporary, they will keep a higher­ than-normal stock of products and will finance them with short-term advances. The interest rate will likely rise but the central bank can intervene to stabilise it, by issu­ ing money, which will tend to clear the initial surplus of goods. But this reaction may not be sufficient if the agents believe that the price decline will persist. Con­ sumers will then reduce their purchases, and companies will remove their stocks of finished products and work only to satisfy confirmed orders. The fall in prices may 15 A detailed study of this issue is done by Raybaut (2014).

16 Terray’s book (2017) examines in detail Gruson’s personal journey and his role in the development

of macroeconomic expertise and forecasting within the French Ministry of Finance.

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worsen the initial negative trend. Gruson concluded that “There is no spontaneous equilibrium in a liberal regime. . . . A direct intervention of public authorities in investments . . . is therefore necessary” (1949, 250). Perroux and the domination effect

The end of the 1940s marked a moment of evolution in Perroux’s thinking: the new post-war world economy and the dominant role of the United States led him to revise his earlier theses. He distanced himself from neo-marginalism and general equilibrium, which he criticised for being built on the assumption of reciprocal and universal interdependence while ignoring inequalities. He complained that eco­ nomics was only concerned with abstract analyses instead of looking at the actual conditions of life. “Force, power and constraint are objects congenitally unfamiliar to the modern science of economics and which these refinements have failed to integrate” Perroux wrote (1948a, 242). To address these issues, Perroux referred to the concept of domination, a notion that had been absent from economists’ analysis of exchange until then. In some cases, domination refers to the deliberate intention of an agent to enforce unfavour­ able conditions on other agents. He broke with the principle of voluntary exchange, according to which the marginal benefit obtained is equal to the marginal benefit given up. A intentionally dominates B if the marginal utility of the good transferred by B exceeds the marginal utility of the good he receives. However, domination may also be unintentional. Perroux (1948a, 248) therefore wrote that “A has an effect of domination on B if, leaving aside any particular intention of A, A has a definite influence on B without the reciprocal being true or being true to the same degree”.17 As he argued, domination power arises from three main sources: bar­ gaining power, the nature of activities and size. He therefore believed that more precise distinctions should be introduced, referring to influence, dominance and partial domination. Perroux first applied his analysis of domination to studying international trade. According to him, imports and exports should be considered not from individuals but from the nation, considered as an economic agent in its own right:18 “Eco­ nomically, the nation is a group of enterprises and households, coordinated and arbitrated by a centre which holds the monopoly of public power, that is to say, by a State” (1948b, 34). If one can consider a nation’s exports and imports, this is because the units that make up the nation are subject to the same superior decisionmaking authority, that of the State, and because these units have a specific degree 17 If a 10% increase in A’s output causes a 5% increase in B’s output, while a 10% increase in B’s output causes a 1% increase in A’s output, then A can be said to dominate B. Domination can be direct or indirect: if A dominates B who dominates C, then it may be that A, for this reason alone, dominates C. 18 Von Wieser (1914, 441) pointed out that, for classical liberals, it was misleading to refer to the purchases and sales of England or Germany. England or Germany, considered as a whole, neither bought nor sold. The English and the Germans are the ones who buy and sell. Perroux argued that one should, on the contrary, consider the imports and exports of England and Germany as nations.

376 Alain Béraud and Claire Silvant of interdependence resulting above all from the existence of a national currency and the presence of external economies at national level. Perroux did not rely on his analysis of domination to criticise the function­ ing of economic systems and particularly the functioning of capitalism. He recog­ nised that domination is the means by which man’s exploitation of man occurs, but pointed out that the main architects of the development of national economies or of the world economy are the dominant firms, the dominant national economies. . . . Through them . . . economic progress is achieved. . . . Through them, techni­ cal and economic innovations, after breaking routines, arouse imitators and spread their benefits to large sections of the public and consumers. (Perroux 1948b, 43) Aggregation and choice issues

Two key colloquia were held in 1952 near Paris. In May, Darmois, Allais, Roy and Fréchet (1878–1973) organised a symposium on the foundations and appli­ cations of risk theory in econometrics under the aegis of the Centre National de la Recherche Scientifique; then, in June, Perroux invited Kenneth Arrow to pre­ sent his book, Social choice and individual value, at a symposium on the “avan­ tage collectif” (collective advantage) held at the Institut de Science Économique Appliquée. These two colloquia shared the common feature of giving French economists the opportunity to discuss the significant proposals put forward by Arrow on the principle of rationality in collective decisions and von Neumann and Morgenstern’s analysis of choices under uncertainty. The debates at these two meetings were different in tone: Allais’ criticism of the postulates and axi­ oms of the American school was much more severe than Guilbaud’s comments to Arrow. The impact of these debates was different, undoubtedly because Allais could publish his article on “the behaviour of rational man in the face of risk” in Econometrica, whereas Guilbaud’s contribution was published in Économie Appliquée, whose circulation was more limited. Nevertheless, the debate on these two problems persisted, as shown, for example, by two articles by Mongin (2012, 2019). From preference aggregation to judgement aggregation

During the symposium organised at the ISEA, Guilbaud, a mathematician who had been a researcher at the ISEA since 1947, gave a brilliant presentation, draw­ ing attention in particular to Condorcet’s Essai sur l’application de l’analyse à la probabilité des décisions rendues à la pluralité des voix (1785).19 Guilbaud, while acknowledging the value of Arrow’s contribution, did not limit himself to presenting 19 Arrow’s and Guilbaud’s contributions were published in 1952 in Économie Appliquée, the review of the ISEA.

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and discussing it. By referring to Condorcet and, to a lesser extent, to Cournot, he shifted the debate and dealt with issues that were close to but different from those analysed by Arrow and Bergson. Arrow’s concern was the existence of a collective welfare function, which he defined as follows: By a social welfare function will be meant a process or rule which, for each set of individual orderings . . . for alternative social states (one ordering for each individual), states a corresponding social ordering of alternative social states. (Arrow 1951, 23) In Arrow’s analysis, social orderings, which are the arguments of the welfare func­ tion, refer to fundamental values or preferences of individuals. In Condorcet’s texts, it was not a question of preference, in the sense that Arrow gave to this word;20 Condorcet, and Guilbaud after him, referred to judgement, to opinion. If a voter prefers this or that candidate, it is because he considers him more capable.21 By combining rational judgements, an irrational judgement may be obtained, and a defendant whom the majority of jurors do not consider guilty may be convicted. It can thus be argued, as Mongin (2012) did, that by generalising the analysis of aggregation of individual preferences, Guilbaud advanced the theory of judgement aggregation or logical aggregation. To examine the existence of social welfare functions, Arrow assumed that agents’ preferences are complete and transitive. The social order must satisfy these two axioms and meet five conditions: (i) The social welfare function is defined for any set of admissible individual orders; (ii) Individual and collective values vary in the same direction; (iii) The social order is independent of irrelevant alterna­ tives; (iv) The social welfare function is not imposed and social order depends on individual preferences; and (v) The social welfare function is not dictatorial. His general possibility theorem of the social welfare function states: If there are at least three alternatives which the members of the society are free to order in any way, then every social welfare function satisfying condi­ tions 1, 2 and 3 and yielding a social ordering satisfying axioms I and II must be either imposed or dictatorial. (Arrow 1951, 59) Guilbaud emphasised the significance of this theorem but regretted that Arrow presented his demonstration in a negative form, referring in an indeterminate way 20 For Condorcet’s analysis, see Volume 1, Chapter 8. 21 The reference to Cournot was less commented on, but is nevertheless relevant. Cournot showed that the aggregation problem was a general one that is not specific to economics or the humanities; it arises just as much when dealing with mathematical objects, for example, triangles. When aggregat­ ing elements belonging to a set, the aggregate does not necessarily belong to that set. Consider two right-angled triangles and average each of the three sides. The three averages obtained may well serve to construct a new triangle, but it is not a right-angled triangle (Cournot 1843, 213).

378 Alain Béraud and Claire Silvant to a rule which he proved did not exist; he then proposed another demonstration by seeking to construct a rule that would allow a coherent global judgement to be reached in all cases where individual judgements are known. The “Condorcet effect” – that is, the existence of non-transitive social preferences – is impos­ sible if one individual belongs to all majorities because the preferences of indi­ viduals are assumed to be transitive. Reciprocally, “the Condorcet effect becomes apparent as soon as majorities are formed on the various questions posed which have no common elements; for then the ‘majority’ opinion is nobody’s opinion” (Guilbaud 1952, 565). In the end, if collective opinion is not to be incoherent – more precisely, if the collective order is to be transitive – one must recognise that the collective opinion is that of one of its members, the same one whatever the question asked. Arrow (1951, 74) noted that if a majority of individuals have the same ranking of social states, the decision rule could be made by majority, supporting the idea that similar attitudes about social states are necessary for the formation of col­ lective judgements. Guilbaud’s position was more radical: he argued that general interest cannot be reduced to particular interests. He demonstrated the impossibil­ ity to conceive general interest as a utility function of individuals if one admits that this utility is ordinal; general interest cannot be conceived as a combina­ tion of particular interests. When unanimity is not achieved, struggle prevails and, according to him, game theory should provide the basis for analysing the outcome. Choice under uncertainty

In Theory of Games and Economic Behavior, von Neumann and Morgenstern returned to Bernoulli’s analysis of choices under uncertainty. Their contribution was widely discussed both in the United States and in France. In May 1952, the CNRS organised a conference on the foundations and applications of risk theory where American (notably Samuelson, Savage, Friedman and Morgenstern) and French (Guilbaud, Malinvaud, Pierre Massé (1898–1987), Georges Morlat (1924– 2022) and Allais) economists had the opportunity to discuss their ideas. It was only after this colloquium that Allais received the results of the investigation he had car­ ried out in June and September 1952, on the basis of which he rejected the theses of the “American school”. Von Neumann and Morgenstern (1944, 26) considered a system U made up of entities u, v, w. . . . They postulated the existence of a complete and transitive order relation in U and an operation: pu + (1 ­ p ) v = w "p Î [ 0,1]

(1)

They interpreted u, v and w as cardinal utilities and p as a probability. w is a math­ ematical expectation and the relation (1) states the principle of the expected util­ ity theory according to which, among various risky alternatives, the one with the

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highest mathematical expectation of utility will be chosen. They introduce into their algebra the axiom of compound probabilities: p éë qu + (1 ­ q ) v ûù + (1 ­ p ) v = pqu + (1 ­ pq ) v It makes no difference whether a combination of two random perspectives, u and v, is obtained in two successive steps – the first with probabilities p and (1 – p), the second with probabilities q and (1 – q) – or in a single step with probabilities pq and (1 – pq). In his speech at the CNRS colloquium, Samuelson introduced the axiom of strong independence, which he considered crucial for establishing expected utility theory (1952, 672). Combining, with the same probabilities, two random perspec­ tives with a third has no effect on the order of preference:

He noted that none of the axioms stated by von Neumann and Morgenstern cor­ responded to his hypothesis of strong independence. Malinvaud (1953, 163) inter­ vened in the discussion, arguing it was implicitly introduced in the work of von Neumann and Morgenstern, following from relation (1). In order to analyse the independence axiom, Massé and Morlat thought that the meaning of the word preference should be clarified (1953). Let us consider two random perspectives, P1 and P2. We state that P2 is absolutely superior to P1 , if, for any x, the probability of winning at least x is greater when P2 is chosen. If this is true only for certain values of x, the two perspectives are comparable only in a subjective sense. If one perspective is absolutely preferable to the other, the inde­ pendence axiom is a theorem. If not, the validity of the axiom cannot be established a priori, it is a matter of fact, and experience must be used to establish it. Breaking with a long-standing tradition that held experimentation to be impossi­ ble in economics, Allais undertook to conduct a survey that would determine whether people (considered to be rational) followed the principles of utility expectation the­ ory. He focused in particular on extreme cases of very small or very high gains. For small payoffs, it can be assumed that their utility is proportional to their amount so that the value of a random perspective is equal to its mathematical expectation. However, individuals do not always prefer the prospects with the highest mathematical expectation: cautious people prefer small but certain gains to risky bets, even if the latter are more profitable on average. To show this, Allais (1953, 59) asked respondents to choose between the follow­ ing two perspectives: Situation A Certainty of receiving 100 million

Situation B 10 chances in 100 of winning 500 million 89 chances in 100 of winning 100 million 1 chance in 100 of winning nothing

380 Alain Béraud and Claire Silvant

Then he asked them to choose between situations C and D defined as follows:

Situation C

Situation D

11 chances in 100 of winning 100 million 89 chances in 100 of winning nothing

10 chances in 100 of winning 500 million 90 chances in 100 of winning nothing

Cautious people may prefer to receive certainly 100 million than to run the risk, however small, of gaining nothing: they prefer A to B. For them, one can write: u (100 ) > 0.1u ( 500 ) + 0.89u (100 ) + 0.01u ( 0 ) but if this were so, these people would have to prefer C to D because 0.11u (100 ) + 0.89u ( 0 ) > 0.1u ( 500 ) + 0.9u ( 0 ) But this is not always the case: cautious people who prefer A to B, prefer D to C because in this second choice, the attraction of certainty has disappeared. Expected utility theory cannot explain the behaviour of agents because, according to Allais (2008), it ignores factors significantly affecting their choices: it neglects the distri­ bution of utilities around their mean, whereas the shape of the density function is a crucial element for the analysis of choices under uncertainty in particular; it dis­ regards the strong dependence between the various contingencies when large sums of money relative to the agents’ wealth are at stake, and it neglects the preference for safety in the neighbourhood of certainty. For a long time, the Allais paradox appeared to be a curiosity. The expected util­ ity hypothesis appeared to be a convenient way of making decisions in a risky uni­ verse, even if it sometimes went wrong. However, numerous experiments revived the issue at the end of the 1970s and the axiom of independence was clearly chal­ lenged. The choice of a risky project cannot be separated from events affecting the agent’s situation.22 Equilibrium and optimum

In his Traité d’économie pure and in Economie et intérêt, Allais had raised, but not fully solved, a series of questions that French-speaking economists had already tried to answer. They concerned, in particular, the existence of equilibrium, the optimality of resource allocation and the management of public enterprises. Allais had simply noticed that his system of equations was determined. Debreu and Arrow demonstrated the existence of equilibrium, using different mathematical concepts from those employed by Allais. Allais, relying on the notion of distributable sur­ plus, proposed a measure of the loss incurred by an economy deviating from the 22 The impact of the Allais paradox on expected utility theory has been studied by Jallais and Pradier (2005).

