The period 1700-1914 is often considered the golden age of notable figures in political economy. The emergence of the discipline in the eighteenth century and its rapid development through the nineteenth century up until the First World War favoured the appearance of numerous authors coming from different intellectual orientations. This stands in strong contrast with what happened in the twentieth century, during which the professionalisation of economics led to a certain uniformity in the methods and approaches taken by many economists and their ways of thinking and publishing. There is thus an amazing choice of notable figures in the period covered by this resource, of which only a few can be mentioned here as examples of importance in the discipline. Moreover, any list of notable figures must be provisional: as time goes by, some figures move into the background and others come into the limelight – the recent positive reappraisal of the work of Jean-Joseph-Louis Graslin is an example thereof. Finally, the reader must be aware that these towering figures conceal the view of lesser known authors, to whom the development of political economy is also greatly indebted.
In the eighteenth century, the first “economists were merchants or bankers (John Law, Richard Cantillon), lawyers (Pierre de Boisguilbert, James Steuart, Cesare Beccaria), civil servants and politicians (Johann Heinrich Gottlob von Justi, Anne-Robert-Jacques Turgot), mathematicians (Jakob Bernoulli, Daniel Bernoulli, Marie-Jean-Antoine-Nicolas Caritat de Condorcet), physicians (François Quesnay), philosophers (Étienne Bonnot de Condillac, Charles Louis de Montesquieu, David Hume, Adam Ferguson, Adam Smith), clergymen (Condillac, Antonio Genovesi, Ferdinando Galiani) or professors (Johann Joachim Becher, Joseph von Sonnenfels). They were all, in a sense, involved in politics, as they could not ignore that their analyses and policies interfered with the action of governments.
In France, Boisguilbert, starting from religious premises, laid the foundations of liberal political economy and severely contested the economic policy of Louis XIV: for him, State interventionism in economic matters was at the origin of the evils from which France was suffering. Quesnay developed these ideas into a specific school of thought, Physiocracy, stressing the importance of agriculture, the source of the ‘produit net’ in a Kingdom and, with his “Tableau économique”, traced the first macroeconomic multi-sector scheme of the working of an economy. Turgot developed a subjective theory of value and prices on the basis of sensationist philosophy, laid the foundations of public economics, and stressed the principle of free competition, especially between individual capitals. This led to an equilibrium characterised by a uniform rate of profits and, as a minister of King Louis XVI, he tried to transform France into a free market economy.
In Scotland, Hume developed what was later to be called the quantity theory of money and the price specie flow mechanism, Ferguson insisted on the peculiar nature of civil societies or commercial states, and Steuart and Smith, as is well known, produced the two important syntheses of economic ideas in the century. While Steuart’s An Inquiry into the Principles of Political Economy (1767) was considered the climax of the science of commerce or commerce politique, Smith, with his celebrated An inquiry into the Nature and Causes of the Wealth of Nations (1776) was one of the founding fathers, with William Petty, Turgot and Graslin, of classical political economy.
During the eighteenth century, political economy was starting to be taught in Italy, first in Naples, in the 1750s (Genovesi taught ‘commercio’ or ‘economia civile’), and then in Milan in the 1760s (Beccaria taught ‘economia pubblica’). During this period, mathematical formalisation began, especially with J. and D. Bernoulli at the beginning of the period, followed, among others, by Beccaria, and then Condorcet.
The first half of the nineteenth century saw the consolidation of classical economics with the works of David Ricardo, James Mill and Robert Torrens in Great Britain. Ricardo’s Principles of Political Economy, and Taxtation (1817) is frequently considered to mark the beginning of abstract analytical economics. All major economic theorists after him felt the need to develop their own analyses on the basis of a critical scrutiny of his work. This applies to Johann Heinrich von Thünen no less than to Thomas Robert Malthus, John Stuart Mill, Karl Marx, William Stanley Jevons, Léon Walras or Knut Wicksell. However, whilst Ricardo’s work was discussed by almost all economists at the time, the number of his followers swiftly fell for a number of reasons: his theory had several shortcomings and was difficult to understand. Some of its problems were considered to be irremediable flaws.
