Turgot on blog.nath.page

Economics Before Adam Smith by Murray Rothbard (Consolidation)

Sat, 07 Nov 2026 00:00:00 +0000

Murray Rothbard begins his discussions about economics from Aristotelian times, but my main interest is in the recent era. The main lessons were around four characters: Richard Cantillon, Anne Robert Jacques Turgot, David Hume, and Adam Smith. Below are my notes, consolidated from previous posts.

Richard Cantillon

(From Richard Cantillon, the Founder of Modern Economics.)

Richard Cantillon (1680-1734), an Irish-French banker/merchant predating Adam Smith, is arguably the founder of modern economics. The book he wrote shortly before his demise, Essay on the Nature of Trade in General, officially published in 1755, was an influential and highly citied document, before it was overshadowed by the retardation of economics that would follow in the form of Adam Smith’s Wealth of Nations (1776).

Turgot on Interest

Fri, 23 Oct 2026 00:00:00 +0000

Turgot recognized interest return on investment as the price paid by laborers to capitalist-entrepreneurs for advances of savings in the form of present money.
He also noted that interest on money loans tend towards the natural rate of interest through the process of capital rebalancing. Demonstration:
1. If the interest rate is lower than the natural rate, people begin to borrow more and invest in businesses where they can earn higher returns. This relative increase in borrowing will increase the interest rate, making it approach the natural rate from below.
2. If the interest rate is higher than the natural rate, people will divest from businesses or liquidate assets and begin to loan out their funds. This will increase the relative supply of loans, which will decrease the interest rate, making it approach the natural rate from above.
3. Capital rebalancing is consistent with this proposition of David Hume: “no man will accept of low profits, where he can have high interest; and no man will accept of low interest where he can have high profits.”
He described the positive relationship between risk and interest rate: Less risky loans would have lower interest and vice-versa. Since government bonds would be the safest, they should bear the lowest rates.
Along with the note on the interest rate of governement bonds, Turgot attached how pernicious to the economy such debts would be. They would effectively result in an interest rate floor, diverting funds to sterile investments. Public debts crowd out productive use of private savings by maintaining artificially high rates.
Lending and borrowing at interest is a reciprocal contract, advantageous to both parties. Hence, usury laws are absurd on moral grounds: the contracts are voluntary and no one is injured.
Turgot also arrived at the Austrian conception of time preference. Interest accounts for the difference in the value of the promise of a sum of money compared to the value of the money available now. The lender of funds needs to be compensated, in the form of interest, for the following:
1. The sacrifice of the utilization of the funds at the present moment,
2. The risk associated with the possibility of losing forever all or a part of the amount loaned.
Turgot also defined the concept of capitalization: present capital value of land or other capital good on the market tends to equal the sum of its expected future rents or returns, discounted by the rate of time-preference/interest.
Turgot described the relationship between quantity of money and interest. Interest rate depends on the savings-spending ratio of the population. Increase in money supply can both increase or decrease the rate of interest, depending on the spirit of thrift or the spirit of luxury. (The logic is similar to that noted in point 2.)

Reference

Murray Rothbard, Economic Thought Before Adam Smith (1995), Chapter 14, 15.

Turgot's Brilliance

Thu, 22 Oct 2026 00:00:00 +0000

Anne Robert Jacques Turgot (1726-81) was a French bureaucrat following Richard Cantillon but preceding Adam Smith who made some brief but remarkable contributions to economic thought. This post focuses on his writings about Laissez-faire/free trade. Jacques Claude Marie Vincent de Gournay (1712-59), his mentor in economics, played an influential role in shaping his thoughts.

Unfortunately, Turgot’s works were not sufficiently considered by his contemporaries and immediate successors. His political associations also might have dissuaded people from citing him. In the words of Joseph Schumpeter, “It is not too much to say that analytic economics took a century to get where it could have got in twenty years after the publication of Turgot’s treatise had its content been properly understood and absorbed by an alert profession.”

Turgot on Taxes and Tariffs

Mon, 19 Oct 2026 00:00:00 +0000

Besides promoting free trade, Turgot argued against taxes and tariffs. Due to the reciprocal nature of trade, Turgot pointed out the absurdity of wanting only to export while not importing. Protective tariffs, set up to discourage imports, were described as war of all against all using state monopoly privilege at the expense of consumers. They led to a system of reciprocal oppression between industries and a balance of annoyance and injustice which made everyone worse off.

Turgot on Free Trade

Sat, 17 Oct 2026 00:00:00 +0000

Turgot regarded industry regulation as a system of coerced cartelization and special privileges conferred by the state. Regulations effectively serve as taxes which increase costs incurred by the producers/sellers, which reduce competition and discourage innovation. Rather than protecting consumers, these regulations compel them to buy inferior products at higher prices.

Economic activities involve the use of the particular knowledge in sole possession of individual market participants. It is not possible for a government or a theorist to obtain or use all such such knowledge. The owners of labor and capital are best suited to employ these factors to the most advantageous use with the help of their skills, experiences, and expectations.

Time Preference

Tue, 30 Jun 2026 00:00:00 +0000

Anne Robert Jacques Turgot, in his criticism of usury laws, described the concept of time-preference and its role in lending at interest. Time-preference refers to the discounting of the future, and the concomitant placing of a premium upon the present. If this rate of discounting is high, the time-preference is high. If the discounting rate is low, the time-preference is low.

Since we prefer a present good to an equivalent amount of the good at some point in the future, lenders will demand, and borrowers will accept, an interest on a loan. Interest is the price of time-preference.