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optimum. Debreu proposed substituting a coefficient of resource utilisation. To the question of whether an increase in the amount of capital available to an economy could increase welfare, Allais answered by reasoning on a stationary economy. The optimum was then reached when the interest rate was zero in the productive sector. Malinvaud, Allais and Jacques Desrousseaux (1912–1993) generalised this reasoning to the case of a growing economy where the optimum is reached when the interest rate is equal to the growth rate. Allais had argued that, to maximise social returns, products should be sold at their marginal cost in the undifferen­ tiated sector. How could this proposition be implemented? How to define mar­ ginal cost? Can we accept the deficit implied by this pricing when the marginal cost is lower than the average cost? Marcel Boiteux proposed answers to these questions. Existence of equilibrium

In August 1952, Gérard Debreu presented a paper at the National Academy of Sciences of the United States of America titled “A Social Equilibrium Existence Theorem”; in December of the same year, he presented another paper to the Econometric Society, “Existence of an Equilibrium for a Competitive Econ­ omy”, written with Kenneth Arrow. Their purposes were different. In the first, he generalised the concept of game to n people and the notion of Nash equi­ librium. In Debreu’s view, the action an agent chooses to take affects not only the payoffs of other agents, but the domain in which they can act. Equilibrium is reached when no player has an advantage in changing his action. What is at stake in the second paper is the existence of a solution to a system of simultane­ ous equations, à la Walras, providing the equilibrium of supply and demand in each market. The structure of this model is similar to that adopted by Allais in his Traité.23 In his Theory of value, Debreu took up an idea Arrow had already suggested (1953): when studying the allocation of resources under uncertainty, one must dis­ tinguish goods according to the conditions in which they are available: “A contract for the delivery of a commodity now specifies, in addition to its physical proper­ ties, its place and date of availability, an event whose realisation conditions the delivery” (Debreu 1959, 106). He presented this theory as an axiomatic analysis of 23 There is no money and the mechanism of exchange is not made explicit. The goods, which are finite in number, are characterised by their physical nature but also by the place and date at which they are delivered. There are three types of agents: firms, consumers and a fictitious agent, the market partic­ ipant. Each production unit can access a closed and convex set of production techniques. Production is irreversible in the sense that it is not possible for two vectors of production to compensate each other exactly. Firms maximise their profits. Competition is perfect. Consumers can be individuals or households but also institutions. The set of consumption vectors is closed and convex. A continuous function represented the preferences; there is no saturation point and indifference areas are convex. Arrow and Debreu introduced a more specific hypothesis: they believed that, for an equilibrium to exist, each individual must have enough to live on, possess goods or be able to offer his labour, and that, in equilibrium, the latter has a positive price.

382 Alain Béraud and Claire Silvant economic equilibrium, probably influenced by Bourbaki’s Éléments de mathéma­ tique (1939). To Debreu, the theory, in a strict sense, is logically completely disjointed from its inter­ pretations. To fully emphasise this split, all definitions, assumptions and main results of the theory, in the strict sense, are written in italics. . . . Such a dichotomy reveals all the assumptions and the logical structure of the anal­ ysis. It also makes possible immediate extensions of this analysis without modification of the theory by a mere reinterpretation of the concepts. (1959, VIII) In sum, the mathematical expression of an axiomatised theory is entirely separated from its economic content. In Walrasian general equilibrium models, prices are given. To relax this assump­ tion, it is natural to turn to Edgeworth’s analysis of an exchange economy, since he focused on the sole exchanges that are Pareto-optimal and thus defined the con­ tract curve. To plot competitive equilibria on this curve, he considered an economy where consumers are divided into two groups, each comprising n agents. Within each group, consumers are identical in their resources and preferences. Edgeworth showed that with an increasing number of agents, a single competitive equilibrium tends to emerge. This outcome was generalised by Debreu and Herbert Scarf in 1963, taking up the notion of core that the philosopher of science Donald Gillies (1928–1975) had put forward: an allocation is in the core if there is no coalition of agents that can improve the situation of some consumers without worsening that of others. After having shown that the competitive equilibrium belongs to the core, Debreu and Scarf followed the procedure used by Edgeworth to prove what hap­ pens to the core when the number of consumers tends to infinity: they assumed an economy including m consumer types, with r consumers of each type. They then demonstrated that if an allocation of resources between the m types of agents is in the core for any r, then it is a competitive allocation.24 Resource allocation and optimum

Allais had proposed a measure of deadweight loss in terms of a specific good selected arbitrarily. Boiteux (1951a) transposed this reasoning by using Roy’s indi­ rect utility function (1942) so that the loss is measured, like in Hicks, by a compen­ satory variation in income. Let us consider an economy at the optimum where the utility of individual h is a function uh ( p, Rh ) of prices p and income Rh . If, as a result of government policy, prices become p + d p and income becomes Rh + d Rh, then the loss of the agent h will be dr h so that: uh ( p + d p, Rh + d Rh ) = uh ( p, Rh + dr h ) 24 On general equilibrium analysis, see the books by Weintraub (1993) and Düppe and Weintraub (2014).

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The total loss for the economy is the sum of the compensating movements. To address this same problem, Debreu (1951) deviated more from Allais’ approach.25 He redefined optimum as a situation where, if we want to keep eve­ ryone’s utility unchanged, one cannot decrease the quantity used of one resource without increasing the quantity of another. To demonstrate the two fundamental theorems of welfare economics, Allais (1943) used differential calculus; for his part, Debreu relied on the theory of convex sets. Debreu measured the deadweight loss by a coefficient of resource utilisation, defined as the ratio between the value of resources needed to enable each individual to achieve at least a given level of utility, and the value of available resources. In this calculation, resources are valued at their equilibrium price. Allais (1947, 162–4) showed that, to apply the notion of optimum to an intertemporal economy, one must redefine it as a situation where any increase in the satisfaction of some individuals during certain periods necessarily has as a counter­ part a decrease in the satisfaction of other individuals, or of the same individuals in other periods. One may ask whether, starting from an optimal situation, an increase in initial capital can increase welfare. To address this question, one must take into account the fact that maintaining capital at a higher level requires more resources to be devoted to replacing worn-out capital. Based on this idea, Allais (1947, 180– 81) demonstrated that to reach maximum productivity in a stationary economy, the interest rate in the productive sector must be zero. The question is thus what happens in a growing economy. Should one save more today to consume more tomorrow? Is there an optimal amount of capital? To answer these questions, Malinvaud (1953, 1959) and Jacques Desrousseaux (1961) used different models: Malinvaud relied on von Neumann’s model (1935–36) in which he introduced final consumption and the scarcity of natural resources, while Desrousseaux, like Allais (1962), took up the analyses of capital by Stanley Jevons (1871) and Eugen von Böhm-Bawerk (1889). In a 1953 paper, Malinvaud distinguished between optimality, which he defined as Pareto did, and efficiency. He considered that a “chronicle” – defined as a series of time periods – is efficient if there is no other chronicle that increases the con­ sumption of a good in a period while maintaining, at least, the consumption of each good in each period. Malinvaud showed that a vector of prices can be associated with an efficient or optimal chronicle. Von Neumann (1935–36) had developed a model in which all the productions increased at the same rate; the whole outcome was invested, and the final consumption was zero. To discuss optimality in this framework, Malinvaud (1959) introduced final demand into this model, defined as the difference between final consumption and the services that natural resources provide. He defined the “harmonised” growth as a process in which inputs, outputs and final demand evolve at a constant rate. He finally demonstrated that in a com­ petitive economy, the rate of interest is higher than the growth rate when the value of final demand is positive (1959, 226), that is, when the value of final consump­ tion is higher than that of the primary factors used. The rate of interest is lower than 25 On the dead loss controversy between Allais and Debreu, see the article by Fèvre and Mueller (2022).

384 Alain Béraud and Claire Silvant the growth rate in the opposite case, and the two rates are equal only if the value of final demand is zero.26 Allais, on his side, described production as a temporal process (1947). He opposed primary factors – natural resources and labour – and produced means of production. A commodity which is available at time t requires primary produc­ tion factors to have been used θ time periods before. The amount of expenditure incurred then depends on the relative price of factors and therefore on the interest rate. He showed that at the optimum, the interest rate must be zero in a station­ ary economy. Desrousseaux (1961) extended this analysis to the case of a growth economy by introducing the concept of regularity – more specifically, the regular­ ity of employment of workers involved in a given phase of the production process. Under the condition that the proportion of workers whose output will lead to final consumption in θ periods remains constant, the interest rate is equal to the optimum growth rate. Pricing of public utilities

The nationalisation of a large number of companies after the Liberation led their directors to raise the question of the pricing of public services. In 1949, Gabriel Dessus, who was director of the commercial department of the national com­ pany Électricité de France (EDF), submitted a report on the general principles of public service pricing in which he highlighted the difficulties of interpreting the notion of marginal cost. This report had a significant impact; Dessus hired Marcel Boiteux who, after having defended a thesis on the optimum under Allais’s direc­ tion, was working at the SNCF (the National society of French railroads) on the possibility of implementing the marginalist principles that Allais had set out in his early works. Boiteux’s work resulted in the introduction of a “green price” (“tarif vert”):27 a different charge was applied depending on whether the consumption was for off-peak periods, peak periods or rush hours. Many economists in the late 1940s took up the idea that public services should be provided at their marginal cost. Boiteux argued that “The purpose of marginal cost pricing is to charge the consumer a price such that any marginal decision concerning his consumption costs him as much as it costs the producer” (1951b, 62). But defining the meaning of the term “marginal cost” is not straightforward. To illustrate the difficulties encountered, Dessus uses the apologue of the Calais traveller. Suppose a passenger arrives at Paris-Nord station just in time to catch the train to Calais. If some seats are vacant, the cost of carrying an extra passenger is close to zero; but if an extra car has to be added (or if another train has to be run, of even a new line has to be built), the cost of carrying an extra passenger increases dramatically and one wonders how, in these circumstances, marginal cost can be 26 A detailed account of Malinvaud’s contribution can be found in Assaf and Duarte (2020). 27 As explained by Boiteux himself, the term green tariff comes from the colour of the file in which this pricing scheme was proposed to the EDF Board of Directors, and has nothing to do with an environmental tariff.

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measured. But even if this first problem could be solved, another would immedi­ ately arise: if the marginal cost is lower than the average cost, should a price be adopted that implies a negative profit for the company? To the questions posed by Dessus, Boiteux provided an answer based on the example of electricity (1949): as consumption is irregular between off-peak and peak hours, electricity tariffs will have to be set in such a way as to flatten the peak while keeping the budget in balance. A first issue considered is that where demand is random or fluctuates between peaks and troughs. When the firm sets its prices, it enables its customers to know the price at which, during a given period, a product will be supplied to them. Based on this demand, the company will arrange its production, building new facilities or closing down existing ones. Thus, the aim is not to solve the problem of the Calais traveller; the question is how, and at what price, the company will satisfy its customers. However, productive capacity may be inadequate when demand or production techniques change abruptly. Demand for electricity is cyclical and vari­ ations in generating capacity cannot be adjusted to variations in demand. There would therefore be permanent unused capacity. Boiteux mentions the example of a power plant that has to cope with alternating days of higher demand and nights of lower demand; it has been built to produce a quantity q0 when the load is normal. Marginal cost γ is a function of the quantity produced q and the standard load q0 . Assume that q0 is a continuous variable: when building a power plant one can decide freely on its production capacity. The total expenditure D ( q, q0 ) involved in producing a quantity q is minimum when the quantity produced is equal to the plant’s regular production level, q0. The marginal cost of development, δ, is the derivative of the minimum total expenditure, D ( q0 , q0 ) , with respect to q0. When the load is constant, the size of the installation is optimal if the product can be obtained at minimum cost: the short-run marginal cost is equal to the mar­ ginal development cost g = d . But when the load is intermittent, that is, q1 in the daytime and q2 at night, the plant size will be optimal when g 1 + g 2 = 2d . In each period the price should be set at the short-run marginal cost. The size of the facil­ ity should be such that arithmetic average prices are equal to the marginal cost of development. Another issue arises under increasing returns: marginal cost is lower than average cost and the marginal cost pricing rule must be changed when the com­ pany is subject to a budgetary condition, such as no deficit, that is incompat­ ible with it. To take this issue into account, Boiteux (1956) proposed to add this requirement to the maximisation problem. His model included three sec­ tors: consumers, private companies and State-owned companies. The behaviour of consumers and private companies follows the usual pattern. State-owned enterprises are subject to two types of requirements: technical requirements and the institutional rule that prescribes a given amount of profit (e.g. zero); the behaviour of nationalised companies is not a given but is precisely one of the unknowns of the system. The optimum is then searched for, which would later be called the second best, by maximising the utility of one consumer, taking the utility of other consumers as a given.

