Wednesday, 12 September 2012

Economist of The Week – Jean-Babtiste Say

If Adam Smith was the prophet and David Ricardo his foremost evangelist, then this week's economist plays the role of Paul, the outsider convert who makes the new ideas known to the whole world. This week, we present you the life and ideas of one of the most famous French economists of his time, who saw the rise and fall of the turbulent French Revolution with his own eyes – Jean-Babtiste Say.

Source: Wikipedia

Early life

Jean-Babtiste Say was born in 1767, in the town of Lyon – near to his parent's native Geneva, where his Protestant ancestors were forced to relocate from France when Louis XIV, the catholic King, revoked the Edict of Nantes which allowed the free practice of Protestantism.
His father, who married the daughter of his businessman employer, seeked to provide a liberal education for his son, free from the interference of the omnipotent Church – he attended a Écully, a famous Lyonnaise school until the age of 15, when the family moved to Paris.


While his father worked in a commercial house, young Jean (and his younger brother Horace, who later became a fierce opponent of Smith and Ricardo) helped out the family business, being an errand boy why learning the tricks of the trade. In 1785 however, came an opportunity which changed his life forever – he and his brother were able to go to London, and from 1785 to 1786, the brothers were able to see the miraculous speed of British industrial development at first hand. In 1786 however, their mentor died, so the two returned to Paris, where the fellow Genevese insurer, Claviere hired them as assistants. He was 21 at the time, and in his free-time, he wrote comedies – but his career path was not at all yet set for him.

Vive la révolution!

In 1789, the French Revolution broke out, and the young Jean-Babtiste and his colleagues were immediately swept in by the events. He himself became a volunteer for the Marquis of Mirabeau, a constitutional monarchist. Some even went further; his boss, Claviere rejected the king, and became a Girondist – an idealist Republican, supporting the rights of the rich bourgeoisie. It was during this time that Jean-Babtiste first read Adam Smith's Wealth of Nations – and like many others, he became a fierce supporter of free markets and unrestricted trade.

Revolutionary contribution

The years of the Revolution were productive ones for Say – he published his first political pamphlet (a demand for free press) in 1789, and when the monarchy was swept away in 1792, and the Girondists came to power, he became a secretary of Claviere, who became Finance Minister of France. His personal life also took a new direction – in 1793, he married his beloved wife Mlle Deloche, the daughter of a detached lawyer.
In 1794, the Girondists suffered a coup d'etat by the more radical Jacobins. Claviere was imprisoned (and he committed suicide), but Jean-Babtiste miraculously survived the change of regime – more to that, he started a magazine, the La Decade, publishing philosophical, political and economic articles, and promoting Adam Smith's ideas to the French people. He became so popular that when Napoleon came to power in 1799, he was named a member of the 100-member tribunate, resigning from his editing job.

Under Napoleon

As a politician with no effective power – Napoleon's rule was already unquestionable, even though technically he was still only First Consul –, Jean-Babtiste had lots of time to devote to his economic studies. In 1803, he published his magnum opus: the long-titled Traité d'économie politique ou simple exposition de la manière dont se forment, se distribuent et se composent les richesses, or as commonly called in English, a Treatise on Political Economy.

The Treatise

His book advocated free trade, and popularised and explained popular concepts of the newly emerging classical economic thought. He divided his books to three parts : production, distribution, and consumption of wealth, which later became the classic divisions of economics.
In it, he argued against Ricardo's value theoryhe argued that value of items should be based on utility, not labour, introducing the subjective theory of value. To use the cow example, this means that you, as a cow farmer, will pay more for a book about dairy farms than your goat-farming neighbour, who on the other hand would pay lavishly for a book about goats.
He is also attributed to Say's Law, which states that supply will always generate it's demand ; while he was not the inventor, he was the first populiser of the concept, and was credited for it even by his contemporaries.
In totality, his ideas were the precursors to the 20th century Austrian School of Economics and neoclassicism.

Later life and death

While his book was revolutionary (get it, right?) in contemporary France, Napoleon, who tried to enforce a mercantilist economic policy, denied the book a reprint, and banned Jean-Babtiste from publishing. Say hence was forced to find a new career - he became a successful cotton factory owner, working with cutting-edge sewing machines.
After the fall of Napoleon, the book saw a second (1814), and then third(1821) edition, and Jean-Babtiste became the most famous French economist of his time. He became a member of the Royal Academy of Sweden, and the first Professor of Political Economy at the College of France. He died in 1832, two years after his wife and suffering from a long illness – but he lived to see the 1830 Revolution, and he is remembered as one of the founding fathers of political economics to this day.

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