Essay on Economic Theory pptx

An Essay on Economic TheoryAn English translation of Richard Cantillon’s Essai sur la Nature du Commerce en Général... An Essay on EconomicTheory An English translation of Richard Cant

An Essay on Economic Theory

An English translation

of Richard Cantillon’s Essai sur la Nature

du Commerce en Général

An Essay on Economic

Theory

An English translation of Richard Cantillon’s Essai sur la Nature du Commerce en Général

Translated by Chantal Saucier

Edited by Mark Thornton

©2010bytheLudwigvonMisesInstituteandpublishedundertheCreativeCommonsAttributionLicense3.0.

RobertF.Hébert

firstblushofdiscovery,proclaimedCantillon’sEssai,“thecradleofpoliti-caleconomy.”Subsequentgrowthanddevelopmentofeconomicthoughthasnotreallyalertedustothesubtletiesofthissuccinctappraisal.Acra-

dleholdsnewlife;andtherecanbelittledoubtthattheEssaiaddednew

lifetotheorganizingprinciplesofeconomics.But“politicaleconomy”doesnotaccuratelydescribethesubjectCantillonaddressed.Indeed,hescrupulouslyavoidedpoliticalissuesinordertoconcentrateonthemechanicsofeighteenth-centuryeconomiclife.Whenconfrontedby

erationsbeputaside,“soasnottocomplicateoursubject,”hesaid,thus

“extraneous”factors,suchaspolitics,Cantilloninsistedthatsuchconsid-invokingakindofceteris paribus

assumptionbeforeitbecamefashion-ableineconomicstodoso

ThisismerelyonewayinwhichCantillonwasaheadofhistime.HeprecededAdamSmithbyageneration.Bothwritersmadeimportantfoundationalcontributionstoeconomics,butfromperspectivesthatwerequitedifferent.Smithwasaphilosopherandeducator.HisapproachtoeconomicsreflectedtheconcernsandapproachesofphilosophicinquirystretchingbacktoThomasHobbes.TheHobbesiandilemmawashowtosecurepeaceandprosperitywithoutsubmittingtoanall-powerfulcentralgovernment.Smithgaveananswerbasedonthenatureandfunctionofan

exchangeeconomyoperatingunderaruleoflaw.The Wealth of Nations

isfullofusefuladvicetothosewhoholdpoliticalpower.Hence,Smithearnedhissobriquet“fatherofpoliticaleconomy.”

icsreflectedtheconcernsofpracticalmenwhosetaboutmakingaliv-ing,andhisanalysisconcentratedonthestructureandmechanicsofan

Cantillonwasabusinessmanandbanker.Hisapproachtoeconom-emergingmarketeconomy.Theeconomyhedescribedwasanenterprise

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TheseconsiderationsalonewouldjustifyrenewedinterestinCantillonandhiswork,buttherehavealwaysbeenimpedimentstoovercome.WeknowlittleofCantillon’slifeandthecircumstancesofhisauthorship.Themanuscriptthatwaseventuallypublishedin1755circulatedprivatelyinFranceforalmosttwodecadesbefore;whenpublished,itappearedundermysteriouscircumstances.Thedesignatedpublisher,Fletchergyles,neverexistedattheaddressgiven;anddespitethephrase“traduitdel’Anglois”onthetitlepage,noEnglishoriginalwaseverfound.Moreover,astatisti-

calsupplementtotheEssaihasgonemissing,andhasneverbeendiscov-ered.Inthe1970saJapanesescholarunearthedaFrenchmanuscriptatthemunicipallibraryinRouenbearingthetitle,“EssayDelaNatureDuCom-merceengénéral,”whichencouragedspeculationthatthefirstwordmayhavebeencarelesslytranscribedfromanEnglishoriginal,stillundiscov-ered.Allofthishasgiveneconomicdetectivesmuchtosiftthroughandexplain.ButtheonesteadfastrealizationthroughouthasbeenthepowerofCantillon’sanalysis

