WEBVTT NOTE 1. J.B. Say: The French Tradition in Smithian Clothing 1 00:00:00.000 --> 00:00:11.000 Classical Economics, An Austrian Perspective on the History of Economic Thought, Volume 2, by Murray and Rothbard 2 00:00:11.000 --> 00:00:19.000 Chapter 1, J. B. Say, The French Tradition in Smithian Clothing 3 00:00:19.000 --> 00:00:25.000 1. The Smithian Conquest of France 4 00:00:25.000 --> 00:00:50.000 One of the great puzzles in the history of economic thought, as we have indicated in Volume 1, is why Adam Smith was able to sweep the field and enjoy the reputation of founder of economic science, when Cantillon and Torgot had been far superior, both as technical economic analysts and as champions of laissez-faire. 5 00:00:50.000 --> 00:01:02.000 The mystery is particularly acute for France, since in Britain the only schools competing with the Smithians were the mercantilists and the political arithmeticians. 6 00:01:02.000 --> 00:01:14.000 The mystery deepens when we realize that the great leader of French economics after Smith, Jean-Baptiste Say, 1767-1832, 7 00:01:14.000 --> 00:01:20.600 was really in the Cantillon-Tourgaux tradition rather than that of Smith, even though he 8 00:01:20.600 --> 00:01:27.800 greatly neglected the former and proclaimed that economics began with Adam Smith. 9 00:01:27.800 --> 00:01:35.160 He, Say, was supposedly only systematizing the wonderful but inchoate truths found in 10 00:01:35.160 --> 00:01:37.440 the wealth of nations. 11 00:01:37.440 --> 00:01:43.240 We shall see below the precise nature of Say's thought and his contributions, as well 12 00:01:43.240 --> 00:02:07.240 as well as his decidedly French, non-Smithian and pre-Austrian logical clarity and emphasis on the praxeologic, axiomatic deductive method, on utility as the sole source of economic value, on the entrepreneur, on the productivity of the factors of production and on individualism. 13 00:02:07.240 --> 00:02:18.240 Specifically, in his brief treatment of the history of thought and his great treatise on political economy, Say makes no mention whatever of Cantillon. 14 00:02:18.240 --> 00:02:36.240 Despite the considerable influence of Turgot on his doctrine, he brusquely dismisses Turgot as sound on politics but of no account in economics, and asserts that political economy in effect began with Adam Smith's Wealth of Nations. 15 00:02:36.240 --> 00:02:51.240 This curious and willful neglect of his own forebears is made obscure by the scandalous fact that there is not a single biography of Say in the English language, and precious little even in French. 16 00:02:51.240 --> 00:02:56.240 Perhaps we can understand this development given the following. 17 00:02:56.240 --> 00:03:03.240 In France, economics had long been associated with the physiocrats, les économistes. 18 00:03:03.240 --> 00:03:10.440 The ouster from the controller generalship of the great Turgot in 1776, and the consequent 19 00:03:10.440 --> 00:03:17.520 demise of his liberal reforms, served to discredit the entire physiocratic movement. 20 00:03:17.520 --> 00:03:23.120 For Turgot was unfortunately considered in the public eye as merely a fellow traveler 21 00:03:23.120 --> 00:03:29.160 of physiocracy and its most influential follower in government. 22 00:03:29.160 --> 00:03:35.540 After this loss of political influence, the French philosophes and the leading intelligentsia 23 00:03:35.540 --> 00:03:40.700 felt free to heap mockery and ridicule upon the physiocrats. 24 00:03:40.700 --> 00:03:48.260 Some of the fanatical cult aspects of physiocracy left it vulnerable to scorn, and the encyclopedists, 25 00:03:48.260 --> 00:03:53.660 though themselves generally pro laissez-faire, led the attack. 26 00:03:53.660 --> 00:03:59.020 The advent of the French Revolution accelerated the demise of physiocracy. 27 00:03:59.020 --> 00:04:05.580 In the first place, the revolution was itself too intensely political to allow much sustained 28 00:04:05.580 --> 00:04:08.140 interest in economic theory. 29 00:04:08.140 --> 00:04:15.140 Second, the physiocrats' strategic devotion to absolute monarchy tended to discredit them 30 00:04:15.140 --> 00:04:19.340 in an era when the monarch had been toppled and destroyed. 31 00:04:19.340 --> 00:04:25.780 Moreover, the physiocrats, with their emphasis on the exclusive productivity of land, were 32 00:04:25.780 --> 00:04:30.860 were associated with devotion to the landed aristocratic interest. 33 00:04:30.860 --> 00:04:36.540 The French Revolution against aristocratic rule and against feudal landholding had no 34 00:04:36.540 --> 00:04:39.460 patience for physiocracy. 35 00:04:39.460 --> 00:04:45.860 The impatience was aggravated by the emergence of industrialism and the Industrial Revolution, 36 00:04:45.860 --> 00:04:51.380 which increasingly rendered obsolete the physiocratic devotion to the land. 37 00:04:51.380 --> 00:04:57.900 All these factors serve to discredit physiocracy totally, and since Turgot was unfortunately 38 00:04:57.900 --> 00:05:04.260 identified as a physiocrat, his reputation was dragged down at the same time. 39 00:05:04.260 --> 00:05:10.460 This situation was aggravated by the fact that Turgot's former aide and close friend, 40 00:05:10.460 --> 00:05:16.900 editor and biographer, was the last of the physiocrats, the statesman Pierre Samuel du 41 00:05:16.900 --> 00:05:25.420 to Pont de Nemours, 1739 to 1817, who added to the problem by deliberately distorting 42 00:05:25.420 --> 00:05:31.420 Turgot's views to make them appear as close to physiocracy as possible. 43 00:05:31.420 --> 00:05:37.080 Originally, Smith's Wealth of Nations was poorly received in France. 44 00:05:37.080 --> 00:05:43.700 The then-dominant physiocrats scorned it as a vague and poor imitation of Turgot. 45 00:05:43.700 --> 00:05:50.700 However, the great libertarian Condorcet, who had been a close friend and biographer of Turgot, 46 00:05:50.700 --> 00:05:56.700 wrote admiring notes appended to several French translations of The Wealth of Nations. 47 00:05:56.700 --> 00:06:03.700 And Condorcet's widow, Madame de Grouchy, continued the family interest in Smithian studies 48 00:06:03.700 --> 00:06:08.700 by preparing a French translation of The Theory of Moral Sentiments. 49 00:06:08.700 --> 00:06:16.700 Later, in the 1790s, the physiocratic remnants latched gratefully onto the Smithian coattails. 50 00:06:16.700 --> 00:06:23.700 Smith, after all, favored laissez-faire, and he was almost outlandishly pro-agriculture, 51 00:06:23.700 --> 00:06:27.700 holding that agricultural labor was the chief source of wealth. 52 00:06:27.700 --> 00:06:33.700 As a result, most of the later physiocrats became early Smithians in France, 53 00:06:33.700 --> 00:06:42.540 France, led by the Marquis-Germain Garnier, 1754-1821, the first French translator of 54 00:06:42.540 --> 00:06:49.340 the Wealth of Nations, who presented Smithian doctrine to France in his Abrege Elementaire 55 00:06:49.340 --> 00:06:56.260 des Principes de l'Economie Politique, 1796. 56 00:06:56.260 --> 00:06:58.900 2. 57 00:06:58.900 --> 00:07:02.580 de Tracey and Jefferson 58 00:07:02.580 --> 00:07:08.540 The leadership of the French Smithians was quickly gained by Jean-Baptiste Say when the 59 00:07:08.540 --> 00:07:15.780 first edition of his Great Treatise on Political Economy was published in 1803. 60 00:07:15.780 --> 00:07:21.620 Say was born in Lyon to a Huguenot family of textile merchants and he spent most of 61 00:07:21.620 --> 00:07:28.100 his early life in Geneva and then in London where he became a commercial apprentice. 62 00:07:28.100 --> 00:07:33.060 Recently he returned to Paris as an employee of a life insurance company, and the young 63 00:07:33.060 --> 00:07:39.580 Say quickly became a leader of the laissez-faire group of philosophes in France. 64 00:07:39.580 --> 00:07:48.180 In 1794, Say became the first editor of the major journal of this group, La Decade Philosophique. 