Abstract
As the seventeenth century came to a close heterodox ideas appeared from many quarters containing statements normally associated with classical liberalism. To those imbued with the new spirit of inquiry and its successes typified by Newton’s discovery of the laws of physics and Harvey’s description of the circulation of the blood in the human body, mercantilist theory was vulnerable on two counts. First, protectionist policies might conceivably preserve trade for a while, but could not guarantee its expansion. The only sound basis for a thriving commerce is the accumulation and efficient utilisation of productive resources. And both commerce and the efficient employment of resources are best left to be carried on by individuals pursuing their own self-interest. Second, and reinforcing the first point, the indefinite accumulation of treasure must be self-defeating in the long run if the logic of the quantity theory was to be taken seriously.
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Notes and References
Pierre le Pesant Boisguillebert, Traité des grains, p. 405.
See Eugene Daire (ed.) Economistes-Financiers du XVIIIe Siècle (Paris: Guillaumin Libraire, 1843) p. 409.
Quoted in C. B. A. Behrens, The Ancien Régime (London: Thames & Hudson, 1967) p. 123.
Quoted in John Marks, Science and the Modern World (London: Heinemann, 1983) p. 106.
N. Barbon, A Discourse of Trade (London, 1690) p. 32.
North, in McCulloch (ed.) Early English Tracts, op. cit. pp. 513, 543.
C. Davenant, An Essay on the East India Trade (1697), in C. Davenant, Political and Commercial Works, ed. C. Whitworth (London, 1771) vol. I, pp. 98, 99.
Davenant, op. cit. vol. v, p. 378.
[Henry Martin] Considerations on the East India Trade, in McCulloch (ed.) op. cit. p. 583.
W. J. Ashley, ‘The Tory Origins of Free Trade Policy’, Quarterly Journal of Economics, vol. 2, p. 338.
Leslie Stephen, English Thought in the Eighteenth Century (London: Macmillan, 1902 ed.) vol. II, p. 297.
Schumpeter, History of Economic Analysis, op. cit. pp. 239, 373, 374. Viner was equally impressed. Martin’s work, he said, revealed ‘almost no trace of the mercantilist or protectionist fallacies’, Viner, op. cit. p. 104. But Martin was no free-trader (at least in regard to Anglo-French trade) as indicated in the text. Ricardo’s disciple, J. R. McCulloch, called North ‘an Achilles without a heel’ and also praised Martin for his understanding of true economic principles. McCulloch, op. cit. pp. xii–xiv.
Viner, Studies, op. cit. pp. 439–40.
Schumpeter, op. cit. p. 376.
J. Bodin, ‘Reply to the Paradoxes of M. Malestroit’, in Monroe (ed.) Early Economic Thought, op. cit. p. 127.
See Hugo Hegeland, The Quantity Theory of Money (Göteborg, 1951) p. 14.
Martin de Azpilcueta [Navarro], Comentario Resolutorio de Usuras (1556), in Marjorie Grice-Hutchinson, The School of Salamanca: Readings in Monetary Theory, 1544–1605 (Oxford, 1952) pp. 94–5.
See also Peter Bernholz, ‘Flexible Exchange Rates in Historical Perspective’, Princeton Studies in International Finance, no. 49 (July 1982) pp. 4–5.
Mun, England’s Treasure, op. cit. p. 17.
J. Locke, Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money (London, 1691) reprinted in
The Works of John Locke (London, 1823) vol. v. For an analysis of Locke’s interpretation of the quantity theory, see
Arthur Leigh, ‘John Locke and the Quantity Theory of Money’, History of Political Economy, vol. 6 (Summer 1974) pp. 204–10.
D. North in McCulloch (ed.) op. cit. p. 538. Locke does, indeed, hint at the automaticity of specie distribution in the following passage: ‘Nature has bestowed mines on several parts of the world; but their riches are only for the industrious and frugal. Whomsoever else they visit, it is with the diligent and sober only they stay.’ Locke, Some Considerations, op. cit. p. 117.
Locke, Some Considerations, op. cit. pp. 16–17.
Jacob Vanderlint, Money Answers All Things (1734) in a Reprint of Economic Tracts with an Introduction by J. Hollander (Baltimore: Johns Hopkins U.P., 1914).
