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An Essay on Economic Theory
Following a century of neglect, William Stanley Jevons, in the first blush of discovery, proclaimed Cantillon's Essai
251 pages, Paperback
First published January 1, 1755
45 people are currently reading
467 people want to read
About the author
Richard Cantillon
31 books15 followersRichard Cantillon (d. 1734) was an Irish-French economist and author of Essai sur la Nature du Commerce en Général (Essay on the Nature of Trade in General), a book considered by William Stanley Jevons to be the "cradle of political economy". Although little information exists on Cantillon's life, it is known that he became a successful banker and merchant at an early age. His success was largely derived from the political and business connections he made through his family and through an early employer, James Brydges. During the late 1710s and early 1720s, Cantillon speculated in, and later helped fund, John Law's Mississippi Company, from which he acquired great wealth. However, his success came at a cost to his debtors, who pursued him with lawsuits, criminal charges, and even murder plots until his death in 1734.
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Displaying 1 - 11 of 11 reviews
February 1, 2014
This book by Cantillon is the only portion of his great work that made it through history. No painting of Cantillon exists so we must depend on these words and history to get a good picture of the man. We know from history that he was born in Ireland and became a banker in Paris during the end of the reign of Louis XIV. Many historians believe he was one of the richest men in Europe at that time. He is known to have married one of the most beautiful women on the continent. He is known to have increased his wealth during his lifetime from nothing to immense sums by speculating correctly during two of the largest financial bubbles, the Mississippi Bubble and South Sea Bubble.
He is finally getting his due as an economist. Proponents of Austrian Economics have accepted him as the Founder of their school. Today he is recognized as inventing the technique of economic analysis, providing the foundation for the study of economics and popularizing many of the terms of the field like entrepreneur and economics. Adam Smith acknowledged Cantillon's contributions. He is the first small government advocate, the first to recognize the role of the entrepreneur in economic growth and the first to diminish the importance of government involvement in economics.
The book is a surprisingly easy read. For an 18th century text the English translation is quite modern in approach and tone. This is not a boring stuffy pedantic work. Richard sticks to the facts and the examples he chooses to illustrate his theories although full of agricultural references they seem applicable to this day as in his time.
If you are interested in economics you must read this book. I rate it 5 stars for content and authorship. It is in these pages the study of economics began.
He is finally getting his due as an economist. Proponents of Austrian Economics have accepted him as the Founder of their school. Today he is recognized as inventing the technique of economic analysis, providing the foundation for the study of economics and popularizing many of the terms of the field like entrepreneur and economics. Adam Smith acknowledged Cantillon's contributions. He is the first small government advocate, the first to recognize the role of the entrepreneur in economic growth and the first to diminish the importance of government involvement in economics.
The book is a surprisingly easy read. For an 18th century text the English translation is quite modern in approach and tone. This is not a boring stuffy pedantic work. Richard sticks to the facts and the examples he chooses to illustrate his theories although full of agricultural references they seem applicable to this day as in his time.
If you are interested in economics you must read this book. I rate it 5 stars for content and authorship. It is in these pages the study of economics began.
March 26, 2016
Version by Henry Higgs, http://www.econlib.org/library/NPDBoo....
Cantillon's book is timeless. I wondered throughout how he would have viewed the not so distant financial crisis that was fueled by a global savings glut that encouraged greater spending, the housing boom and bust, and speculation in financial instruments that no one seemed to understand .... It is now 2016, and countries still struggle.
The warning of what will eventually come to pass when money becomes too plentiful/too scarce in a State due to trade or savings from foreigners (China and emerging markets) is a historical lesson observed throughout history but disastrously forgotten, and likely to be forgotten again until the next crisis, like the author.
It's free to read at econolib.org.
Cantillon's book is timeless. I wondered throughout how he would have viewed the not so distant financial crisis that was fueled by a global savings glut that encouraged greater spending, the housing boom and bust, and speculation in financial instruments that no one seemed to understand .... It is now 2016, and countries still struggle.
The warning of what will eventually come to pass when money becomes too plentiful/too scarce in a State due to trade or savings from foreigners (China and emerging markets) is a historical lesson observed throughout history but disastrously forgotten, and likely to be forgotten again until the next crisis, like the author.
