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SIR JAMES STEUART ON THE ORIGINS OF COMMERCIAL NATIONS

Published online by Cambridge University Press:  18 December 2018

José M. Menudo*
Affiliation:
Universidad Pablo de Olavide.
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Abstract

This paper examines James Steuart’s explanation of the emergence of commercial nations. Unlike other Scottish thinkers of the time, Steuart argues that artifice is necessary for the rise of commercial societies. He uses the term “artificial” to refer to a devised process, one that is an alternative to the supposedly natural process arising from innate propensities. The system of trade and commerce is an “artifice” created by merchants to obtain benefits, and established by the sovereign for his ostentation and personal prestige, until it became generalized as a commercial nation. Steuart’s explanation of the emergence of commercial nations accounts for how individuals become dependent on and subordinate to the public market. This paper concludes that Steuart’s Political Œconomy promotes a science of the artificial that seeks to understand the functioning of non-natural mechanisms and to create instruments that the statesman adapts to the needs and objectives of individuals.

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Articles
Copyright
Copyright © The History of Economics Society 2018 

It is an animal put up to fatten, the more he eats the sooner he is fit for slaughter. When their taste for superfluity is fully formed, when the relish for their former simplicity is sophisticated, poisoned, and obliterated, then they are surely in the fetters of the traders, and the deeper they go, the less possibility there is of their getting out.

—Steuart, An Inquiry into the Principles of Political Œconomy

I. INTRODUCTION

Elie Halévy’s classic study on eighteenth-century utilitarianism distinguishes two theses in which self-interest contributes to the public good (Halévy Reference Halévy1948, pp. 15–17). The natural identity of interests holds that free men, guided by their self-interest, create “harmonies of their own accord and automatically” bring about the good of society. Adam Smith and classical economics rest entirely on this argument. But there is another thesis, which denies that a society dominated chiefly by self-interest will ever harmonize. The artificial identification of interests argues that the interest of individuals must be identified with the general interest, and that it is the art of politics—the job of the legislator—to bring about this artificial identification. Sir James Steuart belongs to the latter tradition. Yet for Steuart, the legislator is not the only agent who creates this type of artifice. Also important in his view is the merchant. In a paragraph in his Principles of Political Œconomy (1767), for instance, Steuart argues that a commercial nation originates in a “scheme” designed and implemented by “merchants” (Steuart [1767] 1995, I, p. 241).Footnote 1 It was not an isolated comment. Steuart dedicated two full chapters to the consequences and effects of the role of merchants in the origin of commercial nations.Footnote 2

In developing these ideas, Steuart broke from his Scottish intellectual peers, because the origin of commercial nations was not, in his view, a consequence of human nature and a long period of historical evolution.Footnote 3 The unintended consequences of individual actions might initiate social change, but they are not alone sufficient to explain how new economic relations are created. Steuart claims instead that artifice is a necessity for commercial nations to emerge and exist.

The literature on Sir James Steuart’s work regarding the appearance of the “commercial nation” is of high quality, and a variety of approaches are used. Many studies point out the ways in which Steuart differed from his Scottish colleagues. For instance, based on the way in which the ideas of Charles-Louis de Secondat, Baron of Montesquieu, were received by figures from the Scottish Enlightenment,Footnote 4 Andrew Skinner (Reference Skinner1993) highlights Steuart’s singularity in the way he dealt with the problems of moving between stages or the consequences of economic change, while Ronald Meek (Reference Meek1967) points out how his originality lay in linking the development of production with a historical and evolutionary approach. Furthermore, Noboru Kobayashi (Reference Kobayashi1967), Michael Perelman (Reference Perelman2000), and William McColloch (Reference McColloch2011) present Steuart’s theory of development as the description of a primitive process of accumulating capital, which led Karl Marx to recognize his historical sensitivity. Ruhdan Doujon (Reference Doujon1994), Rédouane Taouil (Reference Taouil1995), and Aida Ramos (Reference Ramos2011) separate Steuart from the Scottish Historical School when outlining his thought on economic development based on elements of civic humanism, such as the emphasis on frugality or luxury. However, none of the literature highlights the role of merchants in all these processes. The contribution made by this paper involves approaching the theory of the emergence of commercial nations from this different yet essential element (the merchant) in Steuart’s Principles, while at the same time demonstrating that his ideas occupied a specific place within the Scottish Enlightenment. Therefore, it is important to point out that the terms “scheme” or “plan” in Principles of Political Œconomy—e.g., of political economy, of merchants—refer to an artifice aimed at a specific use, illustrated with references to a watch or a wedge. In contrast to the derogatory meaning Smith extols by associating merchants’ project with speculation and with the exaggeration of future results, Steuart presents the terms “project,” “scheme,” or “plan” from the favorable prism of human invention.Footnote 5 The system of trade and commerce is an “artifice” created by merchants to obtain benefits, and established by the sovereign for his ostentation and personal prestige, until it became generalized as a commercial nation.

This article is divided into two main parts. Steuart’s description of necessary preconditions for the emergence of a commercial nation provides the content of the first section. Initially, this section analyzes the historical phases that preceded commercial nations, whose description enables Steuart to portray a society made up of hierarchical relationships and gradually modified dependence links, from the rigid subordination of feudalism to the high interdependency of a society of free men. This is a fundamental issue, because any account of the emergence of commercial nations would need, according to Steuart, to explain how individuals become dependent on and subordinate to new institutions. Afterwards Steuart explains the appearance of money (an invention) and the implementation of the “system of trade and commerce” (a scheme) in terms of the change brought about by the merchant in the relationship between producer and consumer, in contrast to a form of production caused by the division of labor in Adam Smith. We conclude that Steuart uses the term “artificial” to refer to an imagined process, intentionally aimed at a predetermined purpose and an alternative to the natural way described by the immediate response of original principles. He presents the commercial nation as a consequence of designs and inventions, which link individuals via a new type of “commercial” dependence. Now producers and consumers are subordinate to the “public market,” which provides individuals with goods and the money to acquire them.

