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Locke’s Contribution to Economics
Sean Ling
5/14/2015
1864 words

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John Locke was a 17th
century Englishphilosopherand physician whoiswidely considered tobe
one of the most influential thinkers of the Enlightenment. He is also known as the "Father of Classical
Liberalism"due tohis writingson individuality,consent of governedpeople,the significance of property
rightsand religioustolerance. Asa championof natural rights,his ideas,suchas “the pursuitof pleasure
and the avoidance of pain are the sole motivesforaction” [7], influencedcountlesspeople rangingfrom
the founders of the American Revolution to Voltaire, Rousseau, and many Scottish Enlightenment
thinkers. He was alsoan influential economistwhodiscussedseveral ideassuchas private property.For
example,Locke asserted that God has providedus with all the materials we need to pursue those ends,
but that natural resources are useless unless people use and take care of them. He also proposed that
because all men have complete ownershipof theirbodies,anyproductof theirphysical laboralsobelongs
to them. Hence, when a person works on a good or material, he becomes the owner of that good or
material.The person whofarmsthe landandhasproducedfoodownsthe landandthe foodthathislabor
created.The onlyrestrictionto private propertyisthat no one can take somethingif itends up harming
someone else in the process. Unfortunately, not everyone is moral, and in order to protect people’s
propertyand freedoms,people mustcome togetherinthe social–political contractof a communitythat
can create andenforce laws. Locke hasbeensoinfluential that several authorshaveattemptedto explain
his view on economics and political theory. This paper will focus on three of these authors and their
interpretationof Locke’s contributions to economics. Kepa Ormazabal focused on Locke’s criticism of
England’ssecretaryof treasury,specificallyhisview thatthe value of silverhadrisenandthat a decrease
in the value of England’scurrencywas needed. NeilJ.Mitchell pontificatedaboutLocke’suse of political
theory in order to justify and improve capitalism. Finally, Alessandro Roncaglia stated that Locke made
significant contributions to the fieldof economics that included the first discussions on the velocity and
circulation of money and in a laissez-faire treatment of interest rates.

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Ormazabal wrote in the journal “Lowndes and Locke on the Value of Money” how William
Lowndes, the secretary of treasury of England during much of Locke’s lifetime, believed that in order to
“acknowledge the rise in the value of silver bullion in England,” more silver coins had to be issued per
silver in the English treasury, resulting in a “debasement” of the British silver coin. [6] The secretary of
treasure also proposed a recoinage of silver currency to reflect this rise in the value of silver. Although
John Locke agreed with Lowndes that England’s silver supplyneededto be recoined,he disagreed with
the governmentofficial’sfundamental assumptionthatthe rise in the market price of bullionversusthe
Englishsilvercoinwasdue toanincrease inthe value of silverinBritain.Infact,“Locke arguedthatitwas
nonsense to claim that the value of silver had risen when silver itself was the measure of value.” [6] In
other words, a rise in the value of silver relative to silver currency is arbitrary; British silver coins could
have depreciated while the actual value of silver bullion stayed the same or decreased at a slower rate
than British currency. Locke stated that debasing British money is a solution to a problem that doesn’t
exist, and would result in an unfair redistribution of wealth. Ormazabal notes that Locke ultimately
triumphsoverLowndesinthisdebatesince the Englishgovernmentendeduponlyrecoiningthe currency
without depreciating it.
Neil J.Mitchell wrote hisjournal “JohnLocke andthe Rise of Capitalism”inordertofocus on C.B.
Macpherson’s book, The Political Theory of Possessive Individualism which discussed Locke’s economic
theoryandhowit wasusedtojustifycapitalismusingclassical economictheories. [4] Mitchell specifically
highlights Macpherson’s claims that “Locke’s ideas provide moral justification for unlimited private
accumulation, wage relationships, and antisocial individualism…and that property owners in Locke’s
theory possess exclusive political rights coherent withtheir property rights.” [4] Therefore, according to
Macpherson,Locke wasadvocatinglaissez-fairecapitalismandindividualismandwasnotonlyadefender
of propertyrights,butanadvocate of these propertyownershavingunique political andeconomicpower
inajustsociety. However,althoughMitchellagreedthatLocke wasinfavorofacapitalistview onproperty

