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2: THE MERCANTILISTS AS LIBERALS - William Dyer Grampp, Economic Liberalism, vol. 1 The Beginnings 
Economic Liberalism (New York: Random House, 1965). vol. 1 The Beginnings.
Part of: Economic Liberalism, 2 vols.
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THE MERCANTILISTS AS LIBERALS
English mercantilism had its period between about 1500 and 1750. Almost always it is thought of as the antithesis of the classical economic liberalism which followed it. Smith used some of his strongest language to condemn it, and John Stuart Mill, his customary eclecticism failing him, could see no merit in it at all. In this generation, however, there has been a softening of the manner toward it, the expression of some sympathy for the mercantilists, and a disinclination to accept the judgment of the classicists. The new manner however seems much more the consequence of a dissatisfaction with Ricardian economics than the result of a reexamination of mercantilism itself. It has reemerged as a doctrine to be taken seriously, but its strength has come from the unpopularity of liberal ideas much more than from an appreciation of its own merits. The new manner is an expression of the old mistake, that mercantilism and liberalism are antithetical. My purpose in this chapter is to show they are not—to show that mercantilism was one phase in the development of liberal doctrine and as such was in part a precursor of it and in part a complement of it.
A simple distinction is helpful at the start—the distinction between the economic practices of the period and its economic writings. The word “mercantilism” has always been used to describe both, which is unfortunate, because they were not consistent. In what has been written about mercantilism and the mercantilists rather than what has been written by them, the author often will explain, say, the restriction of imports by referring both to the trade policy of the English government and to the concurrent doctrine of a favorable balance of trade. He will move indiscriminately among expressions of public officials, laws, economic tracts, and discourses. The obvious inference is that what was written was a justification of what was done, and that what was done must have found an apologetic in something or other that was written. No one would write this way of recent economic policy. It would be unthinkable to explain the stabilization policy of the Republican administration of the 1950s by a random reference to the economic reports of the President, the actions of the Federal Reserve Board, the 1950 policy statement of the American Economic Association, and other quite discrete events. When studies of mercantilism employ such a method, they present a view that is quite mistaken.
It must lead one to think that because the mercantilist states did not believe in the market as the mechanism for discharging the economic functions of society, the economists of the age held the same belief and were in favor of the intricate kind of regulation which was practiced. More than this indeed is implied. If the practitioners of mercantilism did not understand prices, money, foreign trade, and other matters, the economists also must not have understood these matters. There is a particular implication that the economists did not understand the usual mechanism by which the economic problem is solved in a free society and that this knowledge was the signal discovery of classical economics. From this one must conclude that the mercantilist writers were particularly lacking because they did not understand how the price system directs resources into particular employments and causes output to be distributed in a particular way.
None of these impressions about mercantilist doctrine, as distinct from mercantilist practice, is correct. (About the practices, one finds generalizations nearly impossible to make because there were fundamental disagreements among those who made state policy. An example is the opposition of Parliament to Elizabeth’s granting of monopoly rights.) Yet the impressions are unavoidable if the doctrine and practice are thought to be parts of a unified system, which in fact they were not. My view of mercantilism begins with a distinction between doctrine and practice and is about the doctrine alone. Briefly put, the view is that the mercantilist writers anticipated many of the ideas of classical economics, including the classical conception of self-interest, of the price mechanism, of the mutual advantage in exchange, and of the place of the state in the economic order.
Although the English mercantilist writers have never before been interpreted as they are here, there nevertheless have been many suggestions that their doctrine was not as altogether wrong as one has been led to believe and that in some ways it was a necessary preliminary to classical economics. Marshall thought of it in this way. T. E. Gregory noted that the purpose of mercantilist policy was to increase the demand and the supply of labor in order ultimately to increase national power. But he believed the methods were inconsistent with economic liberalism. Viner was charitable to the writings of later mercantilism, because he found traces of free trade doctrine in them. E.A.J. Johnson suggested that the objective of all of the mercantilists was an efficient use of resources, thereby implying the importance of employment in their doctrine. Keynes noted that their monetary theory was a valid effort to connect the money supply with the rate of interest. Heckscher noticed that some mercantilists declared they were in favor of a free market, even though he thought the declarations were not really meant. Lipson suggested the mercantilists are not to be dismissed in the cavalier fashion with which they usually have been treated. Edmund Whittaker found evidence of individualism in some of their writings. None of these men came to my conclusion and cannot be cited to substantiate it. But I wish to mention their work in order that my views shall not be thought to claim more novelty than they actually have. Shortly after they were first published, there appeared an interesting study of Berkeley made by T. W. Hutchison who independently arrived at many of the same conclusions.1
In what follows, the words “mercantilism” and “mercantilist” refer always to English doctrine and to the Englishmen who expressed it, and, except when explicitly stated, never refer to economic institutions, practices, historical circumstances, or the rulers and administrators of the age.
National Power and Full Employment
It is not in an obvious way that mercantilist and liberal economic doctrine are related. What is indeed obvious, is the great difference between the measures that each proposed to advance its policy. The liberals usually have wanted the market to make most (but not all) of the decisions of economic organization (i.e., about production and distribution). The mercantilists believed the decisions would be made better if the market was controlled in certain ways. There is, however, another way to look at mercantilist doctrine. It is to ask: What did the mercantilist writers believe was the objective of economic policy? And what were their measures of control meant to achieve?
Had the mercantilists been asked to state what their objective was, they undoubtedly would have said it was to create a strong and secure England. Although their motives were mixed and they wanted to do many things, what they wanted to do most was to promote the national interest. But so did the classical economists. They, too, were nationalists. They valued the political and military power of England above all things and were ready to sacrifice efficiency and even justice for it. The title of the major work of classical economics is An Inquiry into the Nature and Causes of the Wealth of Nations—not the wealth of the world, or of the people of Great Britain, but of Britain itself. The title suggests what Smith believed was most important to those who made economic policy. The policy of John Hales is indicated by the title of his work, A Discourse of the Common Weal of This Realm of England, written about 1549. Now the word “nationalism” is a piece of intensional language, and when applied to the economists it has to be shorn of its offensive connotations. They were not like Lord Copper who stood for “strong mutually antagonistic governments everywhere, self-sufficiency at home, self-assertion abroad.” It was rather that they were devoted to God, St. George, and particularly England.
What separated the mercantilists from the liberal economists was the means that each proposed for advancing the national interest. The mercantilists believed it required a prosperous and growing economy. That in turn meant a brisk trade, adequate domestic spending, a proper wage and price structure, a particular distribution of income, an excess of exports over imports, a diligent and obedient working class, the security of private property, the absence of monopoly, the full utilization of agricultural lands, an adequate supply of money, a low rate of interest, and the full utilization of the labor force.
Among these factors the greatest attention was given to the money supply, spending, and employment. By spending they meant what now is called effective demand, and employment meant just what it does today. There were various definitions of the money supply, but all writers agreed it was that which could be used as a medium of exchange. They believed that spending and employment determined each other in the sense that a change in one would cause a change in the other in the same direction. The money supply was made another determinant of spending by some writers, while others made it independent of spending and employment. To most mercantilists, the sufficient condition of prosperity was an amount of spending that would maintain full employment, and they subordinated the accumulation of bullion and other methods of increasing the money supply to the position of determinants of spending. Employment was taken to measure the economy’s output, and output was the measure of the nation’s material welfare. Welfare was essential to national power; hence a large output contributed to such power. Since output depended on employment, the object of economic policy must be full employment. So it was that the objective of mercantilist economic policy was full employment, and that objective was perfectly consistent with the objective of its political policy, which was national power.
