Summary
Summary History of Economic Thought
- Course
- Institution
Summary of the chapters needed to read for the course. Book: History of Economic Thought Radboud University
[Show more]
3 reviews
By: niels_hartman • 4 year ago
By: fennavandersteen • 4 year ago
Not the right chapters
By: jurrianleusink • 5 year ago
Seller
Follow
bleussink
Reviews received
Content preview
Chapter 3 – Mercantilism, Physiocracy, and OtherPrecursors of Classical Economic Thought
Mercantilism
Mercantilismlimthemnasemglvenmtomthemeconoslcmilteratrremandmpractcemofmthemperlodmbetweenm1500-1750.
Themilteratrremprodrcedmfocrieimonmqreitonimofmeconoslcmpoilcymandmwaimriraiiymreiatedmtomampartcriarmlntereit
themserchant-wrltermwaimtrylngmtomprosote.mFormthlimreaion,mtheremwaimofenmconilderabiemikeptclismregardlngm
themanaiytcaimserltimofmpartcriarmargrsentimandmthemvaildltymofmthelrmconciriloni.
Themagemofmsercantilismhaimbeenmcharacterlzedmaimonemlnmwhlchmeverymperionmaimhlimownmeconoslit.
Mercantilismcanmbeitmbemrnderitoodmaimanmlnteiiectraimreactonmtomthemprobiesimofmthemtsei.m Inmthlimperlodmofm
themdecilnemofmthemsanormandmthemrliemofmthemnaton-itate,mthemsercantilitimtrledmtomdeterslnemthembeitmpoilcleim
formprosotngmthempowermandmweaithmofmthemnaton.
Themsercantilitimproceededmonmthemaiirsptonmthatmthemtotaimweaithmofmthemworidmwaimfied.mUilngmthemiasem
aiirspton,mthemichoiaitcimhadmreaionedmthatmwhenmtrademtookmpiacembetweenmlndlvldraii,mthemgalnmofmonemwaim
neceiiarliymthemioiimofmanother.mThemsercantilitimappiledmthlimreaionlngmtomtradembetweenmnatoni,mconcirdlngm
thatmanymlncreaiemlnmweaithmandmeconoslcmpowermofmonemnatonmoccrrredmatmthemeipeniemofmothermnatoni.
m Internatonaimtrademaimamseanimofmlncreailngmweaithmandmpowermofmamnatonmand,mlnmpartcriar,mfocriedm
onmthembaiancemofmtradembetweenmnatoni.
Mercantilitimadvocatedmlncreailngmthemnaton’imweaithmbymilsritaneoriiymencorraglngmprodrcton,mlncreailngm
eiporti,mandmhoidlngmdownmdoseitcmconirspton.mThemweaithmofmthemnatonmreitedmonmthempovertymofmthemsany.
Accordlngmtomsercantilitmthlnklng,mamcorntrymihoridmencorragemeiportimandmdlicorragemlsportimbymseanimofm
tarlffi,mqrotai,mirbildlei,mtaiei,mandmthemilke,mlnmordermtomachlevemamio-caiiedmfavorabiembaiancemofmtrade.
Themfritmsercantilitimargredmthatmamfavorabiembaiancemofmtrademihoridmbemitrrckmwlthmeachmnaton.
Amcentraimfeatrremofmsercantilitmilteratrremlimltimconvlctonmthatmsonetarymfactori,mrathermthanmreaimfactori,marem
themchlefmdeterslnantimofmeconoslcmactvltymandmgrowth.mMercantilitimsalntalnedmthatmanmadeqratemirppiymofm
soneymlimpartcriariymeiientaimtomthemgrowthmofmtrade,mbothmdoseitcmandmlnternatonai.mChangeimlnmthemqrantty
ofmsoney,mtheymbeileved,mgeneratemchangeimlnmthemieveimofmreaimortprt.
Adam Smith:mthemieveimofmeconoslcmactvltymandmltimratemofmgrowthmdependimrponmamnrsbermofmreaimfactori:mthem
qranttymofmiabor,mnatrraimreiorrcei,mcapltaimgoodi,mandmthemlnittrtonaimitrrctrre.mAnymchangemlnmthemqranttymof
soneymworidmlnfrencemoniymthemgeneraimieveimofmprlcei.
BecariemSmithmandmothermciaiilcaimeconoslitimitreiiedmthemreaimforceimthatmdeterslnemthemieveimofmortprt,mthelrm
theorleimfocriedmaisoitmeicirilveiymonmirppiy.mHowever,mbecariemKeynesmesphailzedmthemroiemofmaggregatem
desand,mhemforndmiosemcossonmbondimbetweenmhlimtheorymandmthatmofmthemsercantiliti:mamfavorabiembaiancem
ofmtrademworidmlncreaiemdoseitcmipendlngmandmtherebymraliemthemieveimofmlncosemandmespioysent.
