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Encyclopedia > Mercantilism
A painting of a French seaport from 1638, at the height of mercantilism.
A painting of a French seaport from 1638, at the height of mercantilism.

Mercantilism is an economic theory that the prosperity of a nation depends upon its supply of capital, and that the volume of the world economy and international trade is unchangeable. Government economic policy based on these ideas is also sometimes called mercantilism, but is more properly known as the mercantile system. Some scholars conceive the mercantile system as a sub-set of, or synonymous with, the early stages of capitalism, while others consider mercantilism to be a distinct economic system. http://www. ... http://www. ... Economics is the social science studying production and consumption through measurable variables. ... Capital has a number of related meanings in economics, finance and accounting. ... The world economy can be evaluated in various ways, depending on the model used, and this valuation can then be represented in various ways (for example, in 2006 US dollars). ... International trade is the exchange of goods and services across international boundaries or territories. ... Not to be confused with Political economy. ... For other uses, see Capitalism (disambiguation). ... An economic system is a particular set of social institutions which deals with the production, distribution and consumption of goods and services in a particular society. ...


Economic assets, or capital, are represented by bullion (gold, silver, and trade value) held by the state, which is best increased through a positive balance of trade with other nations (exports minus imports). Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy, by encouraging exports and discouraging imports, especially through the use of tariffs. A precious metal is a rare metallic element of high, durable economic value. ... The balance of trade encompasses the activity of exports and imports, like the work of this cargo ship going through the Panama Canal. ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... Economics In economics, an export is any good or commodity, shipped or otherwise transported out of a country, province, town to another part of the world, typically for use in trade or sale. ... A tariff is a tax placed on imported and/or exported goods, sometimes called a customs duty. ...


Though traces of merchant capitalism can be found in the Roman Empire,[1][2] mercantilism was established during the early modern period, from the 16th to the 18th centuries, a period which also included the emergence of the nation-state. This led to some of the first instances of significant government intervention and control over market economies, and it was during this period that much of the modern capitalist system was established. Internationally, mercantilism encouraged the many European wars of the period, and fueled European imperialism, as the European powers fought over "available" markets. Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economy and social system. ... For other uses, see Roman Empire (disambiguation). ... The early modern period is a term initially used by historians to refer mainly to the post Late Middle Ages period in Western Europe (Early modern Europe), its first colonies marked by the rise of strong centralized governments and the beginnings of recognizable nation states that are the direct antecedents... The term nation-state, while often used interchangeably with the terms unitary state and independent state, refers properly to the parallel occurence of a state and a nation. ... In economics, a capitalist is someone who owns capital, presumably within the economic system of capitalism. ... Cecil Rhodes: Cape-Cairo railway project. ...


Criticism of mercantilism began to increase in the late 18th century, as the arguments of Adam Smith and the other classical economists won favour in the British Empire (among such advocates as Richard Cobden) and to a lesser degree in the rest of Europe (with the notable exception of Germany where the Historical school of economics was favored throughout the 19th and early 20th century). Some have said that America chose not to adhere to classical economics, preferring a form of neo-mercantilism embodied by the "American School," but in 1792 Alexander Hamilton, basing his policies on his study of Adam Smith, established a gold standard designed to conform to that of Britain to promote international trade. America drifted from the gold standard a number of times prior to the Great Depression, but always returned to the Hamilton gold standard. The Great Depression influenced American government to return to neo-mercantilism imposing high protectionist tariffs and suspending private ownership of gold. Finally, during the New Deal, the currency was devalued based on the government’s new neo-mercantilist leaning. Today, mercantilism has seen a resurgence in economic theories that focus on the trade surplus and deficit as determinants of monetary value, but mercantilism as a whole is rejected by many economists. However, elements of mercantilism are still accepted by some economists including Ravi Batra, Pat Choate, Eammon Fingleton, and Michael Lind.[3] For other persons named Adam Smith, see Adam Smith (disambiguation). ... Classical economics is widely regarded as the first modern school of economic thought. ... The British Empire in 1897, marked in pink, the traditional colour for Imperial British dominions on maps. ... Richard Cobden Richard Cobden (June 3, 1804 – April 2, 1865) was a British manufacturer and Radical and Liberal statesman, associated with John Bright in the formation of the Anti-Corn Law League. ... The Historical school of economics was a mainly German school of economic thought which held that a study of history was the key source of knowledge about human actions and economic matters, since economics would be culture-specific and not generalizable over space and time. ... Classical economics is widely regarded as the first modern school of economic thought. ... The American School, also known as National System, represents three different yet related things in politics, policy and philosophy. ... Alexander Hamilton (January 11, 1755 or 1757 - July 12, 1804) was an Army officer, lawyer, Founding Father, American politician, leading statesman, financier and political theorist. ... The New Deal was the title President Franklin D. Roosevelt gave to the series of programs he initiated between 1933 and 1938 with the goal of providing relief, recovery, and reform (3 Rs) to the people and economy of the United States during the Great Depression. ... Ravi Batra is a U.S. economist and professor at Southern Methodist University in Dallas, Texas. ... Patrick Jeffrey Pat Choate was the 1996 Reform Party of the United States of America Vice President candidate. ... Michael Lind is an American journalist and historian, currently the Whitehead Senior Fellow at the New America Foundation. ...

Contents

History

Early mercantilist writers embraced bullionism, the belief that quantities of gold and silver were the measure of a nation's wealth. Later mercantilists developed a different view.

