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 capital, and that the volume of the world economy and international trade is unchangeable. Economics is the social science that studies the production distribution, and consumption of goods and services. In Economics, capital or capital Goods or real capital refers to items of extensive value 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 exchange of Capital, Goods, and Services across International borders or Territories. Government economic policy based on these ideas is also sometimes called mercantilism, but is more properly known as the mercantile system. Economic policy refers to the actions that Governments take in the economic field. Some scholars conceive the mercantile system as a subset of, or synonymous with, the early stages of capitalism, while others consider mercantilism to be a distinct economic system. Capitalism is the Economic system in which the Means of production are owned by private Persons and operated for Profit and where An economic system is a System that involves the production, distribution and consumption of goods and services between

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). Precious Metal is the eighteenth episode in the of the popular American Crime drama, which is set in Las Vegas, Nevada. The balance of trade (or net exports, sometimes symbolized as NX) is the difference between the monetary value of Exports and imports in an 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. For the government of parliamentary systems see Executive (government. For the protectionist Australian political party from the 1880s to 1909 see Protectionist Party In Economics, an export is any good or Commodity, Transported from one country to another country in a Legitimate fashion International trade is exchange of Capital, Goods, and Services across International borders or Territories. For other uses of this word see Tariff (disambiguation. A tariff is a tax imposed on goods when they are moved across a political boundary

Though traces of mercantilism 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. The Roman Empire was the post-Republican phase of the ancient Roman civilization, characterised by an autocratic form of government and large territorial The early modern period is a term initially used by historians to refer mainly to the period roughly from 1500 to 1800 in Western Europe ( Early modern Europe) For the online game see Jennifer Government NationStates. The nation-state is a certain form of State that derives its legitimacy 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. Capitalism is the Economic system in which the Means of production are owned by private Persons and operated for Profit and where Internationally, mercantilism encouraged the many European wars of the period, and fueled European imperialism, as the European powers fought over "available" markets. Imperialism has two meanings one describing an action and the other describing an attitude

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). Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. Classical economics is widely regarded as the first modern school of economic thought. The British Empire was the largest empire in history and for over a century was the foremost global power. Richard Cobden ( June 3, 1804 &ndash April 2, 1865) was a British manufacturer and Radical and Liberal Germany, officially the Federal Republic of Germany ( ˈbʊndəsʁepuˌbliːk ˈdɔʏtʃlant is a Country in Central Europe. The Historical school of economics was an approach to academic Economics and to public administration that emerged in 19th century in Germany, and held sway there 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. Classical economics is widely regarded as the first modern school of economic thought. See also American System (economic plan. The American School, also known as " National System " represents three different yet 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. The New Deal was the name that United States President Franklin D 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 journalist Michael Lind. Raveendra N Batra (born 27 June 1943) is a US economist and professor at Southern Methodist University Pat Choate (born 27 April 1941) is an Economist who is perhaps most known for being the 1996 Reform Party Vice President Michael Lind (born on April 23 1962 in Austin Texas is an American Journalist and Historian, currently the John C ^[3]

History

Early mercantilist writers embraced bullionism, the belief that quantities of gold and silver were the measure of a nation's wealth. Bullionism is an Economic Theory that defines Wealth by the amount of Precious metals owned 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. Economic history is the study of how economic phenomena evolved 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 The Roman Empire was the post-Republican phase of the ancient Roman civilization, characterised by an autocratic form of government and large territorial A market economy is a realized Social system based on the Division of labour in which the prices of Goods and Services are determined in a The Industrial Revolution was a period in the late 18th and early 19th centuries when major changes in agriculture manufacturing and transportation had a profound effect on the England is a Country which is part of the United Kingdom. Its inhabitants account for more than 83% of the total UK population whilst its mainland The Netherlands ( Dutch:, ˈnedərlɑnt is the European part of the Kingdom of the Netherlands, which consists of the Netherlands the Netherlands There were markets for every type of good, for land, for cargo ships; there was even an insurance market. Insurance, in Law and Economics, is a form of Risk management primarily used to hedge against the Risk of a contingent loss ^[4]