386 Alain Béraud and Claire Silvant 3. After the “Trente Glorieuses” At the end of the 1960s, a shift occurred in the work of French-speaking economists, for several reasons. The training of economists improved in France with the crea­ tion in 1960 of a degree in economics where mathematics and statistics were taught. Increasing numbers of engineers and mathematicians became interested in econom­ ics; many of them joined the ranks of university professors, thus blurring the tra­ ditional distinction between engineering economists and academics. New research centres were created: the CEPREMAP, in France, and the CORE, in Belgium, con­ tributed significantly to the development of economic thinking. In parallel, interna­ tional relations between economists became closer; many young French-speaking economists defended their theses abroad, particularly in the United States. The number of works written by economists of different nationalities increased. Thus, the particular identity of a French-speaking tradition gradually diminished. The contributions of French-speaking economists after 1970 are numerous and concern very different fields. We distinguish three types of work: work proposing a critical reading of mainstream approaches; work developing general equilibrium models; and finally, we group together, in a more heterogeneous category, singu­ larly innovative work in microeconomics, especially in industrial economics, and contributions in growth theory emphasising patents and innovation. New approaches and critiques of “mainstream economics”

Many French-speaking economists have criticised mainstream economics in vari­ ous ways. Some of them sought in Sraffa’s work the possibility of developing a theory of production prices which they saw as an alternative to the theory of equi­ librium prices. Others were interested in the evolution of the economic system and formed the “école de la régulation”. Those who worked on inequality also appeared to be critical of the mainstream: some economists attempted to explain why trade between nations is unequal, some others have sought to build a theory of justice while others have developed empirical research on the evolution of inequality or on the most appropriate measures to fight poverty. New theoretical perspectives

The publication of Piero Sraffa’s The Production of Commodities by Means of Commodities, of which Serge Latouche published a translation in 1970, aroused considerable interest among French-speaking economists (Arena and Ravix 1990). In their view, Sraffa’s analysis showed it to be possible to frame a theory of prices breaking with false symmetry between producers and consumers, and emphasis­ ing the concept of reproduction over that of scarcity, thus regaining the features of the classical theory (Bidard 1991). This theory of production prices represented an alternative to the theory of value as developed by Debreu and Arrow. They relied on Sraffa’s book and on the arguments put forward by some Cam­ bridge economists to criticise the neo-classical theory of capital: since the value of capital depends on the rate of profit, a fall in the latter may make a technique

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employing more capital more expensive. The demand for capital is therefore not necessarily a decreasing function of the rate of profit. A problem arises, however: while this criticism is relevant to some versions of marginalism, for example Böhm-Bawerk’s analyses of interest theory, it seems inoperative when applied to general equilibrium theory, since this theory does not refer to the notion of aggre­ gate capital (Faccarello and Lavergne 1977, 303, Bidard 1991, 93). It was also hoped to address some poorly resolved issues in Marxist theory, in particular the problem of the transformation of values into prices. For instance, Abraham-Frois and Berrebi (1979, 1984) sought to determine when both condi­ tions – equality of the sum of prices and values; equality of aggregate profit and aggregate surplus value – allowing a correct transition from values to prices were simultaneously satisfied. Other economists – Benetti et al. (1976) – were nonethe­ less sceptical. They pointed out that the Sraffian assumption that wages are paid post factum was not accidental. On the one hand, it was required to set up the invar­ iant standard, and on the other it led to considering the wage as a mere category of distribution. However, according to them, the wage is a category of distribution only because it is a category of production.28 The case of joint production has been debated extensively because it seems to challenge the idea that, in the Sraffian theory, prices are production prices that do not depend on demand. When each activity produces one good (and only one), and when returns are constant, it is always possible to adapt the production level to demand if the matrix of technical coefficients is indecomposable and productive. But if certain activities produce several goods simultaneously, this is no longer the case and it is not possible to eliminate demand from the analysis, which is why Abraham-Frois and Berrebi (1981) considered it to be the “hidden face” of the analysis. D’Autume (1990, 255) concluded that in joint production, there are several production systems ensuring the pro­ duction of all goods. It is therefore demand that determines the equilibrium production system. . . . This allows us to stress that demand plays an intimate role in the determination of prices, which cannot thus be qualified, in a gen­ eral way, as production prices. Bidard (1991, 219) reached a conclusion similar to that of d’Autume, but by dif­ ferent means. Theories of regulation

The work of the regulation school (“école de la régulation”) is described by Robert Boyer (b. 1943) as an attempt to extend Marx’s analyses by drawing on the tradition 28 These analyses, which relied on Sraffa’s work to reinterpret the Marxist theory of value, were ana­ lysed by Gilbert Faccarello (1983, 1997). He criticised them for restricting themselves to analysing the relationship between the value of commodities and the quantity of labour required to produce them, without addressing the notion of abstract labour, which however plays a crucial role in the Marxist theory of value.

388 Alain Béraud and Claire Silvant of the Annales school in history (Boyer 2015, 6).29 Engineer economists – such as Michel Aglietta (b. 1938), Bernard Billaudot (b. 1939) and Robert Boyer – ini­ tiated this trend; they worked on the development of macroeconometric models within INSEE or the forecasting department of the Ministry of Finance. In the early 1970s, observing with some disappointment discrepancies between the forecasts of their models and empirical observations, they realised the limitations of modelling and sought the origin of these discrepancies in the structural transformations that the French economy was undergoing at that time.30 In Régulation et crises du capitalisme (1976), Aglietta developed a historical analysis of the economic and social evolution of the United States based on Marx’s distinction between production of absolute and relative surplus-value; the inter-war period is said to be a period of transition from a regime of extensive to intensive accumulation. The central factor in this process is the long-term lowering of the social cost of reproduction of labour power, which leads to a rising capacity for accumulation; this evolution allowed the development of a new mode of regulation based on a new form of work organisation, Fordism, and on a mode of consump­ tion characterised by the mass production of standardised goods. A comparable study was conducted for France by researchers at CEPREMAP, whose conclusion was as follows: stagflation in France was the result of the evo­ lution of social relations and economic structures, in particular the modalities of wage bargaining, state intervention and the organisation of the banking system (Bénassy, Boyer and Gelpi 1979). They distinguished between competitive regula­ tion based on price adjustment and monopoly regulation where prices are adminis­ tered or collectively negotiated. Price variations are thus disconnected from market disequilibria, which implies that the regulation of the system is ensured by other mechanisms – extension of indirect wage, unemployment benefits, cyclical budg­ etary policies, and guarantee of the solvency of the banking system by the Banque de France. The history of regulation theories is somewhat paradoxical. The founding works attempted to analyse a type of societal organisation that Aglietta described as Ford­ ist; however, this regulation mode entered into crisis precisely at that time. The task of the advocates of regulation theory was to understand this crisis, and to do so, their initial formulations had to be thoroughly revised. As one moves away from the period of the Trente Glorieuses, the initial expression proves to be increasingly inadequate to capture the emerging 29 The Annales is a history review founded in 1929 by Marc Bloch (1886–1944) and Lucien Febvre (1878–1956) who tried to produce a global history beyond the political, military or diplomatic aspects. The influence of this journal was considerable in France. 30 In an article on the evolution of wages in France, Aglietta (1971) questioned the effectiveness of the estimated Phillips relationship because it only fitted properly one part of the post-war period. He concluded that two periods should be distinguished along a boundary that he places in 1958–59, when de Gaulle returned to power and introduced a series of economic reforms. He suggested that changes in the general conditions of wage and price formation – removal of indexation, absence of price regulation, introduction of international competition – played a decisive role in this evolution.

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modes of development. The concept of hierarchy between institutional forms is thus introduced to account for the gradual domination of the monetary and then financial regime at the expense of the wage relationship. . . . Thus, the theory of Fordism must give way to a political economy of institutional change within the different types of capitalism. (Boyer 2015, 418) The regulation school has found extensions in the economics of conventions, developed by Robert Salais, André Orléan (both former students of the École Poly­ technique and ENSAE) and Olivier Favereau. They consider that theories based on rationality, competition and the achievement of equilibrium through prices are not very effective in explaining the coordination of economic activities. Instead, they emphasise the importance of conventions: to them, the agreement between individuals, even when it is limited to the contract of a commercial exchange, is not possible without a common framework, with­ out a constitutive convention. . . . We try to take into account the variety of possible coordination principles, as well as the existence of situations where a priori antagonistic aims are confronted. (Dupuy et al. 1989, 141) Unequal exchange, social justice, inequality and poverty

In his time, Marx had explained how capitalists exploited workers, but he did not analyse the economic mechanisms by which one country could exploit another. This issue was addressed by Arghiri Emmanuel (1911–2001) in L’échange inégal (1969) (“unequal exchange”). Where Ricardo had shown that in international trade no country could lose out, Emmanuel intended to demonstrate that countries could become wealthier at the expense of others. Observing that the real wage rate was different across countries, he gave up the Ricardian theory of wage, and consid­ ered wages as an independent variable.31 Thus, wages determine prices, and differ­ ences in wages lead to inequality in trade. International trade is indeed a process of exploitation of poor countries. This is because their exports are sold at a low price because wages are low, whereas imports from rich countries are expensive because wages are high. Thus the labour that poor countries have to provide to pay for their imports is greater than the labour needed to produce the goods they export, in a cumulative way.32 This analysis, which called into question the convergence of the struggles of the proletariats of the rich countries and national liberation movements, was vigorously debated by Marxist economists, especially by Charles 31 He modified Ricardo’s assumptions: capital can be freely moved across countries so that the profit rate is uniform, while labour is not mobile. 32 Once a country has taken the lead, it starts, through unequal exchange, to make other countries pay for its high wages. From that moment on, the enrichment of one becomes an increasing function of the impoverishment of the others (and reciprocally).

390 Alain Béraud and Claire Silvant Bettelheim (1913–2006), Christian Palloix and Samir Amin (1931–2018).33 The debate focused in particular on the issue of wages as an independent variable. Social justice and inequality is a field of research which witnessed major con­ tributions by French-speaking economists after 1970, and on which they are still at the forefront of research. Serge-Christophe Kolm’s thought (b. 1932) stands out in this respect: he remarked that while economists have much to say about efficiency, they are almost silent on the distribution of welfare, that is, on social justice. Worse still, they have left out the question of inter-individual utility com­ parison: “Even if not the only issue, the problem of justice is essential, omnipres­ ent and inevitable” (Kolm 1972, 13). In order to define optimal distribution, the economist does not rely on a value judgement, but simply observes the opinions and value judgements of individuals as he observes their consumption choices. From these data, he deduces the optimal production of goods and the optimal dis­ tribution of wealth; thus, normative economics is based on the objective observa­ tion of subjective opinions. A state of society is called equitable if each person prefers to be in her own situation rather than in any other person’s situation, that is, if each thinks of everyone else: ‘I’d rather be in my place than in hers’. . . . In other words, equity implies that no one can be jealous of anyone else; there is equity when no one has a possible reason to be envious. (Kolm 1972, 23) If we accept this definition, a series of questions can be asked. Do fair states pos­ sibly exist? Are there efficient fair states? Kolm’s idea provoked a wide-ranging debate discussed by Marc Fleurbaey (1996). This theoretical work on the notion of justice is complemented by empirical research on inequality. Thomas Piketty (b. 1971) began by looking at inequal­ ity through the prism of high income (Les hauts revenus en France. Inégalités et redistribution 1901–1998, 2001). Tax data show that inequalities in France fell significantly between 1914 and the middle of the century and then increased with­ out returning to their initial level. This evolution is explained by the variation in the share of very high incomes (the first thousandth, or even ten thousandth, of the income distribution); more precisely, the strong variations in capital income explain the evolution of high incomes and inequality. Piketty’s results are in con­ trast to those of Simon Kuznets, who explained that while inequalities increase in the first phase of development, they tend to decrease in a later stage – the French case shows the opposite. Moreover, whereas for Kuznets the evolution of the dis­ tribution is essentially due to “natural” causes, Piketty’s explanation is quite dif­ ferent: the evolution of the distribution is explained by fiscal policy and by the effects of the major shocks of the wars and the great depression. Le capital au XXIe siècle expands this first study in space and time. The main conclusion he draws 33 In particular, see the books by Samir Amin, L’accumulation à l’échelle mondiale (1970) and L’échange inégal et la loi de la valeur (1973).

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is that “the history of the distribution of wealth has always been deeply political, and it cannot be reduced to purely economic mechanisms” (Piketty 2013, 20). The reduction in inequality observed in the developed countries from 1900 to 1910 and from 1950 to 1960 is primarily the product of wars and the policies put in place following these shocks; the increase in inequality from 1970 to 1980 appears to be the effect of fiscal and financial policies. However, Piketty accepts that the diffu­ sion of knowledge and skills is a central mechanism for reducing inequality. Con­ versely, in a world where the rate of profit exceeds the rate of growth – a situation he calls “the central contradiction of capitalism” (2013, 571) – the accumulation and concentration of capital is the main determinant of rising inequality; indeed, the wealth generated in the past accumulates faster than production and wages grow. He believes the answer lies in a progressive tax on capital that would prevent an increase in inequality while preserving the incentives for further accumulation. Piketty’s analysis suggested the need for tax reforms, the implementation of which may be an issue in an open global economy; in other words, is tax progres­ sivity compatible with globalisation, especially financial globalisation? This issue is addressed by Emmanuel Saez and Gabriel Zucman (2019); to them, globalisation does not fundamentally compromise the ability of states to tax large corporations and the wealthiest.34 How to increase taxation on large fortunes in a globalised world? Saez and Zucman explain that in order to avoid tax evasion by the richest, it would be sufficient to copy the US legislation which stipulates that US citizens are taxable for life in the United States. Conversely, to prevent multinationals from declaring their profits where the tax rate is lowest, what they call the “tax gap” should be taxed.35 While Saez and Zucman focus on the taxation of the ultra-rich, Esther Duflo (b. 1972) addresses the poorest. Her work with Rachel Glennerster and Michael Kremer (Duflo et al. 2008) is an attempt to rethink the way economists view the fight against global poverty. She argues that too much effort has been expended in vain to address fundamental questions: What is the ultimate cause of poverty? How much confidence should be placed in market mechanisms? The research has failed to answer these questions, and even the resulting anti-poverty programmes have failed massively. Duflo proposes a contrasting approach: aid programmes must first be evaluated in detail, since “nuts and bolts” play a crucial role in their failure or success. This requires not only scientists and engineers but also what she calls “economist-plumbers”: The economist-plumber stands at the shoulder of scientists and engineers, but has the safety net of a bounded set of assumptions. She is more concerned 34 Indeed, for them, a sound tax system in the twenty-first century must be based on progressive income tax, a tax on corporate profits, and a progressive tax on wealth (the only one capable of ensuring that the ultra-rich pay according to their true ability to pay). 35 Consider the case of a company with its head office in France. The tax deficit is the difference between the amount of taxes it should pay in France and the amount it pays in the tax haven where it is declared. If the company is French, the French state can and should seize the whole of this deficit. If the company is not based in France, the French state would collect a fraction of the tax deficit proportionate to its sales in France.

