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A number of concepts and theories that later became important in the history of economics first appeared in the writings of the Swiss economist J.C.L. Simonde de Sismondi. Whether or not these can be considered as his ‘contributions’ to economics is a question not unlike that as to whether a tree that falls in a deserted forest makes a sound. Sismondi developed the first aggregate equilibrium income theory and the first algebraic growth model. Yet both concepts had to be rediscovered and redeveloped by others before they entered the mainstream of economics, long after Sismondi’s time. The fact that Sismondi wrote in French may have been part of the reason why his work made so little impact at a time when the development of classical economics was largely the work of British economists. However, the fame achieved by his French contemporary, Jean-Baptiste Say, suggests that language differences alone cannot explain the neglect of Sismondi. His economic writings were neglected in France and Switzerland as well.

When he was born in Geneva in 1773, his name was Jean Charles Leonard Simonde. After an exile in Italy, during which he determined that he was descended from a noble Italian family named Sismondi, he returned to Geneva in 1800 with his new surname, Simonde de Sismondi. However, he was sufficiently tentative about it to use his original name on his first book in economics, De la richesse commerciale, in 1803. Sismondi also wrote extensively on history, including a 16-volume history of Italy. All his writings were pervaded by considerations of public policy in general, and the interests of the less fortunate in particular.

Sismondi was born into a prosperous bourgeois family, which was despoiled of much of its wealth during Swiss political upheavals reflecting the contemporary revolution in France. Shifting political fortunes led not only to Sismondi’s exile but to two imprisonments as well. After the turmoil subsided, Sismondi worked at a variety of occupations, including gentleman farmer and professor of philosophy.

Sismondi’s first venture into economics, the two-volume De la richesse commerciale, was intended as a systematic exposition of the ideas of Adam Smith. Yet in it Sismondi also pointed out that he was presenting an ‘absolutely new’ way of looking at aggregate output changes. Crude arithmetic examples depicted output during a given year as a function of investment during a previous year, and showed how a closed economy differed from an economy with international trade, and how the latter differed when there was an export surplus and an import surplus. Algebraic formulas in his footnotes repeated the same arguments presented arithmetically in the text. But the book was little noticed, and so Sismondi’s original efforts produced no contribution to the development of economics.

In the wake of the post-Napoleonic War depression, Sismondi turned his attention once more to economics and to issues of aggregate income equilibrium. In 1814, he produced a long article entitled ‘Political Economy’, written in English for the Edinburgh Encyclopaedia. In the midst of a summary presentation of classical economics appeared an early version of Sismondi’s own theory of aggregate equilibrium income. This theory was elaborated in Sismondi’s main economic work, the two-volume Nouveaux principes d’économie politique (1819). With this work he entered the controversy over Say’s Law and general gluts.

According to Sismondi, the utility of output was balanced against the disutility of work, whether by Robinson Crusoe on an island or by a complex society. But, with different people doing partial balancing in isolation from one another in a complex economy, the aggregate balance was not always continuously assured. Whenever the disutility of labour exceeded the utility of output in a given time period, subsequent time periods would see a decline in aggregate output until the balance was restored. Conversely, when the utility of output exceeded that of labour, output would tend to rise.

The germ of this reasoning had already appeared in L’Ordre naturel by the Physiocrat Mercier de la Rivière in 1767. Sismondi elaborated it into a theory of equilibrium income, with which he challenged the reigning view, expressed in Say’s Law, that there were no limits to production.

Say’s Law, then as later, had many meanings. But one of the contemporary meanings was that there was no such thing as an equilibrium level of aggregate output. Whatever level of output was supplied could always find a demand, and where this did not happen, it was because the assortment of goods did not match consumer preferences, not because the total output was at an unsustainable level. Sismondi rejected this reasoning, arguing that the demand for leisure would at some point outweigh the demand for other goods, and that when production went beyond the point at which this happened, it would be unsaleable at cost-covering prices and so fail to be reproduced in subsequent time periods.

Sismondi understood the full implications of what he was saying and how it contradicted prevailing views. The balance of aggregate supply and demand he considered the most important question in economics, and especially so during the depression following the Napoleonic wars. J.B. Say and the Ricardians maintained that the unsaleability of some goods showed only that insufficient other goods had been produced to exchange with them – that output had the wrong internal proportions, not an excess in the aggregate, and that the proper proportions could be restored at a still higher level of aggregate production. In this view, there could be a partial glut of particular commodities but not a general glut of commodities.