65 00:07:48.180 --> 00:07:53.820 A champion not only of laissez-faire, but also of the burgeoning industrialism of the 66 00:07:53.820 --> 00:08:01.480 Industrial Revolution, say was hostile to the absurdly pro-agricultural physiocracy. 67 00:08:01.480 --> 00:08:10.340 The Decade group called themselves the ideologists, later sneeringly dubbed by Napoleon the ideologues. 68 00:08:10.340 --> 00:08:17.180 Their concept of ideology simply meant the discipline studying all forms of human action, 69 00:08:17.180 --> 00:08:23.660 a study meant to be a respecter of individuals and their interaction, rather than a positivistic 70 00:08:23.660 --> 00:08:35.940 The Ideologues were inspired by the views and the analysis of the late Kondiak. 71 00:08:35.940 --> 00:08:45.420 Their leader in physiological psychology was Dr. Pierre Jean-Georges Cabani, 1757-1808, 72 00:08:45.420 --> 00:08:52.340 who worked closely with other biologists and psychologists at the École de Médicine. 73 00:08:52.340 --> 00:08:58.580 Their leader in the social sciences was the wealthy aristocrat Antony Louis-Claude d'Estudes 74 00:08:58.580 --> 00:09:04.540 Compte de Tracy, 1754-1836. 75 00:09:04.540 --> 00:09:10.220 d'Estudes de Tracy originated the concept of ideology, which he presented in the first 76 00:09:10.220 --> 00:09:20.100 volume, 1801, of his five-volume Elements of Ideology, 1801-1815. 77 00:09:20.100 --> 00:09:28.260 de Tracy first set forth his economic views in his Commentary on Montesquieu in 1807, 78 00:09:28.260 --> 00:09:33.580 which remained in manuscript due to its boldly liberal views. 79 00:09:33.580 --> 00:09:41.020 In the Commentary, de Tracy attacks hereditary monarchy and one-man rule and defends reason 80 00:09:41.020 --> 00:09:44.800 and the concept of universal natural rights. 81 00:09:44.800 --> 00:09:51.400 He begins by refuting Montesquieu's definition of freedom as willing what one ought, to the 82 00:09:51.400 --> 00:09:59.320 far more libertarian definition of liberty as the ability to will and do what one pleased. 83 00:09:59.320 --> 00:10:05.440 In the commentary, de Tracy gives primacy to economics in political life, since the 84 00:10:05.440 --> 00:10:12.320 main purpose of society is to satisfy, in the course of exchange, man's material needs 85 00:10:12.320 --> 00:10:20.880 and Enjoyments, Commerce, de Tracy hails as the source of all human good and he also lauds 86 00:10:20.880 --> 00:10:26.200 the advance of the division of labor as a source of increasing production with none 87 00:10:26.200 --> 00:10:30.880 of the complaints about alienation raised by Adam Smith. 88 00:10:30.880 --> 00:10:37.680 He also stressed the fact that in every act of commerce, every exchange of merchandise, 89 00:10:37.680 --> 00:10:44.280 Both Parties Benefit or Possess Something of Greater Value Than What They Sell. 90 00:10:44.280 --> 00:10:51.180 Freedom of domestic trade is therefore just as important as free trade among nations. 91 00:10:51.180 --> 00:10:59.180 But, de Tracy lamented, in this idol of free exchange and commerce, and of increasing productivity, 92 00:10:59.180 --> 00:11:01.980 comes a blight, government. 93 00:11:01.980 --> 00:11:08.460 Taxes, he pointed out, are always a tax on private property, and are used for positively 94 00:11:08.460 --> 00:11:12.100 wasteful unproductive expenditures. 95 00:11:12.100 --> 00:11:18.780 At best, all government expenditures are a necessary evil, and most, such as public works, 96 00:11:18.780 --> 00:11:22.700 could be better performed by private individuals. 97 00:11:22.700 --> 00:11:28.940 Detracy bitterly opposed government creation of and tampering with currency. 98 00:11:28.940 --> 00:11:34.940 The Basements are simply robbery, and paper money is the creation of a commodity worth 99 00:11:34.940 --> 00:11:38.380 only the paper on which it is printed. 100 00:11:38.380 --> 00:11:46.020 Detrassey also attacked public debts and called for a specie, preferably a silver, standard. 101 00:11:46.020 --> 00:11:52.340 The fourth volume of Detrassey's Elements, The Treatise on the Will, was, despite its 102 00:11:52.340 --> 00:11:56.580 title, Detrassey's Treatise on Economics. 103 00:11:56.580 --> 00:12:01.940 He had now arrived at economics as part of his grand system. 104 00:12:01.940 --> 00:12:07.060 Completed by the end of 1811, the treatise was finally published at the overthrow of 105 00:12:07.060 --> 00:12:14.080 Napoleon in 1815, and it incorporated and built upon the insights of the commentary 106 00:12:14.080 --> 00:12:16.580 on Montesquieu. 107 00:12:16.580 --> 00:12:23.820 Following his friend and colleague J. B. Say, de Tracy now heavily emphasized the entrepreneur 108 00:12:23.820 --> 00:12:27.060 as the Crucial Figure in the Production of Wealth. 109 00:12:27.060 --> 00:12:34.900 Detracy has been sometimes called a labor theory of value theorist, but labor was instead 110 00:12:34.900 --> 00:12:39.700 upheld as highly productive as compared to land. 111 00:12:39.700 --> 00:12:46.580 Furthermore, labor for detracy was largely the work of the entrepreneur in saving and 112 00:12:46.580 --> 00:12:50.140 investing the fruits of previous labor. 113 00:12:50.140 --> 00:12:56.380 The entrepreneur, he pointed out, saves capital, employs other individuals, and produces a 114 00:12:56.380 --> 00:13:01.140 utility beyond the original value of his capital. 115 00:13:01.140 --> 00:13:07.900 Only the capitalist saves part of what he earns to reinvest it and produce new wealth. 116 00:13:07.900 --> 00:13:14.300 Dramatically, de Tracy concluded, industrial entrepreneurs are really the heart of the 117 00:13:14.300 --> 00:13:18.900 body politic, and their capital is its blood. 118 00:13:18.900 --> 00:13:24.900 Furthermore, all classes have a joint interest in the operations of the free market. 119 00:13:24.900 --> 00:13:34.900 There is no such thing, de Tracy keenly pointed out, as unpropertyed classes, for, as Emmett Kennedy paraphrases him, 120 00:13:34.900 --> 00:13:44.900 all men have at least their most precious of all properties, their faculties, and the poor have as much interest in preserving their property as do the rich. 121 00:13:44.900 --> 00:13:55.900 At the heart of de Tracy's central emphasis on property rights was thus the fundamental right of every man in his own person and faculties. 122 00:13:55.900 --> 00:14:04.900 Abolition of private property, he warned, would only result in an equality of misery by abolishing personal effort. 123 00:14:04.900 --> 00:14:23.900 Moreover, while there are no fixed classes in the free market, and every man is both a consumer and a proprietor, and can be a capitalist if he saves, there is no reason to expect equality of income, since men differ widely in abilities and talents. 124 00:14:23.900 --> 00:14:29.900 de Tracy's analysis of government intervention was the same as in his commentary. 125 00:14:29.900 --> 00:14:41.900 All government expenditures are unproductive, even when necessary, and all embody living off the income of the producers and are therefore parasitic in nature. 126 00:14:41.900 --> 00:14:50.900 The best encouragement government can give to industry is to let it alone, and the best government is the most parsimonious. 127 00:14:50.900 --> 00:15:09.900 On money, de Tracy took a firm hard money position. He lamented that the names of coins are no longer simple units of weight of gold or silver, debasement of coins he saw clearly as theft, and paper money as theft on a grand scale. 128 00:15:09.900 --> 00:15:17.900 Paper money, indeed, is simply a gradual and hidden series of successive debasements of the money standard. 129 00:15:17.900 --> 00:15:27.500 The destructive effects of inflation were analyzed and privileged monopoly banks were attacked as radically vicious institutions. 130 00:15:27.500 --> 00:15:40.900 While following J.B. Say and his emphasis on the entrepreneur, de Tracy anticipated his friend in rejecting the use of mathematics or statistics in social science. 