392 Alain Béraud and Claire Silvant about “how” to do things than about “what” to do. In the pursuit of good implementation of public policy, she is willing to tinker. Field experimenta­ tion is her tool of choice. (Duflo 2017, 3) The very nature of her work leads the economist-plumber to ask herself the prob­ lem of causal inference. For example, she must be able to determine whether a reduction in class size improves student outcomes. But in order to ascertain this, one must be able to estimate the results that students in small classes would have achieved if they had been in large classes, and conversely. It is not possible, claims Duflo, to estimate the effectiveness of the measure by tracking a student who moves from one type of class to the other over time. By contrast, the average effects of the programme on a group of students can be obtained by comparing their results with those of a similar group of students who did not receive the programme. Thus, the procedure for analysing the effects of a programme is similar to that used to test the effects of a new drug. Esther Duflo and Abhijit Banerjee applied their research agenda through field experiments, conducted following the creation of the J-PAL (Poverty Action Lab) in 2003. The J-PAL implemented randomised experiments that evaluated the relevance of an anti-poverty measure by comparing its effects to the situation of a control group. Duflo’s field experimentations had a great impact both on fundamental research methods and in the application of development assis­ tance programmes by international agencies. Developments on general equilibrium

Another significant field of contributions by French-speaking economists after 1970 concerned general equilibrium. These contributions were very diverse. First, some economists sought to clarify some of the properties of the Arrow–Debreu model (1953), in particular the uniqueness and properties of aggregate demand functions. As some questions – such as the question of the uniqueness of equilib­ rium – remained unanswered, other economists reformulated the problem or turned to old models that had, somewhat surprisingly, been forgotten during the 1950s and 1960s. Finally, some French-speaking economists developed non-Walrasian general equilibrium models. New insights into the Arrow–Debreu model

The Arrow–Debreu model has been considerably discussed and amended in France since the 1970s. The discussions first focused on the important issue of the unique­ ness and the stability of equilibrium.36 Abraham Wald (1936, 376) had demonstrated 36 However, from the very first work on general equilibrium, doubt started to creep in. In the first edition of his Éléments d’économie politique pure, Léon Walras already pointed out that several equilibria could exist in his analysis of exchanges between two goods. However, he agreed that in the case of the exchange of several goods, “generally speaking, there are not . . . multiple current

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the uniqueness of equilibrium under the assumption that the marginal utility of a good depends more on the variation in the quantity of that good than on the vari­ ation in the quantity of other goods; then Arrow and Hurwicz (1958, 546) proved the uniqueness of the equilibrium under the assumption that goods are pure substi­ tutes. For Debreu (1970), trying to demonstrate the uniqueness of equilibrium in a general way is an overly ambitious goal. An economy can have several equilibria as long as these equilibria are locally unique; however, under very general condi­ tions, if an economy has a finite number of equilibria, these equilibria are locally unique. For the number of equilibria to be finite, in the vicinity of any equilibrium, a change in the price vector must affect the demand for goods: the economy cannot remain in equilibrium. In this case, it can be said that the equilibrium is regular; and if all the equilibria of an economy are regular, we say that the economy is regular. For Debreu, situations where the number of equilibria is infinite are not widespread; therefore, any “random” exchange economy can be said to have a finite number of equilibria and these equilibria are locally stable. Another debate involved the functions of excess demand, based on the obser­ vation that aggregate and individual functions have different characteristics.37 Economists then discussed at length the issue of aggregating individual demands. Sonnenschein (1972, 549) asked the reciprocal question: “Can an arbitrary con­ tinuous function, defined on a compact subset C of the interior of a positive ort­ hant, be an excess demand function for some commodity in a general equilibrium economy?” Sonnenschein (1973), Mantel (1974) and Debreu (1974) answered positively. Debreu considered an exchange economy with l goods and m consum­ ers. The demand of the ith consumer is a function f i ( p, p. ei ) of price vector p and of his income p.ei where ei is the vector of initial endowments of i. The aggregate excess demand function F is defined as the sum of individual demands: m

F ( p ) = å éë f i ( p, p.ei ) ­ ei ùû

(2)

i =1

Under usual hypotheses, F is considered as continuous and fulfils Walras’ law with pF ( p ) = 0 . To Sonnenschein’s question about the possibility of finding a vector of initial endowments e and m consumers satisfying relation (2), Debreu’s answer was yes, provided that the number of consumers is not less than the num­ ber of goods. The reactions of French-speaking economists to these results were very con­ trasted. For Yves Balasko (1988, 69), the main interest of the Sonnenschein– prices possible” (1874, 242) but the evidence is lacking and multiple equilibrium situations are nevertheless possible. 37 The properties of the individual functions are very specific: they admit partial derivatives of any order, they are bijections, the associated Slutsky matrix is symmetric (defined as negative definite) and they satisfy the weak axiom of revealed preferences. In contrast, aggregate functions have few properties: they are homogeneous of degree zero in the set of prices and satisfy Walras’ law. Under a set of traditional assumptions, they are continuous and one can then ensure that an equilibrium exists.

394 Alain Béraud and Claire Silvant Mantel–Debreu theorem was to show that the local behaviour of aggregate excess demand can take any form, which is important when studying stability. He nev­ ertheless admitted that this demonstration did not exclude a specific behaviour of aggregate excess demand when one or more prices tend towards their limits: zero or infinity. Conversely, Alan Kirman (1989, 126) considered that the edifice around the general theory would be pointless, “in the sense that one cannot expect it to house the elements of a scientific theory, one capable of producing empirically falsifiable propositions”. Lastly, Jean-Michel Grandmont’s analysis was different: he tried to demonstrate the stability of equilibrium without relying on assumptions – such as pure substitutability – that are directly related to aggregate demand func­ tions. He took up an idea that Werner Hildenbrand (1983) had already put forward: to analyse the relationship between aggregate demand and individual demand, it is necessary to specify the characteristics of the distribution of agents but exploit it differently. While Hildebrand was interested in the role of the income distribu­ tion, Grandmont emphasised the heterogeneity of preferences: when it increases, ceteris paribus, the equilibrium becomes unique and stable in any process of “tâtonnement”. Temporary general equilibrium models

Other attempts have been made to reformulate the analysis of general equilibrium. In line with the work of Erik Lindahl (1939), Hicks (1939) and Patinkin (1956), Jean-Michel Grandmont developed temporary general equilibrium models (1970, 1974). Instead of an atemporal equilibrium à la Arrow–Debreu where prices on all markets (spot and forward) are fixed at the initial date, Grandmont developed a model which questioned not only the issue of stability, but that of the existence of equilibrium. The reference model considers an exchange economy, in which time, t =1...n , is divided into discrete time periods. Consumption goods ct are not lasting and money, mt , is the only asset that allows the transfer of purchasing power from one period to another. At each date, agents make decisions based on current prices, pt , and prevailing interest rates as well as the expected values of these variables. The agent’s expectations are a function of his information about the current and past prices (viewed as given). Then the expected prices for t are functions y t ( p1 ) of current prices, and the demands of one agent for goods and money are determined by his utility maximisation as follows: Max u ( c1 , ¼ , cn ) under p1c1 + m1 = p1e1 + m

y t ( p1 ) ct + mt =y t ( p1 ) et + mt ­1

(3)

( t = 2,¼, n )

The individual demand function depends on current prices and the initial money endowment of the agent, and is homogeneous of degree 0 only if the elasticity of expected prices regarding current prices is 1, that is to say if Y ( l p1 ) = lY ( p1 ) .

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For this to be the case, either expected prices must be equal to current prices or the inflation rate must be independent of the current price level. By rewriting the utility function as a function of current consumption and the real value of its money holdings, Grandmont showed that the results of program (3) are identical to those of the following system: Max u ( c1 , m1 , p1 ) under p1c1 + m1 = p1e1 + m Thus, if the elasticity of expected prices is different from 1, the function v is not homogeneous of degree zero in m1 and p1 , so it cannot be claimed that utility depends on the agents’ real cash holdings. Grandmont (1974) finally showed that the real cash effect may be too weak, when the elasticity of expectations is 1, to ensure the existence of an equilibrium; the existence of equilibrium requires that the prices anticipated by some agents are not very sensitive to changes in cur­ rent prices. Multiple variations of the temporary general equilibrium model were developed later; Grandmont and Laroque (1973), then Fuchs and Laroque (1976) enriched them by introducing the hypothesis of multiple generations. Overlapping-generations models

Allais (1947) is credited with introducing several generations of agents into a gen­ eral equilibrium model; in particular, he developed a model where the life of indi­ viduals spans two periods, during which two generations coexist, the young and the old. People only work when they are young; their income and consumption in old age are entirely determined by their behaviour while young. The competitive mechanism leads to the maximisation of social returns in a restricted sense, which Allais considers unsatisfactory: the model takes into account the young person’s anticipation of the satisfaction of his future needs when he will be old, but not this satisfaction in itself. However, even if the agents’ expectations are perfect, these two utilities are different. Allais concludes that the maximisation of the social output in the restricted sense . . . actually implies the non-intervention of the State on the savings market, whereas the maximisation of the generalised social output [that is, which considers the satisfaction of the old] is in no way incompatible with such an action. (1947, 771)38 38 Paul Samuelson, who at that time had not read Allais’ book, introduced an overlapping genera­ tions model for similar reasons: he wanted to discuss the conditions under which an optimum could be reached. It highlighted a paradox: “If we suppose but two equal periods of life-work and retirement . . . it becomes impossible for any worker to find a worker younger than himself to be bribed to support him in old age” (Samuelson 1958, 474). A simple solution to this impasse is to introduce money into the system, but it is necessary to admit an infinite number of periods. This idea was debated and contested, but the popularity of generational models grew as evidenced by

396 Alain Béraud and Claire Silvant Despite the apparent similarities between the overlapping-generations models and the Arrow–Debreu model, their structures are different. A first problem was thus to establish the existence of an equilibrium and to study its properties. To demon­ strate the existence of equilibrium in a model à la Debreu, Lionel McKenzie (1959, 55) had introduced the hypothesis of irreducibility, defined as follows: “In loose terms, an economy is irreducible if it cannot be divided into two groups of consum­ ers where one group is unable to supply any goods which the other group wants”. To apply it to an overlapping-generations model where individuals live for only two periods, Balasko, Cass and Shell reformulated it: one cannot improve the welfare of a consumer of generation t without redistributions that involve consumers of the next generation (Balasko et al. 1980). Under this assumption, it is shown that this model has at least one equilibrium, but it can have several and even an infinite number.39 In 1985, Olivier Blanchard criticised the reasoning on an infinite horizon of economic agents (which underlies the Ricardian equivalence analysis by Barro in 1974). To do so, he developed a continuous time model, assuming that the instan­ taneous probability of death is the same for all agents regardless of their age. In this context, the effects of expenditure financing are quite different from Barro’s. In the case of tax financing, if individuals believe that they are likely to die before taxes increase, then the demand for goods will increase. Similarly, if government distributes public debt securities to agents while increasing taxes to pay the interest on debt, this will have effects on the real economy which will differ depending on whether the economy is open or closed. The new classical macroeconomists defended the idea that fluctuations were caused by exogenous shocks that disrupted an otherwise stable economy.40 Grandmont (1985, 996) opposed this idea,41 arguing that “by contrast to currently accepted views, a competitive monetary economy of which the environment is stationary may undergo persistent and large deterministic fluctuations under laissez faire”. He showed that cycles could appear in a purely endogenous way, even though markets are in equilibrium, in the Walrasian sense of the term, at each date and, expecta­ tions are fulfilled. Costas Azariadis and Roger Guesnerie (1982, 1986) demon­ strated the possibility of stationary sunspot equilibria.42 In their analysis, the origin of the cycles lies in the self-realising prophecies of the agents: it is because they believe that the existence or absence of sunspots affects prices that they fluctuate.

39

40 41 42

their place in advanced macroeconomics textbooks: Blanchard and Stanley Fischer (1989), Patrick Artus (1995), André Zylberberg (2000). Samuelson had shown examples of overlapping-generation economies where Walrasian equilibria are not optimal in the Pareto sense. Balasko and Shell (1980) explained this by the existence of a double infinity of consumers and goods. This led them to introduce a weaker notion of Pareto opti­ mum by limiting the possibilities of redistribution to a finite number of periods. Lucas (1975) investigated the effect of exogenous monetary shocks, while Kydland and Prescott (1982) of real exogeneous shocks. Grandmont particularly targeted Robert Lucas on the neutrality of monetary policy, as explained by Cherrier and Saïdi (2018) and Assous and Duarte (2017). By this term, they meant stationary equilibria with correct expectations where prices and quantities are affected by random variables that agents observe but which do not affect preferences, endow­ ments or techniques.

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Grandmont, as well as Guesnerie and Azariadis, reasoned on a simple model, where, as in Samuelson (1958), identical agents live over two periods: during their youth, they produce a non-durable consumer good, at the rate of one unit of good yt per unit of work lt ; when they grow old, they consume the goods produced by the young. Thus, the utility of a young person is a function of his current leisure time (1­ lt ) and of his future consumption level ct +1 . His budget constraint estab­ lishes that the value of the goods purchased during his old age has to be equal to the value of the goods he produced in his youth. As a result, the labour supply of the young person lt depends on his real wage, that is, on the quantity of goods he will be able to afford during his old age, so that lt = c ( ct +1 ) . Utility maximisation shows a substitution effect and an income effect for the labour supply: an increase in the real wage induces people to work more, but the increase in income that it implies can, on the contrary, increase the demand for leisure. If the substitution effect dominates, the labour supply function c ( ct +1 ) is increasing; otherwise, it is decreasing. If expectations are correct, then the supply of goods yt +1 is equal to the demand ct +1 , and the quantity of goods produced in period t is equal to the quantity of work performed yt = lt . We can therefore write yt = c ( yt +1 ) . The evolution of the economy is then described as a sequence of temporary equilibria that converge, or not, towards the stationary equilibrium defined as a sit­ uation where the product is constant. The function χ is increasing if the substitution effect dominates; but under certain conditions the income effect prevails; in this case, the function χ is successively increasing and decreasing. It is therefore not invertible; there are therefore configurations where endogenous cycles can occur as suggested in Figure 14.1. Grandmont (1985, 1022) showed that cycles in period 3 do exist if χ reaches a maximum for a value y * lower than the stationary equilibrium product y and when the second and third iteration c 2 ( y*), c 3 ( y*) are lower than y*. Azariadis and Guesnerie introduced uncertainty into this model by supposing that the economy is hit by a natural phenomenon, say sunspots. There are two states of nature a and b: sunspots can occur (or not), following a Markov process. If a (resp. b) occurs, the probabilities that a and b occur in the following period are p ( a ) = (p a / a ,1­ p a / a ) (resp. p ( b ) = (p a / b ,1 ­ p a / b ) ). These probabilities belong to common knowledge. To introduce prophecies, Azariadis and Guesnerie supposed that all the agents think that if a (resp. b) occurs, the price will be pa (resp. pb ). Their choices are determined by the maximisation of expected utlility under the constraint that they can in any case pay for the goods they want to consume in the next period. If sunspots appear, the labour supply sa (p a / a , p, pa , pb ) is determined by the following program, where p is the first period price: Max p a / a u ( cta+1 ,lt ) + (1 ­ p a / a ) u ( ctb+1 ,lt ) Under pa cta+1 £ p (1­ lt ) pb ctb+1 £ p (1­ lt )

398 Alain Béraud and Claire Silvant

Figure 14.1 Endogeneous cycles Source: (Grandmont 1985, 1021)

When no sunspot appears, the labour supply Sb (p a /b , p, pa , pb ) is determined by a similar program. They show that if, in the vicinity of equilibrium, the sum of the labour supply elasticities with respect to pa and pb is less than −1, there is at least one stochastic equilibrium that is fully correlated with sunspots.43 Thus, French-speaking economists contributed to the development of the theory of endogenous cycles which constitutes a credible alternative to the theories of exogenous cycles developed by new classical economists. Non-Walrasian equilibria

Yves Younès (1937–1996), Jacques Drèze (1929–2022), Jean-Pascal Bénassy (1948–2022) and Malinvaud were undoubtedly pursuing different objectives in their contributions. Drèze (1972) did not refer to the Keynesian tradition; he studied the existence of equilibrium in an economy where the allocation of resources is 43 The situation can be complicated by assuming that half of the agents believe that prices are determined by the appearance or non-appearance of sunspots, while the other half believes that prices are determined by the appearance or non-appearance of moon spots. It is assumed that the occurrence of sunspots and moon spots follow independent Markov processes. Agents determine their labour supply according to the theory they believe in without taking into account what others think. Since prices depend on each other, they are necessarily disappointed: their theories are weakly validated.

