The Moral Philosophy of Management: From Quesnay to Keynes

From Quesnay to Keynes

Pierre Guillet de Monthoux

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781563240812
• eBook ISBN: 9781315486192
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

This book explores the foundation of European management philosophy at a dramatic moment in European history: the Cold War has ended; Western capitalism has triumphed over communism. The book reflects on the role of business and management that has emerged in Western capitalism and it searches for the roots of moral philosophy and the philosophies of management derived from the history of economic thought. It traces such ideas from the late 18th century works, Quesnay and Smith, down through the 19th century to the present. The closing chapter of the book sets out ten principles for tight management in a socio-economic doctrine of ideal enterprise and good management.

1
The Physiocrats’ Theory of the Farm

1. France before 1789; L’Ancien Régime

Is there such a thing as "concrete economics"? One place to start looking for the answer is among the eighteenth-century French economists who were called Physiocrats. Many of the other eighteenth-century economists in other lands would do as well, since economics at that time was a truly practical subject.¹ Economists lectured on concrete things, and their writings were full of practical advice. While in earlier times economists' advice had often been motivated by questions of morality, the eighteenth-century economists are distinguished by their adoption of a more scientific stance. Their reasonings were accepted as authoritative if they were grounded in natural rather than moral laws. The divine, natural laws were to be discovered through a sharpened sense of observation of economic phenomena, and these were to provide the concrete foundations for the scientific disciplines of economics. A lack of insight into the natural order would result in the failure of a business enterprise. Without knowledge, we stand helpless before our projects, and as Linnaeus once proclaimed, "Knock against the rocks, tear ourselves on the thorns, sink into the mud while the satyrs leer at us as project makers."²

The Physiocrats, nevertheless, are regarded as belonging to the discipline of economics in its broadest sense, rather than being more narrowly business economists. I hope to show, however, that their economics would collapse without their notions concerning management and later that this is also true for other schools of economics. To read Francois Quesnay (1694—1774) is to receive a lesson in what business economics is really about, its social function, and the degree of concreteness with which it should be pursued. Francois Quesnay was medical adviser to Louis XV at Versailles. His name is immediately linked by modern economists with the work Tableau économique. which was printed on the king's press in 1758. The ideas it contained were apparently very popular, since it was reported in the physiocrats' journal, Ephémérides du Citoyen. in 1767 that it was no longer possible to obtain copies (the publication was sold out!). It was, indeed, the circle around Doctor Quesnay who were busily engaged with interpreting and spreading his earlier ideas concerning the input/output tables on "la distribution des depenses annuelles d'une nation agricole." the distribution of a nation's annual agricultural costs. The Tableau was not Quesnay's first economic work and, from the point of view of concrete economics, by no means the most important. That the Tableau remains in the classical memory of modern economists says more about the latter's love for abstraction rather than Quesnay's more generally practical disposition.

In the middle of the 1750s two articles appeared that contained the concrete program of the Physiocrats. They were published in Diderot's Encyclopedic in which Rousseau himself, in an article on economics, set out the basic idea that later became Le Contrat social. Quesnay's two articles are titled "Fermiers" (Farmers) and "Grains" (Grain). The first contains the Physiocrats' "theory of the firm," or rather "of the farm," dealing with the productivity of the farm as an enterprise. The second describes the necessary preconditions for the profitability of the farm as a business—the level of prices and sales of grain. The articles were not concerned with any dry systematization of already known facts but were rather concrete analyses seeking to convince and influence. Quesnay pointed out existing shortcomings and argued for legal reforms, and his writings are directed at the entrepreneurs, the farmers, and also at the landowners and the king. With what right did he do this? Was he a "gray eminence" or a secret power holder? The Physiocrats suggested reforms of a nearly "revolutionary character" in a kingdom that we learn in school was despotic and tyrannical. The public distribution of Diderot's Encyclopedic was certainly banned. The Physiocrats were constrained to write under pseudonyms or strange initials. Nevertheless, the concrete economic debate was pursued in an often more open and free atmosphere than is the case in today's formal economic journals and business newssheets. What was the status of these economists of L'Ancien Régime?