131 00:15:40.900 --> 00:15:56.900 As early as 1791, de Tracy was writing that much of reality and human action is simply not quantifiable, and warned against the charlatan application of statistics to the social sciences. 132 00:15:56.900 --> 00:16:06.260 He attacked the use of mathematics in his Memoir on the Faculty of Thought, 1798, and in 1805, 133 00:16:06.260 --> 00:16:12.100 broke with his late friend Condorcet's stress on the importance of social mathematics. 134 00:16:13.060 --> 00:16:16.980 Perhaps influenced by Say's treatise two years earlier, 135 00:16:16.980 --> 00:16:23.700 de Tracy stated that the proper method in the social sciences is not mathematical equations, 136 00:16:23.700 --> 00:16:33.200 But the drawing forth, or deduction, of the implicit properties contained in basic, original, or axiomatic truths. 137 00:16:33.200 --> 00:16:36.700 In short, the method of praxeology. 138 00:16:36.700 --> 00:16:43.700 To de tracie, the fundamental true axiom is that man is a sensitive being, 139 00:16:43.700 --> 00:16:50.700 from which truths can be obtained through observation and deduction, not through mathematics. 140 00:16:50.700 --> 00:16:58.700 For de Tracy, this science of human understanding is the basic foundation for all the human sciences. 141 00:16:58.700 --> 00:17:12.700 Thomas Jefferson, 1743-1826, had been a friend and admirer of the philosophes and ideologues since the 1780s, when he served as minister to France. 142 00:17:12.700 --> 00:17:25.700 When the ideologues achieved some political power in the consular years of Napoleon, Jefferson was made a member of the Breen Trust, Institut National, in 1801. 143 00:17:25.700 --> 00:17:36.700 The ideologues, Cabanis, Dupont, Volnais, Say and de Tracy, all sent Jefferson their manuscripts and received encouragement in return. 144 00:17:36.700 --> 00:17:46.100 After he finished the commentary on Montesquieu, de Tracy sent the manuscript to Jefferson and asked him to have it translated into English. 145 00:17:46.100 --> 00:17:57.300 Jefferson enthusiastically translated some of it himself, and then had the translation finished and published by the Philadelphia newspaper publisher William Dwayne. 146 00:17:57.300 --> 00:18:06.100 In this way, the commentary appeared in English 1811, eight years before it could be published in France. 147 00:18:06.100 --> 00:18:21.500 When Jefferson sent the published translation to de Tracy, the delighted philosopher was inspired to finish his Traité de la Volonté and sent it quickly to Jefferson, urging him to translate that volume. 148 00:18:21.500 --> 00:18:25.500 Jefferson was highly enthusiastic about the traité. 149 00:18:25.500 --> 00:18:32.500 Even though he himself had done much to prepare the way for war with Great Britain in 1812, 150 00:18:32.500 --> 00:18:38.500 Jefferson was disillusioned by the public debt, high taxation, government spending, 151 00:18:38.500 --> 00:18:44.500 flood of paper money and burgeoning of privileged bank monopolies that accompanied the war. 152 00:18:44.500 --> 00:18:45.500 War. 153 00:18:45.500 --> 00:18:52.200 He had concluded that his beloved Democratic-Republican party had actually adopted the economic policies 154 00:18:52.200 --> 00:18:59.080 of the despised Hamiltonian Federalists, and de Trasse's bitter attack on these policies 155 00:18:59.080 --> 00:19:05.380 prodded Jefferson to try to get the traité translated into English. 156 00:19:05.380 --> 00:19:10.940 Jefferson gave the new manuscript to Duane again, but the latter went bankrupt, and Jefferson 157 00:19:10.940 --> 00:19:15.660 Jefferson then revised the faulty English translation Dwayne had commissioned. 158 00:19:15.660 --> 00:19:24.460 Finally, the translation was published as The Treatise on Political Economy in 1818. 159 00:19:24.460 --> 00:19:31.280 Former President John Adams, whose ultra-hard money and 100% specie banking views were close 160 00:19:31.280 --> 00:19:38.260 to Jefferson's, hailed The de Tracey Treatise as the best book on economics yet published. 161 00:19:38.260 --> 00:19:44.140 He particularly lauded de Trasse's chapter on money as advocating the sentiments that 162 00:19:44.140 --> 00:19:47.580 I have entertained all my lifetime. 163 00:19:47.580 --> 00:19:54.900 Adams added that banks have done more injury to the religion, morality, tranquility, prosperity 164 00:19:54.900 --> 00:19:59.540 and even wealth of the nation than they ever will do good. 165 00:19:59.540 --> 00:20:07.280 Our whole banking system, I ever abhorred, I continue to abhor and shall die abhorring. 166 00:20:07.280 --> 00:20:13.700 Every bank of discount, every bank by which interest is to be paid, or profit of any kind 167 00:20:13.700 --> 00:20:18.700 made by the deponent, is downright corruption. 168 00:20:18.700 --> 00:20:24.720 As early as 1790, Thomas Jefferson had hailed The Wealth of Nations as the best book in 169 00:20:24.720 --> 00:20:29.100 political economy, along with the work of Turgot. 170 00:20:29.100 --> 00:20:35.940 His friend, Bishop James Madison, 1749ivid to 1812, who was president of William and 171 00:20:35.940 --> 00:20:43.940 Thomas Jefferson, born in Mary College for 35 years, was the first professor of political economy in the United States. 172 00:20:43.940 --> 00:20:52.940 A libertarian who had emphasized early that we were born free, Bishop Madison had used The Wealth of Nations as his textbook. 173 00:20:52.940 --> 00:21:04.940 Now, in his preface to de Tracy's treatise, Thomas Jefferson expressed the hearty prayer that the book would become the basic American text in political economy. 174 00:21:04.940 --> 00:21:14.140 For a while, William and Mary College adopted de Trassee's treatise under Jefferson's prodding, but this status did not last long. 175 00:21:14.140 --> 00:21:21.540 Soon, Say's treatise surpassed de Trassee in the race for popularity in the United States. 176 00:21:21.540 --> 00:21:30.140 The calamitous Panic of 1819 confirmed Jefferson and his stern hard-money views on banking. 177 00:21:30.140 --> 00:21:45.140 In November of that year, he elaborated a remedial proposal for the Depression, which he characteristically asked his friend, William C. Reeves, to introduce to the Virginia Legislature, without disclosing his authorship. 178 00:21:45.140 --> 00:21:59.140 The goal of the plan was stated bluntly. The eternal suppression of bank paper. The proposal was to reduce the circulating medium gradually to the pure specie level. 179 00:21:59.140 --> 00:22:11.140 The state government was to compel the complete withdrawal of banknotes in five years, one-fifth of the notes to be called and redeemed in specie each year. 180 00:22:11.140 --> 00:22:20.140 Furthermore, Virginia would make it a high offense for any bank to pass or accept the banknotes of any other states. 181 00:22:20.140 --> 00:22:25.340 Those banks who balked at the plan would have their charters forfeited, or else be forced 182 00:22:25.340 --> 00:22:29.820 to redeem all their notes in specie immediately. 183 00:22:29.820 --> 00:22:35.380 In conclusion, Jefferson declared that no government, state or federal, should have 184 00:22:35.380 --> 00:22:38.300 the power of establishing a bank. 185 00:22:38.300 --> 00:22:45.060 Instead, the circulation of money should consist solely of specie. 186 00:22:45.060 --> 00:22:47.460 3. 187 00:22:47.460 --> 00:22:54.180 The Influence of Say's Treatise J. B. Say was made a member of the governing 188 00:22:54.180 --> 00:23:00.700 tribunate during the Napoleonic consulate regime in 1799. 189 00:23:00.700 --> 00:23:06.300 Four years later his treatise was published, soon establishing him as the outstanding interpreter 190 00:23:06.300 --> 00:23:10.280 of Smithian thought on the continent of Europe. 191 00:23:10.280 --> 00:23:17.200 The treatise went through six editions in Say's lifetime, the last in 1829, then double 192 00:23:17.200 --> 00:23:20.060 All in size from the original edition. 