It's free to read at econolib.org.
July 16, 2025
(circa 1735) Don't buy the Mises version with its unwelcome slant on Cantillon. Mises folk don't read anything except Australian writers.
He was business partners with John Law and clearly read Law's Money & Trade book several times, like everyone else in 1717 Europe. Still, this book - according to Antoin Murphy - is a refutation of Law's QE theories. You could call Law a pioneer of the Banking School and Cantillon a pioneer of the Currency School.
He was also a sage, selling Mississippi stock and Law's banknotes short, making a fortune, then faking his own death to retire to the Islands, no doubt with the finest pollone by him at all times.
***
...It is easy to understand by these examples that the sums of money
which a goldsmith or a banker can lend at interest or divert from his cash
are naturally proportional to the practices and conduct of his clients. While
we have seen bankers who were safe with a cash reserve of one-tenth, others must keep nearly one-half or even two-thirds, though their credit might
be as good as that of the first.
Some trust one banker, some another. The most fortunate is the banker
whose clients are rich gentlemen looking for a safe place for their money
without wishing to invest it at interest while they wait.
A general national bank has this advantage over the bank of a single
goldsmith because there is always more confidence in it. The largest deposits are willingly brought to it, even from the most remote quarters of the
city, and this generally leaves small bankers with only the deposits of petty
sums from their neighborhood. Even the revenues of the State are deposited in it in countries where the prince is not absolute. And this, far from
injuring credit and confidence in it, only serves to increase them.
If payments in a national bank are made by transfers or book credits,
the advantage isthat they are notsubject to forgeries. But if the bank issues
notes, false notes may be made and cause chaos. There will also be a disadvantage for those in the city who live far from the bank and who would
rather pay and receive in money and not travel to the bank. This is especially so for those who live in the country. But if the bank notes are dispersed, they can be used near and far. In the national banks of Venice and Amsterdam, payment is only made in book credits, but in the one in London, it is made in credit, in notes, and in money, according to individual
preferences.
Today, London is the strongest bank.
Therefore, it should be understood that the advantage of all banks in a
city, public or private, is to accelerate the circulation of money and to prevent so much of it from being hoarded, as it would naturally be for long
time intervals
Chapter Seven
Further Explanations and Enquiries
as to the Utility of a National Bank
It is of little importance to examine why the Bank of Venice
and that of Amsterdam keep their books in moneys of account different
from current[i.e., silver coin] money, and why there is always a fee for converting these book credits into currency. It is not a point of any usefulness
for circulation. The Bank of London has not followed them in this regard.
Its accounts, notes, and payments are made and are kept in current coins,
which seem to me more uniform, more natural and no less useful.
I have not been able to obtain accurate information about the quantities of money ordinarily brought to these banks, nor the amount of their
notes and accounts, loans, and sums kept as reserve. Someone who is better informed on these points will be better able to discuss them.
However, I know fairly well that these sums are not as large as commonly assumed, so I will briefly discuss the subject.
Assume that the bills and notes of the Bank of London, which seems
to me the most considerable, amount to a weekly average of four million ounces of silver, or about one million sterling. If they regularly keep a quarter or £250,000 sterling or one million ounces of silver in coins in reserve,
the utility of this bank to the circulation corresponds to an increase of the
money of the state of three million ounces or £750,000 sterling, which is
without doubt a very large sum and of very great utility for the circulation
when it needs to be accelerated. However, I have noted elsewhere [e.g., part
2, chapter 8]that there are cases where it is better for the welfare of the state
to slow down the circulation rather than to accelerate it. I have heard that
the notes and bills of the Bank of London have risen in some cases to two
millions sterling, but it seems to me this can only have been by extraordinary accident. And I think the utility of this bank corresponds in general
to only about one-tenth of all the money in circulation in England.
If the general explanations I received in 1719 about the revenues of the
Bank of Venice are correct, it may be said that the utility of national banks
generally does not match one-tenth of the money circulating in a state.
This is more or less what I’ve learned.