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determined by prices but where these can only vary within given limits and where agents can therefore be rationed. It departs as little as possible from the structure of the Arrow–Debreu model: there is no money and transactions are centralised. An equilibrium is obtained by introducing exchange rationing when the price con­ straint is effective.44 Younès’s (1970, 1973) concern was to study the role of money in exchange, taking as his starting point Robert Clower’s article (1967) which sought to analyse the micro-foundations of monetary theory. His thesis is that in an Arrow–Debreu model where prices ensure the compatibility of plans, there is logically no need for money; but money is essential in an economy where prices do not necessarily ensure market equilibrium. What characterises his model is not only the rigidity of prices but also the absence of Walrasian markets: agents meet, for example in pairs, and eventually conclude an exchange. To analyse the existence of an equilibrium in such an economy, Younès relies on the notion of strong non-cooperative equi­ librium. A similar structure can be found in the article he wrote with Malinvaud (1974) but the emphasis shifts: Malinvaud and Younès explain that Walrasian gen­ eral equilibrium theory is unable to give macroeconomics the foundation it needs because its assumptions are too simple, particularly because it admits that “each agent can bring to the market any complex of goods and obtain in exchange any other that has the same value” (1974, 66). Jean-Pascal Bénassy (1973) presents himself as an heir to Keynes, Clower and Leijonhufvud, regretting the lack of inter­ est in the study of disequilibrium situations, even after the contributions of Keynes and Marx. Bénassy developed a model of monopolistic competition to exclude the usual hypothesis of Walrasian models according to which prices are given (both for individuals and for firms). Instead, he proposed the more realistic idea that some firms control the price of the goods they produce. To illustrate the concepts and mechanisms of general equilibrium models, Bénassy (1973) and Malinvaud (1977) built simplified macroeconomic models that distinguish between a series of regimes: classical unemployment, Keynesian unemployment and repressed inflation, in Malinvaud’s terminology. These con­ cepts became popular and widely debated. Important lessons have been learned from this literature. The first is that macroeconomics must be based on microeco­ nomic foundations and that only general equilibrium theory can provide this foun­ dation. However, to do so, it must be profoundly modified, and the interest of the work mentioned above is that it offers a whole series of suggestions in this respect. Several questions remain unanswered, notably the question of expectations. The macroeconomic models of Bénassy (1973) and Malinvaud (1977) are uniperiodic (only the current period’s parameters are involved, whereas agents’ expectations about the future can affect their behaviour in the present period). To highlight the role of expectations, Bénassy (1973, 1984) and d’Autume (1985) reasoned over two periods. They focused on different factors: Bénassy on the analysis of intertemporal consumer choice and d’Autume on investment. Olivier Blanchard and 44 On non-Walrasian equilibria, see Béraud (2020) for further details.

400 Alain Béraud and Claire Silvant Jeffrey Sachs (1982) developed an intertemporal model with rational expectations where prices and wages adjust too slowly for markets to be always in equilibrium. This was the first step in the gradual shift from non-Walrasian equilibrium models to what can be described as neo-Keynesian analyses. Among these neo-Keynesian analyses, we can cite the approach of Bénassy (2002), who developed a series of dynamic macroeconomic models which he presents as a synthesis of four paradigms: general equilibrium theory, Keynesian theory, imperfect competition and the dynamic general equilibrium models devel­ oped by the new classical economists based on the assumption of rationality of expectations. Blanchard, on his side, supports the Keynesian idea that variations in aggregate demand affect the product. In his 1987 paper with Nobuhiro Kiyotaki, he showed that in an economy with monopolistic competition, if changing prices is costly – even if these costs are low – changes in the quantity of money can significantly affect the output. While in models with purely nominal rigidities, sta­ bilising prices can stabilise the product, Olivier Blanchard and Jordi Galí (2007) showed that this is not the case when nominal price rigidities and real wage rigid­ ity coexist. In 2010, they drew similar conclusions for an economy with labour market frictions (Blanchard and Galí 2010). In such an economy, there is unem­ ployment, but for it to be affected by technological shocks, nominal or real rigidi­ ties must exist. New insights into economic incentive, regulatory economics and innovation

A parallel study of Malinvaud’s (1968) and Laffont’s (1982–85) courses, both taught at the ENSAE, clearly illustrates the evolution of microeconomics between the 1960s and 1980s. Malinvaud’s lectures hardly ever mentioned information and incentives, whereas these two concepts were at the heart of Laffont’s work. This evolution started with the analyses of imperfect information situations which led to the development of a theory of incentives in procurement and regulation (as in the title of Laffont and Tirole’s 1993 book). In a second phase, Jean Tirole, based on these results, developed a theory of industrial organisation, conceived as a study of markets’ functioning characterised (or not) by strategic interactions. Research and development played an essential role in the competition between companies as well as for state intervention. The same is true for the economy as a whole insofar as technical progress is a crucial factor in increasing well-being. This is the reason why we have included here the presentation of neo-Schumpeterian analyses of growth that emphasise the role of innovation in economic development. Information and incentives

In the early 1970s, economists began to analyse situations where agents have imperfect, asymmetric information and cannot observe the actions of their part­ ners. French-speaking economists – notably Jean-Jacques Laffont (1947–2004) and Jean Tirole (b. 1953) – took part in this movement, relying on the analyses of moral hazard (Arrow 1963), anti-selection (Akerlof 1970) and the revelation

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principle (Gibbard 1973), and contributed significantly to the development of the theory of incentives and regulation. The work of Jerry Green and Laffont45 (1977a, 1977b) on the role of incentives in planning procedures is part of this approach. They sought to determine the level of production of public goods and the taxes that finance them when taxpayers can behave as “free riders”. To solve this problem, Green and Laffont apply to public goods the procedure that William Vickrey (1961) conceived to make participants in an auction reveal their preferences.46 On this basis, Green and Laffont devised a procedure that encourages agents to reveal their preferences for public goods. In essence, it involves asking each agent to reveal the utility of that good to him and charging only the cost that his choice inflicts on others. Whatever willingness to pay others claim to have, the best solution for each is to tell the truth: the mecha­ nism is incentive-based. Based on this result, Laffont and Tirole (1986a, 1986b, 1993) developed an anal­ ysis of the regulatory process as a relationship between an authority (the principal) and an operator (the agent). In particular, they studied the contracts between the State and companies operating under public service delegation, in the presence of various information asymmetries. How should the State regulate the price at which a public good is supplied by a company? There is an inevitable trade-off between rent and incentive to perform, which is exemplified by the opposition between two regulatory systems, price cap versus cost plus pricing. If the State compensates the firm by a system of price cap, the firm’s incentive to reduce its costs is maximised, since any cost reduction increases its profits, but the rent received by the firm is completely beyond the control of the planner. On the contrary, a “cost plus” pric­ ing does not give the firm any incentive to become more efficient, but is the best system for capturing the rent. Laffont and Tirole considered the case where the State contracts with a company that provides a public good whose total cost is C = b q + a , where β is the marginal cost of production considered as independent of the quantity produced, and α the fixed cost. Under perfect information, produc­ tion would be set at a level where the marginal utility of the good would be equal to its social cost and the State would pay the firm a transfer that would just cover not know the true value asymmetry of information will lead to changes in the rule: the State will inform the firm of the quantity q ( b ) it must produce if it announces a marginal cost β and the transfer t ( b ) planner of the value of β that maximizes its profit t ( b ) q ( b ) ­ a. The price β 45 The Revue d’économie politique devoted a special issue in 2005 to the memory of Jean-Jacques Laffont, to which the reader can refer. In 2015, it published a special issue dedicated to the work of Jean Tirole. 46 Suppose that each agent has to communicate, in a sealed envelope, the price he is willing to pay. The auctioneer announces that the lot will be awarded to the agent who offered the highest price, but that the latter will only have to pay the second highest price. In such an auction, revealing one’s true willingness to pay is the dominant strategy for each agent.

402 Alain Béraud and Claire Silvant by an amount which represents what the State Laffont and Tirole, the firm can make efforts, called e, to reduce its marginal cost (so that its total cost is C = ( b ­ e ) q + a ); but these efforts are unobservable by the State, which only knows b and a . The problem for the State is now one of pure moral hazard; the issue will then be to set a rule that encourages the firm to make an optimal effort. And to reach the optimum of perfect information, the firm must be paid a transfer equal to the social value of the product minus a constant that ensures that the firm’s profit will not be negative when it makes the effort that minimises its costs. If we now assume that the State faces both an adverse selection problem – it does not know the marginal cost – and a moral hazard problem – it does not know the firm’s effort –, it must advise the firm that if it claims that its marginal cost is β, it will have to produce a quantity q ( b ) and receive a transfer t ( b ) ; the purpose of this scheme is to encourage the firm to reveal all information on its costs and effort. The firm’s manager will then have an incentive to share the value of β which max­ imises its profit; the scheme is incentive-based if this value is the true marginal cost. The levels of output and effort will certainly be lower than if information were per­ fect. But, relative to the level of output, the effort is optimal because the firm ben­ efits from the full effect of its effort on its cost. Laffont and Tirole (1993) extended these results to the case in which the firm produces many goods, and in which the regulator wants to encourage the firm to improve the quality of its products. Theory of industrial organisation

Analyses of industrial organisation have undergone a profound transformation in recent years as non-cooperative game theory has emerged as the appropriate tool for studying strategic interactions between decision-makers.47 A classic example of strategic interaction is the behaviour of an incumbent firm seeking to prevent the entry of new competitors into its industry. Sylos-Labini (1962) considered that the incumbent firm should set the price low enough to deter potential competitors. Nevertheless, such a strategy is not always efficient, since it is doubtful that the incumbent firm would maintain its price after the entry of a competitor. In order to gain credibility, it must incur sunk costs, referred to here as investments. Finally, the idea that an incumbent firm must overinvest to prevent the entry of new competitors was widely accepted by economists. However, Drew Fudenberg and Jean Tirole (1984) showed that such an investment could be a strategic drawback as it lessens the incentive to respond to the entrant in an offensive manner. Depending on the case, the incumbent firm should overinvest or under-invest. To capture this idea, a benchmark level of investment must be specified; if the established firm deters entry, the minimum investment needed to keep the competitor out will be the basis for comparison; and in the case where 47 For a presentation of Tirole’s work, see the article by Encaoua (2015) and, more generally, the Janu­ ary 2015 issue of the Revue d’économie politique.

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it accepts the entry of a competitor, the investment made by the established firm will be compared to that which it would have made if it had regarded the entrant’s behaviour as given. To illustrate their point, Fudenberg and Tirole reasoned on two periods and two agents, with advertising expenditure as sunk costs. They showed that, under certain conditions, the incumbent must underinvest because it makes credible its threat to lower its price if a competitor enters the market. Conversely, if the incumbent can tolerate the entry of a competitor, it will overinvest and become what they called a “puppy dog” avoiding a price war with the entrant. Thus the level of investment depends on the nature of irrecoverable expenditure and the slope of reaction func­ tions. In the case where price discrimination is impossible and the incumbent’s customer base remains loyal, the mechanism is as follows: by increasing its adver­ tising expenditure, it reduces the potential market for the entrant to sell its product; however, if the competitor enters and offers at a lower price than the incumbent, the latter will not necessarily lower its selling price because such a decision would reduce the revenue earned from sales to its customers. Finally, the optimal strategy depends on the circumstances; rather than trying to establish general results that would apply to any sector, Tirole showed that the specific characteristics of a given activity determine the outcome. He thus provided a framework for the development of empirical work.48 The evolution of technology and regulation led economists to focus on indus­ tries where network effects occur and where exchangers communicate through a platform (two-sided markets). When the more people use a good, the more useful it is to a user, a network effect is said to exist. But if several networks coexist, potential buyers try to find out which one will be used the most. This behaviour leads to inefficiencies. On the demand side, users delay their purchases to find out which network is more successful. On the supply side, the problem is whether or not suppliers have an advantage in making their products compatible. Laffont, Rey and Tirole (1998) studied the particular case of telecommunications at a time when several governments wanted to introduce competition into an activity where a com­ pany – public or private – had previously held monopoly power. Two sources of market failure were identified. It was pointed out that during the transition period the incumbent was reluctant to allow entrants access to its network at an appropri­ ate price. It was also suggested that firms might use their interconnection agree­ ments to engage in collusive practices. Based on the case of a duopoly, Laffont and his co-authors distinguish two cases. In the first case, the price of the call is the same whether or not the callers belong to the same network. In the second case, an operator may differentiate its tariffs, with customers paying more if they call a number in a competing network. In the first case, the existence of an equilibrium is not certain when the cost of access to the competing network and/or the degree of 48 Eric Maskin and Tirole (1988) extended this analysis with an infinite-horizon sequential duopoly game. They assume that in the industry under consideration, one firm is viable, but not two. Threat­ ened by the entry of a competitor, the incumbent operates with a higher capacity and a lower price than a monopoly that is not threatened by any potential entrant.