oustaskofbringingforthanewandimprovedtranslationofCantillon’s

MarkthorntonandChantalSaucierhaveaccomplishedtheardu-

famouswork.HeretoforetheonlyEnglishtranslationoftheEssaiavail-ablehasbeenthe1931editionproducedbyHenryHiggsfortheRoyalEconomicSociety.Thoughcompetent,ithasbecomelessserviceableovertime,asmoreandmoreofitsshortcomingsdevolved(nottheleastofwhichistheantiquateduseof“undertaker”inplaceof“entrepreneur”).Saucierprovidesamoreaccurateandlucidaccount,bettersuitedtothe21stcentury.Thornton’shandshowsnotonlyincompetentguidanceofthetranslatorbutintheinclusionofnumerousexplanatoryfootnotesthataddhistoricalcontext

Agehasdimmedmymemoryoftheexacthourandday,butwhenIwasmuchyoungerIpresentedapaperonCantillontoasmallgroupofeconomistsgatheredinKeynesHallatCambridgeuniversity.Afterward

mentionedmybeliefthatanewtranslationoftheEssaiwaswarranted.My

listenerenthusiasticallyagreed.Atsomepointitdawnedonmethathehadnotmentionedhisname.SoIasked.“Shackle,”hereplied.Iwasmomen-tarilystunned.g.L.S.Shackle(1903-1992)wasBritain’sleadingintellectonthethemesthatarecentraltoCantillon’sanalysis,namelyimaginationanduncertainty.Ifhewerealivetoday,I’msureShacklewouldwelcomethisnewtranslation,alongsidetherestofuswhohaveanabidinginterestinCantillonandhisideas.

IntroductionbyChantalSaucierandMarkThornton            13Part One: Production, Distribution, and Consumption

Chapter One: Wealth                            21Chapter Two: HumanSocieties                     23Chapter Three: Villages.                          27Chapter Four: Markettowns                       31Chapter Five: Cities                            35Chapter Six: CapitalCities                       39Chapter Seven: TheLaborofthePlowmanisoflessValue

thanthatoftheArtisan                  41Chapter Eight: SomeArtisansearnmore,othersless,

accordingtothedifferentCasesand

Circumstances                      45Chapter Nine: TheNumberofLaborers,Artisansand

others,whoworkinaStateisnaturally

proportionedtotheDemandforthem        49Chapter Ten: ThePriceandIntrinsicValueofaThing

ingeneralisthemeasureoftheLandand

LaborwhichenterintoitsProduction         53Chapter Eleven: TheParorRelationbetweentheValueof

LandandLabor                      59Chapter Twelve: AllClassesandIndividualsinaState

subsistorareenrichedattheExpenseofthe

ProprietorsofLand.                   69Chapter Thirteen: TheCirculationandExchangeof

goodsandMerchandiseaswellastheir

ProductionarecarriedoninEuropeby

Entrepreneurs,andatarisk               73

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Chapter Fourteen: TheDesires,Fashions,andtheWaysofLife

ofthePrince,andespeciallyoftheProperty

owners,determinetheusetowhichLand

isputinaStateandCausetheVariationsin

theMarketPricesofallThings             79Chapter Fifteen: TheIncreaseandDecreaseoftheNumber

ofPeopleinaStatechieflyDependsonthe

taste,theFashions,andtheWaysofLife

Propertyowners                     85Chapter Sixteen: ThemoreLaborthereisinaStatethemore

theStateisjudgednaturallyrich            97Chapter Seventeen: MetalsandMoney,

andespeciallyofgoldandSilver           103Part Two: Money and Interest

Chapter One: Barter.                          115Chapter Two: MarketPrices                       119Chapter Three: TheCirculationofMoney               123Chapter Four: FurtherReflectionontheRapidityor