Classical political economy also developed in France with the works of Jean-Baptiste Say. It advanced however, in a different way to political economy in Britain as Say tried to combine and develop both Smith’s ideas and Turgot’s subjective approach to the theory of value. His writings were influential in both Continental Europe and the USA. As a result, Antoine-Augustin Cournot and Jules Dupuit developed principles that were to be subsequently integrated into marginalist theory. The French context also saw the publication of some very influential, dissident views on economy and society, such as those of Charles Fourier, Claude-Henri de Saint-Simon, and the Saint-Simonians.
During the second half of our period, at a theoretical level, the marginalist theory with its twin concepts of marginal utility and marginal productivity was gradually elaborated, which saw all incomes as reflecting the marginal contributions of factor services to the product. Important representatives of this were Hermann Heinrich Gossen, Jevons, Walras, Carl Menger, Eugen von Böhm-Bawerk, Wicksell, Vilfredo Pareto and John Bates Clark. The most influential textbook advocating this new theory was Alfred Marshall’s Principles of Economics (1890). Several ideas that became prominent at this time were not only developed earlier by figures such as Dupuit and Cournot, but also by scholars like Karl Heinrich Rau.
On the subject of method and politics, advocates of the Historical School, which was first and foremost a German phenomenon and reflected partly the cameralist tradition in German economics, deplored the lack of historical specificity of Ricardo’s analysis and of ethical-historical considerations. Friedrich List attacked the classical economists for allegedly not seeing that free trade was deadly for less developed economies whose industries could not compete with those of the industrially developed countries. In the second half of the century the uncontested leader of the Historical School was Gustav Schmoller. He and the so-called ‘Kathedersozialisten’ (socialists of the chair) had a considerable impact on Otto von Bismarck’s reform policy in Prussia, designed to ward off the socialist assault on the given social order by addressing the ‘Social Question’. The historicists rejected the laissez-faire position and held an essentially etatist and paternalistic point of view. Menger, head of an Austrian school engaged in a heated controversy with Schmoller about the appropriate method in economics – deductive or inductive.
On a political level, socialists were opposed to both classical and marginalist political economy. In the second part of the nineteenth century socialist movements developed in all industrially advanced countries and triggered the formation of political parties. The main representatives of these movements included Pierre-Joseph Proudhon, Marx and Karl Rodbertus.
The self-transformation of capitalism from within, from competitive forms to monopolisation and trustification, especially in the United States of America, gave rise to institutional economics championed by Thorstein Veblen, John Commons and Wesley Clair Mitchell, and, in Britain, to the critical works of John Atkinson Hobson. The observation of economic fluctuations led to the development of theories of business cycles. Important contributions came from Clément Juglar, Mikhail Tugan-Baranovsky, Albert Aftalion and Joseph Alois Schumpeter. Under the influence of Marx, the latter described capitalism as a restless system that cannot be captured exclusively in equilibrium terms, whose characteristic feature was the endogenous generation of innovations, whose diffusion in the economic system was a process of “creative destruction” (J. A. Schumpeter, Capitalism, Socialism and Democracy, 1942).
Finally, the years preceding the First World War saw the first significant publications of a group of young and promising British economists: William Beveridge, Arthur Cecil Pigou, Ralph Hawtrey and John Maynard Keynes.
The stream of economic ideas and theories in the two centuries under consideration defined the confines within which economics in the twentieth century developed. Alternative currents or schools of thought had managed to sharpen their profiles and emphasize their differences, the division of labour within the discipline had continuously deepened and new fields and subfields had sprung up. Economic ideas were increasingly expressed using mathematical formalisations, a concern with their empirical content gained in importance, and their usefulness in guiding economic and social policy had grown. At the end of the period the Social Question loomed large with the conflict between alternative socio-economic systems finding its vivid expression in the Russian Revolution and an alternative way of organising the economy, away from market coordination and towards central planning.
