• Thomas Jefferson's Free-Market Economics

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    From
    An
    Austrian Perspective on the History of Economic Thought
    , vol.
    2, Classical Economics (1995)

    "The
    ideologues – Cabanis, DuPont, Volney, Say, and de Tracy –
    all sent Jefferson their manuscripts and received encouragement
    in return."

    The leadership
    of the French Smithians was quickly gained by Jean-Baptiste
    Say
    , when the first edition of his great Traité
    d’Économie Politique

    was published in 1803. Say was born in Lyons to a Huguenot family
    of textile merchants, and he spent most of his early life in Geneva,
    and then in London, where he became a commercial apprentice. Finally,
    he returned to Paris as an employee of a life insurance company,
    and the young Say quickly became a leader of the laissez-faire group
    of philosophes in France. In 1794, Say became the first editor
    of the major journal of this group, La Décade Philosophique.
    A champion not only of laissez-faire but also of the burgeoning
    industrielisme of the Industrial Revolution, Say was hostile
    to the absurdly proagricultural physiocracy.

    The Décade
    group called themselves the "ideologists," later sneeringly
    dubbed by Napoleon the "ideologues." Their concept of
    "ideology" simply meant the discipline studying all forms
    of human action, a study meant to be a respecter of individuals
    and their interaction rather than a positivistic or scientistic
    manipulating of people as mere fodder for social engineering. The
    ideologues were inspired by the views and the analysis of the late
    Condillac. Their leader in physiological psychology was Dr. Pierre
    Jean George Cabanis (1757–1808), who worked closely with other
    biologists and psychologists at the École de Midécine.
    Their leader in the social sciences was the wealthy aristocrat Antonie
    Louis Claude Destutt, Comte de Tracy
    (1754–1836).[1]
    Destutt de Tracy originated the concept of "ideology,"
    which he presented in the first volume (1801) of his five-volume
    Éléments d’idéologie (1801–15).

    De Tracy first
    set forth his economic views in his Commentary on Montesquieu,
    in 1807, which remained in manuscript due to its boldly liberal
    views. In the Commentary, de Tracy attacks hereditary monarchy
    and one-man rule, and defends reason and the concept of universal
    natural rights. He begins by refuting Montesquieu’s definition of
    freedom as "willing what one ought" to the far more libertarian
    definition of liberty as the ability to will and do what one pleased.
    In the Commentary, de Tracy gives primacy to economics in
    political life, since the main purpose of society is to satisfy,
    in the course of exchange, man’s material needs and enjoyments.
    Commerce, de Tracy hails as "the source of all human good,"
    and he also lauds the advance of the division of labor as a source
    of increasing production, with none of the complaints about "alienation"
    raised by Adam Smith. He also stressed the fact that "in every
    act of commerce, every exchange of merchandise, both parties benefit
    or possess something of greater value than what they sell."
    Freedom of domestic trade is, therefore, just as important as free
    trade among nations.

    But, de Tracy
    lamented, in this idyll of free exchange and commerce, and of increasing
    productivity, comes a blight: government. Taxes, he pointed out,
    "are always attacks on private property, and are used for positively
    wasteful, unproductive expenditure." At best, all government
    expenditures are a necessary evil, and most, "such as public
    works, could be better performed by private individuals." De
    Tracy bitterly opposed government creation of and tampering with
    currency. Debasements are, simply, "robbery," and paper
    money is the creation of a commodity worth only the paper on which
    it is printed. De Tracy also attacked public debts, and called for
    a specie, preferably a silver, standard.

    The fourth
    volume of de Tracy’s Elements, the Traité de la
    volonté (Treatise on the Will), was, despite its
    title, de Tracy’s treatise on economics. He had now arrived at economics
    as part of his grand system. Completed by the end of 1811, the Traité
    was finally published at the overthrow of Napoleon in 1815, and
    it incorporated and built upon the insights of the Commentary
    on Montesquieu. Following his friend and colleague J.B. Say, de
    Tracy now heavily emphasized the entrepreneur as the crucial figure
    in the production of wealth. De Tracy has been sometimes called
    a labor theory of value theorist, but "labor" was instead
    upheld as highly productive as compared to land. Furthermore, "labor"
    for de Tracy was largely the work of the entrepreneur in saving
    and investing the fruits of previous labor. The entrepreneur, he
    pointed out, saves capital, employs other individuals, and produces
    a utility beyond the original value of his capital. Only the capitalist
    saves part of what he earns to reinvest it and produce new wealth.
    Dramatically, de Tracy concluded: "Industrial entrepreneurs
    are really the heart of the body politic, and their capital is its
    blood."

    Furthermore,
    all classes have a joint interest in the operations of the free
    market. There is no such thing, de Tracy keenly pointed out, as
    "unpropertied classes," for, as Emmet Kennedy paraphrases
    him, "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."[2]
    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.
    Abolition of private property, he warned, would only result in an
    "equality of misery" by abolishing personal effort. 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.

    De Tracy’s
    analysis of government intervention was the same as in his Commentary.
    All government expenditures are unproductive, even when necessary,
    and all embody living off the income of the producers and are therefore
    parasitic in nature. The best encouragement government can give
    to industry is to "let it alone," and the best government
    is the most parsimonious.

    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. Paper money, indeed, is simply a gradual
    and hidden series of successive debasements of the money standard.
    The destructive effects of inflation were analyzed, and privileged
    monopoly banks were attacked as "radically vicious" institutions.