SlownessoftheCirculationofMoney

inExchange                       133Chapter Five: Theinequalityofthecirculationof

hardmoneyinaState                  139Chapter Six: Theincreaseanddecreaseinthequantityof

hardmoneyinaState                  147Chapter Seven: Continuationofthesamesubject.          155Chapter Eight: FurtherReflectiononthesamesubject        159Chapter Nine: TheInterestofMoneyanditsCauses         169Chapter Ten: TheCausesoftheIncreaseandDecreaseof

theInterestofMoneyinaState            177

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Part Three: International Trade and Business Cycles Chapter One: Foreigntrade                      185Chapter Two: TheNatureofExchangeRates............ 195Chapter Three: FurtherexplanationsoftheNature

ofExchangeRates.                   203Chapter Four: Thevariationsintheproportionof

valueswithregardtotheMetalswhich

serveasMoney                      209Chapter Five: Theaugmentationanddiminution

ofcoinindenomination                219Chapter Six: BanksandtheirCredit                 227Chapter Seven: Furtherexplanationsandenquiriesasto

theutilityofaNationalBank              233Chapter Eight: RefinementsofCreditofgeneralBanks.      241

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Essai sur la Nature du Commerce en

Généralshouldberightfullycon-sideredoneofthemostimportantbookseverwritten.Itisthefirststatementofeconomictheoryandnotjustasingleorlimitedbreak-through,butacomprehensivetreatmentthatexplainstheorganizationofcommercialsociety.PriortoCantillon,writingsabouttheeconomywerelargelydrivenbyconsiderationsofreligion,ideology,andinterestsgroups.AfterCantillon,therewasascientificmodelthatcouldbeunderstoodandapplied.Mostimportantly,whenitwasproperlyunderstoodandapplied,itunleashedthemarketeconomyandgeneratedgreatprosperity

Earlyinhiscareer,CantillonworkedforawarprofiteerintheBritishgovernmentandlaterforJohnLawintheMississippiCompanyscheme.HisfirstjobenabledhimtoestablishabankinParisfromwhichhegrewrich.CantillonmadeafortuneonthevalueofhissharesinthecompanyduringtheMississippiBubble.Subsequentlyhemademoremoneybysell-ingsharesshortduringthebustandbytakingadvantageofchangesinexchangeratesthathecorrectlyanticipated.AftertheBubble,hewasoneofthewealthiestprivateindividualsintheworld.

Notunlikethemoderndayfinancialscandals,Cantillonwashoundedbylawsuitsandcriminalcharges,somuchsothathisbiographer,AntoinMurphy,suggeststhatratherthanbeingmurderedin1734,Cantillonactu-allyfakedhisdeathandmadeoffwithhismoneytoSouthAmerica.Basedonthebookitselfandotherevidence,wearenowreasonablyconfidentthatCantilloncompletedthemanuscriptin1730.ItcouldneverhavebeenpublishedundertheharshFrenchcensorshiplawsthatpre-vailedthroughoutthefirsthalfofthe18thcenturyand,asaresult,itonlycirculatedprivatelyinhand-copiedmanuscripts.onlyafterthecensorship

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LeastyouthinktheEssaiisadrytechnicalpractitioner’sguidetothe

economy,itshouldbestressedthatCantillondealswithawidevarietyoffundamentalandphilosophicalissuessuchasthenatureofproperty,thedistributionofincome,theoriginofmoney,andtheroleofgovernment.HeevencriticizedanearlyversionoftheMalthusianPopulationtheoryandofferedanaccuratepredictionofthepopulationoftheunitedStatesinthe19thcentury

Cantillon’scircleoffriendsandacquaintancesreadslikeawho’swhooftheearly18thcenturyintellectuals.HisgoodfriendwasLordBoling-broke,aformerPrimeMinisterofEnglandandaleaderoftheJacobitecause.CantillonmetmanyoftheleadingintellectualsofthedaythroughBolingbroke,suchasMontesquieuandVoltaireinFranceandprobablyJonathanSwiftandAlexanderPopeinconnectionwithBolingbroke’spoliticalactivitiesinEngland.Thereisevidencetosuggestthat,inaddi-tiontotheinfamousJohnLaw,CantillonalsoknewandwascriticaloftheeconomistCharlesDavenantandSirIsaacNewton,whowasthedirectoroftheRoyalMint.