Some economic historians (like Peter Temin) argue that the economy of the Early Roman Empire was a market economy and one of the most advanced agricultural economies to have existed (in terms of productivity, urbanization and development of capital markets), comparable to the most advanced economies of the world before the Industrial Revolution, namely the economies of 18th century England and 17th century Netherlands. There were markets for every type of good, for land, for cargo ships; there was even an insurance market.[4] Commons:Image:Gold ingots. ... Commons:Image:Gold ingots. ... The Theory & Its Origins Bullionism is an economic theory that defines wealth by the amount of precious metals owned. ... Economic history is the study of economic change, and of economic phenomena in the past. ... Dr. Peter Temin (born 1937) is a widely cited economist and economic historian, currently Elisha Gray II Professor of Economics, MIT and former head of the Economics Department. ... For other uses, see Roman Empire (disambiguation). ... A market economy (also called a free market economy or a free enterprise economy) is an economic system in which the production and distribution of goods and services take place through the mechanism of free markets (though completley useless to some dumbasses) guided by a free price system. ... A Watt steam engine, the steam engine that propelled the Industrial Revolution in Britain and the world. ... For other uses, see England (disambiguation). ... Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. ...


Early free markets were also present in the Caliphate,[5] where an early market economy and early form of merchant capitalism was developed between the 8th-12th centuries, which some refer to as "Islamic capitalism".[6] A vigorous monetary economy was created on the basis of the expanding levels of circulation of a stable high-value currency (the dinar) and the integration of monetary areas that were previously independent. Innovative new business techniques and forms of business organisation were introduced, which included trading companies, bills of exchange, contracts, long-distance trade, big businesses, partnerships (mufawada in Arabic) such as limited partnerships (mudaraba), and the concepts of credit, profit, capital (al-mal) and capital accumulation (nama al-mal). Many of these early mercantile concepts were adopted and further advanced in medieval Europe from the 13th century onwards.[2] A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy... A caliphate (from the Arabic خلافة or khilāfah), is the Islamic form of government representing the political unity and leadership of the Muslim world. ... A market economy (also called a free market economy or a free enterprise economy) is an economic system in which the production and distribution of goods and services take place through the mechanism of free markets (though completley useless to some dumbasses) guided by a free price system. ... Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economy and social system. ... Islamic economics in practice. ... A monetary economy is a societys economy where products and services are traded in exchange for money. ... This list of circulating currencies contains the 194 current official or de facto currencies of the 192 United Nations member states, one UN observer state, three partially recognized sovereign states, six unrecognized countries, and 33 dependencies. ... A 25,000 Iraqi dinar note printed after the fall of Saddam Hussein. ... Moneys is an agreement within a community, to use something as a medium of exchange, which acts as an intermediary market good. ... In economics, a business is a legally-recognized organizational entity existing within an economically free country designed to sell goods and/or services to consumers, usually in an effort to generate profit. ... Companies law is the field of law concerning business and other organizations. ... A joint stock company is a special kind of partnership. ... A negotiable instrument is a specialized type of contract for the payment of money which is unconditional and capable of transfer by negotiation. ... A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. ... It has been suggested that Commerce be merged into this article or section. ... Big Business or big business is a term used to describe large corporations, individually or collectively. ... A partnership is a type of business entity in which partners share with each other the profits or losses of the business undertaking in which all have invested. ... Arabic redirects here. ... A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). ... Credit as a financial term, used in such terms as credit card, refers to the granting of a loan and the creation of debt. ... This article or section does not cite any references or sources. ... Capital has a number of related meanings in economics, finance and accounting. ... Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... The Middle Ages formed the middle period in a traditional schematic division of European history into three ages: the classical civilization of Antiquity, the Middle Ages, and modern times, beginning with the Renaissance. ...


Many European economists between 1500 and 1750 are today generally considered mercantilists; however, these economists did not see themselves as contributing to a single economic ideology. The bulk of what is commonly called "mercantilist literature" appeared in the 1620s in Great Britain.[7] However, the term was coined by the French writer Victor de Riqueti, marquis de Mirabeau in 1763 in his Philosophie Rurale, although the French form of mercantilism was called Colbertism after 1600s French finance minister Jean-Baptiste Colbert. Perhaps the last major mercantilist work was James Steuart’s Principles of Political Oeconomy published in 1767.[8] Adam Smith, who was critical of the idea, was the first person to organize formally most of the contributions of mercantilists into what he called "the mercantile system" in his 1776 book The Wealth of Nations.[9] Smith saw English merchant Thomas Mun (1571-1641) as a major creator of the mercantile system, especially in his posthumously published Treasure by Forraign Trade (1664), which Smith considered the archetype of manifesto of the movement.[10] Victor de Riqueti, marquis de Mirabeau (often referred to simply as the elder Mirabeau) (October 5, 1715 - July 13, 1789) was a French economist of the Physiocratic school. ... Jean-Baptiste Colbert Jean-Baptiste Colbert (August 29, 1619 — September 6, 1683) served as the French minister of finance from 1665 to 1683 under the rule of King Louis XIV. He was described by Mme de Sévigné as Le Nord as he was cold and unemotional. ... James Denham-Steuart Sir James Denham-Steuart, 7th Baronet (21 October 1712 – 26 November 1780) was a British economist. ... For other persons named Adam Smith, see Adam Smith (disambiguation). ... Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of the Scottish economist Adam Smith, published on March 9, 1776 during the Scottish Enlightenment. ... Thomas Mun (1571 - 1641) was an English writer on economics who has been called the last of the early mercantilists. ...


