Lecture #12 "Mercantilism/Scottish Moral Philosophers/Physiocrats " (09/28/2011)

Through this lecture several systems and economic ways of thinking.

Mercantilism 

• Largely responsible for the lack of growth in several countries.
• Huge regulation and restrictions on everything, stifled innovation. 
• Source of wealth was king's bank account. 
• Gold in Treasury
• Positive Balance of Trade

Mercantalists argued:

1. Anytime there was a trade, it was zero sum (wealth was fixed). There was a winner and loser in every transaction.
2. Money is wealth

Thus based on (1) and (2), they concluded that the King should control trade and push for a positive exchange balance by restricting imports and promoting exports. 

Basic Idea:  no free trade because individuals see the private benefit, not the country as a whole.

French Physiocrats:

• They believe that the source of wealth of a country relies on their agriculture
• No other source was as important as the production of farm goods

Scottish Moral Philosophers:

• There believe was strongly based on the understanding of acting freely.
• Community does not require to act as a whole in order to succeed
• Price-specie flow mechanism works

David Hume (1711-1766):

• Disagree with the Physiocratcs since agriculture was defenetivly not the source of wealth
• Commerce is the source of wealth since it trading tgives. 
• Competition
• Innovation and Leaning
• Division of Labor

Rizzo

-Daniel Gaona