Cantillonopposedtherulingeliteandwasfriendlywithoppositionleadersinbothofthetwogreatwarringpowers,EnglandandFrance.Heprovidedthetheoreticalsuperstructurethatjustifiedtheoppositionagendaagainstbiggovernmentandshowedhowtaxes,regulations,war,andalargenationaldebtimpoverishthepeople.

Cantillonbeganhischallengetoaccepteddoctrineonpageonewhenheshowedthatmoneywasjustamediumofexchangeandthatwealthwasnotmoney,buttheabilitytoconsume.Hedemonstratedthatthebestwaytoproduceconsumergoodswastoallowfreemarketswhereentre-preneurscouldbecountedontomakeself-interestedjudgmentsonwhatwouldbestpleasetheirconsumers.

Cantillon’smodeloftheisolatedestateisaconceptualanalysisoftheemergenceofthemarketeconomyfromfeudalism.ItistheinspirationforAdamSmith’sinvisiblehandbecauseitdemonstratesthatentrepreneurialself-interestwillregulatetheeconomyoftheisolatedestatejustaswellorbetterthaniftheestateownercontinuedtomakeallthedecisions.

The influence of Cantillon’s manuscript was largely unknown and the book had fallen so far into neglect that William Stanley Jevons was said to have “rediscovered” it in the late 19th century However, we now know that

it had a tremendous influence on the development of economics In tion to Adam Smith, it has now been shown that fellow Scotsman David Hume read the manuscript in some form before publishing his own path-breaking contributions to economics In France, Mirabeau had a copy for many years and used it as the basis of his many popular works on econom-

addi-ics The publication of the Essai played a pivotal role in the formation of the

Physiocrat School of economics in the late 1750s We also know that it was very influential on the economic thought of Turgot, Condillac, and Jean-Baptiste Say, and subsequently on the French Liberal School that followed

We can also now say that Cantillon was an important influence on Carl Menger, Ludwig von Mises, and Noble Laureate F A Hayek, of the Aus-trian School of economics, and that he provided the “Cantillon Effects,” which are central to the Austrian theory of the business cycle

Cantillon’s contributions span the entire gamut of economics ing entrepreneurship, methodology, theory, microeconomics, macroeco-nomics, international trade and finance, economic policy, and even areas such as population theory, economic geography, and transport economics

includ-If you want to know the scientific “magic” of the market, here is the man who literally wrote the book

The case for the book is compelling and so is the case for a new

Eng-lish translation First, the Essai presents material that is brilliant, but

diffi-cult Even the original French manuscript must have appeared incredibly complex to his early readers, a point noted by Cantillon himself in the text After all, this was a new science that was fully born in one long stroke of his pen Remember further that Cantillon died shortly after writing the book and that it was not published until long after his personal associates had died, so there was no one to clarify matters

Second, the English translation by Henry Higgs is a faithful tation, but one that is wholly out of date and which provides little guid-ance for the reader In the introduction to the first English edition of the

interpre-Essai sur la Nature du Commerce en Général, published in 1931, Henry

Higgs states that his translation “follows the French text of 1755 with all faults of grammar, spelling, accent and punctuation.” Higgs chose faith-fulness over beauty, sometimes perhaps to the detriment of readability

Throughout history, translators have wrestled with the same question or dilemma: balancing faithfulness with beauty Much as with English, the French language has changed tremendously since the early 18th century,

when Cantillon wrote the Essai A faithful translation, therefore, renders

the text in a language that is no longer in use Our goal differs from that

of Higgs in that we want Cantillon’s book to be accessible to the modern reader Higgs’ translation can only be roughly understood, and in some important instances, is in error