The idea that employment and output should be maximized was expressed early in the period of mercantilism. John Hales, in the Discourse noted above, wrote that the state should adopt measures which would assure a “great plenty” of goods and that a “great plenty” required the employment in agriculture and the towns of all who were able to work. In the same year that Hales’s work is believed to have been published, 1549, there appeared an anonymous tract called Policies to Reduce This Realme Unto a Prosperous Wealthe and Estate. The author stated that foreign and domestic trade would be increased “if every laborer and artificer, and all other [of] the common people of this realm were well set at work.” The mercantilist objective of full employment, its connection with a flourishing trade, and the importance of trade to the nation were all summarized by Edward Misselden in 1622:
And what has more relation to matters of state, than commerce of merchants? For when trade flourishes, the King’s revenue is augmented, lands and rents improved, navigation is increased, the poor employed. But if trade decay, all these decline with it.
The importance of employment was expressed by William Petty (1662) in his familiar proposition that, as the nation’s population increased, its wealth increased in greater proportion, a proposition which was true, he made clear, if employment increased as much as or more than the population. He said the state should take the greatest care to utilize the labor force and to keep its skills in order. If necessary, the idle workers should be
employed to build a useless pyramid upon Salisbury Plain, bring the stones at Stonehenge to Towerhill, or the like; for at worst this would keep their minds to discipline and obedience, and their bodies to a patience of more profitable labours when need shall require it.
Petty’s expedient was ridiculed sixty-six years later by the author of the anonymous Considerations on the East India Trade, but Petty’s principle was accepted. The later author wrote:
A people would be thought extravagant and only fit for bedlam, which with great stir and bustle should employ itself to remove stones from place to place . . .
Yet as a method of increasing employment, the Considerations continued, such a shift was no more silly than the restricting of imports. If trade was free, “every individual man in England might be employed to the profit of the kingdom.” It is clear the later author believed the wise economic policy was one that maximized the national output; it also is clear that this was exactly what Petty believed. What they differed about was how to maximize. The later author implied that labor was mobile, or he may have believed that free trade would create labor mobility; he then could argue that maximum output required the specialization which free trade provides. Petty, on the other hand, made no such assumptions, and therefore the maximizing of output seemed to him to require the full utilization of labor by whatever means were appropriate to the circumstances of the moment.2
William Temple (1671) said the riches of a nation were in its people, and that they would add to the country’s wealth in proportion to necessity’s driving them to industry and enterprise. Nicholas Barbon (1690) believed employment was more important than efficiency in consumption and in the use of resources. Josiah Child (1690) believed the obstacles to greater national wealth were those that restricted free exchange and consequently reduced employment, and the reforms he submitted gave attention to increasing employment. Sir Dudley North (1691), who has been called one of the first free traders, wrote: “Commerce and trade, as hath been said, first springs from the labour of man, but as the stock increases, it dilates more and more.” As trade expands, or “dilates,” it “never thrives better, then when riches are tost from hand to hand.” Charles Davenant (1695) said that security of employment increased the industry of the worker, encouraged him to be thrifty, and hence was favorable to economic growth. John Law (1720) argued that one of the main benefits of an increase in the money supply would be an increase in employment. Daniel Defoe in his famous defense of tradesmen (1732) said the main benefit of trade was in the numbers it employed and he decried the effort of large tradesmen to lower costs and prices by reducing the number of hands through which goods passed on their way to the final buyer. John Cary (1745) stated that the wealth of the nation was in the “labour of its people.” Josiah Tucker (1750) wrote that the country was more prosperous, “the more persons there are employed in every branch of business.” Bishop Berkeley (1751) wrote on economics in the mercantilist period and stated that the satisfaction of wants is the end of economic activity and requires the complete and efficient employment of resources. Malachy Postlethwayt (1759) said the satisfaction of individual wants required full employment and competition.3
The preceding summary is meant to show that full employment was the major objective of mercantilist policy. The writers indicated how important it was by their frequent assertion that the wealth of the nation depended on its “labor”; in the significance they gave to the size of the population; in the common statement that the advantage of trade was in the numbers it employed; in the grave concern expressed over the extent of unemployment, idleness, and poverty, and in the numerous remedies by which these problems were to be solved and the productivity of labor was to be increased. Most of the measures of policy can be explained more simply and completely by assuming that full employment was the mercantilists’ objective than by supposing some other purpose directed their ideas.
One can, however, assume that an increase in the amount of “trade” was the objective if one uses that word, as the mercantilists almost always did, to include all economic activities. Then, their designs for “a brisk trade” become methods of assuring the maximum amount of productive effort, which of course is what full employment is meant to assure. But the word “trade” has a narrower meaning in modern speech, denoting one aspect of the distributive process, and its use can mislead the reader into thinking the mercantilists ignored shipping, manufacturing, agriculture, and other industries, which in fact they did not. Moreover, many of the mercantilists’ ideas can be related more directly to the amount of employment, than to the amount of trade. (For example, their ideas about psychological motivation have a plainer connection with work than with economic activity in general.)
The objective of the mercantilists was not, as often supposed, the accumulation of bullion, a favorable balance of trade, the advancement of private interests, the subordination of the working class, low interest rates, or the elevation of trade at the expense of manufactures and agriculture. Some of these considerations were means to the end of full employment. A few mercantilists may have confused money with wealth and so made bullion an end in itself. The importance of the other considerations is questionable. Certainly none of them had as important a place as full employment did and none serves as well to unify the particular measures of policy that were proposed.
Once full employment is taken as the objective of mercantilist policy, that policy’s difference from liberal policy narrows considerably. Although the difference is not eliminated, it is much less than if one supposes the objective of mercantilist policy was, say, a favorable trade balance, which the liberals never could have accepted as an end in itself.
As very many of the commentaries on mercantilism make a favorable balance of trade the objective of its policy, I must explain why that view is not accepted in this chapter. If the mercantilist writers had wanted a favorable balance of trade for its own sake, they surely would not have given as much attention as they did to the money supply, employment, spending, and domestic trade. Moreover, they would have emphasized (and not merely mentioned), a restriction of imports at least as much as an increase in exports, because either method would create a favorable trade balance. One can, of course, explain away the difficulty by supposing they were uninformed or inconsistent. But that attitude, as those who have worked in the field of intellectual history know, is usually mistaken. In this field the object is to understand what a writer said and not, except as a last resort, assume that he didn’t understand what he was saying.
My explanation of why the mercantilists wanted a favorable balance of trade is that they assumed England would be able to increase employment by exporting more than it imported. In the short-run this is perfectly possible (and the short-run may be a rather long time). The policy is a beggar-your-neighbor device, but as the writers were nationalists this could not have troubled them. In the long-run, a favorable balance of trade could have supported employment at home if England had invested its net receipts abroad. Indeed some mercantilists like Thomas Mun (1630) recommended this be done. Some commentaries on mercantilism have gone beyond the favorable balance of trade and explained it as a device to secure bullion which in turn was thought by the mercantilists (so the commentaries say) to increase the national wealth. As the mercantilists’ monetary theory is explained below, all that need be said here is that most of them did not think this at all.
The Means to Full Employment
In order to achieve full employment, the mercantilists proposed a variety of measures. Most of them have been cited for centuries as wonderful examples of what an economy should not do. However if they are related to the writers’ objective of policy, they invite close and sympathetic attention. In relating them, I wish to group the measures into: (a) those which affected the total spending of the economy; (b) those which affected prices, wages, and the distribution of income; (c) those which affected interest rates; and (d) those which affected the supply of labor. The measures in the first three groups were meant primarily to increase employment by increasing the demand for labor, while those in the fourth group were meant to increase the supply of labor.
