Isaac de la Peña
Jun 3 · 6 min read

(Initially Published Nov 8th, 2017)

We continue reviewing the thesis of The Enemies of Commerce by Antonio Escohotado. If you have not already done so, I recommend that you read Part 1 of this series first.

In 1705 Bernard de Mandeville publishes “The Fable of the Bees” and in a few weeks this booklet of few pages, sold through the streets at half penny, becomes the biggest blockbuster in English history until then, because no one had previously created a similar sarcastic criticism about evangelical poverism. His central thesis is that vice subsidizes virtue: with the right as an ally, specialization and private interest build a society incomparably preferable to that built on altruistic denials. This perspective will resonate half a century later in Smith’s prologue to his famous treatise on political economy “The Wealth of Nations.”

However, let’s not advance events: mercantilism still reigns as an economic theory, which advises to only sell, not buy, and treasure the only valuable asset: the noble metals used as currency, but the ruin of the Spanish Empire is a clear demonstration that the currency is not equivalent to opulence for a country, despite the galleons loaded with gold from the colonies. That gold to which Quevedo dedicated the ingenious verses of his poem “Poderoso Caballero es Don Dinero”.

In the Indies did they nurse him,
While the world stood round admiring;
And in Spain was his expiring;
And in Genoa did they hearse him;
And the ugliest at his side
Shines with all of beauty’s pride;
Over kings and priests awl scholars
Rules the mighty Lord of Money.


And while the Empire is sinking, what happens in the north? England, after receiving as king the Duke of Orange, heir to the Netherlands that defeated the Count-Duke of Olivares, invents a monarchy neither absolute nor centralized bureaucratically. It is not a formal democracy, although it is a political system that is organized by balancing the exercise of coercion with an independence of the judiciary, the legislature and the executive, defined by Montesquieu as “moderation” of power. Instead of leading to civil war, opting for a “weak government” coincides with one of the greatest progress recorded in the vigor and prosperity of a country.

“George Washington crossing the Delaware”, by Emanuel Leutze

Responsible freedom, the core of the social game, has a hint of idealism if we take into account that masters and servants have been identifying freedom with irresponsibility for millennia. Dutch councils and Swiss cantons have been applying these criteria for centuries, which now take hold in a gigantic country colonized by immigrants from half Europe: the American Revolution institutionally consecrates liberalism, a mentality that now spreads in a good part of Europe, although not always with happy results as can be seen in the French Revolution of which we will have occasion to speak later.

The Sins of the Father

When one reviews in detail the legacy of the founding fathers of a discipline with the convenient advantage of being in the present it is difficult, while admiring the successes, not to be surprised by the “sins” (faults, errors or omissions) that in turn they committed, sometimes with disastrous consequences.

Such is the case with David Ricardo, one of the pioneers of modern macroeconomics due to his analysis of the relationship between benefits and wages, as well as one of the main founders of the quantitative theory of money. But by only considering as economic elements capital and labor, his theory is a building raised on a chain of mortgages that will have to be duly paid by history:

  • The first is ignoring that with the entrepreneur the economic process goes from a certain circular flow (production-consumption) to actual development, thanks to the creative destruction derived from its innovations.
  • The second, assuming that profitable businesses arise and work in order to have land, equipment and some months of insured payroll.
  • The third, thinking that work is reduced to manual tasks, and omitting that capital is progressively management of information and knowledge.
David Ricardo (1772–1823)

For us, looking long after Ricardo, the strange thing is that someone as gifted as investor, stock market analyst and economic process theorist, who became a multimillionaire betting on who will win in Waterloo, could at the same time feel part of a world in retreat , undermined by diminishing returns and increasing income inequalities.

Based largely on Ricardo’s work, Marx did not find time to specify the origin and number of social classes, nor did he expose anywhere the merger of the manufacturer / inventor with the patron / investor that would inaugurate the production on a large scale, because no raw material is better asset than inventiveness. In fact, the word “entrepreneur” does not even appear in his work, where the expression “capitalist” covers equally bankers, entrepreneurs, private investors, landowners and rentiers.

In fact, Marx presents the class as a synonym of estate, when the classist or mobile society rather canceled the immobility inherent in the ancient statist society. That misunderstanding allowed much later the Soviet Government to be a proletarian organ without proletarians, and Lenin to be appointed delegate of the industrial worker in a country where that type of profession was rare.

On the other hand, the thesis that accumulation derives from stealing the work of others depends on a never quantified surplus value, nor does it coincide with the history of agricultural and mercantile surpluses in Europe. To the problems of quantifying this theft it must be added that neither the Austrian school, nor the classical nor the neoclassical, discuss a generic correlation between prices and costs, limiting the divergence to admit or reject as costs the entrepreneur’s prize and the return of the credits received, two factors that Marxism sees as fraudulent because considers them unnecessary.

Antonio Escohotado, author of “The Enemies of Commerce”

The Open Society

When Marx enters the scene, the most prosperous period of human history is beginning, but his ideas lead him to predict that capitalism is heading towards a general crisis in the short term, by virtue of which even the most reactionary of workers will become communist in order to survive.

Against the premonition of a general crisis, with capitalism was born a civilization of discovery, where the eternal material shortage gave way to new things cheapened as well by mass production. Other models had relegated consumption to a second-order issue, but the condition of sustained growth for any industrial system is for the worker to buy an increasing share of his own product. Paraphrasing Mandeville himself, few had noticed that the cost of luxury finances innovation, transforming the initially prohibitive article into a cheap good.

In short, the liberal theory is completed at the same time as the communist, not as an alternative to this ideology, exotic back then, but to respond to monarchical absolutism. The liberal can not be conservative, despite the fact that he supports private property as an institution, because he is committed to individual autonomy and wants to consolidate it in the most unequivocal and practical way possible, which is regulating duties towards third parties. Relativist by vocation, contemplates the harshness of life without hopes on miracles, trying to identify what is conducive to greater effectiveness in human effort. The interest of the producer, hegemonic until then, should only be addressed as necessary to promote the consumer’s.

It is important to note that the mercantile life is a regulated game with an intrinsic mystery, which is at odds with the dogmatism of any immobile truth. Dogmatism is replaced by trust: in institutions, in the fulfillment of contracts and in the reciprocal rendering of services. This confidence is the most inexcusable and fragile asset of the economy and it took centuries to grow silently, protected by an organic proliferation.

That condition of permanent opening to this or that result operates as a can opener for the closed society. And I can not find a better way to express it than closing this part with the brilliant words about the uncertainty by Richard Feynman, an American physicist who received the Nobel Prize for his enormous contributions to quantum mechanics, the theory of quantum electrodynamics and particle physics, in addition to being an enthusiastic disseminator of scientific lessons, because he understood that the most important contribution of science is not the accumulation of knowledge, but the formation of the individual critical spirit.

If you liked this post, the series comes to an end in Part 3 that covers the Russian Revolution and the current state of affairs. Don’t miss it!


Musings on technology, philosophy and economics

Isaac de la Peña

Written by

Investor @Conexo_vc and formerly @Inveready. Partner @AgoraEAFI & @Alt_Insights. MIT technologist. Finance, algorithmic trading, AI, big data, mobile, web.



Musings on technology, philosophy and economics

Welcome to a place where words matter. On Medium, smart voices and original ideas take center stage - with no ads in sight. Watch
Follow all the topics you care about, and we’ll deliver the best stories for you to your homepage and inbox. Explore
Get unlimited access to the best stories on Medium — and support writers while you’re at it. Just $5/month. Upgrade