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The dispatching of mercantilist doctrine is one of the foundation stones of modern economics.Yet its defeat has been less total than an introductory economics course might suggest.
MERCANTILISM is one of the great whipping boys in the history of economics.
The school, which dominated European thought between the 16th and 18th centuries, is now considered no more than a historical artefact—and no self-respecting economist would describe themselves as mercantilist.
It is often said that a better understanding of economic history would have helped us to avoid the worst of the recent crisis.
Over the next few weeks Free exchange will consider milestones in economic history, showing how they contributed to the development of economic thought.
The Navigation Acts, which severely restricted the ability of other nations to trade between England and its colonies, were one such example.
And there are some amusing (and possibly apocryphal) stories of bullionism in action.In 1598 Barthélemy de Laffemas, a French thinker, denounced those who opposed the use of expensive silks.He argued that purchasers of luxury goods created a livelihood for the poor, whereas the miser who saved his money “caused them to die in distress”.And almost all mercantilists considered ways of bringing more people into the labour force.Mr Grampp even suggests that Keynesian economics "has an affinity to mercantilist doctrine”, given their shared concern with full employment.In fact, they were alarmed by the idea of hoarding gold and silver.This is because many mercantilist thinkers were most concerned with maximising employment.And a paper by William Grampp, published in 1952, offers a subtler account of mercantilism.Mr Grampp concedes that mercantilists were keen on foreign trade.The best way of ensuring a country’s prosperity was to make few imports and many exports, thereby generating a net inflow of foreign exchange and maximising the country’s gold stocks. Accumulating gold was thought to be necessary for a strong, powerful state.Countries such as Britain implemented policies which were designed to protect its traders and maximise income.