INCREASING THE DEMAND FOR LABOR
Most of the mercantilists stated that the economy would prosper if there was the maximum amount of spending by individuals, business enterprise, foreigners, and (according to Petty) the government. Although most of the writers stressed spending on exports, some noted that spending in wholly domestic markets also was important. Petty stated there were circumstances that justified public extravagance, saying the spending of tax receipts on entertainments and “magnificent shows” put money into the hands of tradesmen, but he did not recommend it as a common practice, urging instead that the state use its fiscal powers to direct spending to capital goods. (That is, government should promote investment.) Barbon stated that covetousness (which meant a high propensity to save) reduced consumption, income, government revenues, and employment. He submitted that the most powerful stimulant to trade, even though it was wasteful in itself, was spending on commodities which quickly became obsolete, like clothing and household furnishings. Defoe believed the economy prospered when every consumer spent a large proportion of his income, although he urged the tradesman himself to be frugal. North was less interested in the solvency of the individual businessman than in the state of all trade. He observed that the desire to emulate their betters drove the “meaner sort” of men to extravagance and often into bankruptcy, which was unfortunate for the bankrupts but “beneficial to the public” because the activity increased trade, employment, and industriousness. Trade and employment will decline, he said, if “the consumption fails, as when men by reason of poverty, do not spend so much in their houses as formerly they did.” Many of the mercantilists were alarmed by the hoarding of gold and silver, and their frequent aspersions on individuals who fancied “plate,” i.e., tableware and household ornaments made of gold and silver, can be interpreted to mean that metals were being withdrawn from their monetary use. North disputed the common view that hoarding was an evil but deferred to the view to the extent of defending a miser by saying that even he spends occasionally and when he does “those he sets on work benefit by their being employed.”4
Foreign trade, however interested the mercantilists more than domestic, because they believed it contributed more to employment, to the nation’s wealth, and to national power. The writers after 1600 stressed the inflationary effect of an excess of exports over imports and the consequent increase in employment which inflation produced. They reasoned that a favorable balance of trade brought gold and silver to England, that the increased money supply caused spending to increase, and the increase in spending caused employment to increase. Some viewed exports more directly (and naively), thinking that the greater was the money value of exports, the greater must employment be. Few, if any, of the mercantilists distinguished carefully between the short- and the long-run effects of a favorable trade balance, a deficiency which would be more regrettable if most of their critics had not also failed to make the distinction. In order to secure a favorable balance, the mercantilists proposed their familiar commercial policy: duties on imports, with rebates on raw materials used in the making of exports; the prohibition of certain imported goods; the removal of export duties; subsidies and other forms of assistance to the export industries; monopoly grants to certain joint stock companies engaged in foreign trade; a prohibition on the export of bullion and coin; and an aggressive foreign policy by which England would help its exporters to capture markets from their competitors. The mercantilists before 1600 advocated foreign trade more because it increased national power than because it increased employment; and they wished to secure a favorable balance in order that England could accumulate bullion for war purposes. For this reason Hales regarded the export industries as most valuable to the nation and he said: “I would have them most preferred and cherished that bring in most commodity and treasure into the country,” commodity and treasure being synonyms for monetary metal.5
Not every one of the measures of policy noted above is proposed in all of the mercantilist tracts. In some they appear to be contradicted, especially the central idea that an increase in spending causes an increase in employment. For example, Temple was opposed to indiscriminate spending on consumption. Other writers lamented the taste for luxuries and urged their use be prohibited. Such opposition to spending rested on one or more of three arguments, and each reveals that the mercantilists in fact did believe an increase in spending caused an increase in employment. Temple, like his contemporary Petty, believed that England required more capital and he urged less consumption out of income in order that there be greater spending on capital goods. The mercantilists who opposed spending on luxuries did so partly because luxuries were imported (and imports reduced the favorable trade balance) and partly because the use of luxuries by the working class was thought to reduce its willingness to work (and so reduced employment).
PRICE AND WAGE POLICY
The mercantilists’ ideas about wages and prices were related to employment in four ways. One view was that wages determined export prices and the amount of exports. Hence wages determined spending and employment. A second was that the relationship between money wages and prices, or real wages, determined the distribution of income which in turn affected the amount of spending and employment. A third was that selling prices determined the amount of spending and employment. A fourth was that real wages determined the quantity of labor supplied.
Those mercantilists who regarded the net export balance as the chief determinant of employment usually favored a policy of low wages, reasoning that low wages meant low costs and prices and greater unit sales. However, some writers favored the opposite policy. Cary believed that high labor costs did not reduce exports. Arguing from the labor theory of value, he stated that the greater was the amount of labor used in the manufacture of exports, the greater their price would be and the greater the return in bullion from their sale—a viewpoint which assumed different demand conditions for English exports from those assumed by the mercantilists who favored low wages. The importance of demand conditions in the export market was made clear by Mun. He said England should take care to keep its costs down in the manufacture of those exports for which foreigners had no great need (i.e., for which the demand was elastic) and that it did not need to be as careful about those exports which foreigners found necessary (for which the demand was inelastic).6
Cary also favored high wages because he believed they supported employment in wholly domestic industries. He was opposed to wage reductions because he believed they would cause workers to spend less on food which in turn would reduce the income of landlords. He said prices should fall only as efficiency increased. Of all of the mercantilists who believed the distribution of income determined spending and employment, Defoe was the most explicit:
The consumption of provisions increases the rent and value of the lands, and this raises the gentlemens estates, and that again increases the employment of people, and consequently the numbers of them.
As the people get greater wages, so they, I mean the same poorer part of the people, clothe better, and furnish better, and this increases the consumption of the very manufactures they make; then that consumption increases the quantity made, and this creates what we call the inland trade, by which innumerable families are employed, and the increase of the people maintained; and by which increase of trade and people the present growing prosperity of this nation is produced.
Berkeley, in one of his rhetorical queries, expressed a similar idea:
Whether as feed equally scattered produceth a goodly harvest, even so an equal distribution of wealth doth not cause a nation to flourish?
Davenant and Postlethwayt also favored a more equal distribution of income or of wealth.7
A policy of high real wages implies a policy of low prices for any given money wage. Therefore one would think that the mercantilists who favored high real wages would have proposed price reductions or at least would not have been against them. Many however were against them. Defoe was, because he believed price cutting damaged the interests of the tradesman who by his central position in the economy had greatest influence on the amount of employment. Defoe, in fact, seems to have wanted high prices and high real wages; if he was aware of the difficulty of having both, it did not restrain him. He proposed wages be kept high by the tradesman’s avoiding all practices that would reduce the amount of labor required in enterprise. “There is a maxim,” he said, “that the more hands it [trade] goes through, the greater public advantage it is to the country.” In order to maintain high prices, he proposed that production be restricted if necessary:
There is another fundamental in the prosperity of a nation, which will never fail to be true, viz., that no land is fully improved until it is made to yield its utmost increase: But if our lands should be made to yield their utmost increase, and your people cannot consume the increase, or foreign trade take it off your hands, ’tis then no increase to us, and must not be produced; so that the lands must be laid down, that is to say, a certain proportion of them, and left to bear no corn, or feed no cattle, because your produce is too great for your consumption.
