Good morning, everyone. My name is Chris Brown. I appreciate you coming here, and I'm glad
that I'm able to wear a suit today. My luggage got here just a couple of days ago. I flew
Air New Zealand, and it was a wonderful flight. They had great movies, great entertainment.
I'd always flown here from Australia on United, because it's always the cheapest, and that's
because they only have the one movie screen. So it was great to have my own personal screen.
The only thing missing from the flight was my luggage. So that's the excuse for my casual
I'm from the Australian Graduate School of Entrepreneurship at Swinburne University, which is near Melbourne, Australia.
I teach and lecture in entrepreneurship and just sometimes in economics.
I incorporate actually a lot of Cantillon into my entrepreneurship classes, and I think he's a good foundation for economics and especially for entrepreneurship.
and Entrepreneurship. And it's a very fruitful area, not only in economics, I think, but especially in entrepreneurship, because people usually know what you're talking about when you talk about Kant-John.
So, an overview of our presentation, and I should just let you know that Mark will be presenting as well. I sort of feel like a bad warm-up act to the main event, because Mark's the expert.
He mentioned here that he oversaw the translation of the new essay on economic theory by Cantillon.
So, overview of the presentation. I'm going to go over the French term entrepreneur,
and I won't try and butcher the language, but I'll go over the term and how it was used starting in the 12th century,
and then how Cantillon used the term and changed its meaning, or as we say, turned it upside down, he flipped its meaning.
And then Mark's going to go over some reasons why this might be the case in terms of looking at Cantillon's three career phases in his life and how his career, how the change in meaning of the term entrepreneur can be reflected by his career and the way he used the term significantly impacted those of the school of the physiocrats and then how we sort of understand the term today.
all right so looking at the term there we've got the 12th century where it's
very general which is to do something which it's okay being general because
Mises also uses the term very generally in a way that we're all entrepreneurs
acting under conditions of uncertainty and this is what it meant in the 12th
century later on sort of the same thing and the 14th person who assumed some
task and what this really means during the Middle Ages was someone who built
Religious buildings such as cathedrals or abbeys, which I found pretty interesting.
We don't usually think of the entrepreneur in that sense, but even more interesting might
be on the 16th, we've got violent war-like action.
So some of the Trojan warriors, for example, in the French literature were referred to
as entrepreneurs, and others during the 16th century would say that these entrepreneurs
Entrepreneurs are hardy, usurping, and intent to risk their lives and fortunes.
And then we've got also, now in the 17th century, we've got the French terms there, which I
won't pronounce, but we've got that first one, which also means one who undertakes something,
but then the next one is someone who works as a contractor, and we get into this notion
of the entrepreneur as a contractor.
And of course we get from that term, redemptor, however you pronounce it, redeemer, and that has a Christian meaning of someone who enters into a contract, for example, or a covenant.
So, later on in the 17th century, we've got undertaker of a construction project which is this idea of contracting with the government, right?
So an entrepreneur was someone who engaged in a construction project, contracted with the government, which is significant because the price of the contract was fixed, so the costs are what was uncertain.
So costs were uncertain, price was fixed, therefore the entrepreneur had to minimize those costs as much as possible to obtain a profit, and if not they would make a loss.
Whereas we'll see later that Cantillon flipped this or reversed this.
Okay, this was also in the French legal and economic literature, you can read this, that it was mainly a government contractor.
But then later on in the 18th century, keeping in mind that Cantillon's essay was published in 1755,
we've got not only a contractor but someone who undertakes substantial projects.
Projects. By that I mean public works mainly, so buildings, roads, canals, bridges, these
sorts of things. It's really interesting because at this time as well, the division of labor
becomes more obvious, or greater, or more recognized in France. And there's the creation
of the Academy of Architecture, which you might think of as sort of the modern day Academy
of, what is it, the AMA, Medical Association, right?
So let me read you this from Hosselitz.
This is his classic 1951 article, which is very difficult to find, but may I point out
that it's on Peter Klein's website, and that's the only place I could find it.