193 00:23:20.060 --> 00:23:28.840 In addition, Say's Cour Complee d'Economie Politique, 1828-1830, was reprinted several 194 00:23:28.840 --> 00:23:29.840 times. 195 00:23:29.840 --> 00:23:37.200 And the extract from the treatise, printed as The Catechism of Political Economy, 1817, 196 00:23:37.200 --> 00:23:42.160 was reprinted for the fourth time shortly after Say's death. 197 00:23:42.160 --> 00:23:48.660 Every great European nation translated Say's treatise into its own language. 198 00:23:48.660 --> 00:23:55.460 In 1802, Napoleon cracked down on the ideologues, a group he had once courted but had always 199 00:23:55.460 --> 00:24:00.140 detested for its liberal, economic and political views. 200 00:24:00.140 --> 00:24:06.360 He recognized the ideologues as the staunchest opponents, in theory and practice, of his 201 00:24:06.360 --> 00:24:09.660 intensifying dictatorship. 202 00:24:09.660 --> 00:24:15.380 and forced the Senate to purge itself and the tribunate of the ideologues, thus ousting 203 00:24:15.380 --> 00:24:19.220 J.B. Say from his tribunal post. 204 00:24:19.220 --> 00:24:25.480 The ideologues were philosophers, and the Bonapartists saw philosophy itself as a threat 205 00:24:25.480 --> 00:24:27.700 to dictatorial rule. 206 00:24:27.700 --> 00:24:34.660 As Joseph Fivet, editor of the Bonapartist Journal de l'Empire, put it, philosophy is 207 00:24:34.660 --> 00:24:39.640 a means of complaining about the government, of threatening it when it departs from the 208 00:24:39.640 --> 00:24:43.920 from the Principals and the Men of the Revolution. 209 00:24:43.920 --> 00:24:50.320 Two years later, shortly after becoming emperor, Napoleon again went after Say, refusing to 210 00:24:50.320 --> 00:24:55.880 allow a second edition of the treatise to be published unless Say changed an offending 211 00:24:55.880 --> 00:24:57.440 chapter. 212 00:24:57.440 --> 00:25:01.840 When Say refused to do so, the new edition was suppressed. 213 00:25:01.840 --> 00:25:08.800 Ousted from the French government, Say became a successful cotton manufacturer for ten years. 214 00:25:08.800 --> 00:25:14.600 In fact, Say became one of the leading new-style manufacturers in France. 215 00:25:14.600 --> 00:25:21.200 As his biographer writes, Say was intimately involved in the emergence of large-scale industry. 216 00:25:21.200 --> 00:25:26.640 He was, in effect, one of the most remarkable types of these manufacturers of the consulate 217 00:25:26.640 --> 00:25:33.160 and of the empire, of these first great entrepreneurs who sought to place the new technological 218 00:25:33.160 --> 00:25:36.840 processes in operation. 219 00:25:36.840 --> 00:25:43.560 After Napoleon's fall in 1814, the second edition of the treatise was finally published, 220 00:25:43.560 --> 00:25:51.400 and in 1819, Say embarked on a new professorial career, first at the Conservatoire National 221 00:25:51.400 --> 00:25:54.520 and finally at the Collège de France. 222 00:25:54.520 --> 00:26:00.300 The admiring Jefferson, himself steeped in laissez-faire economic thought, assured Say 223 00:26:00.300 --> 00:26:05.120 that he would find a hospitable climate in the United States. 224 00:26:05.120 --> 00:26:10.920 Jefferson was joined in those wishes by President Madison. Indeed, Jefferson wanted to offer 225 00:26:10.920 --> 00:26:18.200 Say the professorship of political economy at his newly founded University of Virginia. 226 00:26:18.200 --> 00:26:23.820 Say's treatise exerted great influence in Italy. At first, Smith's wealth of nations 227 00:26:23.820 --> 00:26:31.640 had little impact on Italian economics. Italy had already had a flourishing free trade tradition, 228 00:26:31.640 --> 00:26:39.720 Notably in the Systematic Meditations on Political Economy, 1771, of the Milanese Count Pietro 229 00:26:39.720 --> 00:26:44.440 Verri, 1728-1797. 230 00:26:44.440 --> 00:26:50.360 There was no mention of Smith in the 1780 work of the Neapolitan Gaetano-Felangieri, 231 00:26:50.360 --> 00:27:01.080 1752-1788, in the writings of Count Giovanni Battista-Garrardo d'Arco, 1785, or even as 232 00:27:01.080 --> 00:27:09.040 as late as Francesco Mangotti's free trade work Il Colbertismo, 1792, and even though 233 00:27:09.040 --> 00:27:16.120 the wealth of nations had been translated into Italian in 1779. 234 00:27:16.120 --> 00:27:21.520 The spread of the French Revolutionary regime into Italy brought Adam Smith's influence 235 00:27:21.520 --> 00:27:24.000 along with the soldiers. 236 00:27:24.000 --> 00:27:29.640 Smith became the leading economic authority during the early Napoleonic years. 237 00:27:29.640 --> 00:27:36.120 After 1810, Say and de Trassee swept Italian economics into their camp. 238 00:27:36.120 --> 00:27:42.140 The views of Say were propounded in the lucid treatise the Elementi di economy politica 239 00:27:42.140 --> 00:27:54.460 1813 by Luca de Samuele Cagnazzi of Altimura 1764-1852, and in the treatise by Carlo Bossolini 240 00:27:54.460 --> 00:28:14.660 The Courageous Abbate Paolo Balsamo, 1764-1816, spread Smithian and later Say's views throughout 241 00:28:14.660 --> 00:28:21.060 Sicily, calling for free trade in agriculture and for the freeing of Sicilian agriculture 242 00:28:21.060 --> 00:28:28.700 from the Restrictions of Feudalism, particularly in his Memorie Economice ed Agrari, Palermo 243 00:28:28.700 --> 00:28:38.540 1803, and his Memorie in Edite di Pubblica Economia, Palermo 1845. 244 00:28:38.540 --> 00:28:45.380 Say's friend and colleague, Distut de Trasi, also wielded enormous influence in Italy. 245 00:28:45.380 --> 00:28:53.540 These elements was translated into a ten volume edition, Milan, 1817-1819, by the former 246 00:28:53.540 --> 00:29:00.300 priest Giuseppe Compagnoni, 1754-1833. 247 00:29:00.300 --> 00:29:06.740 Furthermore high up in the revolutionary government of Naples in the 1820s were the elderly statesman 248 00:29:06.740 --> 00:29:13.760 and philosopher Melchiori del Fico, head of the provisional revolutionary junta and correspondent 249 00:29:13.760 --> 00:29:20.500 President and admirer of Detracy, and the follower of Detracy, Pasquale Borrelli, head 250 00:29:20.500 --> 00:29:24.960 of the Neapolitan Revolutionary Parliament. 251 00:29:24.960 --> 00:29:30.600 Spain and the new Latin American countries were also influenced by Detracy. 252 00:29:30.600 --> 00:29:36.240 One of the leaders of the liberal Spanish Revolution of 1820 against absolute monarchy 253 00:29:36.240 --> 00:29:44.500 was Dom Manuel Maria Gutierrez, the translator of the treatise into Spanish, 1817, and professor 254 00:29:44.500 --> 00:29:47.160 of political economy at Malaga. 255 00:29:47.160 --> 00:29:55.220 Furthermore, a member of the revolutionary Spanish Cortes of 1820 was Ramon de Salas, 256 00:29:55.220 --> 00:30:00.760 the translator of de Tracey's commentary, who returned from exile in France to take 257 00:30:00.760 --> 00:30:02.600 part in the struggle. 258 00:30:02.600 --> 00:30:09.160 And still another member of the Cortes, J. Justo Garcia, had translated de Tracy's book 259 00:30:09.160 --> 00:30:11.040 on logic. 260 00:30:11.040 --> 00:30:17.840 In Latin America, de Tracy's admirer and follower, Bernardino Rivadavia, became president of 261 00:30:17.840 --> 00:30:21.880 the newly independent Republic of Argentina. 262 00:30:21.880 --> 00:30:28.160 Tracy also became highly popular in Brazil as well as Argentina, and in Bolivia, his 263 00:30:28.160 --> 00:30:36.160 Ludwig's ideology became the official doctrine of the state schools in the 1820s and 1830s. 264 00:30:36.160 --> 00:30:41.720 It is hardly surprising that the second wave of Smithian writers in Germany were strongly 265 00:30:41.720 --> 00:30:52.440 influenced by J. B. Say's treatise. Ludwig Heinrich von Jacob, 1759-1827, was, like Krauss, 266 00:30:52.440 --> 00:30:56.260 A Kantian philosopher as well as economist. 267 00:30:56.260 --> 00:31:01.880 Studying at the University of Halle, he became professor of philosophy there. 