The second section analyzes the emergence of commercial nations. The establishment of the system of trade and commerce that gives rise to a “commercial nation” is conditioned by three elements that can render its appearance impossible: (i) the natural disadvantages in production and distribution as economic variables; (ii) tyranny as a political variable; and (iii) the division of classes into worker and landowner as a social variable. This section also refers to the consequences that the emergence of commercial nations implies for the government. The statesman must adapt his executive capacity to the complexity of greater interdependence in an increasingly divided society. Steuart’s proposal revolves around the concept of artifice, specifically a “plan of political economy,” which enables the commercial nation to be established without violent revolts and with an improvement in conditions for all individuals. Therefore, the part played by the statesman in the implementation of the “plan of political economy” is at least as important as the role of merchants in terms of introducing the system of trade and commerce into a nation and turning it into a commercial nation. Indeed, this question provides the final contribution of the present paper, since it allows us to define Steuart’s Political Œconomy as a science of the artificial: a discipline that seeks to understand the functioning of these non-natural mechanisms and to create instruments that the statesman adapts to the needs and objectives of individuals.

II. THE GREAT ALTERATION IN EUROPE: NECESSARY PRECONDITIONS

According to Steuart, “the great alteration in the affairs of Europe” began with the discovery of America and of the East Indies. It brought luxury and trade to the royal households.Footnote 6 The nobility emulated the Crown’s demand for superfluous goods. However, the purchase of goods produced in foreign lands required greater quantities of money. The solution was to replace vassalage by payments in cash; the result was a loss of authority, bringing about the collapse of the existing social order (Steuart [1767] 1995, I, p. 68). The use of conjectural history is common in the Scots’ explanations of the origin of commercial nations (Israel Reference Israel2011). Steuart added how new economic relations had been created.Footnote 7 In order to understand them, the growth in the demand for luxury goods must be examined, along with the origin of surplus in modern society.

To explain the emergence of commercial nations, Steuart first must explain how individuals become dependent on and subordinate to new institutions. Individuals became so, according to Steuart, during a historical process that took place over the previous 300 years in Europe. To explain this process, he rejects theories based on an isolated state that put forward universal principles.Footnote 8 For Steuart, the key is the historical process, because therein lie the elements or causes explaining the appearance of commercial nations, enabling us to examine different countries and periods to assess their performance.Footnote 9

Subordination and Dependence

Steuart presents an agrarian society with two social classes: those who live from the fruits of the earth without working, and those who need to work to survive. Personal interest and natural inequalities generate a social relationship characterized by a surplus produced by a working class, which enables another sector of the population to live without working.Footnote 10 The working class need, of course, to cultivate the land for their subsistence. Yet, they at first have no incentive to produce more than what they need to survive. So how does a surplus emerge? According to Steuart, a surplus emerges from the power of or subordination to the landowners.Footnote 11

Here new ideas present themselves concerning the general principles of subordination and dependence among mankind; which I shall lay before my reader before I proceed, submitting the justness of them to his decision. As these terms are both relative, it is proper to observe, that by subordination is implied an authority which superiors have over inferiors; and by dependence, is implied certain advantages which the inferiors draw from their subordination: a servant is under subordination to his master, and depends upon him for his subsistence. (Steuart [1767] 1995, I, p. 316)

Dependence and subordination are present in all historical phases, albeit with varying intensity. The principle of dependence refers to a kind of personal advantage, which does not stem from cooperation between equals but from subordination to the authority. Consequently, social relations always entail authority. Equality between individuals, Steuart asserts, has never existed because society as a whole is composed of a union of hierarchical relationships. Natural dependence, such as the relationship between parents and children, is now extended alongside political dependence, which implies subordination via property laws or legal obligations, first present in the form of slavery and then, through the influence of Christianity, under the feudal system (Steuart [1767] 1995, I, p. 8). From feudal communities with strong social cohesion, owing to the high level of dependence and subordination between their members, Steuart moves towards societies of free men where the introduction of industry enables the individual to depend solely on the results of their “industry.”

In a society of free men, the need for labor as a system of generating surplus on the basis of subordination does not exist. From then on, what the working classes do is called “industry” because, over time, it also incorporates ingenuity.

Industry likewise implies something more than labour. Industry, as I understand the term, must be voluntary; labour may be forced: the one and the other may produce the same effect, but the political consequences are vastly different. Industry, therefore, is applicable to free men only; labour may be performed by slaves. (Steuart [1767] 1995, I, p. 224)

The concept of industry has been the subject of a great debate (James Reference James1977; Braudel 1986) seeking to understand a meaning lost today and difficult to replace with a modern concept.Footnote 12 Throughout the seventeenth and eighteenth centuries, the term “industry” described talents that were useful for productive purposes and became one of the keys to economic prosperity. This use of the word “industry” vanished with the emergence of the classical economists’ labor input. Nonetheless, Steuart made a distinction between man’s industry and labor input in his analysis by introducing different types of dependence.

Once industry has emerged, feudalism declines on account of the appearance of money and sumptuary consumption (Steuart [1767] 1995, I, p. 237). In several chapters of his Principles—chapter VI, book I; chapters III and XIII, book II—Steuart is explicit regarding the necessary conditions for the emergence of a commercial nation—i.e., the use of money and a taste for luxuries—to such an extent that he begins his analysis with the definition of both terms.Footnote 13

The Introduction of Money

In book III of his Principles, titled Of Money and Coin, Steuart tackles the history of money and of monetary systems.Footnote 14 When explaining the origin of commercial nations, Steuart surmises who introduced money into the nation.