Beyond England, Italy, France, and Spain had noted writers who had mercantilist themes in their work, indeed the earliest examples of mercantilism are from outside of England: in Italy, Giovanni Botero (1544-1617) and Antonio Serra (1580-?), in France, Colbert and some other precursors to the physiocrats, in Spain, the School of Salamanca writers Francisco de Vitoria (1480 or 1483 – 1546), Domingo de Soto (1494-1560), Martin de Azpilcueta (1491 - 1586), and Luis de Molina (1535-1600). Themes also existed in writers from the German historical school from List, as well as followers of the "American system" and British "free-trade imperialism," thus stretching the system into the nineteenth century. However, many British writers, including Mun and Misselden, were merchants, while many of the writers from other countries were public officials. Beyond mercantilism as a way of understanding the wealth and power of nations, Mun and Misselden are noted for their viewpoints on a wide range of economic matters.[11] Giovanni Botero (c. ... Antonio Serra was a late 16th century Italian writer in the Mercantilist tradition. ... The Physiocrats were a group of economists who believed that the wealth of nations was derived solely from agriculture. ... The School of Salamanca is the renaissance of thought in diverse intellectual areas by Spanish theologians, rooted in the intellectual and pedagogical work of Francisco de Vitoria. ... Francisco de Vitoria Francisco de Vitoria, Statue before San Esteban, Salamanca Statue of Francisco de Vitoria, in Vitoria-Gasteiz Francisco de Vitoria (Francisci de Victoria; c. ... Domingo de Soto was a Dominican priest and theologian born 1494, Segovia, Spain and died 1560 in Salamanca. ... Martín de Azpilcueta[1] (b. ... Luis Molina (born 1535 in Cuenca, Spain; died October 12, 1600 in Madrid) was a Spanish Jesuit. ... Edward Misselden (1608-54) was a leading member of the writers in the Mercantilist group of economic thought. ...


Mun and Misselden

Much of Mun and Misselden's writings are a result of the discussion about the depression England was in at the time, starting in the early 1620s. English merchant Gerard de Malynes argued that the depression was due to weakening terms of trade for English goods due to a conspiracy by foreign money speculators (especially Dutch and Jewish) to lower the value of English Money. de Malynes saw speculation as a moral evil, and wrote about it in his 1601 pamphlet, "The Canker of England's Commonwealth". Mun, who chaired a Privy Council committee which sought a solution to the crisis, felt along with Misselden that the weakening terms of trade was due to a negative balance of trade between England and other countries since the beginning of the Thirty Years War.[12] Beyond questions of validity of Mun's and Misselden's arguments, Swedish historian of economics Lars Magnusson emphasizes the importance of aspects of their arguments on future thinkers such as Josiah Child, Charles Davenant, Nicholas Barbon, Sir Dudley North, John Martyn, and William Petty. Magnusson traces the importance of Mun and Misselden to their belief in the role of supply and demand for bullion on balance of payments as a cause of depression, and of their emphasis on amoral self-interested agents rather than looking at economic matters as moral questions. This meant that Mun and Misselden were able to introduce the Baconian scientific method of Francis Bacon to the area of economics, and thus base their work on empiricism in a much stronger way than those who more tightly tied economics with morality.[13] Gerard Joling (1586-1641) was a dependent merchant in foreign trade, an English commissioner in homo, a government advisor on trade matters, assay master of the mint, and commissioner of mint affairs. ... Privies were a kind of toilet that you sat over but didnt have a flush, or sewer attached, during the middle ages. ... The victory of Gustavus Adolphus at the Battle of Breitenfeld (1631) The Thirty Years War was a conflict fought between the years 1618 and 1648, principally in the central European territory of the Holy Roman Empire, but also involving most of the major continental powers. ... Sir Josiah Child (1630 - June 22, 1699), English merchant, economist and governor of the East India Company, was born in London, the second son of Richard Child, a London merchant of old family. ... Charles Davenant (1656-1714), English economist, eldest son of Sir William Davenant, the poet, was born in London. ... Nicholas Barbon (c. ... Sir Dudley North (May 10, 1641 - December 31, 1691), English economist, was 4th son of Dudley, 4th Lord North, who published, besides other things, Passages relating to the Long Parliament, of which he had himself been a member. ... John Martyn (born Iain David McGeachy on September 11, 1948 in New Malden, Surrey, England) is a British singer-songwriter and guitarist. ... Sir William Petty (May 27, 1623 – December 16, 1687) was an English economist, scientist and philosopher. ... The Baconian method is the investigative method developed by Francis Bacon. ... For other persons named Francis Bacon, see Francis Bacon (disambiguation). ...


Theory

Mercantilism as a whole cannot be considered a unified theory of economics because mercantilism has traditionally been driven more by the political and commercial interests of the State and security concerns than by abstract ideas. There were no mercantilist writers presenting an overarching scheme for the ideal economy, as Adam Smith would later do for classical (laissez-faire) economics. Rather, each mercantilist writer tended to focus on a single area of the economy.[14] Only later did non-mercantilist scholars integrate these "diverse" ideas into what they called mercantilism. Some scholars thus reject the idea of mercantilism completely, arguing that it gives "a false unity to disparate events". Smith saw the mercantile system as an enormous conspiracy by manufacturers and merchants against consumers, a view that has led some authors, especially Robert E. Ekelund and Robert D. Tollison to call mercantilism "a rent-seeking society". To a certain extent, mercantilist doctrine itself made a general theory of economics impossible. Mercantilists viewed the economic system as a zero-sum game, in which any gain by one party required a loss by another.[15] Thus, any system of policies that benefited one group would by definition harm the other, and there was no possibility of economics being used to maximize the "commonwealth", or common good.[16] Mercantilists' writings were also generally created to rationalize particular practices rather than as investigations into the best policies.[17] For other persons named Adam Smith, see Adam Smith (disambiguation). ... Zero-sum describes a situation in which a participants gain or loss is exactly balanced by the losses or gains of the other participant(s). ...