So, he says, the architects, let me point out before I read you the quote, at the time
the entrepreneurs did everything, they were pretty much the architects, they were those
who oversaw the labor and the construction of the projects and what not, Toselit says,
the architects especially felt that their services were of a higher quality than those
of ordinary master masons or contractors.
This sentiment was enhanced in France by the formation of an academy of architecture and
And in 1676, entrepreneurs, master masons in the building trade were prohibited from
adopting the designation architect of the king, or king's architects, an appellation
which was reserved to those men whom the king had chosen to compose this academy of architecture
to which only outstanding artists were admitted.
Okay, so then later it becomes more of this, again, sort of this mythology of the entrepreneur becoming, you know, bold and daring and dashing and sort of Richard Branson or Bill Gates-ish.
Okay, or maybe the Schumpeter notion of the entrepreneur.
And then we also have now Undertaker of a Business Project, so it's starting to become different, and obviously now we're after Cantillon's essay.
In this 1872 version of the French Dictionary, it references Condiac and Jean-Baptiste Say.
And we know that at least Condiac was heavily influenced by Cantillon, and in his work he wrote,
I have drawn the basis of this chapter from Cantillon's essay and several observations of which I have made in other chapters.
It is one of the best works I know on this subject.
Schumpeter later wrote that nobody before Cantillon had formulated it so fully, referring to the theory of entrepreneurship.
Okay, so let's now take a look at the way Cantillon formulated his theory.
So let me just give an example. He mentions the entrepreneur over a hundred times in his essay.
And there's three main economic actors in the essay.
You've got landowners, where demand comes from, so all entrepreneurs are trying to meet the wishes and tastes and needs of the landowners,
and then you've got the entrepreneurs, and then you've got wage laborers.
And the difference between the entrepreneurs and the laborers are that the laborer is on a fixed wage and the entrepreneurs are on an unfixed wage.
And to me, this seemingly simple or small detail is quite significant in terms of entrepreneurship education, which I'll get to in a minute in the conclusions.
Okay, so Cantillon gives the example of the farmer-entrepreneur.
This farmer-entrepreneur coordinates with the manufacturer-entrepreneur, and there's uncertainty between the present and future.
And for the farmer entrepreneur, Cantillon lists not only is there uncertainty and risk in terms of if a sale will even take place, but obviously in the future the prices are uncertain and this is now flipping the government contractor where the prices were fixed.
So there's no guarantee of profit or loss because of this uncertain future between the two and we see entrepreneurs all along the supply chain.
The same thing occurs with the manufacturer-entrepreneur, the middleman-entrepreneur, profit and loss, uncertainty between present and future, and Cantillon really mentions two main types of risks, right, barring any government bailouts, you would have bankruptcy or starvation.
Okay, later economists of the physiocrat school were influenced by Cantillon, especially Canet, who uses this term three times in his work.
He talks about the operator of a large farm or a businessman or one who supervises labor but does not participate in the labor process.
So with that, let me turn the time over to Mark to talk about Cantillon's three career phases.
Thank you, Chris. Hi, everyone.
What we're basically arguing is that the term entrepreneur changes dramatically from one of a government contractor to the modern term of entrepreneurship, which is someone who is working at risk, who's buying inputs, putting them together in some way, and selling them at an uncertain price in the near future.
And one of the things that we suggest is that his career was influential in this changing of the term.
Cantillon was a banker. He was born an Irish Catholic in Ireland.
His family estates, the ownership of his family's estates were taken by Cromwell.
And so when he reached the age of majority, young adult, there was not much to do in Ireland because they had lost their land.
And so he moved with his brother Bernard to Paris and he started working in his older cousin's bank.
And he was given the account of the British Paymaster General for the War Department.
So, why do you think the British Paymaster General would have their account in an Irish Catholic bank?
Well, apparently he was very successful at what he did, and he was soon approached by the British Paymaster General
and given a job as a clerk in the British Paymaster General's office in Madrid, Spain.
And what had been going on is the War of Spanish Succession.
So Britain, France, Spain, Austria, the Netherlands
were all at war.
British troops were in Spain.
British prisoners were in Spain.