We remedy these shortfalls in a variety of ways First, we modernized the text, especially but not limited to capitalization, punctuation, and sen-tence structure Second, we have changed the 20th century British transla-tion to reflect terminology of more modern times and we believe that this also provides value and clarity For example, Higgs translated “intendans

ou inspecteurs”—which means administrators or supervisors—into ards and bailiffs,” leaving the modern American thinking about airplanes and courtrooms He also translated “habillement” as “rayment” instead of clothing In some cases, we restore the text closer to the original French version An important example of this restoration is Higgs’ translation of the word “entrepreneur”—which plays a central role in Cantillon’s model

“stew-of the economy—into “undertaker.”

Third, we provide explanatory footnotes that describe the people, places, events, weights, measures and currency values that Cantillon used, and which are no longer commonly understood, as well as descriptions and rationales for any substantive changes from the Higgs translation Fourth, we provide abstracts for chapters and provide titles for the sec-tions We also provide graphic illustrations for some of Cantillon’s impor-tant contributions, such as the circular-flow diagram of the economy, in order to aid comprehension We liken the process to restoring a painting

or fine piece of furniture—not changing the original—just cleaning it, ing a few scratches, and putting on a new coat of varnish This new trans-lation, we hope, will appeal to new readers and seasoned economists alike

fix-and give Cantillon’s Essai the attention that it well deserves.

The task of retranslating the Essai sounded like a simple and

straight-forward project for which we completely underestimated the time and ficulty involved It has taken several years and unknown hours of work

dif-to complete, and we fully acknowledge that it could be better Finally, we would like to acknowledge the assistance and encouragement of historians

of economic thought William Breit, Robert Ekelund, Guido Hülsmann, and especially of Robert Hébert Historians Donna Bohannon, Joseph Stromberg, and Thomas Woods were also of great assistance We thank Paul Wicks for copyediting the manuscript We wish to thank Paul Wicks for copy editing the manuscript and our family and friends, especially Bill Curlee for their support.

P a r t O n e

Production, Distribution, and Consumption

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Landproducesgrass,roots,grain,flax,cotton,hemp,shrubsandsev-Riversandseasprovidefishforthefoodofman,andmanyotherthingsforhisenjoyment.Buttheseseasandriversbelongtotheadjacentlandsorarecommontoall,andman’slaborextractsfishandotheradvan-tagesfromthem

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Inthemoresettledsocieties,ifaprinceattheheadofanarmyhasconqueredacountry,hewilldistributethelandsamonghisofficersorfriendsaccordingtotheirmeritorhispleasure(aswasoriginallythecaseinFrance).Hewillthenestablishlawstomaintainpropertyrightsforthemandtheirdescendants,orhewillreservetheownershipofthelandtohim-selfandemployhisofficersorfriendstocultivateit.Healsomaygrantthelandtothemonconditionthattheypayanannualroyaltyorrent,or

1 TheMongols,undergenghisKhancapturedterritoriesfromthePacificoceantoPolandand fromRussiatotheMiddleEastandIndiaandestablishedtheMongolEmpire,thelargestconti- gousempireinworldhistoryduringthe13thand14thcenturies.

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ants,itwillultimatelybedividedamongasmallnumber.onemanwillhaveseveralchildrenandwillnotbeabletoleaveeachofthemaportionoflandequaltohisown.Anotherwilldiewithoutchildren,andwillleavehisportiontosomeonewhohaslandalready,ratherthantoonewhohasnone.Athirdwillbelazy,extravagant,orsickly,andbeobligedtosellhisportiontosomeonemorefrugalandindustrious,whowillcontinuallyaddtohisestatebynewpurchasesonwhichhewillemploythelaborofthose,whohavingnolandoftheirown,areobligedtoofferhimtheirlaborinordertosubsist