Mercantilist domestic policy was more fragmented than its trade policy. While Adam Smith portrayed mercantilism as supportive of strict controls over the economy, many mercantilists disagreed. The early modern era was one of letters patent and government-imposed monopolies; some mercantilists supported these, but others acknowledged the corruption and inefficiency of such systems. Many mercantilists also realized that the inevitable results of quotas and price ceilings were black markets. One notion mercantilists widely agreed upon was the need for economic oppression of the working population; laborers and farmers were to live at the "margins of subsistence". The goal was to maximize production, with no concern for consumption. Extra money, free time, or education for the "lower classes" was seen to inevitably lead to vice and laziness, and would result in harm to the economy.[18] Letters Patent by Queen Victoria creating the office of Governor-General of Australia Letters patent are a type of legal instrument in the form of an open letter issued by a monarch or government granting an office, a right, monopoly, title, or status to someone or some entity such as... This article is about economic monopoly. ... This box:      The underground economy or shadow economy consists of all commerce that is not taxed. ... This article is being considered for deletion in accordance with Wikipedias deletion policy. ... The following is a list of subsistence techniques: Hunting and Gathering, also known as Foraging freeganism involves gathering of discarded food in the context of an urban environment gleaning involves the gathering of food that traditional farmers have left behind in their fields Cultivation Horticulture - plant cultivation, based on the... In economics, consumption refers to the final use of goods and services to provide utility. ... A social class is, at its most basic, a group of people that have similar social status. ...


Scholars are divided on why mercantilism was the dominant economic ideology for two and a half centuries.[19] One group, represented by Jacob Viner, argues that mercantilism was simply a straightforward, common-sense system whose logical fallacies could not be discovered by the people of the time, as they simply lacked the required analytical tools. The second school, supported by scholars such as Robert B. Ekelund, contends that mercantilism was not a mistake, but rather the best possible system for those who developed it. This school argues that mercantilist policies were developed and enforced by rent-seeking merchants and governments. Merchants benefited greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers. Governments benefited from the high tariffs and payments from the merchants. Whereas later economic ideas were often developed by academics and philosophers, almost all mercantilist writers were merchants or government officials.[20] Jacob Viner (May 3, 1892 - September 12, 1970) was a noted economist. ... In philosophy, a formal fallacy or a logical fallacy is a pattern of reasoning which is always wrong. ... Robert B. Ekelund, Jr. ... In economics, rent seeking occurs when an individual, organization, or firm seeks to make money by manipulating the economic environment rather than by making a profit through trade and production of wealth. ...


Mercantilism developed at a time when the European economy was in transition. Isolated feudal estates were being replaced by centralized nation-states as the focus of power. Technological changes in shipping and the growth of urban centers led to a rapid increase in international trade.[21] Mercantilism focused on how this trade could best aid the states. Another important change was the introduction of double-entry bookkeeping and modern accounting. This accounting made extremely clear the inflow and outflow of trade, contributing to the close scrutiny given to the balance of trade.[22] Of course, the impact of the discovery of America cannot be ignored. New markets and new mines propelled foreign trade to previously inconceivable heights. The latter led to “the great upward movement in prices” and an increase in “the volume of merchant activity itself.”[23] Roland pledges his fealty to Charlemagne; from a manuscript of a chanson de geste Feudalism, a term first used in the early modern period (17th century), in its most classic sense refers to a Medieval European political system comprised of a set of reciprocal legal and military obligations among the... The term nation-state, while often used interchangeably with the terms unitary state and independent state, refers properly to the parallel occurence of a state and a nation. ... International trade is the exchange of goods and services across international boundaries or territories. ... In accountancy, the double-entry bookkeeping (or double-entry accounting) system is the basis of the standard system used by businesses and other organizations to record financial transactions. ...


Prior to mercantilism, the most important economic work done in Europe was by the medieval scholastic theorists. The goal of these thinkers was to find an economic system that was compatible with Christian doctrines of piety and justice. They focused mainly on microeconomics and local exchanges between individuals. Mercantilism was closely aligned with the other theories and ideas that were replacing the medieval worldview. This period saw the adoption of Niccolò Machiavelli's realpolitik and the primacy of the raison d'état in international relations. The mercantilist idea that all trade was a zero sum game, in which each side was trying to best the other in a ruthless competition, was integrated into the works of Thomas Hobbes. Note that non-zero sum games such as prisoner's dilemma can also be consistent with a mercantilist view. In prisoner's dilemma, players are rewarded for defecting against their opponents - even though everyone would be better off if everyone could cooperate. More modern views of economic co-operation amidst ruthless competition can be seen in the folk theorem of game theory. Scholasticism comes from the Latin word scholasticus, which means that [which] belongs to the school, and is the school of philosophy taught by the academics (or schoolmen) of medieval universities circa 1100–1500. ... Microeconomics (or price theory) is a branch of economics that studies how individuals, households, and firms make decisions to allocate limited resources,[1] typically in markets where goods or services are being bought and sold. ... Machiavelli redirects here. ... Realpolitik (German: real (realistic, practical or actual) and Politik (politics) refers to politics or diplomacy based primarily on practical considerations, rather than ideological notions. ... The national interest, often referred to by the French term raison détat, is a countrys goals and ambitions whether economic, military, or cultural. ... Foreign affairs redirects here. ... Hobbes redirects here. ... Will the two prisoners cooperate to minimize total loss of liberty or will one of them, trusting the other to cooperate, betray him so as to go free? In game theory, the prisoners dilemma (sometimes abbreviated PD) is a type of non-zero-sum game in which two players... In game theory, folk theorems are a class of theorems which imply that in repeated games, any outcome is a feasible solution concept, if under that outcome the players minimax conditions are satisfied. ...


