The foundational book in classical economic theory is Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations (1776), but there is a large literature in the field of economics preceding the publication of that remarkable work.
One of the earliest notable English books in the field is Proclamation for the Evaluation of Certain Base Monies (1560) by Sir Thomas Gresham. A merchant and financier, Gresham made a proposal in 1565 for the establishment of what later became the Royal Exchange. As an advisor to Elizabeth I, Gresham noted that a fall in the exchange rate makes the export of good coins profitable, but that their place is taken by over-valued coinage. Later dubbed “Gresham’s Law”, the maxim “good money drives out bad” formed the basis for Elizabethan reform of the coinage in 1560.
John Graunt, a haberdasher, wrote one of the first works of statistical estimation. His Natural and Political Observations made upon the Bills of Mortality (1662) was written to document the onset and spread of bubonic plague, but its legacy is that it is the first statistically based estimation of the population of London. Together with his friend Sir William Petty, Graunt established statistical methods that became the foundation for modern demography. Due to a lack of hard data, the two relied on simple estimation techniques, such as in Petty’s Political Arithmetic (1690).
Charles Davenant applied Petty’s principles in Discourses on the Publick Revenues, and on the Trade of England (1698). Davenant’s belief was that high taxation for debt service acted as a burden on trade, industry and land, thus limiting the economy.
The quintessential book of the mercantile period was Thomas Mun’s England’s Treasure by Forraign Trade (1664). Mun equated money with capital, discussing money in relation to international policy, thus politicising economic thought.
Although remembered principally as a philosopher, John Locke wrote on the role of the state regarding the economy. In 1691 he revised his 1668 memorandum as Some consideration of the consequences of the lowering of interest and the raising of the value of money. Locke’s motivation behind the revision was the introduction of a bill to alter the rate of interest and standard value of the coinage. He was a firm believer that interest rates should not be set by the state, but should instead be determined by the market.
Daniel Defoe was a prolific writer in the field of economics, adopting the robust persona of the English tradesman. His contribution to the Atlas Maritimus & Commercialis; Or, a general View of the World (1728) challenged his countrymen to duplicate the pattern of English commerce in their foreign trade ventures. He also encouraged those importing goods to source resources from within British territories in order to secure the independence of the British economy.
A more theoretical figure in the economics of this period is John Law. His Money and Trade Consider’d (1705) envisioned a central bank for his native Scotland, empowered to supply paper money. Law took his economic theories to France, where he established a central bank and almost singlehandedly destroyed the French monetary system in the course of four short years. There his path crossed with the Irish economist and speculator Richard Cantillon, who managed to make a fortune from both Law’s failed Mississippi Scheme and the South Sea Bubble. Cantillon’s Essai sur la nature du commerce en général (1755) is the only fully-realised economic system in print before Smith, and a notable influence on him.
Cantillon’s Essai was also an important impetus to the establishment of the physiocrats. François Quesnay’s Physiocratie (1768), a collection of his writings on the law of nature, acted as their principal manifesto. For Quesnay and the physiocrats, the concept of land as the source of all wealth was central. A more capable theorist than Quesnay, Anne-Robert-Jacques Turgot wrote several works, including one that had an obvious influence on Adam Smith, Réflexions sur la formation et la distribution des richesses, first published in 1769–70 in the Ephémérides du Citoyen, then in book form in 1788.
It was not until the publication of An Inquiry into the Principles of Political Economy (1767) by James Steuart that the phrase “political economy” appeared in the title of an English book. The move away from mercantilism had already been signalled by David Hume in his Political Discourses (1752). But if Adam Smith had not published his great work so soon after, it could well have been James Steuart who was hailed as the founder of political economy.
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