The revenues of the state in Venice may amount annually to four million ounces of silver, which must be paid in banknotes, and the collectors
hired for that purpose, who receive money at Bergamo and in the most
distant places for taxes, have to change it into banknotes when they make
the payments to the republic.
In Venice, all payments for contracts—purchases and sales above a
certain modest sum—must, by law, be made in banknotes. Therefore, all
the retailers who have collected money in their business are compelled to
buy banknotes to make large payments. Those who need money for their
expenses or retail purchases have to sell their banknotes for money.
The sellers and buyers of banknotes are usually equal when the total of
all the credits or accounts on the bank’s books do not exceed the value of
approximately 800,000 ounces of silver.
Time and experience (according to my informant) provided this
knowledge to the Venetians. When the bank was first set up, individuals
brought their money there to have credit at the bank for the same value.
The money that was deposited at the bank was later spent on the needs
of the republic [i.e., the government] and yet, banknotes preserved their
original value because there were as many people needing to buy them
as those needing to sell them. Finally, the state, in need of money, gave credits to war contractors in banknotes instead of silver, doubling the
amount of its credits.
Then with the number of sellers of banknotes being much greater than
number of buyers, the notes began to lose value and fell 20 percent against
silver. By this discredit, the revenue of the republic fell by one-fifth and
the only remedy found for this chaos was to pledge part of the state’s revenues to borrow banknotes at interest. With these loans of banknotes half
of them were cancelled and then with the sellers and buyers being about
equal, the bank regained its original credit and the total of banknotes was
brought back to 800,000 ounces of silver.
In this manner, it has been ascertained that the usefulness of the Bank
of Venice, in terms of money in circulation, corresponds to about 800,000
ounces of silver. If we assume that all the money in the states of that republic amount to eight million ounces of silver, the usefulness of the bank corresponds to one-tenth of that silver.
A national bank in the capital of a great kingdom or state must, it
seems, contribute less to the circulation than one in a small state because
of its distance from the provinces. When money circulates in greater abundance than among its neighbors, a national bank does more harm than
good. An abundance of fictitious and imaginary money causes the same
disadvantages as an increase of real money in circulation, by raising the
price of land and labor, or by changing the value of money and goods only
to cause subsequent losses. This furtive or unnatural abundance vanishes
at the first gust of scandal and precipitates economic chaos.
Toward the middle of the reign of Louis XIV [1638-1715], there was
more money in circulation in France than in neighboring countries, and
the king’s revenue was collected without the help of a bank, as easily and
conveniently as it is collected today in England with the help of the Bank
of London.
If exchanges in Lyons during one of its four trading fairs amounted to
80 millions of livres, and if they are begun and finished with one million in
cash money, they are certainly of great convenience. Because everyone is in
the same location, an infinite number of transactions can take place and it
saves the expense of transporting silver from one place to the other. Normally, it might take three months for this same million of cash to conduct
80 million in payments.
The Paris bankers have often observed that the same bag of money
has come back to them four or five times in the same day when they had a
good deal to pay out and receive.
I think that public banks are useful in small states and in those where
silver is rather scarce, but of little utility in giving a solid advantage to a
large state.
He was business partners with John Law and clearly read Law's Money & Trade book several times, like everyone else in 1717 Europe. Still, this book - according to Antoin Murphy - is a refutation of Law's QE theories. You could call Law a pioneer of the Banking School and Cantillon a pioneer of the Currency School.
He was also a sage, selling Mississippi stock and Law's banknotes short, making a fortune, then faking his own death to retire to the Islands, no doubt with the finest pollone by him at all times.
***
...It is easy to understand by these examples that the sums of money
which a goldsmith or a banker can lend at interest or divert from his cash
are naturally proportional to the practices and conduct of his clients. While
we have seen bankers who were safe with a cash reserve of one-tenth, others must keep nearly one-half or even two-thirds, though their credit might
be as good as that of the first.
Some trust one banker, some another. The most fortunate is the banker
whose clients are rich gentlemen looking for a safe place for their money
without wishing to invest it at interest while they wait.