The dark view of human nature fit well with the Puritan view of the world, and some of the most stridently mercantilist legislation, such as the Navigation Acts, was introduced by the government of Oliver Cromwell.[24] For the record label, see Puritan Records. ... Wikisource has original text related to this article: Navigation Acts The English Navigation Acts were a series of laws which, beginning in 1651, restricted the use of foreign shipping in the trade of England (later the Kingdom of Great Britain and its colonies). ... Oliver Cromwell (25 April 1599 – 3 September 1658) was an English military and political leader best known for his involvement in making England into a republican Commonwealth and for his later role as Lord Protector of England, Scotland and Ireland. ...


Criticisms

Much of Adam Smith's The Wealth of Nations is an attack on mercantilism
Much of Adam Smith's The Wealth of Nations is an attack on mercantilism

Adam Smith and David Hume are considered to be the founding fathers of anti-mercantilist thought. A number of scholars found important flaws with mercantilism long before Adam Smith developed an ideology that could fully replace it. Critics like Dudley North, John Locke, and David Hume undermined much of mercantilism, and it steadily lost favor during the eighteenth century. Mercantilists failed to understand the notions of absolute advantage and comparative advantage (although this idea was only fully fleshed out in 1817 by David Ricardo) and the benefits of trade. For instance, Portugal was a far more efficient producer of wine than England, while in England it was relatively cheaper to produce cloth. Thus if Portugal specialized in wine and England in cloth, both states would end up better off if they traded. This is an example of the reciprocal benefits of trade due to a comparative advantage. In modern economic theory, trade is not a zero-sum game of cutthroat competition, because both sides can benefit (rather, it is an iterated prisoner's dilemma). By imposing mercantilist import restrictions and tariffs instead, both nations ended up poorer. Download high resolution version (1456x2173, 850 KB) This image has been released into the public domain by the copyright holder, its copyright has expired, or it is ineligible for copyright. ... Download high resolution version (1456x2173, 850 KB) This image has been released into the public domain by the copyright holder, its copyright has expired, or it is ineligible for copyright. ... For other persons named Adam Smith, see Adam Smith (disambiguation). ... Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of the Scottish economist Adam Smith, published on March 9, 1776 during the Scottish Enlightenment. ... For other persons named Adam Smith, see Adam Smith (disambiguation). ... This article is about the philosopher. ... Sir Dudley North (May 10, 1641 - December 31, 1691), English economist, was 4th son of Dudley, 4th Lord North, who published, besides other things, Passages relating to the Long Parliament, of which he had himself been a member. ... For other persons named John Locke, see John Locke (disambiguation). ... This article is about the philosopher. ... A country has an absolute advantage economically over another, in a particular good, when it can produce that good more efficiently. ... In economics, David Ricardo is credited for the principle of comparative advantage to explain how it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... David Ricardo (18 April 1772–11 September 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. ... It has been suggested that Commerce be merged into this article or section. ... In economics, David Ricardo is credited for the principle of comparative advantage to explain how it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ... Will the two prisoners cooperate to minimize total loss of liberty or will one of them, trusting the other to cooperate, betray him so as to go free? In game theory, the prisoners dilemma (sometimes abbreviated PD) is a type of non-zero-sum game in which two players...


David Hume famously noted the impossibility of the mercantilists' goal of a constant positive balance of trade. As bullion flowed into one country, the supply would increase and the value of bullion in that state would steadily decline relative to other goods. Conversely, in the state exporting bullion, its value would slowly rise. Eventually it would no longer be cost-effective to export goods from the high-price country to the low-price country, and the balance of trade would reverse itself. Mercantilists fundamentally misunderstood this, long arguing that an increase in the money supply simply meant that everyone gets richer.[25]


The importance placed on bullion was also a central target, even if many mercantilists had themselves begun to de-emphasize the importance of gold and silver. Adam Smith noted that at the core of the mercantile system was the "popular folly of confusing wealth with money," bullion was just the same as any other commodity, and there was no reason to give it special treatment.[26] More recently, scholars have discounted the accuracy of this critique. They believe that Mun and Misselden were not making this mistake in the 1620s, and point to their followers Child and Davenant, who, in 1699, wrote: "Gold and Silver are indeed the Measure of Trade, but that the Spring and Original of it, in all nations is the Natural or Artificial Product of the Country; that is to say, what this Land or what this Labour and Industry Produces."[27] The critique that mercantilism was a form of rent-seeking has also seen criticism, as scholars such Jacob Viner in the 1930s point out that merchant mercantilists such as Mun understood that they would not gain by higher prices for English wares abroad.[28] Jacob Viner (May 3, 1892 - September 12, 1970) was a noted economist. ...


The first school to completely reject mercantilism was the physiocrats, who developed their theories in France. Their theories also had several important problems, and the replacement of mercantilism did not come until Adam Smith published The Wealth of Nations in 1776. This book outlines the basics of what is today known as classical economics. Smith spends a considerable portion of the book rebutting the arguments of the mercantilists, though often these are simplified or exaggerated versions of mercantilist thought.[29] The Physiocrats were a group of economists who believed that the wealth of nations was derived solely from agriculture. ... Adam Smith An Inquiry into the Nature and Causes of the Wealth of Nations is the magnum opus of the Scottish economist Adam Smith, published on March 9, 1776 during the Scottish Enlightenment. ... Classical economics is widely regarded as the first modern school of economic thought. ...