Money had always been in the nation, or, more specifically, in the hands of a small number of the inhabitants of a country. As Steuart explains, they persuaded the others to accept a commodity “of no material use to man” as a means of payment. In contrast to David Hume’s view (Piteau Reference Piteau2002, p. 260), it is a process of convention that resembles not at all a spontaneous phenomenon.

Here a new scene opens. This money must be found in the hands of some of the inhabitants; naturally, of such as have had the wit to invent it, and the address to make their countrymen fond of it, by representing it as an equivalent value for food and necessaries; that is to say, the means of procuring, without work or toil, not only the labour of others, but food itself. (Steuart [1767] 1995, I, p. 42)

Steuart does not explain this process of arbitrary social choice. He is interested in the consequences of the use or introduction of money—i.e., how money becomes “an universal object of want to all the inhabitants.” Although Steuart eventually argues that merchants are indispensable to the rise of commercial nations, here he makes it clear that merchants are not the ones who introduced money. On the contrary, money had to precede merchants: before there could be a commercial nation, the desire for superfluous products needed to become general, which first required a larger population involved in exchanges, which first required money.

Once money has emerged, the “moral incapacity” of the inhabitants to increase demand disappears. How does this happen? Those who have money—the proprietors—cease to work, but not to consume. On the one hand, the production of farmers increases because the proprietors raise their demand for food. Farmers’ surpluses increase and the “rich” demanders pay them with money. On the other hand, free hands will supply their service (or labor), and rich demanders do not give them food in return but rather money. And “this money in their hand will serve as an equivalent for superfluidity of nourishment produced by additional agriculture” (Steuart [1767] 1995, I, p. 45). Now there is a greater population involved in exchanges and a greater surplus of the agricultural product to feed the whole population.

Moreover, Steuart adds that individuals are now linked by another type of dependence, known as “commercial” dependence. Steuart historically observes the permanent need of the individual for others, how these social relations procure a series of advantages, and what kinds of obligation they entail. Dependence has appeared in different ways: (i) natural dependence, as the relationship between parents and children; (ii) dependence through law, in the case of slavery; and (iii) commercial dependence between the rich demander of goods and the industrious individual or worker who supplies them (Steuart [1767] 1995, I, p. 316). Even if the last is the lowest degree of dependence, equality between individuals does not exist within a commercial nation, given that dependence always entails subordination: “he who depends totally upon the sale of his own industry, stands in the fourth degree: this is the case of tradesmen and manufacturers, with respect to those who employ them” (Steuart [1767] 1995, I, p. 318). If the characteristic of this type of authority that superiors wield over inferiors is notoriously elusive in Steuart, the following paragraph can help to clarify the question.

The last refinement [step], and that which has brought liberty to be generally extended to the lowest denominations of a people, without destroying that dependence necessary to serve as a band of society, was the introduction of industry: by this is implied, the circulation of an adequate equivalent for every service, which procures to the rich every advantage they could expect to reap, either from the servitude or dependence of the poor; and to these again, every comfort they could wish to enjoy under the mildest slavery, or most gentle subordination. (Steuart [1767] 1995, I, p. 317)

Now the industrious tradesmen and manufacturers—“the poor,” in Steuart’s words—are under subordination to the proprietor—“the rich”—who buys their products or employs them, and they depend on him for money. Therefore, subordination survives in commercial nations through a monetary relationship between workers and proprietors, which replaces feudal subordination between lords and vassals.Footnote 15 Once money has emerged, free-hands and farmers depend on the demand of the rich, who provide them with money.

The raw material for the system of trade and commerce is ready. “When once this imaginary wealth (money) becomes well introduced into a country, luxury will very naturally follow” (Steuart [1767] 1995, I, p. 45). Now is the time for merchants to build it up.

The System of Trade and Commerce

For Steuart, the new institutions that allow the commercial nation are linked to an artificial construction called the “system of trade and commerce.” Hume uses the term “artificial” to describe an imagined process aimed intentionally at a predetermined purpose, particularly a convention of rules that provide a sense of justice and that represent an alternative to the natural way or are to be inevitably the consequence of natural propensities (self-interest, sexual passion, or natural affection). To explain the formation of rules determining property, rights, and obligations, Hume introduces the artificial process as the result of invention.Footnote 16 In this regard, and used in another historical view, Steuart highlights the artificial nature of the institutions that give rise, together with the statesmen, to the commercial nation, and proof of this is the introduction of the general utility principle required by Hume in order for the artifice to function.Footnote 17 “Trade and commerce are an abbreviation of this long process; a scheme invented and set on foot by merchants, from a principle of gain, supported and extended among men, from a principle of general utility to every individual, rich or poor, to every society, great or small” (Steuart [1767] 1995, I, p. 241).

Steuart highlights, in particular, the artificial nature of these institutions by presenting merchants as creators, responsible for implementing “the system of trade and commerce.”Footnote 18 The system has two stages. The first one creates and stimulates the demand for superfluous products. The second stage is an artificial identification of interests driven by merchants that guides production and exchange.Footnote 19

The process begins when the system of trade and commerce, which merchants were already executing in their countries of origin, spreads to other nations. Chapter V of the second book of his Principles of Political Œconomy is exclusively dedicated to the merchants’ process of introducing a trade described as “active,”Footnote 20 since it is not limited to providing goods that arise from the needs of families.

The active [trade] is when merchants, who have executed this plan at home with success, begin to transport the labour of their countrymen into other regions, which either produce, or are capable of producing such articles of consumption, proper to be manufactured, as are most demanded at home; and consequently will meet with the readiest sale, and fetch the largest profits. (Steuart [1767] 1995, I, p. 247)

With the help of correspondents and producers, the merchant devises the means to generate superfluous needs, in accordance with the customs of each town and with initial prices according to the ability to pay, and not the cost (Steuart [1767] 1995, I, p. 249).