268 00:31:01.880 --> 00:31:07.880 von Jacob published a Smithian treatise on general economic principles, Principles of 269 00:31:07.880 --> 00:31:11.920 Economics, Halle, 1805. 270 00:31:11.920 --> 00:31:19.160 Later editions, up to the third, published in 1825, incorporated Sayite emendations. 271 00:31:19.160 --> 00:31:29.160 Furthermore, von Jacob was so impressed with Say's work that he translated the treatise into German, 1807, and into Russian. 272 00:31:29.160 --> 00:31:38.160 Von Jacob indeed helped spread enlightened views in Russia in more ways than by publishing a translation of Say. 273 00:31:38.160 --> 00:31:46.160 He taught for a while at the University of Kharkov and was a consultant to several official commissions at St. Petersburg. 274 00:31:46.160 --> 00:31:56.160 The most interesting and thorough going Sayite in Germany was Gottlieb Hufelant, 1760-1817. 275 00:31:56.160 --> 00:32:05.160 Hufelant was born in Danzig, where he became mayor and studied at Göttingen and Jena, where he became professor of political economy. 276 00:32:05.160 --> 00:32:13.160 In his Neue Grundlegung der Staatswirtschaft Kunst, Gießen, 1807-1813, 277 00:32:13.160 --> 00:32:20.840 In 1913, Huffelant adopted all the important innovations of J.B. Say, or rather, his return 278 00:32:20.840 --> 00:32:24.760 to the French continental pre-Smithian tradition. 279 00:32:24.760 --> 00:32:31.920 Thus, Huffelant brought back the entrepreneur and carefully separated his pure profits from 280 00:32:31.920 --> 00:32:38.680 confronting risk, from his interest return, and from the rent or wage for his managerial 281 00:32:38.680 --> 00:32:39.680 abilities. 282 00:32:39.680 --> 00:32:52.680 Furthermore, Huffalant adopted a utility scarcity theory of value, stressing the cause of value as the valuations of a stock of goods by individual consumers. 283 00:32:52.680 --> 00:32:58.680 The influence of Say and de Tracy in Russia strikes an ironic note. 284 00:32:58.680 --> 00:33:07.020 In 1825, one of the leading liberal decembrants, Pavel Ivanovich Pastel, who considered de 285 00:33:07.020 --> 00:33:13.680 Tracy's commentary as his Bible, tried to assassinate the absolute ruler, Tsar Nicholas 286 00:33:13.680 --> 00:33:14.680 first. 287 00:33:14.680 --> 00:33:21.600 Nicholas, in turn, proceeded to have Pastel hanged, even though he himself was educated 288 00:33:21.600 --> 00:33:29.880 in the Smithian and Sayite Cour d'Economie Politique of Heinrich Freiherr von Storch. 289 00:33:29.880 --> 00:33:37.040 The English translation of the fourth edition of Say's treatise appeared in London in 1821 290 00:33:37.040 --> 00:33:40.500 as The Treatise on Political Economy. 291 00:33:40.500 --> 00:33:46.280 The Free Trade Boston Journal, the North American Review, reissued the treatise in the United 292 00:33:46.280 --> 00:33:53.640 States the same year with American annotations by the free trade champion Clement C. Biddle. 293 00:33:53.640 --> 00:33:59.720 Say's treatise quickly became and remained the most popular textbook on economics in 294 00:33:59.720 --> 00:34:03.200 the United States down through the Civil War. 295 00:34:03.200 --> 00:34:09.400 Indeed, it was still being reprinted as a college text in 1880. 296 00:34:09.400 --> 00:34:14.960 During that period, the treatise had gone through 26 American printings, in contrast 297 00:34:14.960 --> 00:34:18.480 to Only Eight in France. 298 00:34:18.480 --> 00:34:24.720 The untranslated writings of the ideologues had an unexpected influence in Great Britain. 299 00:34:24.720 --> 00:34:30.640 Thomas Brown, friend and successor to Dugald Stewart in the Chair of Moral Philosophy at 300 00:34:30.640 --> 00:34:38.120 Edinburgh, was fluent in French, and was heavily influenced by the philosophy of de Tracy. 301 00:34:38.120 --> 00:34:44.200 Furthermore, James Mill was a philosophic disciple of Dr. Brown, and was himself an 302 00:34:44.200 --> 00:34:59.200 It is not surprising, therefore, that Mill should have been the first in Great Britain to appreciate the importance of Say's Law of Markets. 303 00:34:59.200 --> 00:35:09.200 It is no wonder that the Say version of Smithianism became the most popular economics work on the European continent and in the United States. 304 00:35:09.200 --> 00:35:15.840 Not being able to call himself a physiocrat, Say called himself a Smith follower, but he 305 00:35:15.840 --> 00:35:19.320 was one largely in name only. 306 00:35:19.320 --> 00:35:28.480 As we shall see, his views were really post-Cantillon and pre-Austrian, rather than Smithian classical. 307 00:35:28.480 --> 00:35:34.200 One crucial difference between Say and Smith was in the limpid clarity and lucidity of 308 00:35:34.200 --> 00:35:36.400 Say's treatise. 309 00:35:36.400 --> 00:35:43.240 Say quite justly called the wealth of nations a vast chaos and a chaotic collection of just 310 00:35:43.240 --> 00:35:49.640 ideas thrown indiscriminately among a number of positive truths. 311 00:35:49.640 --> 00:35:56.040 At another point, he calls Smith's work a promiscuous assemblage of the soundest principles, 312 00:35:56.040 --> 00:36:02.920 an ill-digested mass of enlightened views and accurate information, and, again with 313 00:36:02.920 --> 00:36:08.020 with great perceptiveness say charges that almost every portion of it, the wealth of 314 00:36:08.020 --> 00:36:11.080 nations, is destitute of method. 315 00:36:11.080 --> 00:36:19.280 Indeed, it was precisely Say's great clarity which, while winning him worldwide popularity, 316 00:36:19.280 --> 00:36:24.920 lowered his stock among the British writers who unfortunately ruled the roost of economic 317 00:36:24.920 --> 00:36:26.360 thought. 318 00:36:26.360 --> 00:36:32.200 The fact that he was not British himself doubtless added to this deprecation. 319 00:36:32.200 --> 00:36:39.120 In contrast to the inchoate Smith, or to the tortured and virtually unreadable Ricardo, 320 00:36:39.120 --> 00:36:45.840 Say's clarity and felicity, the very ease of reading him, made him suspect. Schumpeter 321 00:36:45.840 --> 00:36:53.260 puts it very well. His argument flows along with such easy limpidity that the reader hardly 322 00:36:53.260 --> 00:36:59.560 ever stops to think, and hardly ever experiences a suspicion that there might be deeper things 323 00:36:59.560 --> 00:37:02.600 is below this smooth surface. 324 00:37:02.600 --> 00:37:07.000 This brought him, say, sweeping success with the many. 325 00:37:07.000 --> 00:37:09.960 It cost him the goodwill of the few. 326 00:37:09.960 --> 00:37:16.200 He sometimes did see important and deep-seated truths, but when he had seen them, he pointed 327 00:37:16.200 --> 00:37:21.740 them out in sentences that read like trivialities. 328 00:37:21.740 --> 00:37:26.560 Because he was a splendid writer, because he avoided the rough and tortured prose of 329 00:37:26.560 --> 00:37:33.300 of a Ricardo, because, in Jefferson's phrase, his book was shorter, clearer, and sounder 330 00:37:33.300 --> 00:37:40.040 than the wealth of nations, economists then and later tended to confuse smoothness of 331 00:37:40.040 --> 00:37:46.780 surface with superficiality, just as they so often confound vagueness and obscurity 332 00:37:46.780 --> 00:37:48.960 with profundity. 333 00:37:48.960 --> 00:37:53.420 Schumpeter adds, thus he never got his due. 334 00:37:53.420 --> 00:37:59.420 The huge textbook success of the treatise, nowhere greater than in the United States, 335 00:37:59.420 --> 00:38:06.380 only confirmed contemporaneous and later critics in their diagnosis that he was just a popularizer 336 00:38:06.380 --> 00:38:08.220 of a Smith. 337 00:38:08.220 --> 00:38:15.260 In fact, the book got so popular precisely because it seemed to save hasty or ill-prepared 338 00:38:15.260 --> 00:38:19.820 readers the trouble of wading through the wealth of nations. 