Richard Cantillon Used the Term “Intrinsic Value” Correctly (in Accordance with Its Most Commonly Understood Meaning, Circa 1730) to Signify “Opportunity Cost”

The claim here is that Richard Cantillon discovered the concept of opportunity cost one hundred and forty years earlier than its conventional dating. This finding is surprising given Cantillonʼs use of the term intrinsic value and his well-known search for a par value between land and labor. Even more shocking for modern readers of Cantillon is that he used the phrase intrinsic value to designate opportunity cost. Not only did Cantillon have the “flavor” of opportunity cost, as some have suggested, but he used it to construct key applications of economic analysis and integrated it into his theoretical understanding of cost and choice.

To sustain this claim, it will be shown that Cantillon used opportunity cost in three major applications in his Essai sur la nature du commerce en général (hereafter, the Essai), including one that corresponds to the classic textbook illustration of opportunity cost. Cantillon provided an illustration of the role that opportunity cost plays in the value of land similar to that provided by Mill in 1848. In another application, Cantillon incorporated opportunity cost into his demolition of the mercantilistsʼ views on money and interest and into his own defense of usury. The evidence shows that Cantillon had in fact used the term intrinsic value correctly (i.e., in accordance with its most commonly understood meaning, circa 1730) to signify opportunity cost. Furthermore, textual evidence demonstrates that his conception is consistent with all the tenets of our modern understanding of opportunity cost. Cantillonʼs life was one of many mysteries and his economics has presented many puzzles, but one of the central theoretical puzzles is solved here—Cantillon was the first to discover the concept of opportunity cost.

--Mark Thornton, “Richard Cantillon and the Discovery of Opportunity Cost,” History of Political Economy 39, no. 1 (Spring 2007): 98.