Richard Cantillon: An Essay on Economic Theory

When a government prints new money, does it distribute evenly among its citizens? Definitely not! The powerful and rich get the most money. This phenomenon is called Cantillon effect. Richard Cantillon wrote about this in An Essay on Economic Theory, first published in 1755.

Cantillon described how the world actually works. I learn a lot from this great book.

The book can be found at

An Essay on Economic Theory (mises.org)

https://cdn.mises.org/An%20Essay%20on%20Economic%20Theory_2.pdf

The audiobook can be found at

https://www.youtube.com/watch?v=sTLfmSKNeGw

Part 1, Chapter 15, Abstract: Population is based on the tastes and choices of property owners. Early versions of the Malthusian approach to population growth—that it follows some mathematical formula—are criticized. This chapter also shows that the opulence and lavish spending of the prince and absentee landlords living far from their lands was responsible for the poverty and declining population of France, which ultimately led to the French Revolution. (P 85)

The convents of mendicant friars are much more pernicious to a state than those of the closed orders. The closed orders usually do no more harm than to occupy estates which might serve to supply the state with officers and judges, while the mendicants, who are themselves without useful employment, often interrupt and hinder the labor of other people. They take from poor people in charity the subsistence which ought to fortify them for their labor. They cause them to lose much time in useless conversation, not to speak of those who involve themselves in families and those who are malicious. Experience shows that the countries which have embraced Protestantism, and have neither monks nor mendicants, have become visibly more powerful. (P 101)

Comment: This is a discussion on charity. They take from poor people in charity the subsistence which ought to fortify them for their labor.

Part 3, Chapter 7, Abstract: National Banks are of little utility and can be the source of economic chaos. The increase in the supply of money that they provide is relatively small and offers the same disadvantages as increases in real money. They are therefore unnecessary and potentially very harmful. (P 233)

It is then evident that a bank, with the complicity of a public administrator, is able to raise and support the price of public stock, and to lower the rate of interest in the state at the pleasure of this administrator. When the steps are taken discreetly, it can pay off the state’s debt. But these refinements, which open the door to making large fortunes, are rarely carried out for the sole advantage of the state, and those who take part in them are generally corrupted. The excess banknotes, made and issued on these occasions, do not upset the circulation because they are used for the buying and selling of stock. They are not used for household expenses and are not exchanged into silver. But if some panic or unforeseen crisis drove note holders to demand silver from the bank, the bomb would burst and it would be seen that these are dangerous operations. (P 243)

Comment: This is almost identical to today, except the last one and half sentences. Without hard metal to back currency, the powerful can loot the working class to the last drop of blood.