339 00:38:19.820 --> 00:38:25.380 This was substantially the opinion of the Ricardians, who put him down as a writer, 340 00:38:25.380 --> 00:38:30.460 see McCullough's comments upon him in the literature of political economy, who had been 341 00:38:30.460 --> 00:38:37.320 just able to rise to Smithian, but had failed to rise to Ricardian wisdom. 342 00:38:37.320 --> 00:38:42.300 For Marx, he is simply the insipid say. 343 00:38:42.300 --> 00:38:44.460 4. 344 00:38:44.460 --> 00:38:47.740 The Method of Praxeology 345 00:38:47.740 --> 00:38:53.980 A particularly outstanding feature of J.B. Say's treatise is that he was the first economist 346 00:38:53.980 --> 00:39:00.580 to think deeply about the proper methodology of his discipline and to base his work, as 347 00:39:00.580 --> 00:39:04.940 far as he could, upon that methodology. 348 00:39:04.940 --> 00:39:10.020 From previous economists and from his own study, he arrived at the unique method of 349 00:39:10.020 --> 00:39:18.540 and Economic Theory, what Ludwig von Mises was, over a century later, to call praxeology. 350 00:39:18.540 --> 00:39:25.460 Economics, Say realized, was not based on a mass of inchoate particular statistical facts. 351 00:39:25.460 --> 00:39:34.020 It was based instead on very general facts, faits généraux, facts so general and universal 352 00:39:34.020 --> 00:39:39.820 and so deeply rooted in the nature of man and his world that everyone, upon learning 353 00:39:39.820 --> 00:40:09.780 In his introduction to the treatise, which sets forth the methodological nature and 354 00:40:09.780 --> 00:40:16.260 Implications of His Work, Say begins by being critical of the physiocrats and of Dugald 355 00:40:16.260 --> 00:40:22.900 Stuart for confounding the sciences of politics and of political economy. 356 00:40:22.900 --> 00:40:30.020 Say saw that if economics or political economy was to progress, it must stand on its own 357 00:40:30.020 --> 00:40:36.740 feet as a discipline without being intimately mixed from the start with political science, 358 00:40:36.740 --> 00:40:43.100 or the science which sets forth the correct principles of the political order. 359 00:40:43.100 --> 00:40:49.500 Political economy, wrote Say, is the science of wealth, its production, distribution and 360 00:40:49.500 --> 00:40:51.780 consumption. 361 00:40:51.780 --> 00:40:57.540 Say goes on to mention the popularity of the Baconian method of induction from a mass of 362 00:40:57.540 --> 00:41:05.140 facts in the formation of a science, but then adds that there are two kinds of facts, objects 363 00:41:05.140 --> 00:41:13.020 Facts That Exist and Events That Take Place Clearly, objects that exist are primary, since 364 00:41:13.020 --> 00:41:20.060 events that take place are only movements or interactions of existing objects. 365 00:41:20.060 --> 00:41:27.140 Both classes of facts, noted Say, constitute the nature of things, and a careful observation 366 00:41:27.140 --> 00:41:33.080 of the nature of things is the sole foundation of all truth. 367 00:41:33.080 --> 00:41:41.860 This may also be grouped into two kinds, general or constant, and particular or variable. 368 00:41:41.860 --> 00:41:47.640 About the same time as Stuart, but far more comprehensively, Say then launched into a 369 00:41:47.640 --> 00:41:53.880 brilliant critique of the statistical method, and of the difference between it and political 370 00:41:53.880 --> 00:41:55.940 economy. 371 00:41:55.940 --> 00:42:01.520 Political economy deals with general facts or laws. 372 00:42:01.520 --> 00:42:07.360 General economy, from facts always carefully observed, makes known to us the nature of 373 00:42:07.360 --> 00:42:08.800 wealth. 374 00:42:08.800 --> 00:42:14.640 From the knowledge of its nature, deduces the means of its creation, unfolds the order 375 00:42:14.640 --> 00:42:19.760 of its distribution and the phenomena attending its destruction. 376 00:42:19.760 --> 00:42:26.120 It is, in other words, an exposition of the general facts observed in relation to this 377 00:42:26.120 --> 00:42:27.540 subject. 378 00:42:27.540 --> 00:42:33.040 With respect to wealth, it is a knowledge of effects and of their causes. 379 00:42:33.040 --> 00:42:39.480 It shows what facts are constantly conjoined with, so that one is always the sequence of 380 00:42:39.480 --> 00:42:41.440 the other. 381 00:42:41.440 --> 00:42:48.520 Say then added an important point, that economics does not resort for any further explanation 382 00:42:48.520 --> 00:42:50.340 to hypothesis. 383 00:42:50.340 --> 00:42:56.320 In short, unlike the physical sciences, the assumptions of economics are not tentative 384 00:42:56.320 --> 00:43:03.320 of Hypotheses, which, or the deductions from which, must be tested by fact. 385 00:43:03.320 --> 00:43:11.040 On the contrary, each step of the logical chain rests on definitely true, not hypothetical 386 00:43:11.040 --> 00:43:13.200 general facts. 387 00:43:13.200 --> 00:43:19.060 It might be added that it is precisely this crucial difference between the method of economics 388 00:43:19.060 --> 00:43:25.260 and of physical sciences that has brought so much contumely on the head of praxeology 389 00:43:25.260 --> 00:43:28.360 during the 20th Century. 390 00:43:28.360 --> 00:43:35.360 Instead of framing hypotheses, economic science must perceive connections and regularities 391 00:43:35.360 --> 00:43:42.200 from the nature of particular events, and must conduct us from one line to another so 392 00:43:42.200 --> 00:43:50.520 that every intelligent understanding may clearly comprehend in what manner the chain is united. 393 00:43:50.520 --> 00:43:58.560 It is this, Say concludes, which constitutes the excellence of the modern method of philosophizing. 394 00:43:58.560 --> 00:44:05.480 In contrast, statistics exhibit particular facts of a particular country at a designated 395 00:44:05.480 --> 00:44:06.840 period. 396 00:44:06.840 --> 00:44:09.920 They are a description in detail. 397 00:44:09.920 --> 00:44:17.520 Statistics, Say added, may gratify curiosity, but they can never be productive of advantage 398 00:44:17.520 --> 00:44:24.200 if they do not indicate the origin and consequences of the collected facts, and this can only 399 00:44:24.200 --> 00:44:29.120 be accomplished by the separate discipline of political economy. 400 00:44:29.120 --> 00:44:35.560 It is precisely the confounding of these two disciplines that made Smith's Wealth of Nations, 401 00:44:35.560 --> 00:44:42.440 in Say's perceptive words, an immeasurable and irregular mass of curious and original 402 00:44:42.440 --> 00:44:53.920 A Crucial Difference Between Statistics and Political Economy, Say goes on, is that the 403 00:44:53.920 --> 00:45:00.640 latter's general principles or general facts may be discovered and therefore may be known 404 00:45:00.640 --> 00:45:02.480 with certainty. 405 00:45:02.480 --> 00:45:08.840 The principles of political economy, wherever they rest on the rigorous deductions of undeniable 406 00:45:08.840 --> 00:45:13.980 Several general facts rest upon an immovable foundation. 407 00:45:13.980 --> 00:45:18.920 They are what von Mises would later call apodictic. 408 00:45:18.920 --> 00:45:24.680 Political economy, indeed, is composed of a few fundamental principles, and of a great 409 00:45:24.680 --> 00:45:30.380 number of corollaries or conclusions drawn from these principles. 410 00:45:30.380 --> 00:45:37.200 The particular facts of statistics, on the other hand, are necessarily uncertain, incomplete, 411 00:45:37.200 --> 00:45:44.600 Inaccurate and Imperfect, and even when true, say correctly notes, they are only true for 412 00:45:44.600 --> 00:45:46.560 an instant. 413 00:45:46.560 --> 00:45:48.720 Again on statistics. 414 00:45:48.720 --> 00:45:55.120 How small a number of particular facts are completely examined, and how few among them 415 00:45:55.120 --> 00:45:58.320 are observed under all their aspects. 