Beyond the purpose for which the artifice is created, Steuart stresses the important alterations of social relationships entailed by the system. The imitation of the nobility and the ‘aspiration effect’ of workers lead the system to spread until the consumption of superfluous goods becomes a habit among all members of society.Footnote 21 Steuart considers needs to be accumulative and unlimited, in such a way that ostentatious consumption in the present later becomes a need—which Steuart calls “political necessaries” to differentiate them from those needs stemming from subsistence—for every social class.Footnote 22 Although the boost in the demand generates unlimited possibilities for growth, the generalization of the desire for superfluous products requires a greater surplus (Steuart [1767] 1995, I, p. 236). Once again, people need an additional push for their work to create a surplus, and the added element stems from dependence. Now “men are now forced to labour because they are slaves to their own wants” (Steuart [1767] 1995, I, p. 52). A generalized desire for the superfluous leads to the need to generate a surplus with which exchange can be performed.

Once luxury and convenience are introduced into a country, merchants are ready to build the system of trade and commerce (Steuart [1767] 1995, I, pp. 241).

The first part of this “fabric” is a new system of production. As Adam Smith would do later, Steuart uses the example of a pin factory to explain the economic change involved in the new institutional arrangement for production. Steuart focuses on the new relationship between producer and consumer, rather than on the form of production caused by the technical division of labor in Adam Smith. He explains that now the producer sells all his produce to the merchant, who (i) satisfies more distant clients, (ii) detects excesses in supply or demand in the sectors, (iii) transfers this information to the producers via markets, and (iv) avoids the problems that lead consumers to acquire goods directly from the producer: “the distance of the manufactures, the obscurity of his dwelling, the caprice in selling his work …; the retailer has all in his shop, and the public buys at a current price” (Steuart [1767] 1995, I, p. 243).

The next step is the new organization of exchange. Steuart describes the introduction of a ‘public market’—i.e., “how bartering grows into trade” (Steuart [1767] 1995, I, p. 237). Steuart understands the market as a social system of exchange that diverges from “a simple operation” of two contracting parties—i.e., barter—which is the representative exchange within a non-commercial nation. In barter, one exchange realizes the purposes of both exchangers; with money, this is no longer true, as the seller must engage in an additional exchange with a third person, whose purpose is not realized unless there is yet another exchange, and so on. The market is represented by means of a continual flow made up of operations bound closely together. Through the “money of account,” Steuart emphasizes a tripartite division—(i) manufacturers–industry, (ii) merchants–money, and (iii) consumers–wants—that make up the “public market.”Footnote 23 Steuart distinguishes three types of economic agents involved in the process: producers or “manufacturers,” consumers, and merchants who acquire and spread knowledge and information for the functioning of the market. The relationship among the three agents based on money and merchants enables individual exchanges to form a monetary circulation driven by merchants.

Let this third person [the merchant] be brought into play, and the whole operation becomes clear. What before we called wants, is here represented by the consumer; what we called industry, by the manufacturer; what we called money, by the merchant.… This operation is trade: it relieves both parties of the whole trouble of transportation, and adjusting wants to wants, or wants to money; the merchant represents by turns both the consumer, the manufacturer, and the money. To the consumer he appears as the whole body of manufacturers; to the manufacturers, as the whole body of consumers; and to the one and the other class his credit supplies the use of money. (Steuart [1767] 1995, I, pp. 238–239)

Once the system of trade and commerce has been explained, Steuart considers the issue of its transition to the commercial nation, and warns about the unfounded expectations that it generates.

III. COMMERCIAL NATIONS: OBSTACLES AND CONSEQUENCES

According to Steuart, there is no natural trend towards exchange that promotes the division of labor and, therefore, enables one to consider commercial nations as a consequence of human nature.Footnote 24 In Steuart, only nations that have voluntarily or otherwise decided to be commercial will become “commercial nations”; in other words, commercial nations are nations that have introduced “the system of trade and commerce,” in which production and exchange are completely managed by traders; as a result, it is also called a “system of trade and industry.” In short, the commercial nation is not part of the “natural course of things”; rather, it is the result of a deliberate, historical (rather than natural or inevitable) process, a process in which a nation decides to become a commercial nation and takes the necessary steps to becoming so.Footnote 25

Obstacles to the Emergence of Commercial Nations

The first discussion is whether it is possible to establish the system of trade and commerce in another nation. Steuart describes the challenges involved in implementing it in a nation with considerable natural disadvantages (Steuart [1767] 1995, I, p. 327).Footnote 26 With superfluous consumption generalized, the purchase of foreign products offered by merchants can be paid for only with an agricultural surplus fully destined for exportation. Thus the appearance of an industrial population that enables the foreign product to be replaced by a national one is not possible. Without the intervention of the statesman, the price increase in food will reduce incomes until society is divided into two classes: rich and poor. In these nations, the system of trade and commerce is more harmful than beneficial. Economic policy can promote only “passive trade,” which consists of defining a national demand for foreign products that is met ad hoc—i.e., without the existence of the system of trade and commerce (Steuart [1767] 1995, I, p. 247).

Steuart then turns his attention to the political and social conditions required to introduce the system of trade and commerce in a nation and turn it into a commercial nation.

I am far from being of opinion that this [the modern system of trade and commerce] is the only road to happiness, security, and ease; though, from the general taste of the times I live in, it be the system I am principally employed to examine. A country may be abundantly happy, and sufficiently formidable to those who come to attack it, without being extremely rich. Riches indeed are forbid to all who have neither mines, or foreign trade. (Steuart [1767] 1995, I, p. 326)

In the relationship between political and economic systems, both republics or democracies (he uses both terms) and monarchies allow the system of trade and commerce to be implemented, although each political system entails a particular commercial nation (Steuart [1767] 1995, I, p. 322).Footnote 27 Equality is a priority in the democratic system, involving a guarantee of freedom but a moderation of expenses, discouraging national industry. The inequality intrinsic to the monarchic system is detrimental to freedom but allows an increase in the luxury that encourages local manufacture. Therefore, democracy promotes a commercial nation with pre-eminence in the external sector, while monarchies encourage an economy in which domestic trade dominates. In any case, the threat to freedom and frugality are inconveniences only if statesmen “neglect the interest of commerce, so far as not to make it an object of administration” (Steuart [1767] 1995, I, p. 313).