Quesnay was educated as a doctor.³ As a young and unknown surgeon he had thrown himself into a debate on bloodletting. In 1727 a fashionable Parisian doctor named Silva had published a book on the subject that Quesnay found so lacking that he immediately wrote a "counter book." The two men of medicine eventually held a verbal duel under the expert eye of the Marquis of Noailles. Quesnay was declared the winner after having succeeded in convincing those present of the flaws in Silva's work. He left not only as winner of the learned duel but also with permission to print and spread his "counter book." This was later withdrawn from circulation by the royal censor, but with the support of the Academy of Science the censor's decision was reversed and the book appeared in print the following year.

The royal censor had certainly been impressed by the calculations and learned arguments that the leaders of the Academy of Science gave in support of Quesnay's thesis. Although the censorship was strict, the arguments of the scientists eventually prevailed. By 1737 the now successful Doctor Quesnay had become the permanent secretary to the newly established Academy of Surgeons. He thus became responsible for transforming a mode of employment that was previously more like that of butchering into a professional body. As the secretary to the academy, Quesnay received a practical lesson in how a mode of employment could be endowed with social authority. Later in his life he managed to assemble around himself a circle of competent intellectuals who were interested in his ideas and who were often feared in other circles.

Had Quesnay not been afflicted by gout, he would have continued his career as a surgeon. He turned instead to general medicine and purchased the position as medical adviser to the king, "premier médecin ordinaire du roi." Prospering in his new position, he soon moved into the Versailles palace, becoming a confidant of King Louis XV, who raised him to the nobility. It was in Versailles that physiocracy developed. Around Quesnay there assembled a group, a sect of economists. Here was Du Pont de Nemours, the founder of the American company of the same name, the Marquis of Mirabeau, father of one of the main actors in the French Revolution, Mercier de la Rivière, and many other learned gentlemen and ladies. The king himself called Quesnay "mon penseur" and consulted him often on questions concerning the national economy and welfare. The king's protection provided the economists with the possibility to freely develop their ideas, although to have the king's ear was not the same thing as to have such ideas accepted. The king was, in L'Ancien Régime, only one center of power; however enlightened a despot he may have been, there were also other groups who could formulate practical policy.

Versailles itself, where the Physiocrats met, was a forum for different power groupings. Contemporary witnesses describe that enormous construction as a monarchist fairground with the royal family as the main attraction: The carriages run a shuttle traffic between Paris and Versailles bursting at the seams with curious spectators. In the evenings the grand dinners, "le grand couvert," provide a particular attraction, and it is always full in the royal dining hall. Everyone waits with bated breath to see Louis XV perform his special trick. With an elegant stroke of his knife, he decapitates an egg and sends the top sailing through the air in a wide bow. Louis XV knows how to entertain his people. They cheer as he eats more eggs than is sensible.⁴ The whole palace is brimful with visitors. Well-dressed Englishmen traveling through shudder over that wide-open, popular palace which is open to everyone irrespective of estate or clothing. It stinks in the saloons, and every corner and alcove is occupied by the court ladies and gentlemen. During Louis XIV's time, it was a duty for the courtiers to attend at court. Those who absented themselves from the round of feasts, balls, and ceremonies were simply "forgotten." To be forgotten was a fate worse than death. From their estates in the countryside, the young move into Versailles, occupying a closet, a stairway, sharing an attic or a tower, laying claim to whatever they find, to remain there for the rest of their lives. The closets provide changing rooms for the grand feasts. It is a special art for the court ladies, who without the benefit of warm or running water, must paint, clothe, and powder themselves as their status and the occasion demanded.

Englishmen are thoroughly bemused by the spectacle. What does the court really do? In England the gentry engage themselves in agriculture and business. In France the country nobility had traditionally farmed the land and provided soldiers. In the France of Louis XV, however, trade and commerce had become a privilege for the bourgeois. The French nobility itself directs its criticism at the neglected feudal duties in the countryside. As one observer of the court remarks: "The nobility provided a bad example in their flight from the countryside."⁵ The Marquis of Mirabeau, a Physiocrat, writes of the court to which he belongs that "the court nobility's only profession was that of intrigue."⁶ The rich brocades of the dresses and jewelry glitter. Luxury is everywhere apparent, but the true source of wealth is not understood. A perceptive courtier may cry: "Will you be rich? ... leave the luxury that is degrading you!"⁷ But this type of criticism looked back to the old feudal order with its roots in the countryside, village, and family as the sources of a new idealism. In the physiocrats' journal. Ephémérides, it was possible to read that the Chinese emperor was a despot. He was, however, a good despot who did not engage in luxurious consumption, but rather in large-scale projects like artificial lakes and the Great Wall." The critics are appreciative of the old landed nobility that held itself home on the estates: "That nobility lived a hard and steady life that was cheap for the state, and which gave more through permanent residence and the manuring of the land than what we give through our taste, our research, our colic and vapours."⁹

At the same time they joke about these "smelly, country bumpkins" who have never been presented to the king, who have never heard of a financial transaction or participated in an exciting speculation of the kind that is increasingly becoming the hobby of the court nobility.