    While following
    J.B. Say in his emphasis on the entrepreneur, de Tracy anticipated
    his friend in rejecting the use of mathematics or statistics in
    social science. 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. He attached the use of mathematics in his Mémoire
    sur la faculté de penser (Memoir on the faculty of
    thought) (1798), and in 1805 broke with his late friend Condorcet’s
    stress on the importance of "social mathematics." Perhaps
    influenced by Say’s Traité two years earlier, de Tracy
    stated that the proper method in the social sciences is not mathematical
    equations but the drawing forth, or deduction, of the implicit properties
    contained in basic "original" or axiomatic truths –
    in short, the method of praxeology. To de Tracy, the fundamental
    true axiom is that "man is a sensitive being," from which
    truths can be obtained through observation and deduction, not through
    mathematics. For de Tracy, this "science of human understanding"
    is the basic foundation for all the human sciences.

    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. When the ideologues achieved some political
    power in the consular years of Napoleon, Jefferson was made a member
    of the "brain trust" Institut National in 1801. The ideologues
    – Cabanis, DuPont, Volney, Say, and de Tracy – all sent
    Jefferson their manuscripts and received encouragement in return.
    After he finished the Commentary on Montesquieu, de Tracy
    sent the manuscript to Jefferson and asked him to have it translated
    into English. Jefferson enthusiastically translated some of it himself,
    and then had the translation finished and published by the Philadelphia
    newspaper publisher William Duane. In this way, the Commentary
    appeared in English (1811), eight years before it could be published
    in France. 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.

    Jefferson was
    highly enthusiastic about the Traité. Even though
    he himself had done much to prepare the way for war with Great Britain
    in 1812, Jefferson was disillusioned by the public debt, high taxation,
    government spending, flood of paper money, and burgeoning of privileged
    bank monopolies that accompanied the war. He had concluded that
    his beloved Democratic-Republican
    Party
    had actually adopted the economic policies of the despised
    Hamiltonian federalists, and de Tracy’s bitter attack on these policies
    prodded Jefferson to try to get the Traité translated
    into English. Jefferson gave the new manuscript to Duane again,
    but the latter went bankrupt, and Jefferson then revised the faulty
    English translation Duane had commissioned. Finally, the translation
    was published as the Treatise
    on Political Economy
    , in 1818.[3]

    Former President
    John Adams, whose ultra-hard-money and 100 percent-specie-banking
    views were close to Jefferson’s, hailed the de Tracy Treatise
    as the best book on economics yet published. He particularly lauded
    de Tracy’s chapter on money as advocating "the sentiments that
    I have entertained all my lifetime." Adams added that

    banks have
    done more injury to the religion, morality, tranquility, prosperity,
    and even wealth of the nation, than they … ever will do good.

    Our whole
    banking system, I ever abhorred, I continue to abhor, and shall
    die abhorring … every bank of discount, every bank by which
    interest is to be paid or profit of any kind made by the deponent,
    is downright corruption.

    As early as
    1790, Thomas Jefferson had hailed The
    Wealth of Nations
    as the best book in political economy,
    along with the work of Turgot. His friend Bishop James Madison (1749–1812),
    who was president of William & Mary College for 35 years, was
    the first professor of political economy in the United States. A
    libertarian who had emphasized early that "we were born free,"
    Bishop Madison had used the Wealth of Nations as his textbook.
    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. For a while William
    & Mary College adopted de Tracy’s Treatise under Jefferson’s
    prodding, but this status did not last long. Soon Say’s Treatise
    surpassed de Tracy in the race for popularity in the United States.

    The calamitous
    "panic"
    of 1819
    confirmed Jefferson in his stern hard-money views on
    banking. In November of that year, he elaborated a remedial proposal
    for the depression which he characteristically asked his friend
    William C. Rives to introduce to the Virginia legislature without
    disclosing his authorship. 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; the state government was to compel the complete withdrawal
    of bank notes in five years, one-fifth of the notes to be called
    and redeemed in specie each year. Furthermore, Virginia would make
    it a high offence for any bank to pass or accept the bank notes
    of any other states. Those banks who balked at the plan would have
    their charters forfeited or else be forced to redeem all their notes
    in specie immediately. In conclusion, Jefferson declared that no
    government, state or federal, should have the power of establishing
    a bank; instead, the circulation of money should consist solely
    of specie.

    Notes

    [1]
    We should also mention as prominent in the ideologue group the
    historian Constantin François Chasseboeuf, Comte de Volney
    (1757–1820).

    [2]
    Emmet Kennedy, Destutt
    De Tracy and the Origins of "Ideology"
    (Philadelphia:
    American Philosophical Society, 1978), p. 199.

    [3]
    It might be noted that de Tracy’s intermediary in the negotiations
    with Jefferson on the translation was their mutual friend, the
    last of the physiocrats, DuPont de Nemours, who had emigrated
    to Wilmington, Delaware in 1815 to found his famous gunpowder
    manufacturing dynasty.

    Reprinted
    from Mises.org.

    Murray
    N. Rothbard
    (1926–1995) was dean of the Austrian School,
    founder of modern libertarianism, and chief academic officer of
    the Mises Institute. He was
    also editor — with Lew Rockwell — of The
    Rothbard-Rockwell Report
    , and appointed Lew as his literary
    executor. See
    his books.

    The
    Best of Murray Rothbard

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