Alternative Approaches to the Price Mechanism in the Eighteenth Century: Cantillon to Adam Smith

It has been pointed out that the seventeenth-century discussions of the theory of value concentrated on market price.3 In contrast the most important novelties in the discussions of price in the eighteenth century related to long-run price, or supply price, with interest centred on the significance of the differences between it and market price as the stimulus to the allocation of resources between uses — in short the nature and functions of the price mechanism. It is symptomatic of this change of emphasis that the term ‘natural’ was used by Adam Smith and his classical successors to describe this long-run price, while English seventeenth-century writers used it to describe the price in any market that was freely competitive. It will be remembered that it has been pointed out that Petty was an exception to these generalizations about the seventeenth-century English writers’ interest, while Pufendorf on the continent provided a striking example of the continued scholastic type of interest in legal or long-run customary price to which he applied, like Adam Smith after him, the term ‘natural’.