416 00:45:58.320 --> 00:46:04.300 And in supposing them well examined, well observed and well described, how many of them 417 00:46:04.300 --> 00:46:09.940 Some either prove nothing or directly the reverse of what is intended to be established 418 00:46:09.940 --> 00:46:11.620 by them. 419 00:46:11.620 --> 00:46:18.260 And yet, the gullible public is often dazzled by a display of figures and calculations, 420 00:46:18.260 --> 00:46:25.100 as if numerical calculations alone could prove anything, and as if any rule could be laid 421 00:46:25.100 --> 00:46:31.900 down from which an inference could be drawn without the aid of sound reasoning. 422 00:46:31.900 --> 00:46:38.420 Today goes on to a blistering critique of the use of statistics without theory. 423 00:46:38.420 --> 00:46:44.900 Hence there is not an absurd theory or an extravagant opinion that has not been supported 424 00:46:44.900 --> 00:46:51.400 by an appeal to facts, and it is by facts also that public authorities have been so 425 00:46:51.400 --> 00:46:53.760 often misled. 426 00:46:53.760 --> 00:46:59.720 But a knowledge of facts without a knowledge of their mutual relations, without being able 427 00:46:59.720 --> 00:47:05.800 to show why the one is a cause and the other a consequence is really no better than the 428 00:47:05.800 --> 00:47:10.240 crude information of an office clerk. 429 00:47:10.240 --> 00:47:16.520 Say then denounces the idea that a good theory is not practical and that the practical is 430 00:47:16.520 --> 00:47:20.800 somehow superior to the theoretical. 431 00:47:20.800 --> 00:47:26.040 Nothing can be more idle than the opposition of theory to practice. 432 00:47:26.040 --> 00:47:32.240 What is theory if it be not a knowledge of the laws which connect effects with their 433 00:47:32.240 --> 00:47:35.400 causes, facts with facts? 434 00:47:35.400 --> 00:47:40.800 And who can be better acquainted with facts than the theorist who surveys them under all 435 00:47:40.800 --> 00:47:45.760 their aspects, and comprehends their relation to each other? 436 00:47:45.760 --> 00:47:51.840 And what is practice without theory, but the employment of means without knowing how or 437 00:47:51.840 --> 00:47:54.920 why they act? 438 00:47:54.920 --> 00:48:00.960 Say then brilliantly points out why it is impossible for peoples or nations to learn 439 00:48:00.960 --> 00:48:07.960 from experience and to adopt or discard theories correctly on that basis. 440 00:48:07.960 --> 00:48:14.800 Since the early modern era, he notes, wealth and prosperity have increased in Western Europe, 441 00:48:14.800 --> 00:48:21.000 while at the same time, nation-states have compounded restrictions of trade and multiplied 442 00:48:21.000 --> 00:48:24.240 the interference of taxation. 443 00:48:24.240 --> 00:48:31.120 Most people then superficially conclude that the latter caused the former, that trade and 444 00:48:31.120 --> 00:48:36.380 production increased as a result of the interference of government. 445 00:48:36.380 --> 00:48:42.920 On the other hand, Say and the political economists argue the reverse, that the prosperity of 446 00:48:42.920 --> 00:48:48.740 the same countries would have been much greater had they been governed by a more liberal and 447 00:48:48.740 --> 00:48:51.300 enlightened policy. 448 00:48:51.300 --> 00:48:57.940 How can facts or experience decide between these two clashing interpretations? 449 00:48:57.940 --> 00:49:00.340 The answer is that they cannot. 450 00:49:00.340 --> 00:49:07.900 That only correct theory, theory deducible from a few universal general facts or principles, 451 00:49:07.900 --> 00:49:09.460 can do so. 452 00:49:09.460 --> 00:49:16.900 And that is why, notes say, nations seldom derive any benefit from the lessons of experience. 453 00:49:16.900 --> 00:49:23.720 To do so, the community at large must be enabled to seize the connection between causes and 454 00:49:23.720 --> 00:49:30.240 their consequences, which at once supposes a very high degree of intelligence and a rare 455 00:49:30.240 --> 00:49:32.720 capacity for reflection. 456 00:49:32.720 --> 00:49:39.900 Thus, to arrive at the truth, only the complete knowledge of a few essential general facts 457 00:49:39.900 --> 00:49:41.720 is important. 458 00:49:41.720 --> 00:49:47.680 Every other knowledge of facts, like the erudition of an almanac, is a mere compilation from 459 00:49:47.680 --> 00:49:55.440 which nothing results. Furthermore, in arguments about public policies, when facts are allegedly 460 00:49:55.440 --> 00:50:02.600 set against the system of economic theory, it is actually one theoretical system poised 461 00:50:02.600 --> 00:50:11.200 against another. And again, only theoretical refutation can prevail. Thus, said Say, if 462 00:50:11.200 --> 00:50:17.880 If you talk about how free trade between nations is advantageous to all the participants, this 463 00:50:17.880 --> 00:50:25.560 is accused of being a system to which is opposed worry about deficits in the balance of trade, 464 00:50:25.560 --> 00:50:29.780 itself a system, but a fallacious one. 465 00:50:29.780 --> 00:50:36.260 Those who assert, as had the physiocrats, that luxury fuels trade whereas thrift is 466 00:50:36.260 --> 00:51:06.220 In a surprising and perceptive prefigurement of modern controversies, Say goes on to explain 467 00:51:06.220 --> 00:51:13.400 Why the logical deductions of economic theory should be verbal rather than mathematical. 468 00:51:13.400 --> 00:51:20.020 The intangible values of individuals with which political economy is concerned are subject 469 00:51:20.020 --> 00:51:26.900 to continuing and unpredictable change, subject to the influence of the faculties, the wants 470 00:51:26.900 --> 00:51:29.720 and the desires of mankind. 471 00:51:29.720 --> 00:51:36.720 They are not susceptible of any rigorous appreciation and cannot therefore furnish any data for 472 00:51:36.720 --> 00:51:39.480 absolute calculations. 473 00:51:39.480 --> 00:51:47.880 The phenomena of the moral world, noted Say, are not subject to strict arithmetical computation. 474 00:51:47.880 --> 00:51:54.200 Thus we may know absolutely that in any given year the price of wine will depend on the 475 00:51:54.200 --> 00:52:00.880 and the interaction of its supply or stock to be sold with the demand, but to calculate 476 00:52:00.880 --> 00:52:07.600 the two mathematically, these two elements would have to be decomposed precisely into 477 00:52:07.600 --> 00:52:15.680 the separate influence of each of their elements, and this would be so complex as to be impossible. 478 00:52:15.680 --> 00:52:22.840 Thus, it is not only necessary to determine what will be the product of the succeeding 479 00:52:22.840 --> 00:52:29.840 in the World of Money and Credit in the World of Money and Credit in the World of Money 480 00:52:52.840 --> 00:53:20.840 All these data, and probably many others besides, must be accurately appreciated solely to determine the quantity to be put in circulation, itself but one of the elements of price. 481 00:53:20.840 --> 00:53:33.840 To determine the quantity to be demanded, the price at which the commodity can be sold must already be known, as the demand for it will increase in proportion to its cheapness. 482 00:53:33.840 --> 00:53:42.840 We must also know the former stock on hand and the tastes and means of the consumers, as various as their persons. 483 00:53:42.840 --> 00:53:52.840 Their ability to purchase will vary according to the more or less prosperous condition of industry in general, and of their own in particular. 484 00:53:52.840 --> 00:54:04.840 Their wants will vary also in the ratio of the additional means at their command of substituting one liquor for another, such as beer, cider, etc. 485 00:54:04.840 --> 00:54:11.000 I suppress an infinite number of less important considerations, more or less affecting the 486 00:54:11.000 --> 00:54:13.940 solution of the problem. 487 00:54:13.940 --> 00:54:21.460 In short, the enormous number of imprecise, changing and quantitatively unknown determinants 488 00:54:21.460 --> 00:54:27.260 make the application of the mathematical method in economics impossible. 