Essays on the Political Economy of the French Revolution

Louis Rouanet

Advisor: Peter T. Leeson, PhD, Department of Economics

Committee Members: Peter J. Boettke, Christopher J. Coyne, Noel D. Johnson

Online Location, Online
June 14, 2021, 01:00 PM to 03:00 PM


As I write those lines, Napoléon Bonaparte died 200 years ago (on May 5 1821). The passionate public debates over Empereur's legacy demonstrate that in many ways, the influence of the French Revolution extends to this day. Above all, the period going from 1789 to 1815 marks the adoption of unprecedented social experiments. The Clergy's assets were expropriated and sold in auctions, paper money was put in circulation, price controls were, for a while, so widespread that the revolutionaries flirted with central planning, mass conscription was, for the first time, the main way through which soldiers were raised.

This dissertation is less about the French Revolution than about using the French Revolution to improve our understanding of institutional change. Between 1789 and 1815, France went from absolute monarchy to constitutional monarchy, from constitutional monarchy to Republicanism and from Republicanism to a de facto military dictatorship which in turn led to the proclamation of the first Empire. In other words, France from 1789 to 1815 became a genuine laboratory experiment for studying comparative institutional analysis.

Each of the topics covered in this dissertation have in common that they analyze how the government and its agents raise resources, whether it be through price controls, conscription, inflation or the creation of a central bank, for the benefit of some segments of the population. Each chapter analyzes through the lenses of Public Choice theory changes which were key to the development of the French centralized administrative state.

The day after his coup, Napoléon declared in front of the Conseil d’Etat that "We have finished the novel of the Revolution: we must start its story and see what is real and possible in the application of principles, and not what is speculative and hypothetical." Too often, the "speculative and hypothetical" parts of the French Revolution have been over-studied compare to what was, at the time, "real and possible."

A lot has been written, for instance, about the "cult of the supreme being" and French revolutionaries' most egregious rationalist tendencies. To be sure, those tendencies did exist, but they were often secondary in importance event though they played a key function in organizing revolutionary activity. Revolutions, after all, tend to be public goods whose success depend on organizing the interest groups supporting the revolution effectively.

This is not to say that ideology did not play a role in the unfolding of the French revolution, but that focusing on ideology without studying the incentives faced by agents during that period can lead to misleading answers. Why price controls were enacted, or why France moved away from competitive free-banking from 1800 to 1803 has less to do with ideology than the constraints, material and political, faced by agents at the time. Institutional change frame the rules of the game but is itself not immune to economic analysis.

Chapter one tries to come up with a theory for why widespread price controls were adopted in Revolutionary France between 1793 and 1794 despite their cost. I argue that price controls can be a tool for governments to mobilize additional resources while buying the support of certain key interest groups, hence making war politically viable. I argue that urban capitalists benefited from price controls on agricultural output combined with forced sales. I estimate that in the six months preceding the abolition of price controls, the government saved, by using them (and in real terms), the equivalent of roughly 40\% of the annual 1790 central government budget. Consistent with the theory expounded in this chapter, once the exigencies of the war attenuated and as collective action became more costly for the urban population, price controls were abandoned.

Between 1794 and 1796, France experienced an unprecedented hyperinflation fueled by an explosion of paper money called the \textit{assignat}. Chapter two (co-authored with Bryan Cutsinger and Joshua Ingber) uses the assignat hyperinflation as an experiment to illustrate Brennan and Buchanan (1980)'s view that the presence of a "stable" money demand function depends on the constitutional rules underlying the money creation process. In September 1795, the French adopted the Constitution of Year III, which we use to demonstrate how constitutional changes can have important effects on monetary phenomena. We find that the new regime had a structural effect on the demand for money that substantially weakened the link between real money balances and inflation, and that failing to account for this effect results in substantially different estimates of the seigniorage-maximizing rates of inflation. We also find that the new regime increased the volatility of inflation, suggesting that the previous regime was more effective at anchoring the public's inflation expectations. Taken together, these results lend credence to the constitutional perspective's primary theoretical insight.

The third chapter discusses the content of my paper "The interest group origins of the Bank of France" (published in Public Choice). This paper contrasts different interpretations of the creation of the Bank of France. I argue that the Bank of France was the product of rent-seeking behavior rather than the pursuit of public interest, as is commonly supposed. I explain how the changing institutional constraints faced by both politicians and bankers can account for changes in France’s monetary constitution. The creation of the Bank in 1800 followed the fall of the Directory and the establishment of Napoléon’s autocratic regime. I argue that as parliamentarism and the separation of powers were weakened by Napoléon, the cost of establishing and maintaining a monopoly privilege in banking evaporated and the creation of the Bank of France became more likely.

The fourth and final paper, co-authored with Ennio Piano provides a simple economic framework of how the threat of desertion induces both short-run and long-run institutional changes. We show that in the short-run, Napoléon's regime adopted a strategy of discriminatory conscription enforcement: The French government set a lower (higher) conscription rate for those regions where, due to their geographic characteristics, the enforcement of conscription was more (less) costly. In the longer run, Paris centralized the administration of conscription, employed the army for its domestic enforcement, and introduced a set draconian measures to punish deserters, their families, and their communities. These actions resulted in a rapid fall in desertion rates across France, until Napoléon’s failed invasion of Russia compromised the stability of the regime.