Eveniftheprincedistributesthelandequallyamongalltheinhabit-AtthefirstsettlementofRome,eachcitizenwasgiventwounitsof

allywasdividedamongafewowners

aswhatweobservetodayinallthecountriesofEurope.Thelandeventu-berofpeople,eachownerwillmanagehislandhimself,orleaseittooneormorefarmers.Inthiseconomy,itisessentialthatthefarmersandlaborersshouldhavealiving,whetherthelandisexploitedbytheownerorbythefarmers.Theownerreceivesthesurplusoftheland;andhewillgivepartofittotheprinceorthegovernment,orthefarmerswillgivethispartdirectlytotheprinceonbehalfoftheowner

Assumingthenthatthelandsofanewcountrybelongtoasmallnum-Asfortheusetowhichthelandshouldbeput,thefirstnecessityistoemploypartofitforthemaintenanceandfoodofthosewhoworkthelandandmakeitproductive.Therestdependsmainlyuponthedesiresandlife-styleoftheprince,thelordsoftheState,andthepropertyowner.Iftheyarefondofwine,vineyardsmustbecultivated;iftheyarefondofsilks,mul-berrytreesmustbeplantedandsilkwormsraised.Moreover,partofthelandmustbeemployedtosupportthosewhosupplythesewants;iftheydelightinhorses,pasturesareneeded,andsoon

2 Cantillonwrotethateachpersonreceivedtwo“journaux,”whichisapproximatelytwoacres ofland.

However,ifweassumethatthelandsbelongtonooneinparticular,itisdifficulttoconceivehowasocietyofmencanbeformedthere.Wesee,forexample,thatforthecommunallandsofavillage,thereisafixednum-berofanimalsthateachoftheinhabitantsareallowedtomaintain,andifthelandwerelefttothefirstoccupierinanewconquestordiscoveryofacountry,theestablishmentofownershipwouldinevitablyhavetobebasedonsomeruleinorderforasocietytobeestablished,whethertheruleisdeterminedbyforceorbylaw.

Ifoneormoreofthepropertyownersresideinthevillage,thenum-27

Ifthelandisonlysuitableformaintainingsheep,asinthesandydis-Ifthelandconsistsofsandysoilwhereonlytreesgrowandthereisnograssforlivestock,anditisdistantfromtownsandrivers,thetreeswillbeuselessforconsumption.Asinmanyareasofgermany,therewillonlybeasmanyhousesandvillagesasareneededtogatheracornsandfeedpigsinseason.And,ifthelandissterile,therewillbenovillagesorinhabitants

1. Forthemerchantstogoaroundthevillageswouldunnecessarilyincreasethecostoftransportation.

3

ItwaslongbelievedthatJ.B.Sayhadintroducedthetermentrepreneurtoeconomics,butCan-tillonwasthefirsttoemploythetermextensivelyineconomicanalysis.

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2. themerchantswouldperhapsbeobligedtogotoseveralvillagesbeforefindingthequalityandquantityofproductsthattheywishtobuy.

3. Thevillagerswouldgenerallybeintheirfieldswhenthemerchantsarrivedand,notknowingwhatproductsthemerchantsdesired,theywouldhavenothingpreparedandreadyforsale.

4. Itwouldbealmostimpossibletofixthepriceoftheproductsandthemerchandiseinthevillages,betweenthemerchantsandthevillag-ers.Inonevillage,themerchantwouldrefusethepriceaskedfortheproducts,hopingtofinditcheaperinanothervillage,andthevillagerwouldrefusethepriceofferedforhismerchandiseinthehopethatanothermerchantwouldcomealongandtakeitonbetterterms.Allthesedifficultiesareavoidedwhenthevillagerscometotownonmarketdaystoselltheirproductsandbuythethingstheyneed.Pricesarefixedbytheproportionbetweentheproductsdisplayedforsaleandthemoneyofferedforit;thistakesplaceinthesamespot,undertheeyesofallthevillagersofdifferentvillagesandofthemerchantsorentrepreneursofthetown.Whenthepricehasbeensettledbetweenafew,theothersfollowwithoutdifficultyandsothemarketpriceofthedayisdetermined.Thepeasantthengoesbacktohisvillageandresumeshiswork