Early free markets were also present in the Caliphate,^[5] where an early market economy and early form of the mercantile system was developed between the 8th-12th centuries, which some refer to as "Islamic capitalism". A free market is a Market in which property rights are voluntarily exchanged at a price arranged completely by the mutual consent of sellers and buyers A caliphate (from the Arabic خلافة or khilāfa) is the political leadership of the Muslim community in classical and medieval Islamic history A market economy is a realized Social system based on the Division of labour in which the prices of Goods and Services are determined in a This is a sub-article of Islamic economic jurisprudence and Muslim world. ^[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. The monetary economy is that part of a society's Economic system where products and services are traded in exchange for money Wikipedia talkFeatured lists for an explanation of this and other inclusion tags below -->This list of circulating currencies contains the 182 current A currency is a unit of exchange, facilitating the transfer of Goods and/or services It is one form of Money, where money is The Dinar is the name of the official currency in several countries Monetary policy is the process by which the Government, Central bank, or monetary authority of a country controls (i the Supply of Money, 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). A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to Companies law (or the law of business associations) is the field of Law concerning business and other organizations A joint stock company (JSC is a type of business entity it is a type of Corporation or Partnership. A negotiable instrument is a specialized type of " Contract " for the payment of money that is unconditional and capable of transfer by negotiation A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law Trade is the willing exchange of goods, services, or both Trade is also called Commerce. Big Business or big business is a term used to describe large corporations in either an individual or collective sense For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners Arabic (ar الْعَرَبيّة (informally ar عَرَبيْ) in terms of the number of speakers is the largest living member of the Semitic language 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 Credit is the provision of resources (such as granting a Loan) by one party to another party where that second party does not reimburse the first party immediately thereby generating In Economics, capital or capital Goods or real capital refers to items of extensive value 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 Many of these early mercantile concepts were adopted and further advanced in medieval Europe from the 13th century onwards. ^[2]

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. Victor de Riquetti marquis de Mirabeau ( October 5, 1715, Pertuis &ndash July 13, 1789) was a French Economist of the Jean-Baptiste Colbert ( August 29, 1619 — September 6, 1683) served as the French minister of finance from 1665 to 1683 under Perhaps the last major mercantilist work was James Steuart’s Principles of Political Oeconomy published in 1767. Sir James Denham-Steuart 7th Baronet ( 21 October 1712 &ndash 26 November 1780) was a British Economist. ^[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. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. ^[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. Thomas Mun (1571 - 1641 was an English writer on Economics who has been called the last of the early mercantilists. ^[10]

Merchants in Venice

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). Venice ( Italian: Venezia, Venetian: Venesia or Venexia) is a city in Northern Italy, the capital of the Italy (Italia officially the Italian Republic, (Repubblica Italiana is located on the Italian Peninsula in Southern Europe, and on the two largest Giovanni Botero (c 1544 - 1617 was an Italian thinker priest poet and diplomat best known for his 1589 work Della ragione di Stato (The Reason of State. For the Italian comics writer see Antonio Serra (comics Antonio Serra was a late 16th century Italian philosopher and economist in the This article is about the country For a topic outline on this subject see List of basic France topics. The physiocrats were a group of Economists who believed that the wealth of nations was derived solely from the value of land Agriculture or land development Spain () or the Kingdom of Spain (Reino de España is a country located mostly in southwestern Europe on the Iberian Peninsula. The School of Salamanca is the Renaissance of thought in diverse intellectual areas by Spanish theologians, rooted in the intellectual and pedagogical Francisco de Vitoria ( Francisci de Victoria; c 1492 &ndash 12 August, 1546) was a Spanish Renaissance Roman Catholic philosopher Domingo de Soto (1494 - 1560 was a Dominican priest and theologian born in Segovia, Spain and died in Salamanca. Martín de Azpilcueta ( 13 December 1491 &ndash 1 June 1586) was an important Spanish Canonist and Theologian in his time Luis de Molina (September 1535 Cuenca, Spain - October 12, 1600, Madrid, Spain was a Spanish Jesuit 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. Edward Misselden (1608-1654 was a leading member of the writers in the Mercantilist group of economic thought 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]

