The Enlightenment and Political Economy

Turgot, The Theorist

The Origins of Laissez-Faire Economics

Turgot, The Theorist

In a famous passage from his History of Economic Thought, American economist Murray Rothbard praised what he called the "brilliance" of Turgot.

presenting him as the greatest economist of the 18th century, along with Cantillon.

How did Turgot rise to such prominence? It came down to a combination of three key factors. First, his prestigious family background. He came from a long line of royal administrators, many of whom held high-ranking government positions. Second, the golden age in which he was born and raised. Turgot was 21 when Montesquieu published L'Esprit des Lois, and 24 when the first volume of the Encyclopédie appeared.

He was a contemporary of the Physiocrats, Voltaire, Diderot, d'Holbach, Adam Smith, Condorcet, and others. Third, his intellectual precocity. While a student at the Sorbonne, he wrote a letter on paper money at the age of 22, delivered remarkable speeches, and at 24 composed a list of 52 works to write.

Despite his youth, Turgot contributed to the Encyclopédie, authoring articles on topics like "Etymology", "Existence", "Expansibility", "Fairs", and "Foundations". Only one article touched directly on economics—his piece on "Fairs", which detailed the origins of fairs and markets and criticized the growing state interference that disrupted and paralyzed them.

During these early years, he was mentored by Vincent de Gournay, who took him under his wing and formed a close friendship with him. Upon Gournay's death in 1759, Turgot composed a eulogy in which he offered a superb summary of the doctrine of laissez-faire. He notably wrote:

"From every perspective in which commerce may concern the State, individual interest left to itself will always more surely produce the general good than the operations of the government, which are always flawed and necessarily guided by vague and uncertain theory".

In 1767, while an intendant, he composed a compendium of economics under the title of Reflections on the Formation and Distribution of Wealth.

Division of labor, consumer sovereignty, private property, the role of capital, virtually all the major economic themes are addressed. Many historians, the most recent being historian Anne-Claire Hoyng, have pointed out the similarities between this work by Turgot and Adam Smith's The Wealth of Nations, published nine years later.

Turgot defended the freedom of the grain trade in letters to Abbot Terray, later communicated to the King, but half of which are now lost. He wrote:

Sir, if anything is urgent, it is not to impose new restrictions on the most essential of all trades, but to remove those which, unfortunately, have been allowed to remain. If there has ever been a time when the fullest, most absolute freedom, completely free from any kind of obstacle, was necessary, I dare say it is now, and that never has it been less appropriate to consider issuing a regulation on the grain trade.

In 1769, Turgot wrote the article Value and Money for Abbot Morellet's Dictionnaire de Commerce, which ultimately was never published. Galiani had already noted that "man is the common measure of all things", anticipating the subjective analysis that Turgot would develop thirty years later in this article, where he expands on and proves this proposition.

In 1770, well before Bentham, Turgot wrote a memorandum advocating for the freedom of interest rates and usury.

"It is a mistake to believe that the interest on money in commerce should be fixed by the laws of princes", he says, "It is a current price which regulates itself, like that of all other goods", In defense of this position, he refutes the opposition of Aristotle and the Church Fathers.

A remarkable summary of Turgot's laissez-faire doctrine can be found in a forgotten 1773 letter to Abbot Terray on the marking of irons:

What politics must do is to yield to the course of nature and to the course of commerce, which is no less necessary and no less irresistible than the course of nature itself, without attempting to direct it; for to direct it without disrupting it and without harming oneself, one would need to be able to follow all the variations in human needs, interests, and industry; one would need to know them in a level of detail that is physically impossible to obtain, and in which even the most skillful, active, and meticulous government will always risk being wrong,at least by half.

Here we find a very clear statement of the doctrine of laissez-faire, as well as a foreshadowing of Friedrich Hayek's analysis of the pretense of knowledge—that is, the impossibility for a State to fully grasp economic forces in order to control them.

Quiz

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Which economist did Turgot praise?