offarmersandlaborersneededtocultivatethelandsdependentonit,andtothenumberofartisansandsmallmerchantsthatthevillagesborderingonthemarkettownemploywiththeirassistantsandhorses.Finally,italsodependsonthenumberofpersonssupportedbythepropertyownerswholiveinthetown

narilyselltheirproductsinaparticularmarkettown)aresizeableandhavealargeoutput,themarkettownwillbecomeconsiderableandlargeinpro-portion.However,whentheneighboringvillageshavelittleproduction,themarkettownalsoispoorandinsignificant

Whenthevillagesassociatedwithamarkettown(i.e.,thosewhoordi-4

NoticeCantillon’suseofthephrase“naturallyproportional.”Heusesthewordpro-

portionthroughoutthebookwhenheisexplainingnaturallyequilibratingorharmo-nioushumanprocessesthatareself-regulating,especiallyeconomicprocesses,notin thesenseofexactratiosandpercentages.

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Alltheseartisansandentrepreneursserveeachother,aswellasthenobility.Thefactthattheirupkeepultimatelyfallsonpropertyownersandnoblesisoftenoverlooked.Itisnotperceivedthatallthelittlehousesinacity,suchaswehavedescribed,dependuponandsubsistattheexpenseofthegreathouses.However,itwillbeshownlaterthatalltheclassesand

inquestionwillgrowlargeriftheking,orthegovernment,establisheslawcourtstowhichthepeopleofthemarkettownsandvillagesoftheprovincemusthaverecourse.Anincreasednumberofentrepreneursandartisansofeverysortwillbeneededforthemaintenanceofthejudgesandlawyers.Ifinthissamecityworkshopsandfactoriesareestablishedtomanu-facturebeyondhomeconsumption,forexportandsaleabroad,thecitywillbelargeinproportiontotheworkmenandartisanswholivethereattheexpenseofforeigners

plicateoursubject,wemaysaythatthegatheringofseveralrichpropertyownerslivinginthesameplacesufficestoformwhatiscalledacity.ManycitiesinEurope,mainlyintheinterior,owethenumberoftheirinhabit-antstothisassemblage.Inthiscase,thesizeofacityisnaturallypropor-tionedtothenumberofpropertyownerslivingthere,orrathertothepro-ductionofthelandwhichbelongstothem,minusthecostoftransporta-tiontothosewhoselandsarethefurthestaway,andthepartthattheyareobligedtogivetothekingorthegovernment,whichisusuallyconsumedinthecapital

However,ifweputasidetheseconsiderations,inordertonotcom-5 Thisisthefirstmentionofthesupplementwhichhasbeenlost.

6 ers.Propertyownerssustainfarmersandlaborersaswellasartisansandmanufacturingwork- erstotheextentthatrawmaterialsareworkedintofinegoods.Iftheownersliveincitiesfar fromtheirlands,theyalsomustsupportthose(andtheirhorses)whotransporttheproducts tothecity.

oneseesmanyoldcities,whichwereimportant,fallintoruinandothersspringfromtheirashes.greatcitiesusuallyarebuiltontheseacoastoronthebanksoflargeriversfortheconvenienceoftransportation.Watertransporta-tionoftheproductsandmerchandisenecessaryforthesubsistenceandcom-

7 tsarPeterthegreatmovedthecapitalofRussiatoPetersburgin1713.

8 NoticethatCantillonagainmentionstheimportanceoftransportationcosts.Four-wheelwagons weredevelopedin12thcenturybutweremostlyusedbythewealthyuntilthelate18thcentury.

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