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. Gerard de Malynes (1586-1641 was an independent merchant in foreign trade an English commissioner in the Spanish Netherlands, a government advisor on trade 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. For the Mauritanian Thirty Years' War see Char Bouba war. For the band see The 30 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. Sir Josiah Child 1st Baronet (1630 &ndash June 22, 1699) English merchant Economist and governor of the East India Company Charles Davenant (1656-1714 English Economist, eldest son of Sir William Davenant, the poet was born in London. Nicholas Barbon (c 1640 - 1698 (Full name Nicholas Unless-Jesus-Christ-Had-Died-For-Thee-Thou-Hadst-Been-Damned Barbon) was an English Economist, Sir Dudley North (May 10 1641 &ndash December 31 1691 English Economist, was the 4th son of Dudley 4th Lord North, who published besides other Sir William Petty ( May 27 1623 – December 16 1687) was an English Economist, scientist and Philosopher 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. The Baconian method is the investigative method developed by Francis Bacon. Francis Bacon 1st Viscount St Alban KC QC (22 January 1561 – 9 April 1626 was an English Philosopher, Statesman, and author ^[13]

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. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. 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. In Game theory and Economic theory, zero-sum describes a situation in which a participant's gain or loss is exactly balanced by the losses or gains of the other ^[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]

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. Letters patent are a type of Legal instrument in the form of an Open letter issued by a Monarch or Government, granting an office right In Economics, a monopoly (from Greek monos, alone or single + polein, to sell exists when a specific individual or enterprise has sufficient 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 term economic oppression, sometimes misunderstood in the sense of Economic sanction, Embargo or economic boycott, has a different meaning and significance Subsistence is the food necessary to sustain life The following is a list of subsistence techniques: Hunting and Gathering The goal was to maximize production, with no concern for consumption. In economics consumption is the primary motivating force in the wealth or utility maximizing paradigm 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. Social class refers to the hierarchical distinctions (or stratification) between individuals or groups in Societies or Cultures. Economics is the social science that studies the production distribution, and consumption of goods and services. ^[18]

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. Jacob Viner ( May 3, 1892 - September 12, 1970) is best known for his enduring economic modelling of the firm, including the long- In philosophy, a formal fallacy or a logical fallacy is a pattern of reasoning which is always wrong 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. Robert Burton Ekelund Jr (born 1940 is an American economist Education Originally from Galveston Texas, Ekelund attended St This school argues that mercantilist policies were developed and enforced by rent-seeking merchants and governments. In Economics, rent seeking occurs when an individual organization or firm seeks to make money by manipulating the economic and/or legal environment rather than by trade and 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]

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. Feudalism, a term first used in the early modern period (17th century in its most classic sense refers to a Medieval Europe Political system composed For the online game see Jennifer Government NationStates. The nation-state is a certain form of State that derives its legitimacy Technological changes in shipping and the growth of urban centers led to a rapid increase in international trade. International trade is exchange of Capital, Goods, and Services across International borders or Territories. ^[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. In Accountancy, the double-entry 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]

Prior to mercantilism, the most important economic work done in Europe was by the medieval scholastic theorists. Scholasticism was the dominant form of theology and philosophy in the Latin West in the Middle Ages, particularly in the 12th 13th and 14th centuries 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. Microeconomics is a branch of Economics that studies how individuals households and firms and some states make decisions to allocate limited resources typically in markets 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. Realpolitik ( German: de real “realistic” “practical” or “actual” and de Politik “politics” refers to politics or diplomacy based primarily This article is about the generic foreign affairs term See The National Interest for the political journal 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. Thomas Hobbes (born 5 April 1588died 4 December 1679 was an English philosopher, whose famous 1651 book Leviathan established the foundation Note that non-zero sum games such as prisoner's dilemma can also be consistent with a mercantilist view. The Prisoner's Dilemma constitutes a problem in Game theory. It was originally framed by Merrill Flood and Melvin Dresher 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. 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 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. A Puritan of 16th and 17th century England was an associate of any number of religious groups advocating for more "purity" of Worship and Doctrine, The English Navigation Acts were a series of Laws which restricted the use of foreign Shipping and trade between England (later the Kingdom of Great Oliver Cromwell (25 April 1599 Old Style &ndash 3 September 1658 Old Style) was an English military and political leader best known ^[24]

