Robert Jaquis Turgot (1727-1781)

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 Robert Physiocracy
Jaquis Turgot (1727-1781)
(1756-1776)

• Turgot was French Adam Smith

• His famous book is “reflections on the Production and Distribution of
Wealth”
• In his book, Turgot argues against government intervention in the
economic sector.
• Turgot recognized the function of the division of labor, investigated
how prices were determined, and analyzed the origin of Economic
Growth.
• Like Francois Quesnay, Turgot was a leading Physiocrat who attempted
to reform the most stifling of his government’s economic policies. 2
 Robert Jaquis Turgot (1727-1781)

• Turgot’s most important contribution to economics was to point

out that capital is necessary for economic growth,
• Another contribution is that the only way to accumulate capital is
for people not to consume all they produce.
• Most capital, he believed, was accumulated by landowners who
saved the surplus product after paying the cost of materials and of
labor.
• Turgot agreed with Quesnay’s notion of the circular flow of saving
and investment, where savings in one period become investment
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in the next.
 Robert Jaquis Turgot (1727-1781)

• Turgot analyzed the interdependence of different rates of

return and interest among different investments
• He noted that interest is determined by the supply and
demand for capital.
• Turgot distinguished between a commodity’s market price
- determined by supply and demand - and its “natural”
price, the price it would tend to if industries were
competitive and resources could be reallocated.
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 Robert Jaquis Turgot (1727-1781)

• An increase in demand, for example, could increase a good’s price

• But if resources were free to enter that industry, the new supply
would bring the price back down to its “natural” level.
• In this reasoning Turgot anticipated Adam Smith.

• Turgot early recognized the importance of the division of labor for

an economy’s prosperity prior to Smith.
• and he was the first economist to recognize the law of diminishing
marginal returns in agriculture.

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 Robert Jaquis Turgot (1727-1781)

• Predating the Marginalists by a century, he argued that

“each increase (in an input) would be less and less
productive.”
• Turgot applied many of his laissez-faire economic beliefs
during his thirteen-year appointment
• In the latter job one of his first measures was to abolish all
restrictions on sales of grain within France, a measure the
Physiocrats had long advocated.
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 Robert Jaquis Turgot (1727-1781)

• He ended the government’s policy of conscripting labor to build

and maintain roads, and replaced it with a more efficient tax in
money.
• Milton Friedman has called this “one of the greatest advances in
human freedom.”
• Turgot abolished the guild (union) system left over from medieval
times.
• The guild system, like occupational licensing today, prevented
workers from entering certain occupations without permission.
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