Works
In 1767 Steuart published An Inquiry into the Principles of Political Economy, the first book by a Scottish economist with 'political economy' in the title, explaining usage of the term as that:
- economy in general the art of providing for all the wants of a family, seeks to secure a certain fund of subsistence for all the inhabitants, to obviate every circumstance which may render it precarious; to provide every thing necessary for supplying the wants of the society, and to employ the inhabitants ... in such manner as naturally to create reciprocal relations and dependencies between them, so as to supply one another with reciprocal wants.
The book was the most complete and systematic survey of the science from the point of view of moderate mercantilism which had appeared in England and indeed the first full-fledged economics treatise to appear anywhere. Also the German philosopher Hegel recognized that book and wrote a comment about it in the year 1799. Although often regarded as part of the Scottish Enlightenment which produced David Hume and Adam Smith, Steuart's economics hark back to the earlier Mercantilist era.
Mercantilism was the school of thought that held that a positive balance of trade was of primary importance for any nation and required a ban on the export of gold and silver. This theory led to high protective tariffs to maximize the use of domestic resources, colonial expansion and exclusivity of trade with those colonies. British attempts to follow the mercantilist ideas led to the four Anglo-Dutch navigation wars and the American colonials wars of 1776-1781 and 1812. Additionally in 1815, Britain adopted the high tariff, called the corn laws on all imported wheat at the suggestion of mercantalist advisors. Debate over the corn laws would be harsh and would dominate the political discussion and occupy all British governments until the corn laws were repealed in 1846.
At the level of any individual sales transaction, mercantilism held that profit was developed at the point of the sale. Steuart held that profit was a mere "surcharge" upon alienation (sale) of the commodity. Steuart was not a pure mercantilist, however, he believed in a "scientific form of mercantilism." Steuart held that all profit arose from the seller "overcharging" the buyer in any single sales transaction. However, Steuart did allow that the "profit" obtained through exchange would "fluctuate" with the rise and/or fall in demand. Still like all good mercantilists, Steuart's eye remained on the exchange as the creator of profit and he recognized no value in a commodity before the sale.
Steuart was one of the last representatives of the mercantilist school of economic thought. More accurately, while on the Continent, Steuart had imbibed the sophisticated Enlightenment Mercantilism that was in the air—particularly, German Neo-Cameralism -- which combined a legal-statist approach with a "natural" approach to economics. Although a promoter of old fashioned export subsidies and import tariffs, Steuart added several elements that tied this in with a more general theory of economic development. Unlike the old Mercantilists, he recognized Richard Cantillon's "population-subsistence" dynamics. He also introduced the concept of diminishing returns to England. Steuart juggled two interesting theories of price— a long-run labor theory of value and a short-run "demand-and-supply" theory. Indeed, Steuart was among the first to introduce the term "equilibrium". Thus, Steuart was an important forerunner of both the Classical and Neoclassical schools in many respects. Steuart also provided one of the more able statements of the real bills doctrine of money.
Although the work appears to have been well received its impact was overshadowed by Smith's Wealth of Nations that was published only nine years later. It is interesting to note that Adam Smith never quotes or mentions Steuart's book, although he was acquainted with him. It has been argued that Smith avoided Steuart arguments because they would have undermined his Utopia. Moreover, the attacks on Mercantilism in the Wealth of Nations appear to have been mainly directed against Steuart. As Smith appears to have thought that Steuart's conversation was better than his book, he probably wished to keep clear of controversy with him.
Steuart's book was received much more favourably a century later by the members of the Historical school of economics.
Read more about this topic: James Steuart (economist)
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