Criticisms

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. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. David Hume (26 April 1711 25 August 1776 Scottish Philosopher, Economist, and Historian is an important figure in Western philosophy 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. Sir Dudley North (May 10 1641 &ndash December 31 1691 English Economist, was the 4th son of Dudley 4th Lord North, who published besides other John Locke (29 August 1632 – 28 October 1704 was an English Philosopher. David Hume (26 April 1711 25 August 1776 Scottish Philosopher, Economist, and Historian is an important figure in Western philosophy 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. "The principle of comparative advantage", generally attributed to David Ricardo in his 1817 Principles of Political Economy and Taxation extends In international trade the principle of comparative advantage refers to the fact that although one country may have an absolute disadvantage with another value can be created for both David Ricardo (18 April 1772 &ndash 11 September 1823 was an English political economist, often credited with systematizing economics and was one of the most influential Trade is the willing exchange of goods, services, or both Trade is also called Commerce. 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 international trade the principle of comparative advantage refers to the fact that although one country may have an absolute disadvantage with another value can be created for both 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). The Prisoner's Dilemma constitutes a problem in Game theory. It was originally framed by Merrill Flood and Melvin Dresher By imposing mercantilist import restrictions and tariffs instead, both nations ended up poorer.

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. Jacob Viner ( May 3, 1892 - September 12, 1970) is best known for his enduring economic modelling of the firm, including the long- ^[28]

The first school to completely reject mercantilism was the physiocrats, who developed their theories in France. The physiocrats were a group of Economists who believed that the wealth of nations was derived solely from the value of land Agriculture or land development 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. An Inquiry into the Nature and Causes of the Wealth of Nations is the Magnum opus of the Scottish economist Adam Smith. This book outlines the basics of what is today known as classical economics. Classical economics is widely regarded as the first modern school of economic thought. 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]

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. Free trade is a system in which the trade of goods and services between or within countries flows unhindered by government-imposed restrictions Laissez-faire ( pronunciation: French,; English,) is a French phrase literally meaning Let do (“allow to do” 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. The French Revolution (1789–1799 was a period of political and social upheaval in the History of France, during which the French governmental structure previously an In Germany mercantilism remained an important ideology in the nineteenth and early twentieth centuries, when the historical school of economics was paramount. Germany, officially the Federal Republic of Germany ( ˈbʊndəsʁepuˌbliːk ˈdɔʏtʃlant is a Country in Central Europe. The Historical school of economics was an approach to academic Economics and to public administration that emerged in 19th century in Germany, and held sway there ^[31]