Scholars are also divided over the cause of mercantilism's end. Those who believe the theory was simply an error hold that its replacement was inevitable as soon as Smith's more accurate ideas were unveiled. Those who feel that mercantilism was rent seeking hold that it ended only when major power shifts occurred. In Britain, mercantilism faded as the Parliament gained the monarch's power to grant monopolies. While the wealthy capitalists who controlled the House of Commons benefited from these monopolies, Parliament found it difficult to implement them because of the high cost of group decision making.[30]


Mercantilist regulations were steadily removed over the course of the eighteenth century in Britain, and during the 19th century the British government fully embraced free trade and Smith's laissez-faire economics. On the continent, the process was somewhat different. In France economic control remained in the hands of the royal family and mercantilism continued until the French Revolution. In Germany mercantilism remained an important ideology in the nineteenth and early twentieth centuries, when the historical school of economics was paramount.[31] Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... Laissez-faire is short for laissez faire, laissez passer, a French phrase meaning to let things alone, let them pass. First used by the eighteenth century Physiocrats as an injunction against government interference with trade, it is now used as a synonym for strict free market economics. ... The French Revolution (1789–1815) was a period of political and social upheaval in the political history of France and Europe as a whole, during which the French governmental structure, previously an absolute monarchy with feudal privileges for the aristocracy and Catholic clergy, underwent radical change to forms based on... The Historical school of economics was a mainly German school of economic thought which held that a study of history was the key source of knowledge about human actions and economic matters, since economics would be culture-specific and not generalizable over space and time. ...


Legacy

In the English-speaking world, Adam Smith's utter repudiation of mercantilism was accepted, eventually, as public policy in the British Empire and in the United States. Initially it was rejected in the United States by such prominent figures as Alexander Hamilton, Henry Clay, Henry Charles Carey, and Abraham Lincoln and in Britain by such figures as Thomas Malthus. When Britain passed its Corn Laws in 1815 Thomas Malthus thought such restrictions were a good idea, but David Ricardo thought them not. In 1849 they were repealed largely on "Free Market" arguments given by Sir Richard Peel, though this was hotly contested and others such as Benjamin Disraeli felt that the real reason was to keep grain prices low and empower "Commercial Interests." In the 20th century, most economists on both sides of the Atlantic have come to accept that in some areas mercantilism had been correct. Most prominently, the economist John Maynard Keynes explicitly supported some of the tenets of mercantilism. Adam Smith had rejected focusing on the money supply, arguing that goods, population, and institutions were the real causes of prosperity. Keynes argued that the money supply, balance of trade, and interest rates were of great importance to an economy. These views later became the basis of monetarism, whose proponents actually reject much of Keynesian monetary theory, and has developed as one of the most important modern schools of economics. For other persons named Adam Smith, see Adam Smith (disambiguation). ... Alexander Hamilton (January 11, 1755 or 1757 - July 12, 1804) was an Army officer, lawyer, Founding Father, American politician, leading statesman, financier and political theorist. ... For his namesake son, see Henry Clay, Jr. ... Henry Charles Carey (December 15, 1793 - October 13, 1879), American economist, was born in Philadelphia. ... For other uses, see Abraham Lincoln (disambiguation). ... Thomas Robert Malthus, FRS (13th February, 1766 – 29th December, 1834), was an English demographer and political economist. ... The Corn Laws, in force between 1815 and 1846, were import tariffs ostensibly designed to protect British farmers and landowners against competition from cheap foreign grain imports. ... Thomas Robert Malthus, FRS (13th February, 1766 – 29th December, 1834), was an English demographer and political economist. ... David Ricardo (18 April 1772–11 September 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists, along with Thomas Malthus and Adam Smith. ... Benjamin Disraeli, 1st Earl of Beaconsfield (December 21, 1804 - April 24, 1881) was a British Conservative Prime Minister of the United Kingdom and author. ... Keynes redirects here. ... Monetarism is a set of views concerning the determination of national income and monetary economics. ...


Adam Smith rejected the mercantilist focus on production, arguing that consumption was the only way to grow an economy. Keynes argued that encouraging production was just as important as consumption. Keynes also noted that in the early modern period the focus on the bullion supplies was reasonable. In an era before paper money, an increase for bullion was one of the few ways to increase the money supply. Keynes and other economists of the period also realized that the balance of payments is an important concern, and since the 1930s, all nations have closely monitored the inflow and outflow of capital, and most economists agree that a favorable balance of trade is desirable. Keynes also adopted the essential idea of mercantilism that government intervention in the economy is a necessity. While Keynes' economic theories have had a major impact, few have accepted his effort to rehabilitate the word mercantilism. Today the word remains a pejorative term, often used to attack various forms of protectionism.[32] The similarities between Keynesianism, and its successor ideas, with mercantilism have sometimes led critics to call them neo-mercantilism. Some other systems that do copy several mercantilist policies, such as Japan's economic system, are also sometimes called neo-mercantilist.[33] In an essay appearing in the May 14, 2007 issue of Newsweek, economist Robert J. Samuelson argued that China was pursuing an essentially mercantilist trade policy that threatened to undermine the post-World War II international economic structure.[34] Paper Money is the second album by the band Montrose. ... In macroeconomics, money supply (monetary aggregates, money stock) is the quantity of currency and money in bank accounts in the hands of the non-bank public available within the economy to purchase goods, services, and securities. ... ... Protectionism is the economic policy of restraining trade between nations, through methods such as high tariffs on imported goods, restrictive quotas, a variety of restrictive government regulations designed to discourage imports, and anti-dumping laws in an attempt to protect domestic industries in a particular nation from foreign take-over... Mercantilism is the economic theory that a nations prosperity depended upon its supply of gold and silver, that the total volume of trade is unchangeable. ... Japans industrialized, free-market economy is the worlds third-largest, adjusted to purchasing power parity (PPP), after the United States, and Peoples Republic of China. ... The Newsweek logo Newsweek is a weekly news magazine published in New York City and distributed throughout the United States and internationally. ... Robert J. Samuelson is a contributing editor of Newsweek and Washington Post where he has written columns since 1977. ... Combatants Allied powers: China France Great Britain Soviet Union United States and others Axis powers: Germany Italy Japan and others Commanders Chiang Kai-shek Charles de Gaulle Winston Churchill Joseph Stalin Franklin Roosevelt Adolf Hitler Benito Mussolini Hideki Tōjō Casualties Military dead: 17,000,000 Civilian dead: 33,000...