Themvlewmthatmthemiawimofmthemeconosymcoridmbemdlicoveredmbymthemiasemsethodimthatmreveaiedmthemiawimofm
phyilcimwaimanmlsportantmitepmtowardimirbieqrentmdeveiopsentimlnmeconoslcmtheory.
Onemlsportantmdlfferencembetweenmciaiilcaimandmsercantilitcmtheory:m
Themsercantilitimbeilevedmtheremwaimambailcmconflctmbetweenmprlvatemlntereitimandmthemprbilcmweifare.m
Thereforemtheymconilderedmltmneceiiarymformgovernsentimtomchanneimprlvatemieif-lntereitmlntomprbilcm
benefti.
Ciaiilcaimeconoslitimforndmambailcmharsonymlnmthemiyitesmandmiawmprbilcmgoodimaimfowlngmnatrraiiym
frosmlndlvldraimieif-lntereit.
,Influential Precursors of Classical Thought
THOMAS MUN (1571-1641)
Hlimthlnklngmwaimtyplcaiiymsercantilitcmlnmthatmhemconfriedmthemweaithmofmamnatonmwlthmltimitockmofmpreclorim
setaiimandmthereforemargredmformamfavorabiembaiancemofmtrademandmanmlnfowmofmgoidmandmilivermtomietiemthemtrade
baiance.
Hembeilevedmthatmgovernsentmihoridmregriatemforelgnmtrademtomachlevemamfavorabiembaiance,mencorragem
lsportatonmofmcheapmrawmsaterlaii,mencorragemeiportatonmofmsanrfactrredmgoodi,metc.
WILLIAM PETTY (1623-1687)
Hlimeconoslcmwrltngimweremnotmgeneraimtreatieismtheymweremthemreiritmofmhlimpractcaimlntereitimlnmsaterimirchm
aimtaiaton,mpoiltci,msoney,mandmseairresent.
BERNARD MANDEVILLE (1670-1733)
Mandevliie’imiatrlcaimpoesmwaimanmatackmonmthemio-caiiedmientsentaimsorailiti,mwhoiemappeiiatonmrefectim
thelrmbeilefmthatmsorailtymlimnotmsademofmprreiymratonaimprlnclpiei.
Themratonai,mieifihmdrlveimofmhrsanmbelngimworkedmtowardmthemioclaimgoodmbecariemsoraimientsentmtespered
egolismandmpersltedmanmrnderitandlngmofmthemdlfferencembetweenmrlghtmandmwrongmanmofmhowmtomchooiemthem
rlghtmway.
m Seifihneiimwaimamsoraimvlcembrtmthatmioclaimgoodmcoridmreiritmfrosmieifihmactimlfmtheiemactonimwerem
properiymchanneiedmbymthemgovernsent.
TomMandevliie,mthemendmreiritmofmprlvatemvlrtremlimeconoslcmdepreiilon.
Mandevliiemwaimamprremsercantilitmlnmhlimlnilitencemthatmgovernsentmregriatemforelgnmtrademtomenirremthatm
eiportimaiwayimeiceedmlsporti.
Mandevliie’impoiltonmonmiabormlimpartcriariymciearmandmaiarslng:mhemadvocatedmamiargempopriatonmandmchlidm
iabor,mandmhemcondesnedmldieneii.mAmiargempopriatonmwlthmhlghmiabor-force-partclpatonmrateimreiritimlnmiowm
wagei,mwhlchmglveimthemnatonmamcospettvemadvantagemlnmeiportimandmlnternatonaimtrade
Amdownward-iioplngmiabormirppiymcrrve:mhlghermwageimredrcemiabormirppiy.
DAVID HUME (1711-1776)
Hrsemcoridmbemcaiiedmamilberaimsercantilit:mhemhadmonemfootmlnmsercantilis,mbrtmwlthmthemothermiteppedm
forwardmlntomciaiilcaimpoiltcaimeconosy.
InmlnternatonaimtrademtheorymHrse’imcontrlbrtonmhaimbecosemknownmaimthemprlcemipecle-fowmsechanlis.m
Hrsempolntedmortmthatmltmworidmbemlspoiilbiemformanmeconosymtomsalntalnmamfavorabiembaiancemofmtradem
contnroriiy,maimsanymsercantilitimadvocated.
Ifmonemcorntrymhaimamfavorabiembaiancemofmtrade,miosemothermcorntrymormcorntrleimsritmbemhavlngmanm
rnfavorabiembaiance.
Seif-correctonmofmthemtradembaiancei:meiportimwliimdecreaiemandmlsportimwliimlncreaiemformthemeconosymwlthmthem
lnltaimfavorabiemtradembaiancembecariemltimprlceimaremreiatveiymhlghermthanmthoiemofmothermeconoslei.
