“Introduction To Political Economy”

“Introduction to Political Economy” (Traité d’économie Politique): a representative work of bourgeois vulgar economics

• Author: Say, Jean Baptiste: Prince of Science, the great successor and communicator of Adam Smith, and the political economy of the European continent Authoritative, founder of French bourgeois vulgar political economy.
• First published: 1803 in Paris
• Full book title: “On Political Economy, or a Brief Discussion on How Wealth is Generated, Distributed and Consumption”
• Known as:
  • Classic textbooks in European universities at that time

Say’s “Introduction to Political Economy” was translated into many languages, widely disseminated in Western countries, and became a classic textbook in European universities at that time. Say is therefore known as the “Prince of Science”, “the great successor and communicator of Adam Smith” and an authority on political economics on the European continent. The view that supply automatically creates demand put forward in this book was regarded by later generations as “Say’s Law” and had a profound impact on subsequent economic thinking.

From 1805, Say was engaged in industrial and commercial activities – opening a new spinning mill. It was not until 1813 that research work was resumed. In 1817, he published “The Essence of Political Economy” – a shortened version of the above-mentioned “Introduction to Political Economy”. Between 1828 and 1833, Say compiled his lectures into a six-volume “Textbook of Political Economy”.

In “Introduction to Political Economy”, Say first proposed the research object of political economics , divided political economy into three parts: production, distribution and consumption. This is the so-called “three-section rule” adopted by later economists. This is a first of its kind and a scientific division of social and economic life areas. In fact, except for the later economist James Mill who added an exchange to Say’s division, no one has put forward any breakthrough additional insights into this division since then, let alone negative ones. Opinion. To this day, Say’s “Three-Part Rule” and later the “Four-Part Rule” still have their rationality and vitality.

In the book “Introduction to Political Economy”, in addition to the introduction In addition, it is divided into the production, distribution and consumption of wealth, with a total of 3 parts and 42 chapters.

The basic structure of this book is: the first part is “discussing the production factors required for production”, the second part is determining “the law according to which value is distributed among various members and becomes personal income” , the last article discusses the “relative of wealth production”, that is, digesting the results of production. Here, production appears as an intermediate link. Therefore, production, distribution and consumption form a strict logical connection.

Say in his “Introduction to Political Economy” His taxation theory was elaborated in other books. It mainly includes the following contents:

(1) Definition of taxation. He believes that “the so-called tax refers to the transfer of a part of national products from the hands of individuals to the hands of the government to pay for public expenses or public consumption.” He further explained that taxation is the value of the goods paid by taxpayers. “When taxpayers pay taxes, they lose currency. Once taxes are consumed by the government or its officials, the value disappears for the entire society.” (These two paragraphs The words are all from “Introduction to Political Economics” The Commercial Press, 1982, pp. 501-502). Therefore, Say believes that political economy should study the nature of taxation, the sources of taxation, and the impact of taxation on national and personal interests. Say disagreed with the view that the burden of taxation would promote production, and believed that taxation was the extraction of part of their property from private individuals for public use, and that these public expenditures were not used for social reproduction.

(2) Principles of taxation. Say believes that the country’s “best fiscal plan is to spend as little as possible, and the best tax is the lightest tax” (ibid., p. 504). He also agrees with Adam Smith’s views on limiting state functions and reducing unproductive fiscal expenditures, and believes that state intervention in the economy is a bad thing. The five principles of taxation proposed by Say are: 1. Taxation with the most appropriate tax rate. ② It only annoys taxpayers without increasing the national treasury to a minimum. ③People from all walks of life should bear fair burdens. ④Hinder reproduction to the minimum extent. ⑤Conducive to national morality. It is conducive to popularizing habits that are useful and beneficial to society. Said’s five principles of taxation basically inherited Smith’s four principles of taxation, and added the principle of being conducive to “national morality”. In the principle of equity, he advocated heavy taxation on luxuries and light taxation on necessities. Since it was so difficult to distinguish between the two, he thought the only fair thing was that income “needs to be taxed at progressive rates”. He advocated a progressive tax rate, which was different from Adam Smith’s proportional tax rate.

(3) Tax burden transfer and attribution. Say used the theory of “supply and demand elasticity” to analyze the transfer and attribution of tax burdens. It is believed that the tax burden ratio of the taxable object is proportional to the supply and elasticity of the taxable object. The greater the demand elasticity of the taxable object, the more the tax destination will tend to be the seller; the greater the supply elasticity of the taxable object, the more the tax destination will be. Tend to the buyer.

Say’s “Introduction to Political Economy” was published 14 years earlier than Ricardo’s “Principles of Political Economy and Taxation”. Say’s “Introduction to Political Economy” chose a subtitle: “Production, Distribution and Consumption of Wealth”. He objected to confusing politics, which studies relationships between people, with political economics, which studies wealth. In his view, political economy, like physics, is a technical science that specializes in the growth of wealth. After eliminating the relationship between people, Say divided political economy into three independent parts: Wealth production; distribution of wealth; consumption of wealth.

Regarding the source of wealth, Say disagreed with Smith’s labor theory of value. He believed that matter is a given quantity that cannot be increased or decreased and cannot be created by human beings. What human power can do is to change the existing material form so that it can provide utility that it did not have before, or to expand the original utility. Utility, as the inherent power of objects to meet human needs, is the basis of the value of objects. The reason why people recognize that certain things are valuable is entirely composed of various objects with utility. Therefore, creating utility is creating wealth.

Since production is to create utility, then not only labor, but also capital and land contribute to utility in the production process. Therefore, the value of items is created collaboratively by the three production factors of capital, land and labor. On this basis, Sai came up with his distribution theory: since value is jointly created by three factors of production, then the owners of the three factors should get corresponding rewards, that is, workers get wages, capital owners get interest, and land owners get corresponding rewards. The owner receives ground rent. Because wages are the income from labor creating utility, land rent is the income from land creating utility, and interest is the income from capital creating utility, these three types of income are the production costs of utility, and production costs are paid for the productive services of the three factors of production. The price is the reasonable remuneration for their respective contributions. As for the price of production expenses, it is determined by market supply and demand. In this way, Sai established his trinity formula: capital – interest; land – rent; labor – wages.

Say believes that capital, land, and labor are all necessary factors for production. The owners of these production factors invest the factors in enterprises for production according to their respective motives. In fact, they lose other factors of the factor. If the owner of capital postpones his own consumption and hands over the capital to the enterprise for disposal, the payment he receives is interest; the landlord gives up the direct management of the land, so he should receive compensation, that is, rent; the laborer Work severs leisure, so he has the right to wages, etc. Therefore, when the owner of each production factor puts the production factors he owns into the value production process, he actually has a reason to participate in product and value distribution and make up for his losses by virtue of factor ownership. At the same time, Say clearly pointed out that interest and profit are two different concepts. Profit is the income earned by the business owner from assuming the risk of enterprise capital management, and is the reward for his enterprising spirit, talent, willingness to take risks and highly skilled labor; The rent paid for the actual use of capital is interest.

Through Say’s description, people can see the following picture: the political economic system characterized by the “three-part rule”; the wealth production theory with the “three factors of production” as the core ; Wealth distribution theory based on the “Trinity Formula”. These are the economic theories of Sai, who is revered as the “Prince of Political Economy”.

Say’s greatest contribution to Western economics was his creation of the theory of distribution according to production factors. He proposed a set of distribution theories that wages are the remuneration of labor, interest is the remuneration of capital, land rent is the remuneration of land, and profit is the remuneration of entrepreneurial talent. It is still the creed of Western economics and has been widely deepened in practice. implementation.