This idea was revived about thirty years later by Postlethwayt, and from it he developed the notion of maintaining the spending power of farmers by fixing the prices they received in a particular proportion to nonagricultural prices, a notion which contained in rudimentary form the idea of parity pricing. About a century prior to Defoe, Gerard Malynes (1656) wrote that the national interest required high prices. Still earlier, Hales wrote that spending should be directed to high-priced domestically produced goods in preference to lower-priced imports, although he believed the price level was too high and should be reduced by lowering the price of silver.8
The mercantilists’ attachment to high prices came of the inflationary persuasion that was common to most of them after 1600. (Before that, there were several proposals to increase the silver content of the coin which, the writers hoped, would be deflationary.) The writers after 1600 seem to have observed that unemployment was accompanied by declining prices and price warfare. They probably reasoned that in order to keep the economy prosperous, prices had to be kept high by means of maximum spending supported by an adequate money supply. Misselden wrote:
And it is much better for the kingdom, to have things dear with plenty of money, whereby men may live in their several callings: than to have things cheap with want of money, which now makes every man complain.9
It is quite important to notice that most mercantilists believed prices should be raised by monetary means. Almost all of them were opposed to raising prices by monopolistic practices, because that would have reduced employment, or at least would have made full employment more difficult to achieve. The mercantilist opposition to monopoly was not pragmatic or capricious but one part of their belief in competition. Their ideas about competition are explained below, and here it is necessary only to note what they thought was its effect on prices, wages, and employment.
Child stated that competition in domestic and foreign markets, including free entry into all occupations and industries, would increase employment and the national wealth. Tucker stated that a free price system within wholly domestic markets would produce greater employment than any other system. Barbon and North stated the best policy was to allow prices to be set by the estimation of buyers and sellers, even though, according to North, no one wants the prices which “the free market of things will produce.” Similar ideas were expressed by the anonymous author of Policies, etc., by Hales, Malynes, Petty, Davenant, Berkeley, and Postlethwayt. In view of the common belief that the mercantilist writers supported the mercantilist practice of price fixing, there is particular interest in the observations of the author of Policies, etc., about the fixing of food prices in London in the first half of the sixteenth century. His view was that the practice reduced the supply of farm products brought to London and thereby made worse the condition it was meant to alleviate. He wondered how anyone could believe “this present dearth of victual may be redressed by setting prices upon victual,” and continued: “but surely it is not the setting of low prices that will anything mend the matter. But it must be the taking away of the occasion of high prices,” which was, he said, the small supply of goods. He noticed that in addition to its other defects the policy produced inconvenience to the buyer. When prices are set below their market value, “what throng and strife is there then like to be who shall first catch upon that which commeth.” He concluded that a much better policy is “to suffer all kind of persons quietly to sell all kind of victual in the market at what price he can.”10
Another argument advanced for a free market was its salutary effect on the laboring classes. Postlethwayt said that competition among workers forced them to be efficient, responsible, and enterprising, and also lowered their wages. The mercantilists holding this view did not favor low wages for their own sake (although other mercantilists did), but associated high wages with restrictions on the labor supply, such as apprenticeship and journeymen rules and other monopolistic practices. They argued for a market determination of wages and not, as sometimes asserted, for the subordination of the working class. Many of the mercantilists did believe the workers ought to be disciplined, but the belief was not as harsh as later ages have made it out to be. The mercantilists believed that low real wages elicited greater effort, or a greater quantity supplied of labor, than high real wages. The idea was made quite clear by Petty and by one of his eighteenth-century admirers, Thomas Man (1739). They observed that if real wages exceeded a certain amount, the quantity of labor supplied decreased (a backward-sloping supply curve). They concluded that in order to increase employment, wages should not exceed this amount.11
THE RATE OF INTEREST
In addition to achieving full employment by measures that affected spending, wages, and prices, some of the mercantilists also wished to affect the rate of interest. There was more agreement among the writers about the rate of interest than about the correct wage and price policy, but less than about the importance of adequate spending. Those who wished to use the interest rate believed a low rate would assist the merchant by enabling him to increase his inventory, that it would lower the price of exports (by reducing one of their costs), and that both effects would in turn cause employment to increase. Among the writers holding this view were Misselden, Malynes, Temple, Barbon, Child, Law, and the author of Britannia Languens (1680). They proposed various means of reducing the rate and frequently attributed the prosperity of Holland to the low rate there.12
Except for Barbon, who proposed to limit the rate to three per cent by law, these mercantilists favored indirect means of reducing it. Most believed the development of financial institutions, like banking and the money market, would exert a downward influence on the rate. One of the most interesting ideas was that which held the rate varied inversely with the money supply. It was expressed by both Misselden and Malynes—which was unusual because they disagreed fiercely on almost everything else—and it also was proposed by John Law. Misselden said, “The remedy for usury, may be plenty of money”; and Malynes wrote of “the abundance of money; which maketh the price of usury to fall, more than any law or proclamation can ever do.” Law wrote:
. . . indeed, if lowness of interest were the consequence of a greater quantity of money, the stock applied to trade would be greater, and merchants would trade cheaper, from the easiness of borrowing, and the lower interest of money, without any inconveniences attending it.13
(The “inconveniences” were those of usury laws.)
This view of the interest rate was not wholly shared by Petty and North. Petty conceded that an increase in the money supply would lower the rate on loans but was opposed to such manipulation, probably because he believed as many economic matters as possible should be regulated by “the laws of nature” (by which he seems to have meant the free market). He said the interest on a sum of money at loan must be equal to the net rent which the same sum would yield if used to purchase land, except where risk in the two transactions differed. This implies that the money rate of interest must conform to the real rate and can fall only as the productivity of capital declines. This was a long-term view which does not preclude the possibility of short-term differences between Petty’s theory and the conventional one, although the mercantilists themselves might very well have insisted there was. North, too, believed the long-run determinant of the interest rate was the productivity of capital and that the rate could fall only as the “stock in trade” (capital) increased. A low rate was therefore the result of an increase in the quantity of capital and not the cause. North was much opposed to regulating the rate by altering the money supply, believing that the latter adjusted itself to the volume of trade rather than determined it. He also was opposed to usury laws, which he thought would decrease the quantity supplied of loans. One can observe that those who advocated a low rate assumed that a decrease in it would increase the quantity demanded of loans, while North, on the other hand, assumed that a decrease in the rate would decrease the quantity supplied of loans. Neither seemed to want to argue on the other’s grounds, and so the debate could not have been anything but inconclusive.14
There were two other reasons why the mercantilists attended so closely to the money supply, apart from the rate of interest. One was the belief that for any given amount of trade there was an appropriate supply of money and that as the supply increased there would be an increase in trade and employment. In this conception, a change in the money supply was thought to operate directly on spending rather than indirectly by causing a change in the interest rate. It happened that Law used both ideas to support his scheme for increasing the money supply. About the direct effect of an increase, he wrote:
Domestic trade depends on the money: A greater quantity employs more people than a lesser quantity. A limited sum can only set a number of people to work proportioned to it, and it is with little success laws are made, for employing the poor or idle in countries where money is scarce; good laws may bring the money to the full circulation it is capable of, and force it to those employments that are most profitable to the country: But no laws can make it go further, nor can more people be set to work, without more money to circulate so as to pay the wages of a greater number.15
The argument assumes a downward rigidity of prices such that a decrease in the money supply, by causing less spending, produces a decrease in employment and output.
The other reason for the close attention to the money supply was the belief of some that an accumulation of bullion could be desirable. They included Hales, Temple, Cary, and Tucker, the last of whom said:
. . . the whole science of gainful commerce consists, ultimately, in procuring a balance of gold or silver to ourselves from other nations.
