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Merchant and economist of French Huguenot extraction. Gervaise was born in the second half of the 17th century, probably in Paris, and migrated with his family to London in 1681. With his father he was associated with the Royal Lustring Company (1688–1720) engaged in the manufacture of a fine, light, black, glossy silk under patent granted by parliament. Ironically, the year the company lost its charter saw the publication of Gervaise’s 34-page pamphlet, The System or Theory of the Trade of the World with its attack on exclusive companies. Foxwell (1940, p. 167) described it as ‘one of the earliest formal systems of political economy … stating one of the most forcible practical arguments for free trade’. Quite unlike much contemporary writing on trade, Gervaise’s pamphlet is tersely written and especially noted for its peculiar terminology and highly abstract argument. Gervaise is presumed to have died in London by 1739.

The real discoverer of Gervaise’s work, Viner (1937, pp. 79–80), has described it as ‘an elaborate and close reasoned exposition of the nature of international equilibrium and of the self-regulating mechanism whereby specie obtained its “natural” or proper international distribution’. The novelty of Gervaise’s treatment of the specie mechanism is his emphasis on the role of income rather than prices, in strong contrast with subsequent treatments by Cantillon, Vanderlint and Hume. The starting point for the analysis is the proposition that the equilibrium bullion stock of any nation is proportioned to its output in terms of labour and that such a stock also maintains the balance between consumption and production, exports and imports.

Excess bullion breaks these balances by raising consumption and reducing production, thereby lowering exports and raising imports, hence bullion will be exported and the balances will be resorted. An inadequate bullion stock leads to specie inflow by raising production relative to consumption, and exports to imports. Gervaise treats credit as if it were bullion; oversupply or deficiency is self-correcting via the balance of trade, though the adjustment process with credit is more rapid through its additional income effects of interest payment to suppliers of credit, whom he sees as consumers rather than producers. Hence ‘credit is of pernicious consequences to that Nation that uses or encourages it beyond nature’ (Gervaise 1720, p. 14) – a comment perhaps not unrelated to contemporary developments with Law’s system in France. War, capital consumption or export, and restrictions on trade may prevent or postpone attainment of monetary equilibrium. For this reason, and for the resource misallocation potential flowing from encouragement of specific manufactures through companies, laws or taxes on imports, Gervaise (1720, pp. 17–18) concluded that ‘Trade is never in a better condition, than when it’s natural and free’. Gervaise also pointed out that the ‘natural proportion’ of bullion for specific countries was influenced by their situation, particularly as regards proximity to water transport, and that implementing policies of debasing the currency had similar effects on trade and the balance of consumption and production as credit oversupply. Although less elegantly written than Hume’s later account of the specie mechanism, the emphasis on adjustment through income rather than price effects, though not always clearly explained, makes Gervaise’s short and penetrating contribution to the subject more modern than most of its successors in the century and a half which followed.

Selected Works

  • 1720. The system or theory of the trade of the world. Reprinted with a biographical introduction by J.M. Letiche and a foreword by J. Viner. Baltimore: Johns Hopkins Press, 1954.