Cantillon, op. cit. ed. Henry Higgs (London: Macmillan, 1931). The Essai (which may have been originally written in English — Cantillon was an Irish banker in Paris) was not published until 1755. Large portions of the English original were incorporated in PostIethwayt’s writings (1749, 1751–5) and the latter may have been known to Hume.
To illustrate the point about non-traded goods, Cantillon gives the example of corn and cattle in England. Corn was freely traded, but cattle imports were banned (i.e. cattle were non-tradables). However great the increase in English money-supply, the price of corn could not rise above the world level, allowing for transport costs and risk. The price of cattle, however, would be determined solely by English market conditions. See Cantillon, op. cit. (original English trans. 1755) p. 179.
Cantillon, op. cit. p. 184.
Isaac Gervaise, The System or Theory of the Trade of the World (1720) in Reprint of Economic Tracts with a foreword by J. Viner and introduction by J. M. Letiche (Baltimore: Johns Hopkins U.P., 1954).
For a detailed commentary on Gervaise see J. M. Letiche, ‘Isaac Gervaise on the International Mechanism of Adjustment’, Journal of Political Economy, vol. 60 (Feb 1952) pp. 34–43.
Johnson, ‘Mercantilism: Past, Present and Future’, op. cit. p. 4.
Frank W. Fetter, Development of British Monetary Orthodoxy 1797–1875 Harvard U.P., 1965) p. 4.
See also Viner’s Foreword and Thomas M. Humphrey and Robert E. Keleher (eds) The Monetary Approach to the Balance of Payments, Exchange Rates and World Inflation (New York: Praeger, 1982) pp. 122–3.
Gervaise, op. cit. p. 15. Notice that in Gervaise’s account of the adjustment process there is no role for changes in relative price levels.
Gervaise, op. cit. p. 12.
For Hayek’s comment see F. A. von Hayek, Prices and Production (London: Routledge & Kegan Paul, 1931) p. 9.
Marx and Engels’s suspicion of plagiarism against Hume is contained in Karl Marx, vol. I of Capital (Moscow: Foreign Languages Pub. House, 1977) p. 124 n. and
Marx and Engels, Anti-Dühring (Moscow: Progress Publishers, 1969) pp. 280–6.
For a good summary of the contributions of Vanderlint, Cantillon, Gervaise and Hume see Thomas T. Sekine, ‘The Discovery of International Monetary Equilibrium by Vanderlint, Cantillon, Gervaise and Hume’, Economia Internazionale, vol. 26 (1973) pp. 262–82.
David Hume, ‘Hume to Montesquieu’ (letter 10 Apr 1749), in Eugene Rotwein (ed.) David Hume: Writings on Economics (London: Nelson 1955) p. 189.
‘Hume to Turgot’ in Writings on Economics, ed. Rotwein, op. cit. p. 208.
Rotwein, op. cit. p. 65.
Ibid. ‘Hume to Oswald’, p. 197. See also Oswald’s letter dated 10 October 1749: ‘Oswald to Hume’, pp. 191–2.
Viner, Studies, op. cit. p. 319, also pp. 316–18.
Rotwein, op. cit. ‘Hume to Turgot’, p. 209.
Paul A. Samuelson, ‘A Corrected Version of Hume’s Equilibrating Mechanisms for International Trade’, in John S. Chipman and Charles P. Kindleberger (eds) Flexible Exchange Rates and the Balance of Payments: Essays in Memory of Egon Sohmen (Amsterdam: North-Holland, 1980) pp. 141–57.
See also Paul A. Samuelson, ‘An Exact Hume-Ricardo-Marshall Model of International Trade’, Journal of International Economics, vol. 1 (Feb 1971) pp. 1–18.
See Ronald W. Jones, ‘International Trade Theory’, in E. Cary Brown and Robert M. Solow (eds) Paul Samuelson and Modern Economic Theory (New York: McGraw-Hill, 1983) p. 97 n. 57.
On this alternative interpretation of Hume’s mechanism see Charles E. Staley, ‘Hume and Viner on the International Adjustment Mechanism’, History of Political Economy, vol. 8, no. 2 (1976) pp. 252–65.