489 00:54:27.260 --> 00:54:32.920 And therefore, those who have pretended to do it have not been able to enunciate these 490 00:54:32.920 --> 00:54:39.360 These questions into analytical language without divesting them of their natural complication 491 00:54:39.360 --> 00:54:45.880 by means of simplifications and arbitrary suppressions of which the consequences, not 492 00:54:45.880 --> 00:54:52.520 properly estimated, always essentially change the condition of the problem and pervert all 493 00:54:52.520 --> 00:54:59.400 its results, so that no other inference can be deduced from such calculations than from 494 00:54:59.400 --> 00:55:03.640 from Formula Arbitrarily Assumed 495 00:55:03.640 --> 00:55:10.520 Mathematics, seemingly so precise, inevitably ends in reducing economics from the complete 496 00:55:10.520 --> 00:55:17.720 knowledge of general principles to arbitrary formulas which alter and distort the principles 497 00:55:17.720 --> 00:55:21.640 and hence corrupt the conclusions. 498 00:55:21.640 --> 00:55:27.880 But how then is the political economist, knowing the general principles with certainty, to 499 00:55:27.880 --> 00:55:33.880 apply these principles to specific problems such as the condition of the wine market. 500 00:55:33.880 --> 00:55:46.880 Here, too, Say anticipated the brilliant conclusions of Ludwig von Mises on the proper relationship between theory and history, theory and specific application. 501 00:55:46.880 --> 00:55:54.880 Such applied theory in economics, Say indicated, is an art rather than a strict science. 502 00:55:54.880 --> 00:56:02.880 What course is then to be pursued by a judicious inquirer in the elucidation of a subject so much involved? 503 00:56:02.880 --> 00:56:07.880 The same which would be pursued by him under circumstances equally difficult, 504 00:56:07.880 --> 00:56:11.880 which decide the greater part of the actions of his life. 505 00:56:11.880 --> 00:56:15.880 He will examine the immediate elements of the proposed problem, 506 00:56:15.880 --> 00:56:22.880 and after having ascertained them with certainty, which in political economy can be effected, 507 00:56:22.880 --> 00:56:43.880 will approximately value their mutual influences with the intuitive quickness of an enlightened understanding, itself only an instrument by means of which the mean result of a crowd of probabilities can be estimated, but never calculated with exactness. 508 00:56:43.880 --> 00:56:49.880 E. B. Say then relates the fallacies of the mathematical method in economics to the teachings 509 00:56:49.880 --> 00:56:57.760 of his great mentor, the physiologist Cabanee. He quotes Cabanee on how writers on mechanics 510 00:56:57.760 --> 00:57:04.880 grievously distort matters when they deal with the problems of biology and medicine. 511 00:57:04.880 --> 00:57:11.360 Citing Cabanee, the terms they employed were correct, the process of reasoning strictly 512 00:57:11.360 --> 00:57:37.920 Say then adds that whatever has thus been pointed out about the fallacies of the mechanistic 513 00:57:37.920 --> 00:57:45.200 Method in Biology is a fortiori applicable to the moral sciences, which is why we are 514 00:57:45.200 --> 00:57:51.520 always being misled in political economy, whenever we have subjected its phenomena to 515 00:57:51.520 --> 00:57:54.120 mathematical calculation. 516 00:57:54.120 --> 00:57:58.800 In such case, it becomes the most dangerous of all abstractions. 517 00:57:58.800 --> 00:58:06.360 Finally, Say perceptively points to another problem that, then as now, leads learned people 518 00:58:06.360 --> 00:58:13.240 are unable to dismiss the principles and conclusions of economics, for they are too apt to suppose 519 00:58:13.240 --> 00:58:19.940 that absolute truth is confined to the mathematical and to the results of careful observation 520 00:58:19.940 --> 00:58:27.460 and experiment in the physical sciences, imagining that the moral and political sciences contain 521 00:58:27.460 --> 00:58:34.720 no invariable facts or indisputable truths and therefore cannot be considered as genuine 522 00:58:34.720 --> 00:58:43.360 and Sciences, but merely hypothetical systems, more or less ingenious, but purely arbitrary. 523 00:58:43.360 --> 00:58:48.720 To bolster this view, the critics of economics point to a great many differences of opinion 524 00:58:48.720 --> 00:58:50.680 in that discipline. 525 00:58:50.680 --> 00:58:51.800 But so what? 526 00:58:51.800 --> 00:58:53.260 Say asks. 527 00:58:53.260 --> 00:58:59.160 After all, the physical sciences have always been rent by controversy, sometimes clashing 528 00:58:59.160 --> 00:59:04.600 with as much violence and disparity as in political economy. 529 00:59:04.600 --> 00:59:10.760 The mathematical method was not the only system of abstraction to suffer a trenchant demolition 530 00:59:10.760 --> 00:59:13.160 by J. B. Say. 531 00:59:13.160 --> 00:59:20.200 For Say was also sharply critical of verbal methods of logic that took off into the Empyrean 532 00:59:20.200 --> 00:59:27.680 without continuing groundwork in and repeated checking by reference to general and universal 533 00:59:27.680 --> 00:59:29.240 facts. 534 00:59:29.240 --> 00:59:34.960 This was Say's main methodological stricture against the physiocrats. 535 00:59:34.960 --> 00:59:41.000 Instead of first observing the nature of things, or the manner in which they take place, of 536 00:59:41.000 --> 00:59:48.000 classifying these observations and deducing from them general propositions, that is, instead 537 00:59:48.000 --> 00:59:56.400 of being praxeologists, the physiocrats commenced by laying down certain abstract general propositions 538 00:59:56.400 --> 01:00:02.480 which they styled axioms, from supposing them to contain inherent evidence of their own 539 01:00:02.480 --> 01:00:04.000 truth. 540 01:00:04.000 --> 01:00:10.440 They then endeavored to accommodate the particular facts to them and to infer from them their 541 01:00:10.440 --> 01:00:17.080 laws, thus involving themselves in the defense of maxims evidently at variance with common 542 01:00:17.080 --> 01:00:20.760 sense and universal experience. 543 01:00:20.760 --> 01:00:27.900 In short, a system of economic theory must not only be axiomatic deductive, it must always 544 01:00:27.900 --> 01:00:35.660 make sure to ground those axioms in common sense and universal experience. 545 01:00:35.660 --> 01:00:40.640 In his introduction to the fourth edition, Say leveled similar structures against David 546 01:00:40.640 --> 01:00:44.200 Ricardo and the Ricardian system. 547 01:00:44.200 --> 01:00:52.000 Ricardo, too, sometimes reasons upon abstract principles to which he gives too great a generalization. 548 01:00:52.000 --> 01:00:59.860 Ricardo, he charged, begins with observations founded on facts, but then pushes his reasonings 549 01:00:59.860 --> 01:01:07.260 to their remotest consequences without comparing their results with those of actual experience. 550 01:01:07.260 --> 01:01:13.060 After a certain point in the reasoning, the facts differ very far from our calculation, 551 01:01:13.060 --> 01:01:18.740 And from that instant nothing in the author's work is represented as it really occurs in 552 01:01:18.740 --> 01:01:20.180 nature. 553 01:01:20.180 --> 01:01:25.060 It is not sufficient, Say concludes, to set out from facts. 554 01:01:25.060 --> 01:01:31.540 They must be brought together, steadily pursued, the consequences drawn from them constantly 555 01:01:31.540 --> 01:01:34.980 compared with the effects observed. 556 01:01:34.980 --> 01:01:41.300 So that the science of political economy must show in what manner that which in reality 557 01:01:41.300 --> 01:01:47.580 does take place, is the consequence of other facts equally certain. 558 01:01:47.580 --> 01:01:54.400 It must discover the chain which binds them together, and always, from observation, establish 559 01:01:54.400 --> 01:01:58.560 Establish the existence of the two links at their point of connection.