And they had to be paid for by the British War Department.
Money had to be sent to Madrid.
Goods and services had to be bought for the troops
to provision those troops.
So what essentially is going on is that the British Paymaster General is getting money for the British government, sending it to a bank in Madrid, who is then giving the money to the Assistant Paymaster General in Spain, and then food, clothing and so forth, the pay of the soldiers is then doled out.
He's working, the British Paymaster General at the time was James Bridges, who was known
in history as the most successful war privateer of the age, and essentially what was going
on is all of these guys were on the take, the regiments, the officers, the whole process
was one of graft and corruption, and Cantillon was a very successful employee of this operation.
He came up with the idea of two sets of books, where the money would come into the Paymaster
General's office, into the Paymaster General's account.
Then they would be used to buy goods and services for the troops by a shadow company who would
then sell those provisions to the army at marked up prices.
So it's very similar to today where Halliburton buys a gallon of gasoline in the United States,
ships it over to Afghanistan, and it goes from $3 a gallon to $500 a gallon.
So it's very much a very corrupt affair.
After the war, he's greatly rewarded by Bridges for his services, the two sets of books idea,
and his silence, because the British government was after bridges for graft and corruption,
but Cantillon was able to cover the whole thing up.
So he takes that money and goes into banking in Paris.
He's very successful working, lending money, cashing bills of exchange for people.
As was the main business of, you get a bill of exchange from a London bank, take it with
you to a Paris bank and then cash it in for silver coins whenever you needed it.
And so that was the main role of banking, but the banks also lent money to businesses
and Cantino talks about that process and the various types of businesses that he was familiar
with Making Loans II.
And this is where he sort of understood the idea that, you know, you were always at risk.
You were at risk lending money.
You were at risk changing bills of exchange.
The businesses themselves were at risk.
All of this is used, all of this analysis is used in his analysis of usury laws, which
which he sees as only harmful to the economy.
And then finally, Cantillon was involved
in John Law's Mississippi Company and the Mississippi
Bubble.
He was an integral part.
He was hired by John Law.
He set up with Bernard an expedition to Louisiana
to actually try to exploit the Mississippi Company.
He made tons of money on the way up, selling short on the way down, and making another
fortune in foreign exchange.
So he understood the whole thing, and he understood it basically as a government racket, as something
that was completely contrived.
The Mississippi Company actually was the tax collector, the central bank, and the owner
of all the colonial overseas properties of France.
So he has these three career moves, one as a government contractor, then as a banker,
and then finally as sort of a government contractor working within this combination of central
bank, IRS, and overseas empire.
And I think what we find is that as the government contractor in Spain, the government contractor
in the Mississippi bubble were very corrupt practices, they didn't necessarily have to
exist and they weren't a part of the normal, well-regulated function in the economy, whereas
a typical bank was different. It was an entrepreneurial venture, everything was truly at risk, just
This is the general entrepreneurial category of people buying fixed prices for their cost
of production and selling at risk uncertain prices in the marketplace.
So that's basically our conclusions is that we think that Cantillon's career experiences
influenced his understanding of what the entrepreneur was and what it wasn't.
Chris, do you have any things to finish up with?
Sure, I guess I would just say coming from the entrepreneurship perspective in terms of teaching entrepreneurship,
I would say that this has quite an impact on entrepreneurship education in terms of how we think about the entrepreneur and what we teach.
So for me, my PhD work looks at entrepreneurship education and I argue that to understand what should be taught, we have to understand what the entrepreneur actually does or what the function or role of the entrepreneur is.
And if it's sort of as ubiquitous as Cantillon points out that it's anyone on an unfixed wage,
then that's not just someone who engages in bold business behavior or makes decisions,
but a whole host of activities from finance to marketing to creativity to innovation to ideas,
whether ideas or opportunities and whatnot.
I also think we talk about in the paper the danger of public-private partnerships
where these contracts are entered into when the price is fixed
in the future or if it's cost plus pricing even worse
where there's a guaranteed profit margin and how this causes
inefficiencies and things like that.
Thank you very much.