The Wealth of Nations_ Books 4-5 - Adam Smith [4]
Smith also enjoyed a warm relationship with Turgot: a fact attested by Smith himself in a letter to the Duc de la Rochefoucauld, dated 1 November 1785, where he referred to the ‘ever-to-be-regretted Mr Turgot’. He added, ‘tho’ I had the happiness of his acquaintance, I flattered myself, even of his friendship and esteem, I never had that of his correspondence.’8 Another of Smith’s friends, the Abbé Morellet, confirmed that
M. Turgot, who like me loved things metaphysical, estimated his [Smith’s] talents greatly. We saw him several times; he was presented at the house of M. Helvetius; we talked of commercial theory, banking, public credit and several points in the great work he was meditating.9
Smith could hardly fail to be impressed by such a high level of activity in a distinctive field, nor by the presence of the macro-economic model first developed in Quesnay’s Tableau économique. It is now widely recognized that this basic model represented an advance in economic theory so considerable that it compared with Harvey’s discovery of the circulation of the blood. The economist and historian J. A. Schumpeter described the model as marking ‘the great breach’ and went on to point out:
Only with the help of such an analysis was it possible for further knowledge of the economic life process to develop and were scholars enabled to survey all the general factors and their functions as well as all the elements which have to be considered in every individual problem so far as it is purely economic.10
Schumpeter also said that the model represented ‘the first method ever devised in order to convey an explicit conception of the nature of economic equilibrium’.11
But before approaching Smith’s account of the system in Book IV, Chapter IX, it is worth bearing in mind that he confronted, in effect, two versions of the argument. The first was the original model associated with the master, Quesnay, and the second the modified version introduced by the ‘revisionist’, Turgot.
François Quesnay (1694–1774)
Quesnay’s purpose was both practical and theoretical. As R. L. Meek has shown, Quesnay announced his purpose in a letter to Mirabeau which accompanied the first edition of the Tableau économique. ‘We must not lose heart,’ he wrote, ‘for the appalling crisis will come, and it will be necessary to have recourse to medical knowledge.12He clarified his position in a further letter to the Marquis de Mirabeau, written in 1758:
I have tried to construct a fundamental Tableau of the economic order for the purpose of displaying expenditure and products in a way which is easy to grasp, and for the purpose of forming a clear opinion about the organization and disorganization which the government can bring about.13
The model in question seeks to explore the interrelationships between output, the generation of income, expenditure and consumption – or in Quesnay’s words, a ‘general system of expenditure, work, gain and consumption’14which would expose the point that ‘the whole magic of a well-ordered society is that each man works for others, while believing that he is working for himself’.15As Meek put it:
In this circle of economic activity, production and consumption appeared as mutually interdependent variables, whose action and interaction in any economic period, proceeding according to certain socially determined laws, laid the basis for a repetition of the process in the next economic period.16
Perhaps the easiest way of introducing the issues involved is to consider the argument of the Analyse (1766). In this model Quesnay identified two main sectors of activity, agriculture and manufacture, together with three major socio-economic groups: the farmers; the proprietors of the land; and those engaged in manufacture. The farmers were defined as the productive class, since it was assumed that only agriculture was capable of generating surpluses.