An eighteenth-century view of economic development: Hume and Steuart

Abstract

Despite their differences on other questions, Hume and Steuart had almost identical theories of long-run economic development. In their story, agriculture can produce a surplus of food to support urban manufacturing (and other things), but will not do so unless farmers want to trade the surplus for something. In the early stages of development, the absence of attractive manufactured goods gives no incentive to farmers. Once a taste for 'luxury' emerges, normally stimulated by imports from elsewhere, agriculture and industry expand together. Developments is driven by changing tastes combined with a changing menu of goods on offer.Hume, Steuart, development, luxury, surplus, agriculture,

Book Reviews

“…She does not appear worried at all that apparently within the Enlightenment state direction of economic activity is a live conceptual possibility. That she makes her case too easy can be seen by her dismissive attitude (4) toward James Steuart, a very attentive reader of Hume, and Smith's rival in attempting to work out Hume's programme (Skinner 1990;Brewer 1997). Steuart took Hume's analysis of institutional design to heart to promote policies that would allow the 'statesman' to 'adapt the different operations of [political economy] to the spirit, manners, habits, and customs of the people; and afterwards to model these circumstances so, as to be able to introduce a set of new and more useful institutions' (Steuart 1966(Steuart [1767, preface).…”

The Concept of an Agricultural Surplus, From Petty to Smith

“…Steuart agreed. Steuart followed Hume very closely in the arguments discussed here (Brewer 1997), so I shall concentrate on Hume. An agricultural surplus can feed a non-agricultural population of ''superfluous hands'' (Hume) or ''free hands'' (Steuart).…”

“…Agricultural improvement involves heavy fixed investment in clearing, draining, enclosing, and manuring the land, and in working animals, farm buildings, and equipment (1776, pp. Hume, by contrast, had little or nothing to say about investment in productive activities (see Brewer 1997). The corresponding expansion of industry requires investment in wage 18 Note, incidentally, that the quoted extract refers to those who have ''command'' of food, implicitly including landlords who receive part of the product, a clear link to the ''invisible hand'' passge in the Theory of Moral Sentiments (see below and Brewer [2009]).…”

On the Other (Invisible) Hand...

“…Smith's treatment of luxury owed much to David Hume, who had argued, only a few years earlier, that agriculture could produce a surplus, in the sense that a given number of people working in agriculture could produce enough to feed themselves and more, but that the surplus would only be produced if there was some reason to do so. Farmers do not want to eat all they could produce but they (or the landlords) want to consume luxuries, thus creating jobs in manufacturing and services and also providing an incentive to maximize agricultural output (Hume 1752, Brewer 1997, 1998. Francis Hutcheson, Smith's teacher, had previously hinted at a similar argument: if the land were equally divided and used only to produce luxuries, there would be 'no knowledge of arts [and] no agreeable amusements or diversions' (1726 139).…”