404 Alain Béraud and Claire Silvant substitutability between the two networks is high. In the area where an equilibrium is possible, a decrease in the cost of access lowers prices and profits; the incentive to lower tariffs is weak. In the second case, firms benefit from charging different rates depending on whether their customer is calling an internal or external number. This policy often leads to a misallocation of resources. But in the case of competi­ tion between equals, it can increase welfare. Most often when there is a network effect, platforms allow buyers and sellers to interact. They charge a fixed fee, say a membership fee, and a variable fee on each transaction. Laffont and Tirole define these two-sided markets, in a narrow sense, as those where the allocation of rights between buyers and sellers affects the volume of transactions and the profits of the platform. Let us consider a very simple case where the platform is a monopoly and the participants do not pay a fixed cost. If pB and pS are the cost to buyers and sellers, respectively, the total price that maximises the profit of the platform is given by the traditional Lerner formula (Rochet and Tirole 2003, 997); the price structure is given by the ratio of the elasticities of demand h B and h S : p B ps = hB hs The issues of market form analysis, state intervention and firm regulation have been central to the concerns of French-speaking economists in recent times. They have emphasised the idea that planners have only imperfect information at their disposal to accomplish this task and that, for regulation to be effective, it is neces­ sary that the mechanisms put in place encourage the managers of firms to reveal the private information at their disposal and to implement measures likely to improve the productivity of their firms. A Neo-Schumpeterian theory of growth

A final important contribution in the recent period is the analysis of innovation and growth by Philippe Aghion (b. 1956) and Peter Howitt. Their aim is to understand how the decision to innovate is made and to study its effects, by considering innova­ tion as “creative destruction” as Schumpeter did: creation by providing new goods, new techniques, new firms, as well as destruction by making old skills, old products and existing firms obsolete. This double nature implies that the actual direction of the effects of an innovation is, a priori, often indeterminate. If, for example, research becomes more fruitful, output growth may be stimulated or hindered depending on whether the expected profits from the innovation increase or decrease. Similarly, innovations can lead to a higher or lower than optimal growth rate. The innovator considers neither the losses suffered by those he crowds out nor the gains of those who, building on his research, will discover new processes or new products. To address these issues, Aghion and Howitt (1992, 1998, 2009) proposed sev­ eral models which, although their specifications differ, follow the same logic. In

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The Economics of Growth (2009), they distinguish two types of goods: a final consumer good y, is produced with labour, L, the efficiency of which is At , and a an intermediate consumption good x so that: yt = ( At L ) xt1­a . In a competitive market, the relative price of the intermediate good is equal to its marginal produc­ tivity. Innovation consists in bringing in a new intermediate good that increases the efficiency of labour At , by a factor g . The probability that research leads to innovation, m , in an increasing function of the ratio of research and development expenditure Rt to labour efficiency g At : the more advanced the technology, the more one has to spend to innovate. The innovator has a monopoly as long as no competitor has succeeded in developing a more efficient intermediate good. The head of a company intending to innovate compares the research and development expenditure that he will have to undertake with the mathematical expectation of the revenue generated by that innovation. The growth rate is, in this model, random: it is zero when, during the period, no innovation is made; otherwise, it is equal to the growth rate of labour efficiency g . On average, it is an increasing function of the ratio of research expenditure to labour efficiency, which determines the probability that research will be successful. From their analysis, Aghion and Howitt drew five conclusions: 1. The more productive the research, the faster the growth. This suggests that countries that invest more in higher education have an advantage. 2. Growth increases with the size γ of innovations. Thus, a country with low pro­ ductivity can progress rapidly if, when innovating, it is able to reach the techno­ logical frontier. 3. A patent scheme can, by making imitation more difficult, stimulate growth. 4. The model suggests that competition is harmful to growth because it reduces the innovator’s profits. Since this conclusion seems to be incompatible with the empirical results, Aghion et al. (1997, 2001) modify their hypothesis by admit­ ting that a less productive firm than the technological leader can not only sur­ vive but also catch up. It may be that competition favours innovation, as firms seek to innovate to escape a situation where they would be overtaken by their competitors. 5. Finally, in Aghion and Howitt’s model, the larger the population the faster the growth, because the market available to the innovator is larger. However, empir­ ical studies reject this idea; Aghion and Howitt (1998, 407) then propose a new version of their model in which, when the population is larger, the multiplication of varieties of the final good reduces the efficiency of research efforts, which are dispersed over a multitude of goods. The relationship between population and growth vanishes. Conclusion

Economic knowledge has always crossed borders and French-speaking economists have long maintained close relations with English and German-speaking scholars. However, until the middle of the twentieth century, French-speaking students, or

406 Alain Béraud and Claire Silvant more broadly all French-speaking people interested in political economy, preferred to read works written in French. Even if a French translation of Alfred Marshall’s Principles was available – and it was belatedly in 1906 – French-speaking students continued to work on Charles Gide’s Principes instead. This situation has gradually evolved. Textbooks such as Mankiw’s or Blanchard’s are now widely distributed, and no longer bear the mark of the national legacies of the past. More importantly, research is now often conducted jointly by economists of different nationalities. This collaboration of researchers with different back­ grounds has proved remarkably productive, bringing many French economists to the most influential positions, both in universities and in international institutions. The specific feature of French economic thinking has gradually faded, even if the most internationally renowned French economists have long continued to carry the legacy of the great tradition of engineer-economists. References Abraham-Frois, Gilbert, and Edmond Berrebi. 1979. “Étalon(s) et ‘transformation’: pour clore un débat”. Econometrica, 47 (5), 1307–309. Abraham-Frois, Gilbert, and Edmond Berrebi. 1981. “La demande, face cachée de la pro­ duction jointe”. Revue économique, 32 (6), 1154–65. Abraham-Frois, Gilbert, and Edmond Berrebi. 1984. “Le problème de la transformation: solution(s)”. Econometrica, 52 (5), 1315–16. Aftalion, Albert. 1927. Monnaie, prix et change. Expériences récentes et théorie, 2nd ed. Paris: Sirey, 1940. Aghion, Philippe, and Peter Howitt. 1992. “A Model of Growth Through Creative Destruc­ tion”. Econometrica, 60 (2), 323–51. Aghion, Philippe, and Peter Howitt. 1998. Endogenous Growth Theory. Cambridge: The MIT Press. Aghion, Philippe, Christopher Harris, Peter Howitt, and John Vickers. 2001. “Competition, Imitation and Growth with Step-by-Step Innovation”. The Review of Economic Studies, 68 (3), 467–92. Aghion, Philippe, Christopher Harris, and John Vickers. 1997. “Competition and Growth with

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Index

Abensour, Miguel 292

Abraham-Frois, Gilbert 186, 387

Aftalion, Albert 175, 179–80, 182, 249n2,

362, 364

Aghion, Philippe 404–5

Aglietta, Michel 388

Akerlof, George A. 400

Albert, Alexandre-Martin 303n11

Alembert see Le Rond d’Alembert, Jean

Allais, Maurice 113n22, 360, 368–74, 376,

378–84, 395

Allisson, François 153n18

Amin, Samir 390

Ampère, André-Marie 78, 80n4

Amstein, Hermann 136

Andler, Charles 331–2

Antonelli, Étienne 175, 182

Arena, Richard 46, 256n8, 332n10, 386

Aristotle 325

Arkwright, Richard 348

Arlès-Dufour, Barthélemy 288

Arrow, Kenneth 132, 376–8, 380–1, 386,

392–4, 396, 399–400

Artus, Patrick 396n38

Assaf, Matheus 384n26

Assous, Michaël 396n41

Audier, Serge 236n59

Augustin, Thierry 264–5, 283

Aujac, Henri 369

Aupetit, Albert 10, 181–3, 185

Autume, Antoine d’ 387, 399

Azariadis, Costas 396–7

Babeuf, François-Noël (known as Gracchus Babeuf) 202, 224–5, 288, 296, 316

Bachelier, Louis 10, 189–91

Balasko, Yves 393, 396

Baldin, Claire 62

Balogh, Thomas 369

Banerjee, Abhijit 392

Baranzini, Roberto 135n5, 153n18, 154n20,

156n22

Barone, Enrico 137

Barrault, Émile 265, 277–8, 280–2, 307

Barrère, Alain 372–3

Barro, Robert 396

Bastiat, Frédéric 7n6, 9, 41, 44–5, 47–8,

50–3, 55, 60, 62–3, 67–8, 99–100,

122, 220, 291

Batbie, Anselme 166

Baubérot, Jean 233n50

Baudrillart, Henri 43, 45, 46n10, 52–3,

58–9, 62, 67, 71, 122, 126, 227

Baumol, William 21, 31, 35

Bazard, Saint-Amand 224, 265–6, 268n5,

271–5, 278–81, 287, 342–3

Beaujour, Félix de 209n16

Becker, Gary Stanley 31

Beecher, Jonathan 224n36, 288, 296n7

Bellet, Michel 225n36, 232n48, 317

Bellom, Maurice 167

Bénassy, Jean-Pascal 388, 398–400

Benetti, Carlo 387

Bénichou, Paul 198

Benkemoune, Rabah 169

Bentham, Jeremy 14, 16, 18, 51, 205

Béraud, Alain 5, 22–3, 26, 40–1, 46–7, 57,

62, 148n16, 399n44

Bergson, Abram 377

Bernoulli, Daniel 72, 79, 378

Bernstein, Eduard 325

Berrebi, Edmond 387

Berry, duchess of 208, 230n47

Bertrand, Joseph 10, 60n29, 89, 102, 139,

140n12, 173, 188–9, 365

Bertrand, Louis 234n52

Bestor, Arthur E. 225n40

Bettelheim, Charles 390

Index Bidard, Christian 186, 223, 386–7

Billaudot, Bernard 388

Binaut, Louis-Auguste 216n28 Blackstone, William 250

Blair, Hugh 249

Blanc, Louis 5, 50, 56, 197, 225n36, 232,

288–91, 297–304

Blanc de Lanautte d’Hauterive, Alexandre Maurice 7n5 Blanchard, Olivier 396, 399–400, 406

Blanqui, Adolphe-Jérôme 7, 41–3, 46, 228,

231, 320

Blanqui, Auguste 231, 293

Bloch, Ernest 292

Bloch, Marc 388n29 Block, Maurice 62, 227

Böhm-Bawerk, Eugen von 174, 178, 354,

371n13, 383, 387

Boisguilbert see Le Pesant de Boisguilbert, Pierre Boissonade, Gustave Émile 166

Boiteux, Marcel 369, 381–2, 384–5 Bonald, Louis-Gabriel-Ambroise de 202,

207

Bonaparte, Louis-Napoléon 48, 162, 199,

224

Bonaparte, Napoléon 4n1, 13, 15, 250

Boninsegni, Pasquale 152–3 Bonnet, Victor 65n34 Bonnot de Condillac, Étienne 12, 15,

18n10, 19n11, 24, 27, 36, 41

Booth, Charles 350

Bordas, Louis 110

Borel, Émile 189n12, 365

Borgetto, Michel 224

Bortkiewicz, Ladislaus von 156n22 Boson, Marcel 153

Bouchet, Thomas 56–7, 224, 225n36, 287

Boudon, Raymond 351

Bourdeau, Vincent 225n36, 318

Bourgeois, Léon 176

Bourguin, Maurice 178

Boutmy, Émile 43, 165

Boutry, Philippe 219n31 Bowman, Frank Paul 237

Boyer, Robert 387–9 Boyve, Édouard de 233n50 Branca-Rosoff, Sonia 225n40 Braudel, Fernand 370

Brentano, Lujo 350

Breton, Yves 6–7, 40–2, 45n8, 59–62, 68,

106n2, 110, 121n34, 126

Bridel, Pascal 135n5, 136n8, 153, 154n20,

156n22, 251, 253–4, 260

415

Brisset, Nicolas 371n12 Brocher de la Flèchère, Henri 135n7 Brooke, Michael 347n1 Buchez, Philippe 224, 232–3, 237, 287,

289, 300

Buonarroti, Philippe 225, 296

Burat, Jules 43n5 Buret, Eugène 209, 255n7, 301, 320

Byé, Maurice 369

Cabanis, Pierre-Jean-Georges 12, 15

Cabet, Étienne 50, 224n36, 232–3, 237,

288, 291, 296, 316, 321

Cahen, Jacqueline 232n48 Canard, Nicolas-François 59n28, 253

Cantillon, Richard 20

Caritat de Condorcet, Marie-Jean-Antoine-

Nicolas de 3, 6, 14–15, 72, 131,

307, 343, 376–8

Carnot, Hippolyte 228, 265, 277–9, 288

Carrel, Armand 265

Cass, David 396

Castleton, Edward 324n6 Cauwès, Paul 8, 55, 162, 166, 175, 177

Cazaux, Louis-François Guillaume 7n5 Cernuschi, Henri 66

Chailley, Joseph 168, 227

Chamberlin, Edward H. 102, 366n7, 369

Chambost, Anne-Sophie 224n36, 302

Champs, Emmanuelle de 18n9 Chanial, Philippe 225n36, 236n58 Charbit, Yves 53n18 Charléty, Sébastien 266n4 Chatzis, Konstantinos 106n2 Cherbuliez, Antoine-Élisée 41, 51, 70,

203n5, 206n7

Chernyshevsky, Nikolay 321

Cherrier, Béatrice 396n41 Chevalier, Michel 5, 8, 40, 42–5, 48–9, 55,

57, 64, 66–7, 70–1, 107, 108n8,

125, 168, 170, 265, 276–7, 280,

282, 293, 299, 305, 310

Cheysson, Émile 119, 166–7, 182, 184,

350

Claeys, Gregory 225n40 Clapeyron, Émile 277

Clark, John Bates 178

Clavière, Étienne 13

Clément, Ambroise 45, 126n44 Cliffe-Leslie, Thomas 341

Clower, Robert W. 141n13, 399

Cobden, Richard 5, 125

Cochin, Augustin 349n2 Coilly, Nathalie 266n4, 282

416

Index

Colson, Clément 6n4, 10, 119, 164, 167, 172–3, 182, 184–5, 354, 366n8 Comoy, Guillaume-Emmanuel 114n23 Comte, Auguste 197, 225n36, 227n44, 235n54, 237, 264–5, 326n8, 341–7, 351–2, 357 Comte, Charles 4n1, 7n6, 18, 41–2, 46–7, 49–50 Condillac see Bonnot de Condillac, Étienne Condorcet see Caritat de Condorcet, Marie­ Jean-Antoine-Nicolas de Confucius 238 Considerant, Victor 197, 224, 232–3, 288–90, 293, 303n11 Considère, Armand 164 Constant de Rebecque, Benjamin 7, 18, 51n16, 67, 200–6, 238, 255 Coquelin, Charles 6, 43, 45, 49, 52, 54, 56, 64, 66, 168, 207n9, 227 Corcelle, François de 216n27 Coriolis, Gaspard-Gustave 106n5 Coste, Clément 56, 225n36 Courcelle-Seneuil, Jean-Gustave 47–8, 51, 53, 57–8, 64, 66, 72, 123 Cournot, Antoine-Augustin 8–10, 41, 55, 59–60, 78–102, 106, 108, 112, 120, 131, 134, 139, 173–4, 177, 187–8, 191, 332–3, 335, 377 Cousin, Victor 51n16, 131 Coux, Charles de 207, 212–17, 219, 238 Craiutu, Aurelian 46n11 Cuvillier, Armand 233 Dameth, Henri 50, 56n22, 67–8 Darmois, Georges 362n4, 369, 376 Darwin, Charles 72n40, 234n51 David, Marcel 225n36 De Bernardi, Mario 110 Debreu, Gérard 132, 360, 369, 380–3, 386, 392–4, 396, 399 Decourdemanche, Alphonse 305–7 De Gaulle, Philippe 388n30 Delolme, Jean-Louis 250 Delvallez, Sophie 280 Demar, Claire 288 Démier, Francis 5, 225n36 De Paepe, César 234–6, 321, 324 Deroin, Jeanne 288 Deschamps, Marc 78n1 Desrousseaux, Jacques 381, 383–4 Dessus, Gabriel 384–5 Destutt de Tracy, Antoine-Louis-Claude 6, 12–15, 17, 19, 23–30, 35–6, 54, 108, 125, 343

