Revisiting Cantillon's Admirable Theory of Distribution and Value

Grieve, Roy H (2015) Revisiting Cantillon's Admirable Theory of Distribution and Value. Discussion paper. University of Strathclyde, Glasgow.

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    Abstract

    This paper returns to an issue I discussed in a review article published some twenty years ago** The subject under discussion was Anthony Brewer’s 1992 study*** Richard Cantillon: Pioneer of Economic Theory. That review provided a vehicle for consideration of Cantillon’s theory of value, particularly for questioning Brewer's rejection of Cantillon's analysis, on the ground that he (Brewer) understood it to propose a dead-end "land theory of value" which attempted to account for equilibrium relative values in terms of quantities of "land embodied". In the present paper a fuller critique of that land-embodied interpretation of Cantillon's value theory is presented. From what might be described as a Sraffian perspective, we – contrary to Brewer - interpret Cantillon as offering a perceptive and valid analysis of the operation of the market mechanism in the case of a surplus producing system in which distribution is determined - exogenously to the price system - by social factors of property ownership and economic power. We suggest that, given Cantillon's view (in a pre-industrial context) of land as a country's principal economic resource, he may be said to have told a general story associating equilibrium commodity prices ("intrinsic values") with the quantity and quality of land employed in production. Appreciating that an approach in terms simply of physical quantities of land could not serve to explain relative values under the complexity of real world conditions, he expressed his understanding in the form of a "cost of production theory" explaining intrinsic values as represented by the costs – comprised of wages and rents measured in money – incurred by entrepreneurs for the use of heterogeneous inputs of land and labour. Labour costs can be translated into land costs via Cantillon's "Par". These production costs reflect both the use of resources and the balance of economic power within society. Thus, on the subject of "intrinsic value" we read Cantillon as following not a crude land-embodied treatment, but instead a cost of production approach, an approach which would be further developed by the Classics and Marx as appropriate to later economic and social conditions.