The Classical Theory of Economic Growth

The Classical Theory of Economic Growth

The Classical Theory of Economic Growth

The Classical Theory of Economic Growth

Synopsis

Walter Eltis's classic account of the theories of growth and distribution of Franccedil;ois Quesnay, Adam Smith, Robert Malthus, David Ricardo, and Karl Marx is reprinted with a substantial new Introduction setting the work in a broader context. He restates their individual contributions rigorously with extensive references to the original texts. He shows how each developed the work of his predecessors to produce a coherent and distinctive classical theory of growth.

Excerpt

This book seeks to provide an account of the theory of economic growth and income distribution as it was invented and developed successively by François Quesnay, Adam Smith, Thomas R. Malthus, David Ricardo and Karl Marx. These were five of the most original and distinguished thinkers to devote serious attention to economic problems, and they left important books which have enriched economics and exercised great political influence.

The classical theory of economic growth which they initiated, elaborated and corrected has two fundamental characteristics. Part and only part of the economy generates an investable surplus over costs; and growth depends on the reinvestment of a sufficient fraction of that surplus. In Quesnay’s version of the theory, growth depends primarily on the reinvestment of the agricultural surplus, but it is also strongly influenced by the demand for agricultural produce which owes much to the extent to which rents are spent on food. The economy’s full interrelationships are set out in the celebrated Tableau Economique, which Quesnay invented in 1758–9, and this is the subject of Chapter 1.

The theory of economic growth which follows from the conditions set out in the Tableau is the subject of Chapter 2. Economic advice streamed to Versailles, Baden Baden and even St Petersburg from Quesnay’s Physiocratic school of Economistes, and many of his contemporaries were satisfied that profoundly important logical argument based on the Tableau underpinned the policy recommendations, but the Tableau itself, like much of the modern economics on which government decisions are based, was extremely obscure.

Smith visited Paris in 1765–6 while respect for Quesnay’s economics was at its height, and it may be presumed that he achieved a complete grasp of Physiocratic economic theory. The Nature and Causes of the Wealth of Nations of 1776 which links the generation of an economic surplus to capital accumulation and economic growth contains the essence of Quesnay’s argument, but Smith found a way

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