Rotwein, op. cit. p. 74 n. 1. Two interesting articles on Hume and modern monetarism and the monetary approach to balance-of-payments theory are Thomas Meyer, ‘David Hume and Monetarism’, Quarterly Journal of Economics (Aug 1980) pp. 89–101, and
Dietrich K. Fausten, ‘The Humean Origin of the Contemporary Monetary Approach to the Balance of Payments’, Quarterly Journal of Economics (Nov 1979) pp. 655–73.
Blaug, op. cit. p. 23.
Rotwein, op. cit. p. 63.
Ibid. pp. 39–40. Although each monetary inflow had only transitory effects on output expansion and employment — there was no long run ‘trade-off’ between unemployment and inflation — Hume obviously believed that periodic injections of this kind had favourable cumulative effects on economic development. The transitory effects depended on the assumption that when ‘a quantity of money is imported into a nation … it must first quicken the diligence of every individual, before it encreases the price of labour’. (ibid. p. 38). Regular increases in the money-supply were therefore the means to lift the economy to higher levels of output and employment — given, as Hume implicitly recognised, the existence of unused resources.
Viner, Studies, p. 99.
Keynes, General Theory, op. cit. p. 343 n.
Rotwein, op. cit. p. 76.
Ibid. p. 78.
Ibid. p. 84.
Ibid. pp. 66, 75, 78–81.
F. Quesnay, ‘Grains’, in Eugene Daire, Physiocrates (Paris, 1846); (Geneva: Slatkine Reprints, 1971) p. 295.
See also A. Sauvy (ed.) François Quesnay et la Physiocratie (Paris: Institut National d’Etudes Demographiques, 1958) p. 964.
Quesnay, ‘The second edition of the tableau’, in R. L. Meek, The Economics of Physiocracy: Essays and Translations (London: Allen & Unwin, 1962) p. 124.
There is evidence for such optimism, e.g. Ralph Davis’s observation that ‘the years 1730–70 saw a big advance in the productivity of French agriculture’. Davis, The Rise of the Atlantic Economies, op. cit. p. 291.
By Professor Peter Groenewegen, in ‘Turgot’s place in the history of economic thought: a bicentenary estimate’, History of Political Economy, vol. 15, no. 4 (1983) pp. 590, 593.
S. Hollander, The Economics of Adam Smith (London: Heinemann, 1973) p. 50.
Turgot, ‘Letter on the Marque des fers’, quoted in Groenewegen, op. cit. p. 591.
Quoted by Groenewegen, op. cit. p. 591.
See G. Schelle, Œuvres de Turgot (Paris, 1913–23), vol. 2 p. 510.
J.-F. Melon, Essai politique sur le commerce (1734), quoted in E. Daire, Economistes français du 17e siècle (Paris, 1843) p. 733.
Jacques Savary, Le parfait négociant, ou Instruction générale de tout ce qui regarde le commerce (Paris, 1675) (1713 ed.) p. 1.
Montesquieu, Espirt des Lois, book xx, p. 2 quoted by Albert O. Hirschman, The Passions and the Interests (Princeton UP, 1977) p. 80.
preface to William Robertson, History of the Reign of the Emperor Charles V, ed. Felix Gilbert (Univ. of Chicago Press, 1972) p. 67.
Sir James Steuart, An Inquiry into the Principles of Political Economy (1767) ed. Andrew S. Skinner (Edinburgh: Oliver & Boyd, 1966) vol. 2, p. 217, and vol. 1, LXXIII.
Quoted in James L. Clifford (ed.) Man Versus Society in Eighteenth-Century Britain: Six Points of View (Cambridge U.P., 1968) p. 14.
Ekelund and Tollison, Mercantilism as a Rent-seeking Society, op. cit.
F. A. von Hayek, The Constitution of Liberty (Chicago U.P., 1960) p. 163.
Adam Ferguson, An Essay on the History of Civil Society (Edinburgh, 1767) p. 187, quoted in
F. A. Hayek, New Studies in Philosophy, Politics, Economics and the History of Ideas (London: Routledge & Kegan Paul, 1978) p. 264 n. 56.
See also Hayek, Individualism and Economic Order (London: Routledge & Kegan Paul, 1948) p. 7.
Appleby, op. cit.pp. 22–3.
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Gomes, L. (1987). The Decline of Mercantilist Trade Doctrines. In: Foreign Trade and the National Economy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08992-5_3
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