Here are just some introductory remarks on mercantilism.
Mercantilism is a little difficult to cover as an analytic topic,
because it's not quite an economic theory,
and when you read a lot of the mercantilists,
they don't always make sense
and there's not always some way
you can nudge or push all of it into a contemporary framework.
You can think of a lot of it as practical maxims for statesmen
rather than being economics, per se.
It's important to realize that mercantilism was set in a world
where there were growing trade relations.
All of sudden, international trade and international finance were major issues,
there was growing state power,
countries wanted to compete more on the world stage,
and mercantilism was originally a set of recipes that would help them do so
with some economic points thrown into that mix
Here are some key points which are common across mercantilist writings,
though I'm not sure there's one writer
who has exactly all of these in the way I'm presenting.
But in any case, you can think of mercantilism as having
a lot to do with state-building,
making a state more powerful and raising more revenue.
Our mercantilist writers,
they generally favor a large and growing population.
That was also to make the nation stronger.
There's a big emphasis on having a favorable balance of trade in mercantilism.
Often, if anything, this would be called
one of the defining characteristics of mercantilism,
that is, you wanted an influx of precious metals into your country
rather than having the metals flow out.
Very often, it's not really exactly explained why you want this,
but, again, it recurs time and again in mercantilist writings.
There's a general favoring of low interest rates --
with real and nominal typically not being distinguished.
The idea that a country should manipulate its economic relations
with its colonies toward its advantage.
And, in general, international economic relations are viewed implicitly
as either zero-sum or negative-sum.
So, you can think of mercantilim as a cluster concept
where most mercantilist writers offer some bundle of these ideas listed here.
Again, there's no perfectly mercantilist writer
but if I had to pick two typical people to read,
to get a flavor for mercantilism,
I would suggest going to Thomas Mun and also Gerard de Malynes.
And, in general, mercantilism reached its peak popularity
in 16th and 17th century England.
It's important to note, mercantilism really was not just a British phenomenon.
There was French mercantilism, German mercantilism,
mercantilism in other forms.
But these other approaches, they tended to have a bit more to do
with state-craft directly,
and they were less likely to have fed
into the mainstream of analytic economic thought
as it was to later culminate
in classical economics and Adam Smith.
In the sense analytically, I think it's Britsh mercantilism
that really is important.
But keep in mind that mercantilisms of other countries or regions,
they had their own distinct flavors,
and don't oversimplify by thinking it's just all like the British.
Still, some general notions of building up the state
and worrying about international economic relations,
you find these in the other mercantilisms as well.
Why was there mercantilism and why did it persist so long?
Well, there are at least 3 major approaches to this.
One of them, which can be found in Jacob Viner,
suggests that we had mercantilism because of analytic errors.
We had bad economics.
And once economics got better,
mercantilism turned into classical economics.
Another approach to mercantilism, from Ekelund and Tollison,
is to view it as a form of rent-seeking.
That is, the mercantilist writers were serving established interests
and centers of political power,
and they came up with doctrines to rationalize their patrons and supporters.
Another approach to mercantilism, quite different,
you find this in Keynes in his general theory.
And Keynes argued that mercantilism actually and partial sense.
If you think of these economies as perhaps having some sticky prices
or overly regulated prices and wages,
and they might have aggregate demand shortfalls,
well, then it might make sense to want
this influx of metals and low interest rates and growing population,
because that would boost aggregate demand.
What's the truth? I actually think --
there's quite a bit to all of these 3 hypotheses
and mercantilism, as we find it in the real world,
is some combination of those.
The most important thing to mercantilism to me,
apart from its historical relevance,
is in terms of economic theory,
over time, mercantilism becomes increasingly analytical.
16th century mercantilism --
is usually just a bunch of statements.
By the time you get to, say, the middle of the 17th century in British writings,
you can see a lot of elements from classical economics
in the mercantilist writers,
and bit by bit, the foundations of classical economics are being built up.
Finally, when you go to read Adam Smith,
you find in Smith so many of the elements from the more sophisticated mercantilists.
Not that Smith was a mercantilist,
but you get a better understanding if just how much
he drew from the best of the mercantilists
and jettisoned some of the worst ideas.
So mercantilism in this sense is really very important
as some really fundamental origins of economic reasoning more generally,
no matter what may be the mistakes or shortcomings
of mercantilism more generally.
Of course, there's really plenty you can read on mercantilism;
it spanned centuries and also countries.
Obviously, Google the key terms and some of the references listed earlier.
A lot of those are available online.
If you'd like one general book as a kind of overview
of economic thought before Adam Smith,
I very much recommend the book by Terence Hutchison,
Before Adam Smith
And finally, to get a sense of the institutional context
and policy struggles behind mercantilism,
the importance of mercantilism as state-building,
there's a very detailed work of history by John Brewer
called
but I think it's an excellent way to understand
how mercantilism fit into this broader picture.