histofthought1

402 Economic thought before Adam SmithThese 'measures', however, are hardly perfect, Turgot acknowledges, sincethe values of gold and silver always vary in relation to commodities as wellas each other. All monies are made of the same materials, largely gold andsilver, and differ only on the units of currency. And all these units arereducible to each other, as are other measures of length or volume, by expressionsof weight in each standard currency. There are two kinds of money,Turgot notes, real money - coins, pieces of metal marked by inscriptions ­and fictitious money, serving as units of account or numeraires. When realmoney units are defined in terms of the units of account, the various units arethen linked to each other and to specific weights of gold or silver.Problems arise, Turgot shows, because the real monies in the world are notjust one metal but two - gold and silver. The relative values ofgold and silveron the market will then vary in accordance with the abundance and therelative scarcity of gold and silver in the various nations.14.7 InfluenceOne of the striking examples of injustice in the historiography of economicthought is the treatment accorded to Turgot's brilliant analysis of capital andinterest by the great founder of Austrian capital and interest theory, Eugenvon Bohm-Bawerk. In the 1880s, Bohm-Bawerk set out, in the first volumeof his Capital and Interest, to clear the path for his own theory of interest bystudying and demolishing previous, competing theories. Unfortunately, insteadof acknowledging Turgot as his forerunner in pioneering Austrian theory,B6hm-Bawerk brusquely dismissed the Frenchman as a mere physiocraticnaive land-productivity (or 'fructification') theorist. This unfairness to Turgotis all the more heightened by recent information that B6hm-Bawerk, in hisfirst evaluation of Turgot's theory of interest in a still unpublished seminarpaper in 1876, reveals the enormous influence of Turgot's views on his laterdeveloped thought. Perhaps we must conclude that, in this case, as in othercases, B6hm-Bawerk's need to claim originality and to demolish all hispredecessors took precedence over the requirements of truth and justice. 10In the light of Bohm-Bawerk's mistreatment, it is heartwarming to seeSchumpeter's appreciative summation of Turgot's great contributions to economics.Concentrating almost exclusively on Turgot's Reflections, Schumpeterdeclares that his theory of price formation is 'almost faultless, and, barringexplicit formulation of the marginal principle, within measurable distance ofthat of B6hm-Bawerk'. The theory of saving, investment and capital is 'thefirst serious analysis of these matters' and 'proved almost unbelievably hardy.It is doubtful whether Alfred Marshall had advanced beyond it, certain thatJ.S. Mill had not. Bohm-Bawerk no doubt added a new branch to it, butsubstantially he subscribed to Turgot's propositions'. Turgot's interest theoryis 'not only by far the greatest performance...the eighteenth century pro-