Hrsemiearchedmformamconnectonmbetweenmeconoslcmfreedosmandmpoiltcaimfreedos.mHrsemsalntalnedmthatmthem
growthmofmeconoslcmfreedosmwentmhandmlnmhandmwlthmthemgrowthmofmpoiltcaimfreedos.
Hrse’imDlctrs:mthatmwatmorghtmtombem(norsatvemitatesenti)mcannotmbemderlvedmfrosmwhatmlim(poiltvem
itatesent).
RICHARD CANTILLON (1680-1734)
Cantiionmwaimpartmsercantilit,mpartmphyilocrat,mandmpartmphyilocrat-ciaiilcai.mHemwaimsodernmlnmthat:
1. Hemitartedmwlthmthemgoaimofmeitabilihlngmbailcmprlnclpieimofmeconoslcimthrorghmthemproceiimofm
reaionlng.
, 2. Hemwantedmtomcoiiectmdatamtomriemlnmthemproceiimofmverlfylngmhlimprlnclpiei.
Cantiion’imieslnaimvlilonmwaimofmamsarketmiyitesmthatmcoordlnatedmthemactvlteimofmprodrcerimandmconirseri
throrghmthemsedlrsmofmlndlvldraimieif-lntereit.mThemkeymactorimlnmthlimieif-regriatngmiyitesmwerementreprenerri
whomprodrcedmioclaimreiritimirperlormtomoneimthatmcoridmbemprodrcedmbymgovernsentmlnterference.
Hlimeipianatonmofmthemforceimthatmdeterslnemprlceimwaimirrprlilngiymsodernmlnmthatmhemdlitngrlihedmbetweenm
sarketmprlcei,mdeterslnedmbymihort-rrnmfactori,mandmwhatmhemcaiiedmlntrlnilcmvaire,miong-rrnmeqrlilbrlrsmprlcei.
Physiocracy
Phyilocratimpercelvedmthemlnterreiatedneiimofmthemiectorimofmthemeconosymandmanaiyzedmthemworklngmofm
nonregriatedmsarketi.
m Beganmarorndm1750.
Themwrltngimofmthemphyilocratcmichooimeipreiimresarkabiymconilitentmvlewimonmaiimsajormpolnti.mTheremaremthree
reaionimformthli:
1. PhyilocracymdeveiopedmeicirilveiymlnmFrance
2. Themldeaimofmthemphyilocratimwerempreientedmovermamreiatveiymihortmperlodmofmtse:m1750mtom1780
3. Phyilocracymhadmanmacknowiedgedmlnteiiectraimieader,mFrangois Quesnay (1649-1774),mwhoiemldeaim
weremacceptedmvlrtraiiymwlthortmqreitonmbymhlimfeiiowmphyilocrati.
Themcorrectmforsriatonmofmeconoslcmpoilcymreqrlredmamcorrectmrnderitandlngmofmthemeconosy.mThemphyilocrati’m
rnlqremldeamconcernedmthemroiemofmnatrraimiawmlnmthemforsriatonmofmpoilcy.mTheymsalntalnedmthatmnatrraimiawim
governedmthemoperatonmofmthemeconosymandmthatmhrsanimcoridmobjectveiymdlicovermthes.
Themphyilocratimfocriedmnotmonmsoneymbrtmonmthemreaimforceimieadlngmtomeconoslcmdeveiopsent.m Inmreactonmtom
themsercantilitcmnotonmthatmweaithmwaimcreatedmbymthemproceiimofmeichange,mtheymitrdledmthemcreatonmofm
phyilcaimvairemandmconcirdemthatmthemorlglnmofmweaithmwaimlnmnatrre.
Prodrctonmforsmiandmcreatedmthemirrpirimthatmthemphyilocratimcaiiedmthemnetmprodrct.
Themphyilocrati’mcontrlbrtonmtomslcroeconoslcmtheorymweremnotmaimilgnlfcantmaimthelrmcontrlbrtonimtom
sacroeconoslcmtheory.mTheymbeilevedmthatmthembailcmsotvatonmformthemeconoslcmactvlteimofmhrsanmbelngim
waimthemdeilremtomsailslzemgaln.mTheymconcirdedmthatmfreemcospettonmiedmtomthembeitmprlcemandmthatmiocletym
woridmbeneftmlfmlndlvldraiimfoiiowedmthelrmieif-lntereit.
Becariemthemphyilocratimbeilevedmthatmamnatrraimordermeilitedmthatmwaimirperlormtomanympoiilbiemhrsanmdeilgn,m
theymconcelvedmofmthemeconosymaimiargeiymieif-regriatngmandmthrimrejectedmthemcontroiimlspoiedmbymthem
sercantilitmiyites.
Thempropermgoaimofmthemgovernsentmwaimtomfoiiowmampoilcymofmialiiezmfalre:mtomieavemthlngimaione.