The only political system that is not compatible with the commercial nation is tyranny. The problem is known as “undetermined subordination,” meaning a lack of public liberty.Footnote 28 A society of free men means that the exercise of authority upholds the principles of impartiality (uniform application) and non-arbitrariness (equal treatment of similarly situated individuals). Steuart presents the relationship between freedom and the rule of law from a different perspective from that of the clash between the restriction of the legislator and the power of freedom.Footnote 29 Instead of being an instrument of protection, the rule of law is a means of guaranteeing the exercise of economic activity—e.g., when a legislative project removes the physical barriers of a territory, creates a space of action, and eliminates a situation of privilege, or when the law develops a commercial agreement between nations, merchants join new market spaces. The system of trade and commerce does not operate without “public liberty” because industry is destroyed when the producer is subjected to discretionary taxes, charges, or assistance. Steuart highlights the unbearable uncertainty that this situation provokes in the producer (Steuart [1767] 1995, I, pp. 324–325). It is not the essence of the tax system in itself because Steuart considers it completely necessary to the economic activity. For example, high, general, stable, and progressive taxes do not ruin manufacture, although they may have negative consequences on external trade.Footnote 30 But an arbitrary tax system distorts competition, interrupts industrial activity, and prevents the appearance of new initiatives. Hoarding eventually appears and public revenues diminish because the sources of private wealth have disappeared. The lower classes “ought by industry to enrich” the nation but they find themselves without credit, because the money is lent to the state, with taxes that fall on productive resources instead of taxing the outcome of production.Footnote 31

The third matter is the influence of the system of trade and commerce on the division of social classes. Steuart discusses its incompatibility with a society divided between landowners and serfs, as occurs in feudalism. Since industry generates wealth and wealth grants power, the sovereign cannot establish a system that grants power to those who must only obey (Steuart [1767] 1995, I, p. 328). When the system of trade and commerce is possible, the sovereign of the feudal nation must assume an inevitable change in the relations of dependence and subordination. Steuart describes three historical situations to illustrate how subordination gives way to the emergence of classes that question the power balance: (i) the opening of the doors of the senate of Venice or Genoa to prosperous citizens; (ii) the political influence of the Praetorian Guard or the Janissaries through the security they provided to the emperor or the sultan; and (iii) the replacement in terms of influence on the monarch’s decisions of the nobleman’s wisdom by the liquidity of an industrial class that holds the monarch’s sources of wealth. If the statesman limits the power of the upper classes and spreads public freedom via a single subordination to the law, “a more mild, and a more regular plan of administration” will be introduced (Steuart [1767] 1995, I, p. 329). The effects are greater when Steuart describes how the market system limits the power of the sovereign himself. Now the legislator cannot access the wealth of the citizens because they can evade his authority by avoiding taxes.

The system of trade and commerce implies that the administration or government system enabling the action of power is more complex and that the influence of the statesman’s policy over citizens is weaker (Steuart [1767] 1995, I, pp. 277–278). Greater attention should be paid, according to Steuart, to this loss of influence because the system of trade and commerce can be channeled but not counteracted (Steuart [1767] 1995, I, p. 331).Footnote 32

The Wedge and the Watch: The Consequences for the Statesman

Steuart’s discourse is aimed at public opinion and defends the argument that the response to the system of trade and commerce is not less government, but a new exercise of political power. However, the definition and content of this statesman’s policy are notoriously elusive in Steuart. Of particular relevance here is the fact that the statesman plays a part at least as important as that of merchants when it comes to turning a country into a commercial nation.

In chapters XIV, XV, and XVI of the second book of his Principles of Political Œconomy, Steuart explains how the statesman responds to the system of trade and commerce with the creation of another artifice, called the “plan of political economy,” with no relation with central planning, because society cannot be planned, according to Steuart.Footnote 33 In line with his idea of a lack of an invisible hand, chapter XVI—Lycurgus’s plan—presents an artifice as the necessary way of achieving public happiness within a commercial nation. The first conclusion that Steuart wants readers to draw from the case of Lycurgus’s Sparta is that the new statesman’s mode of action is taking place for the public good.

It is of governments as of machines, the more they are simple, the more they are solid and lasting; the more they are artfully composed, the more they become useful; but the more apt they are to be out of order. The Lacedemonian form may be compared to the wedge, the most solid and compact of all the mechanical powers. Those of modern states to watches, which are continually going wrong; sometimes the spring is found too weak, at other times too strong for the machine: ...; then the machine stops, and if it be forced, some part gives way; and the workman’s hand becomes necessary to set it right. (Steuart [1767] 1995, I, pp. 331–332)

A new approach to economic policy is required due to the fact that “security, ease, and happiness, therefore, are not inseparable concomitants of trade and industry” (Steuart [1767] 1995, I, p. 341). The forces of the system of trade and commerce modify the correspondence between the contributions to the community and the profit obtained, altering the welfare of social groups in contrasting directions. Damages can arise from the introduction of machinery, from the variation of prices of necessary goods, from delays in the operation of the markets, or from the loss of competitiveness. The consequences are unemployment, hunger, crisis in the balance of payments, or an increase in credit. First, therefore, the statesman’s action is a necessary response to social relations that are in constant movement, to maintain common well-being (Steuart [1767] 1995, I, p. 161). The statesman must precisely be “attentive to provide food, other necessaries and employment for all the people” (Steuart [1767] 1995, I, p. 352).

