Eighteenth Century Economics: Turgot, Beccaria and Smith and Their Contemporaries

By Peter Groenewegen | Go to book overview

16

A re-appraisal of Turgot’stheory of value, exchange and price determination

Although so important an authority as J. A. Schumpeter has stated that only the Turgot specialist should look beyond the ‘Reflections’ for his economic doctrines, those interested in Turgot’s contribution to the general theory of value, exchange and price determination would miss a great deal of important material if they took Schumpeter’s advice. 1 The ‘Reflections’ devote relatively little space to the analysis of value as such, 2 and although this contains the analysis of price determination as well as comments on the measure of value and the theory of exchange, it contains by no means the whole of Turgot’s ‘sophisticated treatment of value’. 3

For Turgot, the theory of value was not only a matter of theoretical interest; it was also a matter of great practical importance, since its principles, in his opinion, would demonstrate the disadvantages of price regulation as well as the undoubted advantages of free trade. His detailed criticism of the regulation of interest rates and the grain trade, as well as his more general defence of laissez-faire, depended on the careful development of theoretical propositions which were intended to reveal the undesirable consequences of regulated markets and the benefits of free competition. 4 It is therefore not surprising that Turgot devoted a great deal of attention to the subject of value, exchange and price determination. 5

Apart from the ‘Reflections’, Turgot presented an essentially subjective theory of value and exchange in his unfinished paper of 1769, ‘Valeurs et monnaies’; 6 he also dealt with the theory of value and exchange, especially that between present and future goods, in his ‘Mémoire sur les prêts d’argent’, which was written in the same year. 7 Finally, he presented an equilibrium analysis in the classical manner which connects market price and cost of production: this was put forward in a letter to Hume and in his ‘Observations sur le mémoire de M. de Saint-Péravy’. 8 When these pieces on the theory of value are combined, an analysis emerges which can be regarded as a most important contribution on this subject in the eighteenth century.

It is the purpose of this chapter to reappraise Turgot’s theory of value, exchange and price determination and to compare his contribution with those of the leading economists of the eighteenth century. The first section below will deal with value concepts as analysed and defined by Turgot, the second will deal

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