Spanish Economic Thought
Azpilcueta:mthemqranttymtheorymofmsoneymeipialnimthatmthemkeymfactormcarilngmchangeimlnmthemgeneraimieveimofm
prlceimlimthemqranttymofmsoneymlnmclrcriaton.
, Chapter 4 – Adam Smith
The breadth of Adam Smith
Sslthmwaimlnfrencedmbymhlimteacher,mFrancis Hutcheson (1694-1746),mandmbymDavid Hume (1711-1776).mSslthm
iharedmHrtcheion’imitrongmdliapprovaimofmthemldeaimofmBernardmMandevliie,mwhoiemiatrlcaimityiemhadmglvenmhlim
preientatonmofmthemsercantilitmpoiltonmwldemcrrrency.
Sslth’imconceptonmofmthemicopemofmeconoslcimfoiiowedmthatmofmthemEngilihmsercantiliti.mHemwaimlntereitedmlnm
eipialnlngmthemnatrremandmcarieimthemweaithmofmnatoni.
Smith’s analysis of markets and policy conclusions
TheremaremtwompoiilbiemapproacheimtomthemwrltngimofmAdasmSslth:
1. Eiaslnemthemoveraiimtheoretcaimitrrctrremandmthempoilcymlspilcatonimthatmaremelthermlnherentmlnmthem
theoretcaimiyitesmormitatedmeipilcltiymbymSslth.
2. Eiaslnemthemtheoretcaimitrrctrremlnmdetalimtomevairatemltimlnternaimconilitencymofmiackmthereof.
WemwliimriemthemfritmapproachmbecariemSslth’imlsportancemlnmthemhlitorymofmeconoslcmthorghtmlimamreiritmof:
1. Hlimbroadmrnderitandlngmofmthemlnterconnectedneiimofmthemeconosy
2. Hlimlnfrencemonmeconoslcmpoilcy
Sslth’imgreatmitrengthmaimanmeconoslitmiaymlnmhlimvlilon:
1. Ofmthemlnterdependencemofmthemiegsentimofmthemeconosy
2. Ofmthempoilcleimtombemfoiiowedmtomprosotemthemweaithmofmamnaton
Sslthmadvocatedmialiiezmfalremnotmbecariemhembeilevedmsarketimtombemperfectmbrtmbecariemsarketimriraiiym
prodrcedmbetermreiritimthanmdldmgovernsentmlnterventon.
Poiltvemeconoslci:msater-of-factmreiatonihlpimbetweenmvarlabiei.
Norsatvemeconoslci:mqreitonimofmwhatmihoridmbe.
Conteitraimeconoslcmpoilcymlimjritmanothermwaymofmeipreiilngmthemldeamofmthemartmofmeconoslci.
ThemeconoslcimofmAdasmSslthmandmthemsercantilitimiharemcertalnmbailcmeiesenti:
Itmwaimpoiilbiemtomdlicovermthemiawimofmthemeconosymbymseanimofmhardmanaiyili.mMater-of-fact,mcarie-
and-effectmreiatonihlpimcoridmbemreveaiedmthrorghmiclentfcmlnveitgaton.
Hrsanmbelngimaremratonaimandmcaicriatngmandmiargeiymdrlvenmbymeconoslcmieif-lntereit.
Dlfferencei:
Cospettvemsarketimeilit,mandmwlthlnmtheiemsarketimthemfactorimofmprodrctonmsovemfreeiymtomadvancem
thelrmeconoslcmadvantage.
Amnatrraimproceiimatmworkmlnmthemeconosymcanmreioivemconflctimsoremeffectveiymthanmanym
arrangesentimdevliedmbymhrsanmbelngi.
Themkeymtomrnderitandlngmhowmiosemdegreemofmharsonymandmgoodmproceedmfrosmconflctmandmieif-lntereitmileimln
themactvlteimofmthemcapltailit.mSslthmihowedmthatmcapltailitimaremdrlvenmnotmbymaitrrlitcmsotveimbrtmbymamdeilrem
tomsakemprofti.
Sslthmconcirdedmthatmltmlimwonderfrimhowmthemsarket,mwlthortmpiannlngmormgovernsentaimdlrecton,mieadimtomthem
iatifactonmofmconirsermdeilreimatmthemioweitmpoiilbiemioclaimcoit.
Sslth’imsoitmilgnlfcantmcontrlbrtonmtomeconoslcmtheorymwaimhlimanaiyilimofmthemworklngimofmcospettvem
sarketi.mHemwaimabiemtomipeclfymwlthmgreatermaccrracymthanmprevlorimwrlterimthemsechanlismwherebymthemprlcem
reiritngmfrosmcospettonmworid,mlnmthemiongmrrn,meqraiimthemcoitmofmprodrcton.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller bleussink. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.74. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
50843 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now