Sismondi argued that there could be a general glut of commodities because one of the goods desired was leisure – that is, exemption from the production of commodities. He did not believe that this occurred in the normal course of free market competition but because government policy sometimes artificially fostered production at an unsustainable level. Like the orthodox economists of his time, Sismondi regarded money as an unessential factor, a ‘veil’ obscuring but not fundamentally changing the behaviour of economic aggregates. His disagreements with the classical economists had nothing to do with monetary controversies such as those in 20th-century macroeconomics.

When Sismondi’s Nouveaux principes appeared in 1819, it was immediately attacked in the Edinburgh Review in October of that year, in the midst of a discussion of Robert Owen. Its reasoning was declared a ‘fallacy’ and once more ‘proportions’ – not aggregates – were declared to be the only prerequisites for markets to be cleared and increased output sustained. A glut was there defined as ‘an increase in the supply of a particular class of commodities, unaccompanied by a corresponding increase in the supply of those other commodities which should serve as their equivalents’. In short, there were partial gluts but no general gluts and a still higher level of output was sustainable if properly proportioned internally. The basis of this reasoning was explicitly attributed to ‘the celebrated M. Say’, with a ‘most clear and conclusive’ treatment of the subject added by James Mill.

The appearance of T.R. Malthus’s Principles of Political Economy the following year added fuel to the debate, for he too challenged Say’s Law in the same way. Marx later characterized Malthus’s book as simply the ‘English translation’ of Sismondi, but in fact it represented views which Malthus had long expressed in correspondence with Ricardo. Replies to both authors began to appear in both French and English publications during the 1820s, provoking rejoinders in books and articles. Their controversy over general gluts persisted for more than a decade, involving not only the leading economists of the time – Say, Ricardo, Malthus, Sismondi, Torrens, McCulloch and both Mills – but also Samuel Bailey, William Blake, Thomas Chalmers, and others either forgotten or little remembered in the history of economics. These published controversies were supplemented by correspondence between Sismondi and Say, Sismondi and Ricardo, Malthus and Say, and Malthus and Ricardo. Only Say seems to have acknowledged that the theory of aggregate equilibrium income had relevance to one version of Say’s Law that was current at the time. In the fifth edition of his Traité d’économie politique in 1826 he added three paragraphs to his chapter on the law of markets, discussing ‘the limit to a growing production’ and repeating (without citation) Sismondi’s argument that when output’s ‘utility is not worth what it cost’, such output is unsustainable. A year later he admitted in a letter to Malthus that his law of markets was ‘subject to some restrictions’ which he had included in the most recent edition of his book. (Unfortunately, the English translation of Say’s Traité is from the previous edition.) Finally, in a textbook published in 1828–9, Say followed the chapter on his law of markets with a chapter entitled, ‘Limits to Production’ – a phrase from Sismondi.

No such impact or even acknowledgement occurred in British economic writings. There Sismondi and Malthus were answered as if they were arguing for secular stagnation instead of temporary aggregate disequilibrium. John Stuart Mill enshrined this misunderstanding of Sismondi and Malthus in his classic Principles of Political Economy in 1848. Thus things stood for nearly a century, until John Maynard Keynes resurrected Malthus, but not Sismondi, as his predecessor in aggregate equilibrium theory.

Sismondi’s anticipations of later economic theory were not limited to aggregate income theory. In the course of dealing with that large topic he also proposed a theory of destabilizing responses to overproduction, which would initially take the economy further from equilibrium, though it would ultimately return to equilibrium ‘after a frightful suffering’. He also dealt with the issue of the short-run shut down point of a firm, which he argued would produce even below cost-covering prices if much of its cost was fixed rather than variable. Sismondi also argued against the reigning Malthusian population theory, pointing out fatal ambiguities in the word ‘tendency’ as Malthus used it and using empirical evidence to show that the historical tendency was for food supply to grow faster than population.

In many ways Sismondi also anticipated Marx. Sismondi’s emphasis on ‘the proletarians’, on an increasing concentration of capital, recurring business cycles, technological unemployment and economic dynamics in general all reappeared (without credit) in Marx’s writings.

None of these pioneering efforts by Sismondi received either contemporary acknowledgement or later recognition by the profession. His loose and sometimes inconsistent writings and his emotional assertions made it easy to dismiss him and throw away his insights along with his errors. He left no disciples and his eclecticism provided no dogma around which a school could crystallize.

Selected Works

  • 1814. Political economy. New York: Augustus M. Kelley, 1966.

  • 1819. Nouveaux principes d’économie politique. Paris: Delaunay, 1827.