A general national bank has this advantage over the bank of a single
goldsmith because there is always more confidence in it. The largest deposits are willingly brought to it, even from the most remote quarters of the
city, and this generally leaves small bankers with only the deposits of petty
sums from their neighborhood. Even the revenues of the State are deposited in it in countries where the prince is not absolute. And this, far from
injuring credit and confidence in it, only serves to increase them.
If payments in a national bank are made by transfers or book credits,
the advantage isthat they are notsubject to forgeries. But if the bank issues
notes, false notes may be made and cause chaos. There will also be a disadvantage for those in the city who live far from the bank and who would
rather pay and receive in money and not travel to the bank. This is especially so for those who live in the country. But if the bank notes are dispersed, they can be used near and far. In the national banks of Venice and Amsterdam, payment is only made in book credits, but in the one in London, it is made in credit, in notes, and in money, according to individual
preferences.
Today, London is the strongest bank.
Therefore, it should be understood that the advantage of all banks in a
city, public or private, is to accelerate the circulation of money and to prevent so much of it from being hoarded, as it would naturally be for long
time intervals
Chapter Seven
Further Explanations and Enquiries
as to the Utility of a National Bank
It is of little importance to examine why the Bank of Venice
and that of Amsterdam keep their books in moneys of account different
from current[i.e., silver coin] money, and why there is always a fee for converting these book credits into currency. It is not a point of any usefulness
for circulation. The Bank of London has not followed them in this regard.
Its accounts, notes, and payments are made and are kept in current coins,
which seem to me more uniform, more natural and no less useful.
I have not been able to obtain accurate information about the quantities of money ordinarily brought to these banks, nor the amount of their
notes and accounts, loans, and sums kept as reserve. Someone who is better informed on these points will be better able to discuss them.
However, I know fairly well that these sums are not as large as commonly assumed, so I will briefly discuss the subject.
Assume that the bills and notes of the Bank of London, which seems
to me the most considerable, amount to a weekly average of four million ounces of silver, or about one million sterling. If they regularly keep a quarter or £250,000 sterling or one million ounces of silver in coins in reserve,
the utility of this bank to the circulation corresponds to an increase of the
money of the state of three million ounces or £750,000 sterling, which is
without doubt a very large sum and of very great utility for the circulation
when it needs to be accelerated. However, I have noted elsewhere [e.g., part
2, chapter 8]that there are cases where it is better for the welfare of the state
to slow down the circulation rather than to accelerate it. I have heard that
the notes and bills of the Bank of London have risen in some cases to two
millions sterling, but it seems to me this can only have been by extraordinary accident. And I think the utility of this bank corresponds in general
to only about one-tenth of all the money in circulation in England.
If the general explanations I received in 1719 about the revenues of the
Bank of Venice are correct, it may be said that the utility of national banks
generally does not match one-tenth of the money circulating in a state.
This is more or less what I’ve learned.
The revenues of the state in Venice may amount annually to four million ounces of silver, which must be paid in banknotes, and the collectors
hired for that purpose, who receive money at Bergamo and in the most
distant places for taxes, have to change it into banknotes when they make
the payments to the republic.
In Venice, all payments for contracts—purchases and sales above a
certain modest sum—must, by law, be made in banknotes. Therefore, all
the retailers who have collected money in their business are compelled to
buy banknotes to make large payments. Those who need money for their
expenses or retail purchases have to sell their banknotes for money.
The sellers and buyers of banknotes are usually equal when the total of
all the credits or accounts on the bank’s books do not exceed the value of
approximately 800,000 ounces of silver.
Time and experience (according to my informant) provided this
knowledge to the Venetians. When the bank was first set up, individuals
brought their money there to have credit at the bank for the same value.
The money that was deposited at the bank was later spent on the needs
of the republic [i.e., the government] and yet, banknotes preserved their
original value because there were as many people needing to buy them
as those needing to sell them. Finally, the state, in need of money, gave credits to war contractors in banknotes instead of silver, doubling the
amount of its credits.