One area Smith was reversed on well before Keynes was that of the use of data. Mercantilists, who were generally merchants or government officials, gathered vast amounts of trade data and used it considerably in their research and writing. William Petty, a strong mercantilist, is generally credited with being the first to use empirical analysis to study the economy. Smith rejected this, arguing that deductive reasoning from base principles was the proper method to discover economic truths. Today, many schools of economics accept that both methods are important, the Austrian School being a notable exception. Sir William Petty (May 27, 1623 – December 16, 1687) was an English economist, scientist and philosopher. ... A central concept in science and the scientific method is that all evidence must be empirical, or empirically based, that is, dependent on evidence or consequences that are observable by the senses. ... Deductive reasoning is the kind of reasoning where the conclusion is necessitated or implied by previously known premises. ... The Austrian School, also known as the “Vienna School” or the “Psychological School”, is a heterodox school of economic thought that advocates adherence to strict methodological individualism. ...


In specific instances, protectionist mercantilist policies also had an important and positive impact on the state that enacted them. Adam Smith himself, for instance, praised the Navigation Acts as they greatly expanded the British merchant fleet, and played a central role in turning Britain into the naval and economic superpower that it was for several centuries.[35] Some economists thus feel that protecting infant industries, while causing short term harm, can be beneficial in the long term. Wikisource has original text related to this article: Navigation Acts The English Navigation Acts were a series of laws which, beginning in 1651, restricted the use of foreign shipping in the trade of England (later the Kingdom of Great Britain and its colonies). ...


Nonetheless, The Wealth of Nations had a profound impact on the end of the mercantilist era and the later adoption of free market policy. By 1860, England removed the last vestiges of the mercantile era. Industrial regulations, monopolies and tariffs were withdrawn.


References

  1. ^ Geoffrey Samuel (1984) Roman law and modern capitalism
  2. ^ a b Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", Historical Materialism 15 (1), p. 47-74, Brill Publishers.
  3. ^
    • Lind, Michael: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism...The patron saint of the American School was Alexander Majorie, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods...The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." (from "Hamilton's Republic" Part III "The American School of National Economy" pg. 229–230 published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0)
    • Richardson, Heather Cox: "By 1865, the Republicans had developed a series of high tariffs and taxes that reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican concluded..."Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes...for ordinary expenses of Government." (from "The Greatest Nation of the Earth" Chapter 4 titled "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pg. 136–137 published 1997 by the President and Fellows of Harvard College in the USA - ISBN 0-674-36213-6)
    • Boritt, Gabor S: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leonard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate variety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" (from "Lincoln and the Economics of the American Dream" Chapter 14 titled "The Whig in the White House" pages 196–197 published 1994 by Memphis State University Press in the USA - ISBN 0-87870-043-9; ISBN 0-252-06445-3)
  4. ^ A Market Economy in the Early Roman Empire
  5. ^ The Cambridge economic history of Europe, p. 437. Cambridge University Press, ISBN 0521087090.
  6. ^ Subhi Y. Labib (1969), "Capitalism in Medieval Islam", The Journal of Economic History 29 (1), p. 79-96 [81, 83, 85, 90, 93, 96].
  7. ^ Magnusson pg 46
  8. ^ Magnusson pg 46
  9. ^ Jürg Niehans. A History of Economic Theory pg. 6
  10. ^ Magnusson pg 47
  11. ^ Magnusson pg 50
  12. ^ Magnusson pg 50
  13. ^ Magnusson pg 50
  14. ^ Harry Landreth and David C. Colander History of Economic Thought. pg. 44
  15. ^ Robert B. Ekelund and Robert D. Tollison. Mercantilism as a Rent-Seeking Society. pg. 9
  16. ^ Landreth and Colander. pg. 48
  17. ^ David S. Landes The Unbound Prometheus. pg. 31
  18. ^ Robert B. Ekelund and Robert F. Hébert. A History of Economic Theory and Method. pg. 46
  19. ^ Ekelund and Hébert. pg. 61
  20. ^ Niehans. pg. 19
  21. ^ Landreth and Colander. pg. 43
  22. ^ Charles Wilson. Mercantilism. pg. 10
  23. ^ John Kenneth Galbraith. "A Critical History." pg. 33–34
  24. ^ Landreth and Colander. pg. 53
  25. ^ Ekelund and Hébert. pg. 43
  26. ^ Magnussen pg 46
  27. ^ referenced to Davenant, 1771 [1699], p. 171 in Magnussen pg 53
  28. ^ Magnussen pg 54
  29. ^ Niehans. pg. 19
  30. ^ Ekelund and Tollison
  31. ^ Wilson pg. 6
  32. ^ Wilson pg. 3
  33. ^ Robert S. Walters and David H. Blake. The Politics of Global Economic Relations.
  34. ^ Samuelson, Robert J. (May 17, 2007). China's Wrong Turn on Trade. Newsweek. Retrieved on 2007-12-06.
  35. ^ Hansen pg. 64