Second, the statesman’s new mode of action is not reduced to “a system of written laws, but stamped upon the minds” of individuals. Steuart distances himself from both the concept of policy, which regulates economic activity, and a legal or institutional framework, based on natural or artificial laws, to suggest an intervention that is active, gradual, and preventing (Karayiannis Reference Karayiannis and Reisman1994, p. 42).Footnote 34 Steuart assumes that commerce and self-interest might lead to disorder. Instead of a self-adjusting mechanism, he believes, private self-interest will conform to the public good in the long run by means of the plan of political economy. There are no results to expect in the short run because the plan needs time to have influence on conduct and behavior. In the same way that merchants have modified the behavior of individuals, the statesman can make society benefit from the effects of the mechanics of passions by guiding individual action towards the direction specified in the plan. In conformity with the principle of the artificial identification of interests, the work of the artifices of the legislator should be to identify the interest of individuals with the general interest.Footnote 35 The way in which economic policy is transmitted is an incentive for citizens who are looking out for their own interests.

Finally, Lycurgus’s plan teaches Steuart another lesson. Sufficient authority is necessary in the nation to support the execution of his plan: “I never recommend them [his principles of political economy] farther than they may be rendered possible in execution, by preparatory steps, and by properly working on the spirit of the people” (Steuart [1767] 1995, I, p. 363). For this reason, in modern nations the statesman needs to limit the power of the upper classes and to spread public freedom via a single subordination to the law. Part of the population, those devoted to manufacture, assumes the risk of leaving their survival in the hands of farmers and agricultural landowners. Benefitting from a relationship of dependence on agriculture that guarantees them the necessary goods, the industrial class accepts subordination to the rule of law.Footnote 36 Consequently, a pact is devised so that society guarantees the protection of tradesmen and manufacturers who produce far from the subsistence sources: “This conveys my idea of a free and perfect society, which is, a general tacit contract, from which reciprocal and proportional services result universally between all those who compose it” (Steuart [1767] 1995, I, p. 109). This artifice consists of a dependence contract that encompasses everyone—i.e., it prohibits unilateral independence—and, therefore, the “political” relationships of dependence and subordination are limited to the link between the individual and the state. The subordination of subjects to the rule of law in exchange for survival enables the statesman to execute his plan. The exercise of authority is likened to the exercise of strength and solidity of a wedge, but now it must be similar to the delicacy of a watch (Steuart [1767] 1995, I, p. 426).Footnote 37

In chapters XV and XVI, the content of the “modern” plan of political economy is superficially explained by Steuart. Given that the action of power is more complex, it is necessary first to have an extensive knowledge of the socio-economic structures prevailing in a given society. The statesman’s action requires a vast amount of information and personal knowledge of a country, but also of literature and economic conditions. Therefore, the administrators of a state must be local and involved in the welfare of their people (Ramos Reference Ramos2007, p. 203). Second, the statesman must choose the political economy that suits the well-being of his nation. The public good cannot stem from an immediate response of the natural propensities of individuals and, therefore, also requires an imagined artifice aimed at a predetermined purpose—e.g., a schema of being long great and powerful by trade (Steuart [1767] 1995, I, p. 363). However, there is no ideal society. The plan must be adapted to each community because not all communities have the same combination of private interests or the same economic conditions; thus, the same response and goals will not apply to all societies.Footnote 38 The content consists of a body of knowledge provided by economic science (Steuart [1767] 1995, I, p. 308). When the principles are well understood by the statesman, every transgression of them is clearly seen—this is the limit imposed by the political economy on the leader’s arbitrary abuses.Footnote 39

To sum up, the plan of political economy is the new statesman’s mode of action. Steuart does not want to repeat past mistakes—e.g., the abuses of the sovereign, the application of economic policy without considering its impact in the long run, the absence of information available to the government. Economic policy requires a design that seeks to organize the statesman’s exercise of power over citizens towards a predetermined purpose.

IV. FINAL REMARKS

Throughout this paper, we have seen to what extent Steuart is part of the literature that seeks to explain the evolution of political and social life through economic activity. In fact, when dealing with the move towards the commercial nation, he proves himself to be a much more cautious author than revealed by the literature. Rather than providing an unequivocal defense of commercial nations, Steuart analyzes the opportunities and disadvantages that can be generated by a system of trade and commerce. He shows greater concern for studying the political and social effects of the system of trade and commerce than for approving the increase in well-being that its establishment generates.

The second matter is his theory of power relations. Steuart’s discourse aims to defend the argument that the response to sovereign abuses is not less government, but rather a better exercise of political power. Personal interest cannot be channeled towards the public good by institutions because society is made up of a union of hierarchies that generate different power relations—i.e., legislation is only one of them. We must also add the impact of exogenous events—e.g., Christianity or the discovery of the Indies—that slowly modify subordination links. Therefore, Steuart’s economic thought cannot be studied on the basis of a group of relationships between equals. Each individual, group, or social class is situated on a different level from the rest, and each exchange has different consequences for the parts. Evidently, when the problem at hand is the origin and emergence of the commercial nation, Steuart questions why and how individuals have been subordinated to the system of trade and commerce.

Finally, we highlight the importance of the construction of artifices, involving designs aimed at achieving particular purposes and with unexpected collective consequences; i.e., the natural propensities of individuals are not a sufficient explanation. The system of trade and commerce is a “Humean artifice.” It was created by merchants to obtain benefits, and established by the sovereign for his ostentation and personal prestige, until it became generalized as a commercial nation. The consequences are (i) the appearance of a new type of power (commercial dependence); (ii) subordination to the law; (iii) the disappearance of the feudal system; and (iv) an increase in the well-being of the poorest classes. According to Steuart, the statesman ought to adapt his policy to changing institutions instead of looking for answers based on a non-existent natural order. The role of persuasion in this new political economy is yet to be determined. Its role in the emergence of the commercial nation has been essential because the merchants transform the acquirement of luxury and superfluous goods into “political needs” for the people. The government also requires persuasion so that its plan is successful.