This has been taken to mean, by Smith and John Stuart Mill for example, that the mercantilists believed money was wealth. Some in fact may have believed this; I doubt that many did. Hales stated that accumulation was desirable because treasure was the “sinews of war.” Petty said that the nation should accumulate gold and silver,
because those things are not only not perishable, but are esteemed for wealth at all times and everywhere.
The statements of Hales and Petty do not imply a nation should accumulate specie because it is wealth but because it is a store of value or what today would be called an international reserve. Even Mun, who has come down to us as one of the first to expose the fallacy of bullionism, conceded there were times when a prince would be wise to lay by a store of treasure. One may deny this and argue there are better ways of acquiring a reserve and of increasing military power. But surely one cannot say the mercantilists confused money with wealth. Nor can one say they were mistaken in relating the money supply to the rate of interest and to spending. Moreover, some of the mercantilists were opposed to the accumulation of bullion and coin or to restrictions on their export. Hence there is no warrant at all for stating the characteristic fallacy of mercantilism was the confusion of money with wealth Petty, Child, North, and Berkeley were opposed to accumulation, and Child opposed restricting the export of coin because he thought restriction would reduce employment.16
INCREASING THE LABOR SUPPLY
There was one other set of measures by which the mercantilists meant to increase employment. It consisted of ways of increasing the quantity supplied of labor (to which the relationship of real wages is explained above), of increasing the labor supply, and of increasing the productivity of labor. That the mercantilists looked at the employment problem from the supply side as well as the demand side of the market is of some importance. They were not interested only in a policy for putting people to work, important as that was, but also in a long-range program of expanding the quantity of resources. They emphasized increasing the labor force rather than the capital supply because they believed the population was the more important part of the nation’s resources.
Their methods of increasing the labor force seem harsh to us and are often said to show an animosity toward the lower classes. Those who think of the mercantilists in this way usually imply that the classical economists had a more enlightened view of the laboring classes.17 Certainly more sympathy was expressed by the classicists: there was less carping, less preaching of the “early to bed, early to rise” variety, and there was more tolerance of distinctively human behavior. But when all this is said, there remains the fact that the classical economists—from Smith to Ricardo—did not make any important proposals to redistribute income or otherwise to ameliorate the condition of the lower classes except to urge that the best hope for them, as for other classes, was greater efficiency, the steady accumulation of capital, and economic progress—goals which were, indeed, sought by the mercantilists as well. Actually most of the mercantilist labor policy assumed that self-interest governs individual conduct, an assumption entertained as fully today as 300 years ago. The mercantilists believed the unemployed should receive only a subsistence allowance for the same reason that modern economists believe unemployment compensation should be set below prevailing wages. To do more for the unemployed will make them prefer leisure to work, so the reasoning goes. It was stated precisely in 1848 by J. S. Mill, who said that the best way to treat the poor is to make them wish they were rich, and in 1964 by an American relief administrator, who said public aid was not supposed to make the poor comfortable. Whatever attitude the mercantilists had about the poor, it was less important than the stated purposes of their labor policy. The purposes were to increase the population, to increase the size of the labor force within a given population in number of workers and in the amount of work supplied by each worker, and to increase the productivity of the labor force.
In order to increase the population, some writers proposed that subsidies be given to large families. They attached the ingenious scheme of financing the subsidies by a tax on bachelors. (What would have happened, one wonders, if the tax reduced the number of bachelors, hence the revenue from them, and the subsidies increased the birth rate, hence government expenditure? No doubt there is an equilibrium position somewhere in this.) Other proposals were to encourage the immigration of skilled workers and tradesmen, which would be easier (many mercantilists said) if there were greater tolerance of French Protestants and of Jews. The proportion of the population working was to be increased by bringing children into the labor force. Petty estimated that if all children between six and sixteen were employed, the national wealth of England would be increased by five million pounds annually (about the year 1662).18 Almost all mercantilists considered ways of bringing more people into the labor force. Some writers wanted to turn men away from the army and navy and into gainful employment, to turn criminals to legitimate activity, and, above all, to rehabilitate the poor and indigent whom circumstances or choice had deprived of the will to work. That is, they wished to utilize the capacities of those groups whose labor was being wasted.
Petty said that enlistments in the armed forces could be reduced by raising wages in civilian employments. The poor and the indigent were to be rehabilitated by workhouses into which they were to be forced on pain of receiving no public assistance whatever and in which they would be taught a skill. More severe treatment was thought proper for criminals. They were to be shown that crime was not to their interest. Temple proposed “to change the usual punishment by short and easy deaths, into some others of painful and uneasy lives,” a change which involved branding the cheeks of criminals, slitting their noses, and condemning them to slavery in the colonies. Berkeley believed that all who would not work should be impressed into labor gangs and used for public projects. John Locke had views on this problem, and they are interesting, although to call him a mercantilist would be stretching even the definition I have given the word. He was a Commissioner of the Board of Trade in 1697 and in this capacity proposed that vagabonds be impressed into the navy, that while they were waiting in a port for a vessel they be put to hard labor, and that their children be sent to workhouses where they would be taught a skill. Locke, when he turned to the affairs of the world, was savagely practical. (On what he proposed for the colony of South Carolina, see the third chapter of volume two.) Not all of the mercantilists were ruthless. Child pleaded for understanding and patience. He proposed to provide relief to the poor in a way that would rehabilitate them and demonstrate to others that the lower classes were an asset and not a liability.19
In order to increase the amount of work offered by the labor force, many proposed that the state remove the distractions that gave workers bad (that is, unindustrious) habits. Drinking had first to go. According to Defoe:
In addition to limiting the number of ale houses, there was to be a prohibition (submitted by Tucker) of cockpits, skittle alleys, stages for cudgel playing, making book on horse races, the selling of liquor, cakes, fruit, “or any like temptations to draw people together” and away from their jobs. Other mercantilists asked for sumptuary control, because they thought the wearing of ribbons and ruffles and the drinking of tea made the workers prideful and insubordinate. One writer, John Deacon, deplored the taste for luxury and lamented the evil into which England had fallen when it allowed:
. . . these foolish proud toys for prickma-deintie dames, these dices and cardes, for these careles ding-thrifts, these hobbi-horses, rettles, and painted boxes for boies, with 1000 trifling toies besides, . . .20
What is interesting is that in such statements there usually was no fear expressed of insubordination becoming a threat to political security. What alarmed the mercantilists was sloth, not sedition.
In order to make them more productive, the common people were to be shown that industry, skill, and enterprise were to their advantage. Rewards—some in money, some in the form of distinction—were to be given. Industrious and skilled immigrants were to be attracted to England in order to set an example for native workers. Children were to be trained to the habit of work from an early age, and older persons were to be shown in a variety of ways why they should be industrious. In his program for improving the poor, Tucker asked that courts be formed in each district to supervise the working class, each court to be presided over by “Guardians of the Morals of the Manufacturing Poor.” By precept, inducement, and punishment, the poor would be transformed into a national asset. One of the rewards was to be “a good book” stamped in gold on one side with “The hand of the Diligent Maketh Rich” and on the other, “To the Praise of Them that Do well.”21
The labor policy of the mercantilists was a logical deduction from their ideas of economic psychology. Almost all believed there were three factors that directed individuals to economic activity: the stimulus given by physical environment; the desire of men to emulate their betters (which was partly governed by social environment); and the eagerness for material gain. Men were believed to be the more industrious, the more difficult were the conditions in which they lived: the climate, the fertility of the soil, the national wealth in relation to the size of the population. The less favorable was their environment, the more likely they were to become rich. Temple wrote:
I conceive the true original and grounds of trade to be, great multitude of people crowded into small compass of land, whereby all things necessary to life become dear, and all men, who have possessions, are induced to parsimony; but those, who have none, are forced to industry and labour . . . such, as are not [vigorous], supply that defect by some sort of inventions or ingenuity. These customs arise first from necessity, but increase by imitation, and grow in time to be habitual in a country, . . .