Then with the number of sellers of banknotes being much greater than
number of buyers, the notes began to lose value and fell 20 percent against
silver. By this discredit, the revenue of the republic fell by one-fifth and
the only remedy found for this chaos was to pledge part of the state’s revenues to borrow banknotes at interest. With these loans of banknotes half
of them were cancelled and then with the sellers and buyers being about
equal, the bank regained its original credit and the total of banknotes was
brought back to 800,000 ounces of silver.
In this manner, it has been ascertained that the usefulness of the Bank
of Venice, in terms of money in circulation, corresponds to about 800,000
ounces of silver. If we assume that all the money in the states of that republic amount to eight million ounces of silver, the usefulness of the bank corresponds to one-tenth of that silver.
A national bank in the capital of a great kingdom or state must, it
seems, contribute less to the circulation than one in a small state because
of its distance from the provinces. When money circulates in greater abundance than among its neighbors, a national bank does more harm than
good. An abundance of fictitious and imaginary money causes the same
disadvantages as an increase of real money in circulation, by raising the
price of land and labor, or by changing the value of money and goods only
to cause subsequent losses. This furtive or unnatural abundance vanishes
at the first gust of scandal and precipitates economic chaos.
Toward the middle of the reign of Louis XIV [1638-1715], there was
more money in circulation in France than in neighboring countries, and
the king’s revenue was collected without the help of a bank, as easily and
conveniently as it is collected today in England with the help of the Bank
of London.
If exchanges in Lyons during one of its four trading fairs amounted to
80 millions of livres, and if they are begun and finished with one million in
cash money, they are certainly of great convenience. Because everyone is in
the same location, an infinite number of transactions can take place and it
saves the expense of transporting silver from one place to the other. Normally, it might take three months for this same million of cash to conduct
80 million in payments.
The Paris bankers have often observed that the same bag of money
has come back to them four or five times in the same day when they had a
good deal to pay out and receive.
I think that public banks are useful in small states and in those where
silver is rather scarce, but of little utility in giving a solid advantage to a
large state.
August 10, 2022
Enorme. En el Essai de Cantillon tienes, en forma embrionaria, los principios y campos de estudio más importantes de la ciencia económica. No es un mero tratado de teoría monetaria, como algunos piensan, ni se limita tampoco a explicar el sistema de precios. El ensayo contiene desde economía espacial hasta consideraciones sobre la división del trabajo, el sistema bancario, el comercio internacional e incluso la economía de guerra. El autor es considerado como proto-fisiócrata y su teoría del valor es en base al coste de oportunidad del uso de la tierra por lo que puede estar algo desfasado, pero por lo demás su estudio sigue siendo muy útil para lectores modernos.
December 18, 2024
"La cuna de la Economía Política" es una muy buena manera de describir este ensayo.
Es impresionante para alguien que se le enseñó la historia económica a través de los ojos de los míticos Clásicos, como lo son Smith, Ricardo y Malthus, leer parte de sus contribuciones más importantes en este ensayo de Cantillon; La Teoría del Valor, Las Ventajas Comparativas, el tema de la Población.
Bien menciona Mr. Léonce de Laverge "todas las teorías de los economistas están contenidas anticipadas en este libro..." se les adelantó medio siglo básicamente, aunque se haya publicado allá por 1755, de dice que se escribió por 1720, una locura.
Es impresionante para alguien que se le enseñó la historia económica a través de los ojos de los míticos Clásicos, como lo son Smith, Ricardo y Malthus, leer parte de sus contribuciones más importantes en este ensayo de Cantillon; La Teoría del Valor, Las Ventajas Comparativas, el tema de la Población.
Bien menciona Mr. Léonce de Laverge "todas las teorías de los economistas están contenidas anticipadas en este libro..." se les adelantó medio siglo básicamente, aunque se haya publicado allá por 1755, de dice que se escribió por 1720, una locura.
February 27, 2022
Keeping in mind the time in which this was written (late 1720s-early 1730s), this is an incredibly insightful work. Keeping in mind Rothbard's Crusoe economics which he plays out a market on an individual basis and later adding other individuals, Cantillion plays out the market of a modern nation(modern for his time). Farms, villages, towns, cities, capitals, all producing, trading, and interacting in the market. Cantillion's work is short but in every way a treatise.