But which among these groups did Louis XV favor? Perhaps it was just these country nobility as, for example, the Marquis of Tubilly, who had invented a ploughing machine. Or was it the Duke of La Rochefoucauld, who had developed a means of efficient milk production? Presumably he also had a sneaking admiration for the Duke of Charost, who stopped demanding a hard day's work from his peasants and instead built a hospital and announced an annual prize for the best essay on farming. Of him, Louis XV is reported to have said: "This was a small, good man ... who did not appear to be much, but he gave new life to three of my provinces."¹⁰

It is possible to imagine what subjects were discussed by the king with his closed circle of economists. These discussions were reserved for his private moments, unlike the public performances at the banquets and ceremonies. Among the economists he could talk about topics not approved by the court—and worse still—the powerful provincial parliaments and magistrates of the state. For the latter, the economists, together with the philosophers and others who wrote in the encyclopedias and pamphlets, were the "disturbers of the peace of the public," a peace guaranteed by the magistrates through an infinite number of detailed regulations covering just about every area of human activity. When Louis XIV had declared that it was he who was the state, it was a message addressed to the parliaments that had control of taxation and financing through state loans. Louis XV pursued a royal struggle with these regional governments, "republicans" who hindered all attempts at reformation. At the height of the Physiocrats' period during the 1760s, there were strong conflicts between the king and the parliaments. The king sought to exercise his popular sovereignty and central power against the conservative and decentralized power of the parliaments. The philosophers and economists stood on the side of the king, advocating the idea of a kind of natural order that should reign in economic affairs. It was particularly the economists who provided the ideas that were used in this struggle. These ideas concerned such matters as tax reform and moral regeneration, where the various classes of society would learn to take their responsibility for the functions of a naturally organized state. It was in this situation that the Physiocrats developed their concrete message concerning an effective means of production and distribution. This was the background to their managerial philosophy.¹¹

2. Production

Only a productive activity is worthy of being called an "enterprise," and production for Quesnay is identical with agriculture. In actual fact, he never uses the word "production," but rather always talks about "reproduction." The first of the Physiocrats' articles, titled "Fermiers" (Farmers), from 1756, deals with farming as a business enterprise. Quesnay wanted to unveil a number of prejudices about farming and show their destructive consequences for the nation. These prejudices were based upon a lack of concrete observation and detailed knowledge, resulting in a generally "vague" understanding of agriculture that was entirely misleading. This "imparfait" understanding failed to recognize that farming was a business and failed to see the importance of farming activity for the wealth of the state. A widespread prejudice was that "the...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• Preface
• Chapter 1. The Physiocrats' Theory of the Farm
• Chapter 2. Pleasure and Enterprise: The Foundation for "The Wealth of Nations"
• Chapter 3. Men, Food, or Machines: Entrepreneurs Who Saved Profits But Destroyed Economy
• Chapter 4. Karl Marx: A Ricardian Management Scientist
• Chapter 5. Good Management in Harmonic Stagnation: Business Economics and Ethology in John Stuart Mill
• Chapter 6. From Bookkeeping to General Equilibrium: Management in the Doctrine of Léon Walras
• Chapter 7. Enterprise against Stagnation: On Management of Productivity and Risk in Alfred Marshall's Theory
• Chapter 8. Managers as Officers of the State: The Role of Enterprise in Gustav Schmoller's Prussian Theory
• Chapter 9. Self-Management and the Hope for Moral Emancipation: Charles Gide's Social Economy
• Chapter 10. The Amoral, Calculating Manager: Rational Decision Making in Gunnar Myrdal's Walrasian Theory
• Chapter 11. Enterprise as Adventure; or, The Golden Calf Dance in John Maynard Keynes's General Theory
• Chapter 12. The Socio-Eeonomic Doctrine on Ideal Enterprise and Good Management: A Summary of Concrete Economy from Quesnay to Keynes
• Bibliography
• Index