Footnotes

I would like to thank Paul Dudenhefer and Stephen Meardon for his comments and suggestions on an earlier version of this article. The paper benefitted from inspiring remarks made by three anonymous referees and several colleagues at the Charles Gide Conference (Lyon 2014). Any remaining errors are nevertheless my responsibility. This work was supported by the Regional Government of Andalusia under Grant project SEJ-246 and the Andalusian Studies Centre under Grant project PRY131/11.

1 Steuart also uses the terms “invention” and “fabric” (Steuart [1767] 1995, I, pp. 31, 346).

2 Even if the literature uses the term “commercial society,” we prefer the term “commercial nations” because it was more often used in the eighteenth century.

3 “This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another” (Smith [1776] 1981, p. 25). For the use of conjectural history and the constant and fixed principles of human nature in the Scots’ account of the rise of commercial society, see Donald Winch (Reference Winch, Goldie and Wokler2006), Jonathan Israel (Reference Israel2011), and Christopher Berry (2013, ch. 2).

4 A comparative approach when explaining a considerable part of the evolution of political and social life through economic development (Skinner Reference Skinner1963). Even more, the Scottish Enlightenment has been interpreted as an intellectual response to Montesquieu, Voltaire, Jean-Jacques Rousseau, Pierre Bayle, and l’Encyclopedie (Israel Reference Israel2011).

5 The ambivalent use of the term “projector”—sometimes referring to speculation and fraud, others denoting ingenuity and dynamism—comes from the seventeenth century (see Thirsk Reference Thirsk1978, pp. 1–2). As Donald Winch underlines, Smith condemns angrily the projects by which merchants have deceived the statesman to serve their interest at the expense of the rest of society. For the use of the terms “projector” and “man of system” in Adam Smith, see, respectively, Hollander (Reference Hollander1999) and Winch (Reference Winch, Goldie and Wokler2006).

6 Steuart ([1767] 1995, I, p. 13). “Bounds of all the European Kingdoms” is the expression used by Hume, and “a revolution of the greatest importance to the publick happiness” in Smith’s view.

7 Skinner (Reference Skinner1993) establishes a clear distinction between Smith, who presents history as a preface to understand the exchange economy, and Hume or Steuart, who present an integral process giving rise to a commercial state. For a comparison of Smith and Steuart on the use of conjectural history, see also Ramos (Reference Ramos2007). The historical stages approach was used by contemporaries such as John Millar, Adam Ferguson, and Adam Smith (Skinner Reference Skinner and Skinner1966; Berry Reference Berry2013). For an analysis of Steuart’s concept of progress, see Doujon (Reference Doujon1994).

8 His criticism of arguments based on the “imaginary” laws of nature is frequent. See Steuart ([1767] 1995, I, p. 320).

9 For Anthony Brewer (Reference Brewer1997), Steuart takes as the starting point of his inquiry the concepts used by Hume in his essay on luxury—e.g., class division, the intersection of industry and agriculture, the dependence on or economic consequences of luxury goods. Hume divides the economy into two sectors: agriculture and industry, the latter a result of the ability of the former to produce more food than necessary. The new preferences for products manufactured abroad foster development. Imports insert agricultural workers into the market as food sellers, through their surplus production, and as buyers of manufactured goods.

10 Steuart ([1767] 1995, I, p. 27). Steuart uses the term “class” to mean a social status—e.g., higher classes, lower classes, owners—or an occupational group—consumers, producers, free-hands, industrials (Brewer Reference Brewer1997, p. 6). It consists of a social division of labor also used by contemporaries such as David Hume or Richard Cantillon (Skinner Reference Skinner, Dow and Dow2006, p. 78), although Steuart emphasized the mobility of individuals between classes (Karayiannis Reference Karayiannis1988).

11 In relation to Steuart’s work, Skinner (Reference Skinner and Skinner1966) highlights dependence between the members of a society and subordination as guidelines related to types of social organization in a historical context. Based on this reference, Dominique Cabonet (Reference Cabonet, Porta, Scazzieri and Skinner2001) describes the subordination/dependence duality as a principle to constitute a theory of history, which analyzes political regimes. For José M. Menudo (Reference Menudo2013), Steuart’s analysis seeks to find principles that statesmen can use in their decision making, and historical processes provide “natural and rational” principles.

12 The debate appears to end up with three meanings for “industry.” The first refers to know-how, the second to all non-farm economic activity—trade and industry—and the third to industrial activity (James Reference James1977).

13 “By LUXURY, I understand the consumption of any thing produced by the labour or ingenuity of man, which flatters our senses or taste of living, and which is neither necessary for our being well fed, well clothed, well defended against the injuries of the weather, or for securing us against every thing which can hurt us.

By MONEY, I understand any commodity, which purely in itself is of no material use to man for the purposes above-mentioned, but which acquires such an estimation from his opinion of it, as to become the universal measure of what is called value, and an adequate equivalent for any thing alienable” (Steuart [1767] 1995, I, pp. 41–42). Absorbed in the economical debate on luxury, Steuart emphasizes that this does not concern excesses, vices, or a waste of fortune. It consists of consumption with positive effects as they result in employment and sustain the industrial class. Regarding Steuart’s contribution to the topic of sumptuary expense, see Ramos (Reference Ramos2011).

14 For this combination between theoretical antimetallism and the convention of acceptability, see Piteau (Reference Piteau2002).

15 Jean Dellemotte and Benoît Walraevens (2015) present the case of Adam Smith. Labor survives in commercial society through a salary relationship of dependence and subordination between the worker and the capitalist, which replaces feudal dependence in primitive societies.