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. Adam Smith ( baptised 16 June 1723 – 17 July 1790) was a Scottish moral philosopher and a pioneer of Political economy. 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. Henry Clay Sr ( April 12, 1777 &ndash June 29, 1852) was a nineteenth-century American statesman and Orator who Henry Charles Carey ( December 15, 1793 - October 13, 1879) a leading 19th century Economist of the American School Abraham Lincoln (February 12 1809 &ndash April 15 1865 the sixteenth President of the United States, successfully led his country through its greatest internal Thomas Robert Malthus FRS (13 February 1766 – 23 December 1834 was an English political economist and demographer who expressed views When Britain passed its Corn Laws in 1815 Thomas Malthus thought such restrictions were a good idea, but David Ricardo thought them not. The Corn Laws were Import tariffs designed to support domestic British corn prices against competition from less expensive foreign-grain imports between 1815 and 1846 Thomas Robert Malthus FRS (13 February 1766 – 23 December 1834 was an English political economist and demographer who expressed views David Ricardo (18 April 1772 &ndash 11 September 1823 was an English political economist, often credited with systematizing economics and was one of the most influential 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. Benjamin Disraeli 1st Earl of Beaconsfield, KG, PC, FRS (born Benjamin D'Israeli; 21 December 1804 &ndash 19 April 1881 was " 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. John Maynard Keynes 1st Baron Keynes CB (ˈkeɪnz "cains" (5 June 1883 &ndash 21 April 1946 was a British Economist whose ideas 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. Monetarism is a school of economic thought 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. Paper Money is the second album by the band Montrose. It was released in 1974 and was the last album to feature Sammy Hagar as lead vocalist In Economics, money supply, or money stock, is the total amount of money available in an Economy at a particular point in time 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. The public sector is the part of economic and administrative life that deals with the delivery of goods and services by and for the Government, whether national Regional 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. For the protectionist Australian political party from the 1880s to 1909 see Protectionist Party ^[32] The similarities between Keynesianism, and its successor ideas, with mercantilism have sometimes led critics to call them neo-mercantilism. Neomercantilism is a term used to describe a policy regime which encourages exports discourages imports controls capital movement and centralizes currency decisions in the hands of a Some other systems that do copy several mercantilist policies, such as Japan's economic system, are also sometimes called neo-mercantilist. The economy of Japan is the second largest economy in the world after the United States, at around US$4 ^[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. Newsweek is an American weekly Newsmagazine published in New York City. Robert J Samuelson (Born Robert Jacob Samuelson on December 23, 1945) is a contributing editor of Newsweek and Washington Post Talk People's Republic of China) PEOPLE'S REPUBLIC OF CHINA ARTICLE GUIDELINES World War II, or the Second World War, (often abbreviated WWII) was a global military conflict which involved a majority of the world's nations, including ^[34]

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. 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 Smith rejected this, arguing that deductive reasoning from base principles was the proper method to discover economic truths. Deductive reasoning is Reasoning which uses deductive Arguments to move from given statements ( Premises to Conclusions which must be true if the Today, many schools of economics accept that both methods are important, the Austrian School being a notable exception. The Austrian School, also known as the “ Vienna School ” or the “ Psychological School ” is a heterodox school of economics that advocates

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. The English Navigation Acts were a series of Laws which restricted the use of foreign Shipping and trade between England (later the Kingdom of Great ^[35] Some economists thus feel that protecting infant industries, while causing short term harm, can be beneficial in the long term.

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

Bibliography

• Ekelund, Robert B. ; Tollison, Robert D. (1981). Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective. College Station, TX: Texas A&M University Press. ISBN 0890961204.  
• Ekelund, Robert B. ; Hébert, Robert F. (1975). A History of Economic Theory and Method. New York: McGraw–Hill. ISBN 0070191433.  
• Heckscher, Eli F. (1935). Mercantilism. London: Allen & Unwin.  
• Keynes, John Maynard (1936). "Notes on Mercantilism, the Usury Laws, Stamped Money and the Theories of Under-Consumption", The General Theory of Employment, Interest, and Money. The General Theory of Employment Interest and Money was written by the English economist John Maynard Keynes. London: Palgrave Macmillan.  
• Landreth, Harry; Colander, David C. (2002). History of Economic Thought, 4th edition, Boston: Houghton Mifflin. ISBN 0618133941.  
• Magnusson, Lars G. (2003). "Mercantilism", in Biddle, Jeff E. ; Davis, Jon B. ; Samuels, Warren J. : A Companion to the History of Economic Thought. Malden, MA: Blackwell Publishing. ISBN 0631225730.  
• Niehans, Jürg (1990). A History of Economic Theory: Classic Contributions, 1720–1980. Baltimore, MD: Johns Hopkins University Press. ISBN 0801838347.  
• Vaggi, Gianni; Groenewegen, Peter (2003). A Concise History of Economic Thought: From Mercantilism to Monetarism. New York: Palgrave Macmillan. ISBN 0333999363.  
• Wilson, Charles [1958] (1963). Mercantilism. London: Routledge and Kegan Paul.  

Further reading

External links

• Thomas Mun's Englands Treasure by Forraign Trade
• Book IV of The Wealth of Nations, Adam Smith's attack on the Mercantile System
• Mercantilism List of references