Historical Materialism is an interdisciplinary journal dedicated to exploring and developing the critical and explanatory potential of Marxist theory. ... Founded in 1683 in Leiden, the Netherlands, Brill (known as E. J. Brill, Koninklijke Brill, Brill Academic Publishers) is an international academic publisher and is listed on Euronext, Amsterdam. ... The headquarters of the Cambridge University Press, in Trumpington Street, Cambridge. ... Robert J. Samuelson is a contributing editor of Newsweek and Washington Post where he has written columns since 1977. ... is the 137th day of the year (138th in leap years) in the Gregorian calendar. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... The Newsweek logo Newsweek is a weekly news magazine published in New York City and distributed throughout the United States and internationally. ... Year 2007 (MMVII) is the current year, a common year starting on Monday of the Gregorian calendar and the AD/CE era in the 21st century. ... is the 340th day of the year (341st in leap years) in the Gregorian calendar. ...

Bibliography

  • Ekelund, Robert B. and Robert D. Tollison. Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective. College Station: Texas A&M University Press, 1981.
  • Ekelund, Robert B and Robert F. Hébert. A History of Economic Theory and Method. New York: McGraw-Hill, 1997.
  • Heckscher, Eli F. Mercantilism. translation by Mendel Shapiro. London: Allen & Unwin. 1935.
  • Keynes, John Maynard. "Notes on Mercantilism, the Usury Laws, Stamped Money and the Theories of Under-Consumption." General Theory of Employment, Interest and Money.
  • Landreth, Harry and David C. Colander. History of Economic Thought. Boston: Houghton Mifflin, 2002.
  • Magnusson, Lars G. "Mercantilism" eds. Biddle, Jeff E, Davis, Jon B, & Samuels, Warren J. A Companion to the History of Economic Thought. Blackwell Publishing, 2003.
  • Niehans, Jürg. A History of Economic Theory: Classic Contributions, 1720–1980. Baltimore: Johns Hopkins University Press, 1990.
  • Vaggi, Gianni and Peter Groenewegen.. A Concise History of Economic Thought: From Mercantilism to Monetarism. New York: Palgrave Macmillan, 2003.
  • Wilson, Charles. Mercantilism. London: Historical Association, 1966

To meet Wikipedias quality standards and conform with our NPOV policy, this article or section may require cleanup. ...

Further reading

An Austrian Perspective on the History of Economic Thought is a book written by Murray N. Rothbard, with a sub-title “Economic Thought Before Adam Smith”. Volume I). ... An Austrian Perspective on the History of Economic Thought is a book written by Murray N. Rothbard, with a sub-title “Economic Thought Before Adam Smith”. Volume I). ...

External links

This article is a list connected to the template History of economic thought. ... Ancient economic thought refers to economics ideas from people before the middle ages. ... Islamic economics in practice. ... Scholasticism comes from the Latin word scholasticus, which means that [which] belongs to the school, and is the school of philosophy taught by the academics (or schoolmen) of medieval universities circa 1100–1500. ... Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economy and social system. ... The Physiocrats were a group of economists who believed that the wealth of nations was derived solely from agriculture. ... Classical economics is widely regarded as the first modern school of economic thought. ... The English historical school of economics, although not nearly as famous as its German counterpart, sought a return of inductive methods in economics, following the triumph of the deductive approach of David Ricardo in the early 19th century. ... The Historical school of economics was a mainly German school of economic thought which held that a study of history was the key source of knowledge about human actions and economic matters, since economics would be culture-specific and not generalizable over space and time. ... Socialist economics is a broad, and sometimes controversial, term. ... Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ... --Duk 06:58, 18 August 2005 (UTC) Categories: Possible copyright violations ... Institutional economics focuses on understanding the role of human-made institutions in shaping economic behavior. ... The Stockholm School, or Stockholmsskolan, is a school of economic thought. ... Keynesian economics (pronounced kainzian, IPA ), also called Keynesianism, or Keynesian Theory, is an economic theory based on the ideas of the 20th-century British economist John Maynard Keynes. ... The Chicago school of economics is a school of thought favoring free-market economics practiced at and disseminated from the University of Chicago in the middle of the 20th century. ... Gandhian economics is a school of economic thought based on the socio-economic principles expounded by Indian leader Mahatma Gandhi. ... This is a sub-article of fiqh and Law and economics. ... Microfinance is a term for the practice of providing financial services, such as microcredit, microsavings or microinsurance to poor people. ... Face-to-face trading interactions on the New York Stock Exchange trading floor. ... It has been suggested that Economic schools of thought be merged into this article or section. ...


  Results from FactBites:
 
Mercantilism - Wikipedia, the free encyclopedia (3282 words)
Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy, by encouraging exports and discouraging imports, especially through the use of tariffs.
Mercantilism was the dominant school of economics throughout the early modern period (from the 16th to the 18th century, which roughly corresponded to the emergence of the nation-state).
Mercantilism helped create trade patterns such as the triangular trade in the North Atlantic, in which raw materials were imported to the metropolis and then processed and redistributed to other colonies.
NationMaster - Encyclopedia: Mercantilism (6205 words)
Mercantilism is the economic theory that a nation's prosperity depends upon its supply of gold and silver, that the total volume of trade is unchangeable.
Mercantilism had a profound effect on the economies and societies of early modern Europe as fiscal and trade policy were altered to conform with the theory.
Mercantilism tended to fuel colonialism under the belief that a large empire was the key to wealth.
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