Read
January 17, 2025Es interesante como documento de la historia de las doctrinas económicas. Como un ignorante en economía me pareció interesante (sobre todo por la determinaciones del valor y de las monedas), aunque varias cosas se me escapan.
November 25, 2020
Stuff people talked about 400 years ago, but we think is new.
April 7, 2025
Richard Cantillon's "Essay on the Nature of Trade in General" is a foundational work in economics, and here are 5 key takeaways:
1. The Importance of the Entrepreneur: Cantillon was one of the first to highlight the role of the entrepreneur as a risk-taker. He recognized that entrepreneurs operate in an uncertain environment, buying and selling at uncertain prices. This concept is crucial to understanding how markets function.
2. The Role of Land: Cantillon emphasized that land is the primary source of wealth. He argued that all production ultimately derives from land, and that the distribution of land ownership has a significant impact on the economy.
3. Monetary Theory: Cantillon provided early insights into the effects of changes in the money supply. He understood that an increase in the money supply does not affect all prices equally, but rather has a cascading effect, influencing some prices before others. This is known as the "Cantillon effect."
4. The Circulation of Wealth: He analyzed how wealth circulates through the economy, focusing on the relationships between landowners, entrepreneurs, and laborers. He gave great focus to the way that money flows through the economy.
5. Spatial Economics: Cantillon also gave insights into the spatial organization of the economy, looking at how markets and cities are formed, and how goods are transported.
These key takeaways demonstrate Cantillon's profound understanding of economic principles, and his work has had a lasting impact on the development of economic thought.
1. The Importance of the Entrepreneur: Cantillon was one of the first to highlight the role of the entrepreneur as a risk-taker. He recognized that entrepreneurs operate in an uncertain environment, buying and selling at uncertain prices. This concept is crucial to understanding how markets function.
2. The Role of Land: Cantillon emphasized that land is the primary source of wealth. He argued that all production ultimately derives from land, and that the distribution of land ownership has a significant impact on the economy.
3. Monetary Theory: Cantillon provided early insights into the effects of changes in the money supply. He understood that an increase in the money supply does not affect all prices equally, but rather has a cascading effect, influencing some prices before others. This is known as the "Cantillon effect."
4. The Circulation of Wealth: He analyzed how wealth circulates through the economy, focusing on the relationships between landowners, entrepreneurs, and laborers. He gave great focus to the way that money flows through the economy.
5. Spatial Economics: Cantillon also gave insights into the spatial organization of the economy, looking at how markets and cities are formed, and how goods are transported.
These key takeaways demonstrate Cantillon's profound understanding of economic principles, and his work has had a lasting impact on the development of economic thought.
December 29, 2015
To William Stanley Jevons, Cantillon's Essay is the "cradle of political economy". Indeed, here, well before Adam Smith, you can find a closed economy model, the invisible hand, the notion of entrepreneurs, a circular flow, velocity of circulation, von Thünen's location theory and much else, including the famous 'Cantillion effects', perhaps his seminal contribution.
But it is harder to see the precursor to subjective value theory that the translator, Mark Thornton, does. When Cantillion talks about "intrinsic value" derived from the land and labour embodied in the production of a good, I am inclined to believe he means just that, not some imperfectly stated notion of opportunity cost. Neither is Cantillon free of Mercantilism. When he talks about 'regulating' trade, again, sometimes I am inclined to think he means just that and is only occasionally referring to the discipline of the market.
Either way, this book is utterly vital to an understanding of the history of economics.
But it is harder to see the precursor to subjective value theory that the translator, Mark Thornton, does. When Cantillion talks about "intrinsic value" derived from the land and labour embodied in the production of a good, I am inclined to believe he means just that, not some imperfectly stated notion of opportunity cost. Neither is Cantillon free of Mercantilism. When he talks about 'regulating' trade, again, sometimes I am inclined to think he means just that and is only occasionally referring to the discipline of the market.
Either way, this book is utterly vital to an understanding of the history of economics.
May 20, 2014
I wrote the foreword to the recent edition of this book published by Laissez Faire Books. Go to LFB.org. The book is well worth reading.
Displaying 1 - 11 of 11 reviews