PART I: ECONOMICS

Reflections on the Formation and
Distribution of Wealth

Turgot first explains the need for a division of labor. If everyone had to produce whatever he needed, starting from an equal distribution of natural resources, almost no one would be able to secure his needs. The division of labor produces inequality, and this is a necessary price of progress. In the development of the division of labor and an expanding market, money is essential. As exchanges proliferate, a common price for a good, in exchange for another particular good, will establish itself. When each good has a price in terms of some other good, we can proceed to establish the price of any good in terms of any other good. In effect, every good functions as money. Nevertheless, it is practically necessary to have one or two goods singled out as money, and gold and silver have nearly universally been adopted for this function. Turgot first expounds the standard Physiocratic view that agricultural land is the sole source of productive activity, but he later emphasizes the importance of accumulation of money. This is essential for large-scale investment and a prosperous economy. The state should not restrict interest rates. The determination of the rate of interest should be left to the market. Without an adequate rate of return, accumulation of money will not take place.