A Biography of A.R.J. Turgot – Part 6 – INFLUENCE

One of the striking examples of injustice in the historiography of economic thought is the treatment accorded to Turgot’s brilliant analysis of capital and interest by the great founder of Austrian capital-and-interest theory, Eugen von Böhm-Bawerk. In the 1880s, Böhm-Bawerk set out, in the first volume of his Capital and Interest, to clear the path for his own theory of interest by studying and demolishing previous, competing theories. Unfortunately, instead of acknowledging Turgot as his forerunner in the pioneering Austrian theory, Böhm-Bawerk brusquely dismissed the Frenchman as a mere physiocratic land-productivity theorist. This unfairness to Turgot is all the more heightened by recent information that Böhm-Bawerk, in his first evaluation of Turgot’s theory of interest in a still-unpublished seminar paper in 1876, reveals the enormous influence of Turgot’s views on his later developed thought. Perhaps we must conclude that, in this case as in others, Böhm-Bawerk’s need to claim originality and to demolish all of his predecessors took precedence over the requirements of truth and justice.

In the light of Böhm-Bawerk’s mistreatment, it is heart-warming to see Schumpeter‘s appreciative summation of Turgot’s great contributions to economics. Concentrating almost exclusively on Turgot’s “Reflections,” Schumpeter declares that his theory of price formation is “almost faultless, and, barring explicit formulation of the marginal principle, within measurable distance of that of Böhm-Bawerk.” The theory of saving, investment, and capital is “the first serious analysis of these matters” and “proved almost unbelievably hardy. It is doubtful whether Alfred Marshall had advanced beyond it, certain that J.S. Mill had not. Böhm-Bawerk no doubt added a new branch to it, but substantially he subscribed to Turgot’s proposition.” Turgot’s interest theory is “not only by far the greatest performance . . . the eighteenth century produced but it clearly foreshadowed much of the best thought of the last decades of the nineteenth.”

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