Deville, Gabriel 225n40, 316n1 Dewey, John 288n1 Dézamy, Théodore 225, 288, 296 Diemer, Arnaud 118n27 Divisia, François 184, 365, 369, 371 Dockès, Pierre 40, 130, 149 Domarchi, Jean 372–3 Dommanget, Maurice 330 Dreyfus, Alfred 170, 325 Drèze, Jacques 398 Droin, Nathalie 234n52 Drolet, Michael 224n36 Droz, Joseph 7n5, 320 Duarte, Pedro 384n26, 396n41 Duchâtel, Tanneguy 209 Duflo, Esther 391–2 Du Mesnil-Marigny, Jules 45, 55, 59 Dumont, Arsène 234n51 Dumont, Étienne 17–18, 51n16 Dunoyer, Anatole 43, 165 Dunoyer de Segonzac, Charles Barthélemy 4n1, 19, 41–4, 47, 50, 53, 55–9, 67–9, 71, 126, 168, 205, 214n24, 301, 346 Dupin, Charles 42, 55, 349n2 Dupont de Nemours, Pierre Samuel 17–18 Düppe, Till 382n24 Dupuit, Jules 8–10, 28, 40, 44n6, 45–6, 51–60, 70, 105–27, 164, 173–4, 184–5 Dupuy, Jean-Pierre 382 Durkheim, Émile 197, 240, 341–2, 350–4, 357 Duroselle, Jean-Baptiste 207n12, 217 Duruy, Victor 166 Dutens, Joseph-Michel 7n5 Duval, Jules 44 Edgeworth, Francis Ysidro 89, 93, 102, 155–6, 185, 347, 382 Effertz, Otto 332–4 Eichthal, Gustave d’ 289 Einaudi, Luigi 110 Ekelund, Robert B. 9, 105, 121n34 Elster, Jon 45n7 Emmanuel, Arghiri 389 Encaoua, David 402n47 Enfantin, Barthélemy Prosper 228, 265–6, 272–3, 277–8, 280–2, 287, 293–4, 295n6, 305, 307, 309–10, 342–3 Engels, Friedrich 228, 236, 264n2, 291, 295n6, 313 Erreygers, Guido 186, 223 Esménard du Mazet, Camille 59, 60n31

Index

417

Ganilh, Charles 7n5 Gans, Jacques 225n40 Garnier, Joseph 8, 42–8, 53–7, 60, 64,

66–7, 71–2, 107n6, 108–9, 110n19,

126n36, 126n44, 165, 168

Gelpi, Rosa Maria 388

Fabre, Auguste 233n50 Faccarello, Gilbert 5, 17, 19, 26, 33, 62n32, Gengembre, Gérard 202n3 Gérando, Joseph-Marie de 209

68, 126, 203n4, 212n22, 214n24,

Gerbet, Philippe 212, 215n26 248, 347, 387

Gesell, Silvio 302

Faucher, Léon 42, 45, 56, 65n34, 122

Gibbard, Allan 401

Fauveau, Gustave 45, 59–60, 72, 109n10 Gide, Charles 47n12, 61, 151, 166, 175–8,

Favereau, Olivier 389

180, 182, 217n29, 225n36, 232–4,

Febvre, Lucien 388n29 236, 332, 350, 406

Fellner, William 89–90, 102

Giffen, Robert 350

Ferguson, Adam 343

Gillard, Lucien 354

Ferraton, Cyrille 318

Gillies, Donald 382

Ferry, Jules 131, 163

Giordani, Tommaso 326n7 Fèvre, Justin 217n29 Girardin, Émile de 73n41, 308

Fèvre, Raphaël 371n12, 383n25 Gislain, Jean-Jacques 40–1, 61, 253n6,

Fischer, Stanley 396n38 342, 357

Fischman, Marianne 366n8 Glennerster, Rachel 391

Fisher, Irving 89, 136, 333n11, 354, 356,

Godin, Jean-Baptiste 322

360, 362, 371

Gossen, Hermann Heinrich 150

Fix, Théodore 211, 255n7 Gouhier, Henri 263

Flachat, Eugène 277

Gourevitch, Alexander 330

Flachat, Stéphane 277

Gournerie, Jules de la 164

Fleurbaey, Marc 390 Grandjonc, Jacques 225, 229

Fontenay, Roger de 45, 47, 58–9, 61–2,

Grandmont, Jean-Michel 369, 394–8 107–8

Grange, Juliette 263n1 Forbonnais, François Véron de 21

Graslin, Jean-Joseph-Louis 307n15 Forget, Evelyn L. 17

Green, Jerry 401

Fossembroni, Vittorio 33

Grünberg, Carl 225n40 Fourastié, Jean 367n10 Gruson, Claude 372–5 Fourcade, Marion 369

Fourier, Charles 218–19, 224, 225n39, 228, Guépin, Ange 288

Guesde, Jules 318, 324, 330

280, 287, 292, 296, 316, 321

Guesnerie, Roger 396–7 Fourn, François 224n36 Guilbaud, Georges-Théodule 369, 376–8 Fournière, Eugène 167, 235–6 Guilhaumou, Jacques 225n40 Foville, Alfred de 180

Guillaume, Édouard 366

Fréchet, Maurice 376

Guillaume, Georges 366

Frégier, Antoine-Honoré 301

Guillaumin, Gilbert-Urbain 4, 42–4, 46, 48,

Fressoz, Jean-Baptiste 317–18, 324

54, 56, 57n25, 60n30, 61, 72, 168,

Freycinet, Charles de 163–4 198, 207n9, 208, 227

Friedman, Milton 378

Guizot, François 4, 7n6, 42, 46, 298

Frobenius, Georg 186

Guyot, Yves 8, 44n6, 62, 170

Frobert, Ludovic 225n36, 354

Fuchs, Gérard 395

Hagemann, Harald 332n10, 333n11

Fudenberg, Drew 402–3 Halbwachs, Maurice 354, 372

Halévy, Elie 309

Gacon, Stéphane 319

Harrington, James 250

Gaillard, Chantal 224n36

Hashimoto, Hitoshi 17

Galí, Jordi 400

Haubtman, Pierre 224n36

Gall, Franz Josef 343

Haussmann, Georges Eugène 106

Gallouédec-Genuys, Françoise 207n12

Etner, François 47, 53n18, 59–60, 106–7,

108n9, 109n12, 113, 115, 119,

121n34, 348

Eyguesier, Nicolas 253n5, 255n7

418

Index

Hauterive see Blanc de Lanautte d’Hauterive, Alexandre Maurice Hayek, Friedrich August von 273n9, 371

Head, Brian William 25

Hébert, Robert F. 9, 105, 121n34 Helvétius, Catherine 15

Helvétius, Claude-Adrien 17–18, 343

Henderson, James M. 141n13 Henri IV 199

Herr, Lucien 331

Hicks, John Richard 373, 382, 394

Hildebrand, Bruno 61, 341

Hildenbrand, Werner 394

Holbach see Thiry d’Holbach, Paul-Henri Hollander, Samuel 35

Hotelling, Harold 119

Howitt Peter 141n13, 404–5 Hume, David 181, 249, 343

Hurwicz, Leonid 393

Hyse, Richard 248n1 Ingold, Alice 325

Ingrao, Bruna 135n5

Isambert, Gaston 236–7

Israel, Giorgio 135n5

Jacoud, Gilles 13, 273

Jaffé, William 132n2, 134, 135n6, 140

Jallais, Sophie 380n22 James, Émile 369

James, Michel 16

Jaume, Lucien 298n10 Jaurès, Jean 318, 325, 331

Jefferson, Thomas 15

Jesus Christ 218, 237–8 Jevons, William Stanley 8, 78, 102,

109n14, 135–6, 156n22, 168,

177–8, 354, 357, 365, 383

Jobard, Ambroise 52n17 Jolink, Albert 135n5 Jouffroy, Théodore 131, 200–1 Jourdain, Édouard 224n36 Jourdan, Alfred 6n4, 170–1 Jousse, Emmanuel 324

Juglar, Clément 6, 43, 64–5, 178–80 Kalaora, Bernard 347n1 Kalecki, Michael 369

Kant, Immanuel 133n3, 235n54 Karsenti, Bruno 336

Kautsky, Karl 325

Keynes, John Maynard 360, 365n5, 368,

372–4, 398–9

Kirman, Alan 394

Kiyotaki, Nobuhiro 400

Klotz, Gérard 106, 110, 121n34, 126

Knies, Karl 61, 341

Kolm, Serge-Christophe 390

Koolman, Gary 20

Kremer, Michael 391

Kropotkin, Pyotr Alexeyevich 234n51

Kuznets, Simon 390

Kydland, Finn E. 396n40

Labrousse, Ernest 370

Lacordaire, Henri-Dominique 212–13 Lafarelle-Rebourguil, François-Félix de

211

Lafargue, Paul 228

La Fayette see Motier de La Fayette, Gilbert du Laffont, Jean-Jacques 400–4 Lagrange, Joseph-Louis 133, 136, 153

Lahautière, Richard 296

Lallement, Jérôme 9, 135n5, 143n14 Lallier, François 211

Lamé, Gabriel 277

Lamé-Fleury, Ernest 45, 106n5, 107

Lamennais see Robert de Lamennais, Félicité Landry, Adolphe 172–5, 197, 225, 318–19,

