A Discussion of Richard Cantillon

As one of the earliest economists looking into markets, Cantillon was one of the first individuals to define market price and “real” price. In general, Cantillon conclude

Also, in terms of Cantillon’s beliefs on the effects of money on prices and productivity, it appears that his stubbornness to deviate from a loanable-funds theory of interest is a drawback in his overall monetary theory. Cantillon’s assertion that the proportionate number of lenders and borrowers in a market determines interest rates is not entirely accurate due to the fact that Cantillon neglected to observe the effects of money supply on the overall propensity to invest and general level of specific investment activities. Also, in his studies Cantillon failed to correlate real prices to monetary policy, but rather just relative market prices to the effects of monetary policies. However, it is worthy to note that Cantillon was a true pioneer on monetary issues in the sense that he realized that who and where money is injected into an economy plays an important role in determining the outcome on the economy overall. In more modern economics, it appears that most individuals have lost sight of this idea and focus more simply on the overall levels of money supply in general. Cantillon’s idea that either a lender or a spender of monetary units exists is good to bear in mind when determining the effects on an economy of money supply injection because there is always a specific travel path that monetary units will follow. What Cantillon realized is that this travel path that money follows is characterized by the nature of the individuals that use it, and in turn determines the effects on the economy. In application to current monetary policies this could be most effective for developmental economies such that the distribution of money can be properly allocated to ensure that the equilibrium interest rate is upheld, rather than seeing violent fluctuations in interest rates that indicate an unstable economy with inflation and price control problems. Overall, even though Cantillon ignored monetary effects on real prices, he was truly on target when he analyzed the travel pathways of money. In essence, the pathway traveled by money is more important than the actual amount, as this determines the true effect borne by all individuals in an economy.

Additionally, following along the lines of Cantillon’s discussion of competition and entrepreneurs in the economy, it appears as though there needs to be a readjustment in the overall definition of competition held in regard today. In modern economics competition is often identified as the market structure and feasibility of entry. However, Cantillon’s definition of competition describing the rivalrous process between contestants vying for the same consumers is more in line with how consumers act on an individual basis. Competition is not necessarily the number of businesses performing the same activities in an economy such that a market structure is created, but rather how consumers individually determine their preferences. For this reason, Cantillon seems to have a more accurate grasp on how competition can influence the market in the sense that it is the individual choices of consumers that ultimately determine the profitability of a particular business. It seems that this notion of competition as defined by Cantillon is more applicable in regards to product marketing in modern economics because it lays a foundation for the reasoning behind convincing a consumer as to why they need a specific product. In general, a readjustment to the idea of competition in the market place could potentially stimulate higher productivity and technological advance in a more streamlined manner by accelerating the process by which consumer confidence is

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