16 “First, because, tho’ the cause of the establishment of these laws had been a regard for the public good, as much as the public good is their natural tendency, they wou’d still have been artificial, as being purposely contriv’d and directed to a certain end. … This system, therefore, comprehending the interest of each individual, is of course advantageous to the public; tho’ it be not intended for that purpose by the inventors” (Hume Reference Hume1739, p. 529).

17 “But however single acts of justice may be contrary, either to public or private interest, ’tis certain, that the whole plan or scheme is highly conducive, or indeed absolutely requisite, both to the support of society, and the well-being of every individual” (Hume Reference Hume1739, p. 497).

18 This element can be interpreted as an influence of German literature because society is understood as a corpus of different social orders and not only as a human group. See Tribe (Reference Tribe1988).

19 Skinner (Reference Skinner1963) prefers the term “control” instead of “guide.” We could discuss control in terms of group or class, but not monopoly (Steuart [1767] 1995, I, p. 263). Steuart explicitly underlines the need for competition between merchants so that the “public market” works.

20 Edgar Johnson (Reference Johnson1937) names Malachy Postlethwayt as preceding the distinction between passive and active trade. The latter involves the control of the transport infrastructure, the possession of industrial establishments, and the development of work-related ingenuity. Its consequences are wealth and economic independence. Passive trade is a result of a failure in manufacturing development and entails commercial paralysis, exhaustion of natural resources, and dependence.

21 Robert Eagly (Reference Eagly1961) uses “aspiration effect” to refer to the increase in productivity generated by the more disadvantaged population’s desire for a better quality of life.

22 See chapter XXI, book II of Steuart’s Principles of Political Œconomy.

23 He uses “money of account” to refer to the invariable measure of price: “Money of account therefore, is quite a different thing from money-coin, and might exist, although there was no such thing in the world as any substance, which could become an adequate and proportional equivalent for every commodity” (Steuart [1767] 1995, III, p. 270).

24 Hume and Smith describe exchange as “natural” (Rutherford Reference Rutherford2012, p. 36). Hume associates the appearance and spread of the commercial system with the universal desire to gain and to experience, while Smith links the system to a natural tendency to exchange in individuals (Skinner Reference Skinner1993). However, Ferguson saw the separation between the soldier and the citizen as indicating the starting point of the commercial society (Geuma Reference Geuma, van Gelderen and Skinner2002). In short, none of them considers any artifice necessary to explain the birth of the commercial society.

25 The establishment of the system of trade and commerce is directly associated with the ambition and prestige of the sovereign, particularly with the ability of commercial nations to avoid military conflicts (Steuart [1767] 1995, I, p. 329). Steuart probably refers to Montesquieu’s thesis, which notes that trade based on mutual dependency discourages war. Smith also morally approves of commercial society because the spread of the market reduces food costs and because international trade promotes international peace (Fleischacker Reference Fleischacker2004, p. 55).

26 Only the possession of gold or silver mines could compensate for the natural disadvantages for production or distribution.

27 These distinct economic behaviors within each political system seemingly draw on Montesquieu’s L’Esprit des lois. See Spector (2006) for Montesquieu’s analysis of the relationship between laws and political systems.

28 Steuart considers it necessary to define his own concept with the term “public liberty,” since the natural liberty of social contract theorists does not exist: “By a people’s being free, I understand no more than their being governed by general laws, well known, not depending upon the ambulatory will of any man, or any set of men, and established so as not to be changed, but in a regular and uniform way; for reasons which regard the body of the society, and not through favor or prejudice to particular persons, or particular classes” (Steuart [1767] 1995, I, pp. 315–316).

29 He uses the study of the liberté et protection formula proposed by J.-F. Melon and also used by F. Verón de Forbonnais. The law seeks to control freedom and, therefore, will remove any obstacle that represents a threat.

30 The situation would worsen if the sovereign sought to compensate for the loss of collection with more taxes on immovable assets.

31 “[R]obbing them of the seed before it is sown, instead of waiting for a share in the harvest” (Steuart [1767] 1995, I, p. 326).

32 Notice that the relationship between the statesman and merchants put forward by Smith and Steuart illustrates their distinct approach to political philosophy. In Smith’s view, merchants persuade the statesman to promote policies that benefitted themselves, but were detrimental to the nation. In Steuart, the statesman was not persuaded by a project that was not in his best interest, but rather tried to use the merchant’s artifice to serve the common well-being.

33 Deborah Redman (Reference Redman1996) reveals various arguments that clarify the inconsistency of readings that mistakenly interpret Steuart’s work as a defense of totalitarianism. It is important to note that the subject of chapter XIV of the second book is not political systems, previously examined, but the statesman’s mode of action. However, even more substantially it is the very subject of the Principles of Political Œconomy: “I answer, that although it seem [sic] addressed to a statesman, the real object of the inquiry is to influence the spirit of those whom he governs” (Steuart [1767] 1995, I, p. xviii).

34 A proposal that is hard for the literature to label—“paternalistic” (Skinner Reference Skinner and Skinner1966), “benign” (Redman Reference Redman1996), “corporate state” (Eltis Reference Eltis and Mair1990).

35 For an analysis of the use of the principle of the artificial identification of interests in the eighteenth century, see Halévy (Reference Halévy1948).

36 “From these principles may be deduced the boundaries of subordination. A people who depend upon nothing but their own industry for their subsistence, ought to be under no farther subordination than what is necessary for their protection” (Steuart [1767] 1995, I, p. 321).

37 Instead of following the watch of the perfect craftsmanship, Steuart looks for a watch repairman (Blaney and Inayatullah Reference Blaney and Inayatullah2010).

38 See Elias Khalil (1989) and Robert Urquhart (Reference Urquhart1996).

39 From 1699 to 1776, the main question in political science is whether a commercial system renders a ruler corrupt (Pocock Reference Pocock1981).

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