Postlethwayt summarized the idea by saying, “The greatest industry has ever been the effect of the greatest necessity.”22
About emulation, the second factor, Petty stated that men always seek to excel. When placed together, as in large cities, their emulative instinct becomes all the keener, and each exerts himself to equal or to surpass his neighbors. On occasion, this factor can work to the individual’s disadvantage, as when it drives him to extravagance and ostentation. Defoe cautioned the tradesman to live well within his means and to leave foolish spending to his betters. Other mercantilists also warned against the danger of emulating the rich. Most, in fact, did not have as much confidence as Petty had in the power of this factor for good, but all recognized the power itself.23
Material gain, the third factor, was believed to be the most important cause of industry. The mercantilists believed that the greater was the gain from a particular employment the greater usually would be the quantity of resources supplied (an upward sloping supply curve). This idea of self-interest was expressed quite early, was repeated to the very end of the mercantilism, and was then carried forward by classical economics. Hales wrote that “profit or advancement nourishes every faculty; which saying is so true, that it is allowed by the common judgement of all men.” Others concurred, among them Petty, North, Davenant, and Defoe.
Gain [Defoe wrote] is the tradesman’s life, ’tis the essence of his being, as a qualified tradesman. Convenience, and the supply of necessary things for life, were the first causes indeed of trade, but the reason and end of the tradesman is to get money. ’Tis the polestar and guide, the aim and design of all his motions; ’tis the center and point to which all his actions tend, ’tis the soul of business, the spur of industry, the wheel that turns within all wheels of his whole business, and gives motion to all the rest.24
What Defoe said of the tradesman (and Lamb described more economically as “the quick pulse of gain”) was believed to be true of everyone. It was true in a special way of the worker. An increase of real wages would be accompanied by an increase in the quantity of labor supplied until they reached a certain amount. Beyond this amount, the quantity of labor supplied would decrease. The mercantilists who thought of the labor supply function in this way believed that pecuniary self-interest had less of an effect on workers than on others, or that before self-interest could operate effectively the worker first had to become accustomed to high real wages. Self-interest had to be reinforced by other factors. One was emulation. This trait could be exploited by placing before the working man the rewards which others had acquired by their industry. In this way, his “wants and appetites” could be whetted and would make him more industrious (an idea that appears in growth economics today). But wants had to be guided prudently. If certain of them were indulged (drinking, for example), the individual would work less. Of all of the factors that made men industrious, environment was the most certain in its operation, even though it was less powerful than self-interest. If the poor could not be brought to gainful activity by monetary rewards or enticed to it by the desire to excel, they could be forced to it by necessity. Moreover, as Temple explained, the habits formed while overcoming necessity would remain with them, and the workers would continue to be diligent after the original cause had disappeared.
In their conception of economic psychology, the mercantilist writers anticipated one important element of classical economics. Elsewhere they anticipated two other of its features—the nature of the price mechanism and the political presuppositions of economic policy.
THE CLASSICAL VIEW
In the classical view, individuals placed their labor and capital in those employments where returns were comparatively high and withdrew them from those where returns were comparatively low. The final result was an allocation that created equal (incremental) returns in all employments between which resources were transferable. The result was automatic, or “natural,” in the sense of being produced by the discrete and independent action of individuals as distinct from intentionally collective action by them. The famous invisible hand was the operation of self-interest in a competitive market. The end product was a use of resources that brought their owners the highest possible real incomes and the economy the greatest possible total product. Whatever interfered with the operation of self-interest as it directed the movement of resources—whether the interference originated with the government or in private monopolistic practices—would reduce the efficiency of the economy and, what is the same thing, the sum of individual real incomes.
The classical conception of optimum consumption was not developed in as much detail as the theory of resource allocation, but the central elements of the former are clear. In whatever way money income happened to be distributed, individuals could achieve greatest satisfaction from it if they were free to spend it as they chose and if prices were established by the competition of buyers and sellers. The independent bidding of buyers established a set of demand prices, and the independent offering of sellers established supply prices. An act of buying and selling under these conditions was a presumption that both buyers and sellers maximized their returns. Or at least they were better after exchange than before. The gains from it were mutual, although they were not necessarily divided equally between buyers and sellers.
Free exchange was believed to provide commutative justice by providing an income to each person proportioned to what the market believed he was worth. That the individual might be appraised outside the market, in a noneconomic way, was well recognized, and the recognition implied a discrepancy between commutative and distributive justice. The consequence was a dissatisfaction with the distribution of income, even though the classical economists had little to offer as a remedy. Their dissatisfaction was of an ethical, not a positive, kind. Excepting Sismondi and Malthus, they did not believe that inequality could prevent the full employment of resources. They did believe inequality could cause an inefficient use of resources. For example, the rich spent a substantial amount on personal services, which the classicists believed added nothing to the national wealth. They believed the production of goods did add to the national wealth.
The classicists believed that, given the distribution of income, a free market would provide the most efficient use of resources. About the full use of resources, most of them were silent. Their silence can be taken to mean they believed a free market would provide full as well as efficient employment. One reasonably can suppose that if they believed full employment was as much of a problem as efficiency they would have written as much about it as they in fact did write about efficiency.
The classical economists did have reservations about the efficiency of a free market. One of them has been noted—the effect of inequality. They also believed a free market was unable to supply certain goods of great social value and they believed self-interest should not rule in areas, like government, where disinterested behavior was called for.
THE MERCANTILIST VIEW
The mercantilist conception of the price mechanism was similar in certain ways to that of the classicists. Both agreed that self-interest could and should direct the allocation of resources; that prices were and should be determined by supply and demand; that competition was desirable; and that in domestic markets there was mutual advantage in exchange.
The mercantilists did not believe that universal efficiency could be established by the price system. What they did believe was that a limited operation of the system was desirable. They also held a qualified conception of the harmony of self-interest. The issue of full employment was that on which there was the greatest difference between them and the classicists. The mercantilist view was that free international trade would reduce employment, that inattention to the monetary system would have the same result, and that a very unequal distribution of income could reduce spending which in turn would reduce employment.
The mercantilist conception of self-interest, in its psychological aspect, has been explained. From it followed the belief that under certain conditions the free allocation of resources would yield the greatest possible efficiency and employment. The mechanics of the price system was explained by one of the earliest writers, Hales, and he suggested the knowledge was common at the time. It was sufficiently well known to be an issue in some of the controversies over economic reform. Hales was associated with Somerset—the Protector during the minority of Edward VI—in the program to eliminate the enclosures. Hales also was a member of Parliament and introduced three bills for economic reform. One was to maintain tillage and reduce enclosures, another to rebuild decaying houses, and the third to prohibit the monopolistic practices of forestalling and regrating. All of them were defeated.
His discourse is in the form of a dialogue between a doctor and a knight who at one point consider the best means of eliminating the scarcity of corn. The doctor says the price should be free to find its market value just as the price of wool is free.
Knight: How would you have them [the husbandmen] better cherished to use the plough?
