Mercantilism and the Physiocracy
Early economic thought (pre-classical economics) (8th century BC – 1776) 1. early pre-classical economics (Greeks, Scholasticism) (800 BC – 1500) 2. late pre-classical economics (1500-1776)
Mercantilism, 16th - 18th centuries;
Physiocracy, France, 1750 -1789
Late pre-classical economics spans from circa the year of 1500 to 1776. We can distinguish two main currents of economic thought in this period: Mercantilism, active in the whole Europe from 13th to 16th century and Physiocracy, a French school of economic thought, active from about 1750 to 1789. We discuss them in turn.
Important writers of this period (late pre-classical economics) Thomas Mun, England’s Treasure by Foreign Trade, 1664
William Petty, Political Arithmetic, 1690
Bernard Madeville, The Fable of the Bees, 1714
David Hume, Political Discourses, 1752
Richard Cantillon, Essay on the Nature of Commerce in General, 1755 Francois Quesney, Tableu Economique, 1758
The period between 1500 and 1750 was characterized by an increase in economic activity. Feudalism was giving way to increasing trade. Individual economic activity was less controlled by the custom and tradition of the feudal society and the authority of the church. Production of goods for market became more important and land, labor and capital began to be bought and sold in markets. This laid the groundwork for the Industrial Revolution in the second part in the 18th century. However, we have to remember, that still we are talking about pre-industrial world, where agriculture is the most important sector of the economy.
During this period from 16th to the half of 18th century, economic thinking developed from simple applications of ideas about individuals, households and producers to a more complicated view of the economy as a system with laws and interrelationships of its own.
Mercantilism is the name given to the economic literature and practice in Europe of the period between 1500 and 1750. Although mercantilist literature was produced in all the developing economies of Western Europe (and I should add some Eastern European, for example in Poland, economies too), the most significant contributions were made by the English and the French.
Whereas the economic literature of scholasticism was written by medieval churchmen, the economic theory of mercantilism was the work of secular people, mostly merchant businessmen, who were privately engaged in selling and buying goods. The literature they produced focused on questions of economic policy and was usually related to a particular interest the merchant and writer (in one person) was trying to promote.
For this reason, there was often considerable skepticism regarding the analytical merits of particular arguments and the validity of their conclusions. Few authors could claim to be sufficiently detached from their private issues and offer objective economic analysis. However, throughout the mercantilism, both the quantity (there were over 2000 economic works published in 16th and 17th century) and quality of economic literature grew. The mercantilist literature from 1650 to 1750 was of distinctly higher quality, these writers created or touched on nearly all analytical concept on which Adam Smith based his Wealth of Nations, which was published in 1776.
The age of mercantilism has been characterized as one in which every person was his own economist. Since the various writers between 1500 and 1750 held very diverse views, it is difficult to generalize about the resulting literature. Furthermore, each writer tended to concentrate on one topic, and no single writer was able to synthesize these contributions impressively enough to influence the subsequent development of economic theory.
Secondly, mercantilism can best be understood as an intellectual reaction to the problems of the times. In this period of the decline of feudalism and the rise of the nation-states,...
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