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Revisiting Cantillon's admirable theory of distribution and value - a misinterpretation corrected

Author

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  • Roy H Grieve

    (Department of Economics, University of Strathclyde)

Abstract
This paper returns to an issue I discussed in a review article published some twenty years ago** The subject under discussion was Anthony Brewer’s 1992 study*** Richard Cantillon: Pioneer of Economic Theory. That review provided a vehicle for consideration of Cantillon’s theory of value, particularly for questioning Brewer’s rejection of Cantillon’s analysis, on the ground that he (Brewer) understood it to propose a dead-end “land theory of value†which attempted to account for equilibrium relative values in terms of quantities of “land embodiedâ€Â. In the present paper a fuller critique of that land-embodied interpretation of Cantillon’s value theory is presented. From what might be described as a Sraffian perspective, we – contrary to Brewer - interpret Cantillon as offering a perceptive and valid analysis of the operation of the market mechanism in the case of a surplus producing system in which distribution is determined - exogenously to the price system - by social factors of property ownership and economic power. We suggest that, given Cantillon’s view (in a pre-industrial context) of land as a country’s principal economic resource, he may be said to have told a general story associating equilibrium commodity prices (“intrinsic valuesâ€Â) with the quantity and quality of land employed in production. Appreciating that an approach in terms simply of physical quantities of land could not serve to explain relative values under the complexity of real world conditions, he expressed his understanding in the form of a “cost of production theory†explaining intrinsic values as represented by the costs – comprised of wages and rents measured in money – incurred by entrepreneurs for the use of heterogeneous inputs of land and labour. Labour costs can be translated into land costs via Cantillon’s “Parâ€Â. These production costs reflect both the use of resources and the balance of economic power within society. Thus, on the subject of “intrinsic value†we read Cantillon as following not a crude land-embodied treatment, but instead a cost of production approach, an approach which would be further developed by the Classics and Marx as appropriate to later economic and social conditions.

Suggested Citation

  • Roy H Grieve, 2015. "Revisiting Cantillon's admirable theory of distribution and value - a misinterpretation corrected," Working Papers 1506, University of Strathclyde Business School, Department of Economics.
    • Handle: RePEc:str:wpaper:1506
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    References listed on IDEAS

    as
    1. Aspromourgos, Tony, 1989. "The Theory of Production and Distribution in Cantillon's Essai," Oxford Economic Papers, Oxford University Press, vol. 41(2), pages 356-373, April.
    2. Hayek, F. A., 2012. "The Trend of Economic Thinking," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226321363 edited by Bartley, III, W. W. & Kresge, Stephen, December.
    3. Aspromourgos Tony, 1997. "Cantillon on real wages and employment: a rational reconstruction of the significance of land utilization," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 4(3), pages 417-443.
    4. repec:ucp:bkecon:9780226320670 is not listed on IDEAS
    5. Reneé Prendergast, 1991. "Cantillon and the Emergence of the Theory of Profit Contribution," History of Political Economy, Duke University Press, vol. 23(3), pages 419-429, Fall.
    6. Joseph J. Spengler, 1954. "Richard Cantillon: First of the Moderns. II," Journal of Political Economy, University of Chicago Press, vol. 62(5), pages 406-406.
    7. Joseph J. Spengler, 1954. "Richard Cantillon: First of the Moderns. I," Journal of Political Economy, University of Chicago Press, vol. 62(4), pages 281-281.
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    More about this item

    Keywords

    Richard Cantillon's Essai; Value and Distribution; the Par; the alleged land theory of value;
    All these keywords.

    JEL classification:

    • B11 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Preclassical (Ancient, Medieval, Mercantilist, Physiocratic)

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