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rights, he disagreed with Macpherson about Locke using his economic theory to assign greed as the
motivating force of capitalism. He also disputed Macpherson’s claim that Locke’s view of capitalism
justifiedclass-basedrestrictionsonpolitical oreconomic mobility.Instead,MitchellpointsoutthatLocke
believed in the “Laws of Nature” and interpreted those laws to mean that a person can’t take more
resources than he can use, and the resource people do take must be used efficiently and not wasted or
hoarded.ThisphilosophycombinedwithLocke’seconomicshardlypointstogreedas the maindriverof
capitalismandeconomicgrowth.Inaddition,Locke believedthatall wealthwasthe productof labor,and
the more one workedonone’slandorcapital,the more wealththatpersonwill get.He neverdesignated
a rigid class system for society based on wealth or family name according to Mitchell. Consequently,
Mitchell not only explains much of Locke’s economic theories in his journal; he also debunks a famous
professor’s assertions about these same economic theories of Locke in the process. [3] This famous
college professor, C.B. Macpherson, wrote about possessive individualism, a concept wherein an
individual is considered the sole proprietor of his or her skills and owes nothing to society for them.
Mitchell’s journal acknowledges the facts and insights of Macpherson’s book while identifying and
correcting its misconceptions about Locke’s economic theory and philosophy.
Lastly, Alessandro Roncaglia simply wrote on Locke’s contributions to economic theory. For
instance,in TheEuropean Journalof theHistory of EconomicThought,RoncagliaclaimsthatLocke viewed
property as a natural right that is derived from labor. [5] Locke elaboratedon this concept by writing in
his Second Treatise on Civil Government that the individual ownership of goods and propertyis justified
by the labor exerted toproduce goodsor the utilizationof propertytoproduce goodsthat are beneficial
to humansociety. [2] He thenexplainedthat nature onits ownprovideslittleof value tosociety; instead
the laborexpendedinthe creationof goodsgivesthemtheirvalue. Roncagliathen underlined adifferent
take on how Locke used God and nature to justify his political theory; his labor theory of property.This
labortheoryof propertycanalsobeaccuratelydescribed asalabortheoryofvalueaccordingtoRoncaglia,

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“and it opposed the ideas of Hobbes…who took private property to have been instituted through an
agreement(or‘social contract’) markingtransitionfromthestate of nature toorganizedsociety,andthus
to be of a conventional nature. Inaddition,Locke believed thatproperty comes before governmentand
as a result, governmentcannot"disposeof the estatesof the subjectsarbitrarily." [5] Thisrighttobe free
of governmentconfiscationof property isconstrainedby the law of subsistence,whichstatesthat people
don’t have the right to take more than what they can use. Roncaglia also claimed that Locke’s general
theory of value and price is a supply and demandtheory, in which he refersto supply as "quantity" and
demand as "rent". "The price of any commodity rises or falls by the proportion of the number of buyer
and sellers,"and"thatwhichregulatesthe price of goods is nothingelse buttheirquantityinproportion
to their rent." [5] The quantity theory of money forms a special case of this general theorybecause the
value of money can be looked at as the demand for money while the quantity of money in circulation
could be seen as the supply of money in the economy. Roncaglia subsequently informs hisreaders that
Locke concluded that the value of money is inversely related to the quantity of money in circulation.
Finally,Roncagliapointsoutthat“Lockearguedthatitisprosperitythatfavorsamoderatelevel ofinterest
rates, and that any attempt to reduce them by law is doomed to failure; besides, in so far as it may
succeed, such an attempt may prove detrimental, slowing down accumulation.” [5] Locke was against a
bill beforethe British Parliamentthatattemptedto lowerthe maximumlegal interestrate from6percent
to 4 percentbecause he saidthat interestisaprice,which isdeterminedbythe lawsof nature.Therefore,
ceilingsoninterestratesare counterproductive becausepeople wouldshirk thisceiling,andthe costs of
avoiding it would drive interest rates even higher than they would have been without the ceiling. Like
Ormazabal,Roncagliatoucheson Locke’scriticismsof Englishmonetaryandeconomicpolicyinhistime,
but emphasizes his theories more than Ormazabal and Mitchell do.
Which of these authorshas the most compellinginterpretationof Locke and hiscontributionsto
economics? Kepa Ormazabal told a story in his journal “Lowndes and Locke on the Value of Money” in

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whichLocke successfullyconvincedgovernmentofficialsnottodecrease the value of Britishcurrencyand
to merely recoin the British silver currency. Through this story, we can clearly see Locke’s influence on
monetary policy and economic thinking in 17th
century England and beyond. Neil J. Mitchell used his
journal tocritique a prominent20th
centurypolitical scientist’sview onLocke andhis viewsoncapitalism
and its ultimate impact on society. Roncaglia delved into Locke’s theories on property, the rights
associatedwithpropertyownership,laborvalue andmonetarytheory.He tookamuchmore holisticview
of Locke’s economic theories than Mitchell and Ormazabal and ultimately had a more compelling
explanationof Locke’s contribution to economics and monetary policy than them. Therefore, although I
would recommend reading both Ormazabal’s and Mitchell’s pieces on John Locke, I would first and
foremostadvocate Roncaglia’sanalysisof Locke and his impacton the fieldof economicsand monetary
policy.

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Bibliography
1. Locke, John. The Works of John Locke: In Ten Volumes. Aalen: Scientia Verlag, 1963. Print.
2. Locke,John,and J. W. Gough. The Second Treatise of Government. New York:Barnes& Noble,1966.
Print.
3. Macpherson, C. B. The Political Theory of Possessive Individualism. Oxford, 1962.
4. Mitchell, Neil J. “John Locke and the Rise of Capitalism.” History of Political Economy Summer 1986
18(2): 291-305
5. Roncaglia,Alessandro."FromPolitical EconomytoEconomics.Method,the Social andthe Historical
inthe Evolutionof EconomicTheory." TheEuropean Journalof theHistory of Economic Thought 16.3
(2009): 527-29. Web.
6. Ormazabal, Kepa. “Lowndesand Locke on the Value of Money.” History of Political Economy (2012)
44(1): 157-180
7. Walsh, Julie. "Internet Encyclopedia of Philosophy." Internet Encyclopedia of Philosophy.Université
Du Québec à Montréal, 2014. Web.