331–7

Laplace, Pierre-Simon 133

La Rochefoucault, François Alexandre de

14

Laroque, Guy 395

Lassalle, Ferdinand 321, 324

Latouche, Serge 386

Latour, Bruno 351n3 Laurent, Evelyne 43n5, 44

Laurent, Hermann 152

Laveleye, Émile de 44, 66, 321

Lavergne, Léonce de 61–2, 126n44, 177,

217n29

Lavergne, Philippe de 387

Law, John 230

Le Bon, Gustave 341, 350

Le Bras-Chopard, Armelle 224n36, 280,

282

Lechevalier, Jules 293

Leijonhufvud, Axel 399

Lemieux, Cyril 336

Lendjel, Émeric 186, 366n8 Lenoir, Marcel 10, 185–6 Leo XIII 199, 219

Leontief, Wassily 187, 366n7 Le Pesant de Boisguilbert, Pierre 3

Lépinay, Vincent Antonin 351n3

Index

419

Markov, Andreï 397, 398n43 Marshall, Alfred 8, 102, 112n21, 178,

184n9, 185, 333n11, 350, 354, 364,

406

Martin, Thierry 78n1, 79

Marx, Karl 228, 232n48, 236, 260n12, 289,

291, 302, 313, 316–17, 319–23,

325–6, 328, 335, 387–9, 399

Maskin, Eric 403n48

Massé, Pierre 378–9

Maupertuis, Marie-Antoinette 331n10, 333

Mazzini, Giuseppe 153

McCulloch, John Ramsay 63, 248, 259

McKenzie, Lionel 396

McLure, Michael 153n19

Mechnikov, Lev 234n51

Mehmet, Ali 282

Méline, Jules 162, 166

Melun, Armand de 208, 217, 349n2

Ménard, Claude 78n1

Menger, Carl 168, 350, 365, 371n13

Milbach, Sylvain 212n20

Mill, James 14, 35

Mill, John Stuart 40, 58, 63, 72, 79, 98–9,

137, 181, 207n9, 220, 305, 321,

347, 350, 357, 361

Minard, Charles-Joseph 114n23

Mirabeau, Gabriel-Honoré de 13

Mises, Ludwig von 371

Misner, Paul 207n12, 217, 219n31

Moch, Jules 366n8

Molinari, Gustave de 7n6, 8, 41, 43–5,

47–8, 50, 52–4, 56n22, 57, 60,

Macherey, Pierre 292

62, 66–8, 71, 122, 168–70, 172,

Magnan de Bornier, Jean 26, 89n7

217n29, 219, 350

Mahyer, Jules 107

Malinvaud, Edmond 369, 378–9, 381, 383, Mongin, Philippe 376–7

Monnet, Jean 369

384n26, 398–400 Montaigne, Michel de 18n10

Malon, Benoît 197, 225n36, 227, 234–6, Montalembert, Charles Forbes de 212

316, 318–26, 336–7

Montesquieu see Secondat de Montesquieu,

Malon, Jean 319

Charles Louis de

Malthus, Thomas Robert 13n3, 14, 17, 22,

Montyon, Antoine-Jean-Baptiste de

30, 32, 35, 40, 46–7, 57–8, 63,

227n44–45

126–7, 171, 209, 210n18, 214, 249,

Moon, Parker Thomas 207n12, 217,

256, 320

219n31

Mankiw, Gregory 406

Moore, Henri 356

Mantel, Rolf 393–4

Morgenstern, Oskar 371, 378

Mantoux, Étienne 372–3

Morlat, Georges 378–9

Marchionatti, Roberto 154n20

Mornati, Fiorenzo 153, 154n20

Marco, Luc 43n5, 44, 46

Mosbah-Natanson, Sébastien 350

Marczewski, Jean 369

Mosca, Manuela 118–19, 121n34, 348

Maret, Henry 213

Motier de La Fayette, Gilbert du 14, 264

Marie de Saint-Georges, Pierre Alexandre

Mueller, Thomas 383n25

Thomas Amable 303n11 Muiron, Just 288

Marjolin, Robert 372–3

Le Play, Frédéric 109, 166–7, 177, 184,

197, 303n11, 327, 341–2, 347–51,

357

Le Prestre de Vauban, Sébastien 72

Lerner, Abba 404

Le Rond d’Alembert, Jean 156

Leroux, Jules 197, 226n43, 311

Leroux, Pierre 197, 207n10, 223–4, 226,

228, 232, 237–40, 265, 288–90,

293, 296, 298, 301, 316, 320

Leroy-Beaulieu, Anatole 207n12

Leroy-Beaulieu, Paul 6n4, 8, 43, 57, 62,

67–8, 71–2, 151, 165, 168, 170–2,

347

Lescure, Jean 179–80

Lesseps, Ferdinand de 265, 282n13

Leter, Michel 41

Letourneau, Charles 341, 350

Levallois, Michel 282n14

Le Van-Lemesle, Lucette 5, 7, 41–2, 61,

71–2, 106, 107n6, 317

Levasseur, Émile 70, 165

Lindahl, Erik 394

List, Friedrich 79

Locke, John 12, 15

Louis XIV 199, 207n10

Louis XVIII 15

Louis-Philippe 46, 207n10, 208, 230n47

Lucas, Robert 396n40–41, 396n42

Luciani, Jean 69

Lutfalla, Michel 7, 40–1

420

Index

Mun, Albert de 217, 222

Musso, Pierre 225n36, 263n1, 266n4, 267,

276, 282–3

Nadault de Buffon, Benjamin 107

Napoléon Ier see Bonaparte, Napoléon

Napoléon III see Bonaparte,

Louis-Napoléon

Nash, John 90, 381

Navet, Georges 224n36

Navier, Claude-Louis 28, 114–15, 164

Necker, Jacques 203, 206n7, 249–50

Negishi, Takashi 371n14

Nemo, Philippe 41

Newton, Isaac 133, 154, 157

Niboyet, Eugénie 288

Nicoletis, John 366n8

Nogaro, Bertrand 181–2, 362–4

Noirot-Bonnet, Louis 336

Numa, Guy 22–3, 32, 34, 96n8, 121n34,

125n42, 148n16 Obry de Labry, Félix-Jacques 107

Orain, Arnaud 307n15

Orléan, André 389

Oulès, Firmin 153

Owen, Robert 295–6

Ozanam, Antoine-Frédéric 213

Paillottet, Prosper 47

Palgrave, R. H. Inglis 43

Palloix, Christian 390

Pantaleoni, Maffeo 109n14, 153

Pareto, Vilfredo 99, 137, 151–8, 183,

326n7, 341, 354, 357, 365, 371–2,

382–3, 396n39

Parieu, Félix Esquirou de 45, 67

Paschoud, Jean-Jacques 250

Passy, Frédéric 45, 52, 68

Passy, Hippolyte 48, 71, 109

Patinkin, Don 394

Pecqueur, Constantin 197, 199, 225n36,

229–32, 237–8, 288, 290–1, 297–305, 308–9, 311–12, 321

Peel, Robert 180

Peillon, Vincent 224, 225n36, 237,

239n63

Pelloutier, Fernand 330

Pénin, Marc 47, 225n36, 233n50

Pereire, Émile Jacob 265, 275, 294, 305–7,

310

Pereire, Isaac 265, 275, 293–4, 310

Périn, Charles-Henri-Xavier 207, 217,

219–22

Perreux, Gabriel 288n1

Perron, Oskar 186

Perrot, Michelle 280

Perroux, François 368–72, 375–6

Pétré-Grenouilleau, Olivier 224n36

Pettit, Philip 318n2

Phillips, Alban William 388n30

Picard, Alfred 164

Picavet, François 41

Piccard, Antoine-Paul 135

Picon, Antoine 224n36, 266, 269n6, 279,

282n12, 283

Pictet de Rochemont, Charles 249

Pictet, Marc-Auguste 249

Piketty, Thomas 307n16, 390–1

Pirou, Gaëtan 360, 369–70

Pius IX 46, 207n9

Pius VII 200

Place, Francis 18

Poincaré, Henri 361–2

Poinsot, Philippe 110, 121n34

Poisson, Siméon-Denis 78

Poncy, Louis-Charles 292

Potier, Jean-Pierre 8, 10, 16, 130, 148n16,

149

Potron, Maurice 10, 186–7, 223

Pradier, Pierre-Charles 380n22

Prat, Georges 367n9

Prélot, Marcel 207n12

Prescott, Edward C. 396n40

Prevost, Pierre 249

Prochasson, Christophe 225n36

Proudhon, Pierre-Joseph 4, 5n3, 50, 68,

72, 131, 197–8, 224n36, 229–32,

283, 288–9, 293, 302–3, 306n14,

316, 318, 320–1, 324n6, 325–6,

329, 331

Puynode, Gustave du 56n22, 67

Quandt, Richard E. 141n13

Quesnay, François 3, 17, 41, 46, 131

Raffalovich, Arthur 170

Ragni, Ludovic 62

Ramsey, Frank 118

Rancière, Jacques 283–4

Raspail, François-Vincent 288

Rau, Karl Heinrich 60

Ravix, Jacques-Laurent 386

Ravix, Joël 46, 55

Rawls, John 283

Raybaut, Alain 374n15

Rebeyrol, Antoine 135n5

Reclus, Élisée 234n51

Index Regnault, Jules 10, 190–1 Régnier, Philippe 263n1, 266n4, 281n12, 282, 320n3 Renard, Georges 236, 316 Rétif de la Bretonne, Nicolas-Edme 225 Rey, Éric 403 Rey, Joseph 288, 295–6 Reybaud, Louis 226–7, 312 Reynaud, Jean 207n10, 224, 226n42, 227–8, 232, 288 Ribeill, Georges 277–8 Ricardo, David 5, 13n3, 14–15, 22–3, 25–7, 29, 32, 35–6, 40, 46–7, 54, 55n24, 58, 59n28, 62–3, 81, 84, 110n18, 125, 137, 181, 210n18, 248–9, 253–60, 320, 322–3, 364, 389 Ricœur, Paul 292 Ring, Mary Ignatius 207n13 Riot-Sarcey, Michèle 225n36, 280, 298n9 Ripert-Monclar, André de 230 Rist, Charles 47n12, 175, 362, 364, 365n5, 369 Robert de Lamennais, Félicité 207, 212–13, 230, 300 Robespierre, Maximilien 15, 288 Robinson, Joan 369 Rochet, Jean-Charles 404 Rodbertus, Karl 321 Rodrigues, Eugène 265 Rodrigues, Olinde 265 Roederer, Pierre-Louis 43n5 Rognon, Frédéric 225n36, 233n50 Rolland, Patrice 325 Romani, Paul-Marie 331n10, 333 Romani, Roberto 251n3 Roscher, Wilhelm 61–2, 177, 220, 341 Rosier, Michel 354 Rossi, Pellegrino 4, 7n6, 41–2, 45–6, 48, 51, 53, 55, 57–8, 62, 65, 69–71, 108, 110n19, 111, 116, 118, 123, 126n44, 171n2 Rouanet, Gustave 235–6 Rouher, Eugène 45 Rouland, Gustave 45 Rousseau, Jean-Jacques 12, 51, 206n6–7, 239, 248–9, 251, 291 Rousseau, Louis 207, 213, 217–19, 221–2 Roy, René 184, 365, 368–70, 376, 382 Royer, Clémence 71 Ruchonnet, Louis 131 Rueff, Jacques 184, 361–3, 366n8, 367–8, 370, 374

421

Sachs, Jeffrey 400 Saez, Emmanuel 391 Sagot-Duvauroux, Dominique 52 Saïdi, Aurélien 396n41 Saint-Simon, Claude-Henri de (also known as Henri Saint-Simon) 197, 201, 213, 224, 225n36, 227–8, 237, 263–71, 275, 277–80, 282–3, 287, 291–2, 295, 297, 301, 305, 320–1, 342, 347 Salais, Robert 389 Salinis, Antoine de 212 Salis, Jean-René de 249n2 Sampaio, Guilherme 372 Samuelson, Paul Anthony 140, 378–9, 395n38, 396n39, 397 Sand, George 288, 292 Sand, Shlomo 225n36 Savage, Leonard J. 378 Savary des Brûlons, Jacques 20 Savoye, Antoine 347n1 Say, Horace 41 Say, Jean-Baptiste 4, 6–8, 12–36, 40–3, 45–7, 51, 54, 57–62, 67n38, 68, 71–2, 81, 96, 110–11, 114, 116, 131, 145, 162–6, 178–9, 205, 206n7, 209–10, 221, 228, 248–9, 256, 258, 260, 298, 307, 320, 346 Say, Jean Étienne 13 Say, Léon 131, 163, 165, 168, 227 Scarf, Herbert 382 Schäffle, Albert 323, 336 Schérer, Edmond 133 Schmoller, Gustav 341, 350 Schoelcher, Victor 289 Schopenhauer, Arthur 235n54 Schumpeter, Joseph Alois 9, 40n1, 105, 132, 140, 249, 352, 354, 357, 366n7, 404 Schwartz, Antoine 5 Secondat de Montesquieu, Charles Louis de 13, 15, 206–7, 307–8, 343 Seebohm Rowntree, Benjamin 350 Seligman, Edwin Robert Anderson 308n18 Sen, Amartya 249, 287 Senior, Nassau William 63 Septfontaines, Henri Emmery de 106n5 Shell, Karl 396 Sieyès, Emmanuel-Joseph 14, 42, 225 Silvant, Claire 47, 53, 66, 71–2, 123n37 Simiand, François 172–5, 197, 341–2, 354–7, 361, 373 Simonde de Sismondi, Jean-CharlesLéonard 32, 179, 197, 200–1, 203, 206n7, 209, 223, 248–61, 307, 320

422

Index

Simonin, Jean-Pascal 106, 109, 121n34,

125n41

Sismondi see Simonde de Sismondi, Jean-Charles-Léonard Slutsky, Eugen 393n37 Smith, Adam 5, 7, 16–17, 19, 25, 27–9, 41,

46, 54, 57n24, 58, 59n28, 62–3, 68,

71, 81, 98, 108, 125, 168, 171, 202,

209–10, 214, 217, 248–9, 253–5,

257, 259–60, 291, 320, 341, 343, 348

Socrates 325

Sonnenschein, Hugo 393

Sorel, Georges 197, 225n36, 229n46, 237n62, 318–19, 324–31, 336–7 Sowell, Thomas 256

Spencer, Herbert 341, 347

Spiethoff, Arthur 178

Spinoza, Baruch 239

Sraffa, Piero 187, 386–7 Staël-Holstein, Germaine de 18, 51n16,

202–6, 210, 250

Stanziani, Alessandro 317

Steedman, Ian 225n37 Steiner, Philippe 5, 16–17, 29, 40–1, 43,

53, 157, 203n4, 225n36, 307, 342,

347, 356–7

Steuart, James 21

Strigl, Richard von 371

Sudre, Alfred 227

Swedberg, Richard 45n7, 342

Sylos-Labini, Paolo 402

Talabot, Paulin 277

Tarde, Gabriel 197, 341–2, 350–2, 357

Tavernier, René 173

Taylan, Ferhat 326n8 Terray, Aude 374n16 Theocharis, Reghinos D. 78n1 Théry, Edmond 162

Thiers, Adolphe 4, 48, 50, 60, 65n34, 71,

122, 162–3

Thiry d’Holbach, Paul-Henri 18

Thornton, Henry 5

Thünen, Johann Heinrich von 178

Tinbergen, Jan 369 Tirole, Jean 400–4 Tocqueville, Alexis de 4, 18, 45, 56n21,

210n19

Torrens, Robert 32

Touchard, Jean 217n29 Tribe, Keith 337

Triffin, Robert 366

Tristan, Flora 288

Tugan-Baranovsky, Mikhail 178

Turgot, Anne-Robert-Jacques 3, 6, 12, 20,

23–4, 27, 41, 46, 54, 56, 131, 162,

171, 348

Urbain, Ismaÿl 289

Uri, Pierre 369

Vacherot, Étienne 131, 133–4 Van Daal, Jan 132n1–2, 135n5 Varroy, Henri 164

Vatin, François 46, 52, 62, 106–9, 118n26,

119, 121n34, 123, 334

Vauban see Le Prestre de Vauban, Sébastien Veblen, Thorstein 341, 357

Véret, Jeanne-Désirée 288

Verley, Patrick 3

Viard, Bruno 224n36 Vickrey, William 401

Vico, Giambattista 325

Vidal, François 197, 296–8, 301–5 Vigoureux, Clarisse 297

Ville, Jean 365

Villeneuve-Bargemont, Jean-Paul Alban de

207–11, 213–14, 217, 219, 221n32,

228, 230, 301

Villermé, Louis René 4, 42, 208, 209n15,

301, 349n2

Villey, Edmond 6n4, 170–2, 175

Vincens, Émile 211

Vincent, Gilbert 225n36, 233n50 Vincent, Julien 317

Vincent, Kenneth Steven 225n36, 319

Voilquin, Suzanne 288

Von Neumann, John 365, 376, 378–9, 383

Walch, Jean 266n4 Wald, Abraham 392

Walker, Donald Anthony 132n1–2, 135n5, 140–1 Walker, Francis Amasa 144

Walras, Aline 135

Walras, Auguste 8, 130–2, 135

Walras, Marie-Esprit-Léon 8–10, 44, 52,

57, 59–60, 65n34, 66n35, 78, 79n2,

102, 108, 109n11, 109n14, 130–57,

165–8, 175, 177–8, 181–4, 187–9,

333, 365–6, 371, 381, 392n36, 393

Wartelle, Jean-Claude 170

Washington, George 264

Watt, James 347

Weber, Max 341, 357

Weill, Georges 207n12 Weintraub, E. Roy 382n24 Wernick, Andrew 225n36

Index Whatmore, Richard 13

Whitham, William 234n52, 324n6 Wicksell, Knut 364

Wicksteed, Philip 137

Wieser, Friedrich von 375n18 Wolkoff, Mathieu 45, 59

Wolowski, Louis 8, 42, 44, 48, 50, 52–3,

55, 56n22, 57, 59, 61–2, 65–6,

70–1, 176–7, 220, 303n11

Wooddeson, Richard 250

Worms, René 341–2, 350, 357

Yonnet, Franck 263n1, 276

Younès, Yves 398–9

Zenkine, Serge 279n11

Zucman, Gabriel 391

Zylberberg, André 396n38

423