Dr.: To let them have more profit by it than they have, and liberty to sell it at all times, and to all places, as freely as men may do their other things. But then no doubt the price of corn would rise, specially at the first more than at the length; yet that price would provoke every man to set plough in the ground, to husband waste grounds, yes to turn the lands which be enclosed from pasture to arable land, for every man will gladder follow that wherein they see the more profit and gains. And thereby must needs ensue both great plenty of corn, and also much treasure should be brought into this realm by occasion thereof; and besides that plenty of other victuals increased amongst us.25
These remarks taken out of context easily could be interpreted as an argument for the unrestricted operation of the price system. That “every man will gladder follow that wherein they see the more profit and gains” is in agreement with Smith’s statement that “Every individual is constantly exerting himself to find out the most advantageous employment for whatever capital he can command.” Hales also anticipated the classical economists in his statement that “the workman never travails but as the master provokes him with good wages”; in his belief that the common ownership of capital is less productive than individual ownership—“that which is possessed of many in common is neglected of all”—and his conviction that many forms of economic control are ineffective before the power of self-interest—“for many heads will devise many ways to get anything by.”26 So long as only the positive aspects of Hales’s ideas are compared with those of Smith, the two agree. But about the normative aspect there was disagreement, as is shown below.
PRICING AND COMPETITION
Many of the mercantilists explained how prices are determined by supply and demand. Malynes wrote:
Everyman knoweth, that in the buying and selling of commodities there is an estimation and price demanded and agreed upon between both parties, according to a certain equality in the value of things, permitted by a true reason grounded upon the commodious use of things. So that equality is nothing else but a mutual voluntary estimation of things made in good order and truth wherein equality is not admitted or known.27
Actually, the statement goes much beyond saying that supply and demand determine price. It suggests that utility is the basis of value (“commodious use”), that utility is a subjective magnitude (“truth wherein equality is not admitted or known”), and that there is an advantage in exchange to both buyer and seller (“a certain equality in the value of things”).
The words “true reason” have a special significance both for Malynes’s statement and for the doctrine of other mercantilists. In the quotation above, true reason should be interpreted to mean accurate perception or accurate understanding. The statement then expresses the idea that price or value is determined by individual evaluation and only this evaluation is accurate. The idea implies that individuals are the best judges of their welfare. Malynes again remarked on true reason in his exposition of the law of merchants, which, he said, was the only law that was universal and absolute, the same everywhere and at all times, and that it had its origin in Cicero’s conception of true law as right reason agreeable to nature.28 Malynes’s conception of natural law anticipated that of the classical economists. They (as explained in volume two) identified natural law with reason and made reason an individual trait. That was in contrast to conceptions of natural law which made reason an immanent quality of social institutions or of a supernal power. The doctrine suggested by Malynes was really the doctrine of natural rights.29
The practical result of the doctrine was a policy of individual economic freedom. Petty, for example, argued against the many economic controls imposed by the state and attributed England’s difficulties to the fact that “too many matters have been regulated by laws, which nature, long custom, and general consent ought only to have governed.” Positive laws, he stated, should consist of “whatsoever is right reason and the Law of Nature,” a statement which is best interpreted by placing the word “therefore” before “the Law of Nature,” since Petty did not make a substantive distinction between reason and natural law.30
Because they believed that supply and demand ought to determine prices, most of the mercantilists were opposed to price fixing and to many forms of market control. Barbon stated “the value of all wares arises from their use” and that a “plenty” of wares makes them cheap while a “scarcity” makes them expensive. He concluded that “the market is the best judge of value.” North asserted the “universal maxim” of price is that “plenty of anything makes it cheap.” Law stated that the price of a commodity is determined by the quantity offered for sale in relation to the demand. As the quantity offered increases, the price or value declines. He illustrated the point most interestingly by water and diamonds, explaining that diamonds were more valuable than water, despite its greater “usefulness,” because the quantity supplied of diamonds was less than that of water. This paradox is mentioned by Smith, using the identical commodities; but he does not resolve it as explicitly as Law had who wrote about fifty years earlier. Berkeley expressed the principle of price determination in one of his queries:
Whether the value or price of things, be not a compounded proportion, directly as the demand, and reciprocally as the plenty?31
The opposition to market control was made explicit by Child. He listed nine laws which he said were impediments to trade and employment. Included were laws that prohibited the export of coin, raised the price of exports, reduced the price of beer, forbade engrossing (“there being no more useful trade in a nation”), and limited the supply of labor by restricting entry into skilled trades. He stated:
It is the care of law makers first and principally to provide for the people in gross, not particulars; . . .
Davenant expressed the same conclusion:
Trade is in its nature free, finds its own channel, and best directeth its own course, and all Laws to give it rules and directions, and to limit and circumscribe it, may serve the particular ends of private men, but are seldom advantageous to the public.32
Petty believed (as noted above) that economic relations among individuals should be directed by “whatsoever is right reason” and not by the state. Of all the mercantilists, North most clearly expressed the idea that free exchange is the way to national greatness. He wrote:
Now it may appear strange to hear it said,
That the whole world as to trade, is but as one nation or people, and therein nations are as persons.
That the loss of a trade with one nation, is not that only, separately considered, but so much of the trade of the world rescinded and lost, for all is combined together.
That there can be no trade unprofitable to the public; for if any prove so, men leave it off; and wherever the traders thrive, the public, of which they are a part, thrives also.
That to force men to deal in any prescribed manner, may profit such as do happen to serve them; but the public gains not, because it is taking from one subject, to give to another.
That no laws can set prizes in trade, the rates of which must and will make themselves: but when such laws do happen to lay any hold, it is so much impediment to trade, and therefore prejudicial.33
The Political Ideas
The mercantilist conception of free exchange had a political as well as economic aspect, and both anticipated the ideas of the classical economists. Although the mercantilists differed among themselves about the origin of government, they agreed upon the extent of its powers, which, they said, should be limited by law. The limitation would enable men to exercise their economic liberty, which in turn would foster the growth of the economy. Temple said the economy could prosper “under good princes and legal monarchies, as well as under free states,” but that it must decline under a “tyrannical power”—free states here meaning republican governments. The words were used also to mean any form of government whose power was limited, as by Barbon who said trade could flourish only in a “free government,” of which a constitutional monarchy was one form. “Men are most industrious, where they are most free, and secure to enjoy the effects of their labours,” he said. In its economic application, the doctrine of limited power meant that regulation of the market should be minimized and made to apply uniformly to all persons and trades. “All favour to one trade or interest against another, is an abuse, and cuts so much of profit from the public,” North said.34
THE ORIGINS AND FORMS OF GOVERNMENT
As among the classical economists, so among the mercantilists there was considerable disagreement about the foundations or beginnings of government. Some, like Temple, believed the authority of the state was an extension of the authority of the father over the family and they believed the ideal state was like a harmonious family. As the family was ruled by a loving father, so the state was ruled by a benevolent monarch. “Thus a family seems to become a little kingdom, and a kingdom to be but a great family,” he wrote. The father-king, one must remember, was limited in his power and in no sense was an absolute ruler.
Other mercantilists accepted the contract theory of government which then enjoyed its ruling hour. Petty believed the political difficulties of the day were the result of the “warpings of time, from the rectitude of the first Institution,” that the changes were unnatural and hence could be corrected. The greatest exponent of the contract theory among the mercantilists was Defoe. He said that every man had natural rights, that they were beyond the power of the state to abridge, and that the state was the creature, not the maker, of law. He said the deposition of the Stuart dynasty was justified because it had exceeded its legitimate authority and had left the people with only revolution as the means of securing their rights. Barbon and Davenant were forcible in advocating constitutional procedures, asserting that only by these means could the liberty of the individual be protected.35
The differing conceptions of the origin of government did not lead to disagreement over the proper form or structure. The mercantilists were all of them opposed both to absolute rule by an individual and to unlimited rule by the people. Their opposition to both autocracy and democracy came of a profound distrust of power per se. Temple wrote:
Many men are good and esteemed when they are private, ill and hated when they are in office . . . and many men come out, when they come into great and public employments.36
There is a notable agreement between Temple’s ideas of power and those Hume expressed about seventy-five years later. Temple said that authority is the “foundation of all ease, safety, and order in governments” and that “authority arises from the opinion of wisdom, goodness, and valour in the persons who possess it.” He meant that the power of government would be more legitimate and more certain, the more it obtained “the consent of the people, or the greatest and strongest part of them.” It was the “greatest and the strongest” among the people who should exercise power. He was opposed to democracy because, in his view, it was unable to provide stability and security. By offering liberty to all men, it solicited an expression of those natural traits that bring men into conflict and then place them under the absolute rule of the few. He said that democracy was unwise because men were inherently restive, because they had diverse interests, were prone to be contentious, and always were eager to battle over the inevitably few positions of power. The same ideas were at the center of Defoe’s opposition to democracy, and motivated his belief that class distinctions were necessary and therefore natural.37
Their opposition to democratic government did not make the mercantilist writers apologists for an aristocracy, and they did not approve of many of the forms of illiberalism which they saw about them. Most of the mercantilists were opposed to religious intolerance and insisted upon the rightness, as well as expedience, of allowing each person to seek his spiritual salvation in his own way. Defoe was highly critical of the English ruling classes, believing their attitude toward trade was an obstacle to the progress of the economy. The Compleat English Tradesman and parts of The Compleat English Gentleman, together with the parabolical meaning of Robinson Crusoe, can be interpreted as an effort to persuade the aristocracy of the national value of trade and so to secure a higher social position for the tradesman. (One of the small ironies in the history of economics is that Robinson Crusoe has been used repeatedly to illustrate, of all things, rational economic conduct. It is much more an illustration of the tradesman’s mentality. Did Robinson allocate his resources to equalize marginal returns? Hardly; he was much too busy building fences all over the island as if he were preparing it for a suburban development.) Other mercantilists wrote persuasively of the great usefulness of the tradesman and of the wisdom of giving him greater political power and a higher social position.
POLITICS, THE PRICE MECHANISM, AND POLICY
The ideas of politics and of the price mechanism stand in a paradoxical relationship to the economic policy which the mercantilists advanced. If one reads only their expressions about economic and political liberty, one easily could believe their policy must be laisser faire. If, on the other hand, one looked only at the measures of control they proposed, one could conclude they thought very little of freedom. The paradox is that the mercantilists anticipated many of the positive and some of the normative elements in classical economics but came to much different conclusions about policy. They were reluctant to follow the principle of freedom to all of the practical results they thought it would bring, and, what is equally clear, they were reluctant to modify their ideas of liberty in order to achieve the practical results they wanted.
It is instructive to compare the ideas of Hales and Smith on the normative aspects of free exchange. When Smith observed that each individual always tries to discover “the most advantageous employment for whatever capital he can command,” he concluded that the “study of his advantage naturally, or necessarily, leads him to prefer that employment which is most advantageous to society.” Hales did not think this always would be so. Another colloquy examines the question:
Knight: Every man is a member of the commonweal, and that that is profitable to one may be profitable to another, if he would exercise the same feat. Therefore that is profitable to one, and so to another, may be profitable to all, and so to the commonwealth. . . .
Dr.. That reason is good (adding so much and more of it). True it is that thing which is profitable to each man by himself, (so it be not prejudicial to any other) is profitable to the whole commonwealth, and not otherwise; or else robbing and stealing, which perchance is profitable to some men, were profitable to the whole commonweal, which no man will admit.38
Malynes, too, was unable to endorse free exchange completely. He said it might conflict with the “good of the commonwealth, which is the cause that princes and governors are to set at the stern of the course of trade and commerce.” He said that to allow merchants to set the course of trade would be as imprudent as to consult vintners about laws against drunkenness. A similar qualification was made by Child:
. . . the profit of the merchant, and the gain of the kingdom . . . are so far from being always parallels, that frequently they run counter one to the other, although most men . . . do usually confound these two.
Although he was in favor of competition, Postlethwayt hesitated to endorse it wholly. “Exchange of merchandise for merchandise is advantageous in general; but not in cases where it is contrary to the foregoing maxims,” he wrote, the maxims being that trade should be directed to increasing the money supply and employment. Even the enlightened North was dubious about the universal harmony of self-interest operating on the market, although he viewed the possible disharmony oppositely from the usual way. He was less troubled with occasions on which the individual could gain at the expense of the nation than with the possibility of the nation gaining at the expense of the individual (as when an unwise investment reduced the income of the investor even though it led to greater employment of others). Some mercantilists believed the economy could prosper at the expense of individuals, if they engaged in extravagant expenditure, which although it might damage them was nevertheless beneficial to trade. The idea was set forth by Mun in a chapter entitled “Of some Excesses and Evils in the Commonwealth, which not withstanding decay not our Trade nor Treasure.” The idea was made popular by Mandeville in his fable of the bees whose private vices were public benefits. It was not, however, as widely accepted as the notoriety of Mandeville’s verse suggests. Davenant, although he admitted the possibility, denied that private extravagance was the only way to wealth and submitted that a wise levying of excises would give the lie to the notion that “riot and expense, in private persons, is advantageous to the public.”39
These passages indicate that the mercantilists not only proposed controls which would have abridged economic freedom but also that they were quite aware of the effect of their measures. They also were aware of why freedom should be limited.
One reason was that unlimited freedom would prevent the economy from achieving its major purpose, which was an increase in the nation’s wealth. In order to achieve this, they believed the market had to be controlled in some important ways. The other reason was less significant, and the limitation which it implied was in no way inconsistent with classical economic policy. When, for example, Hales denied that self-interest always produced universal harmony, he cited the act of theft in proof of his view (actually, he had more than this on his mind, and the example was not well chosen). The prohibiting of crime is not, of course, a denial of freedom. Nor was there a denial of freedom in the similar proposals of other mercantilists. Many of them said that the unlimited freedom of the tradesman would lead eventually to monopoly. This, again, was not a denial of the principle of free exchange, which assumes competitive behavior. Indeed, the opposition to monopoly is an affirmation of liberal doctrine, and many mercantilists anticipated the doctrine in their opposition to monopoly and in their defense of competition. Tucker excoriated the regulated companies (which had certain monopolistic powers) in language which suggests Smith at the height of indignation:
This is the greatest and most intolerable of all the evils of monopolies. It is a prostitution of the trade and welfare of the public, to the merciless ravages of greedy individuals.
Postlethwayt anticipated the classical conception of the advantages of competition. He wrote:
Domestic rivalship in trade produces plenty; and plenty cheapness of provisions, of the first materials, of labour, and of money. Rivalship is one of the most important principles of trade, and a considerable part of its liberty. Whatever cramps or hurts it in these four points is ruinous to the state, and diametrically contrary to its intent, which is the happiness and comfortable subsistence of the greatest number possible of men.
North warned of the devious forms which monopoly could assume:
For whenever men consult for the public good, as for the advancement of trade, wherein all are concerned, they usually esteem the immediate interest of their own to be the common measure of good and evil.
In the next century Smith said dryly: “I have never known much good done by those who affected to trade for the public good.”40
When the mercantilists wrote that economic freedom had to be qualified because it led to abuse, they really were not taking exception to the principle but were amplifying it to state that the individual is not free to deprive others of their freedom.
There was, however, another kind of qualification, and it directed the mercantilists to propose substantial restrictions on free exchange. In order that the nation increase its wealth, or income, all resources had to be fully employed. The mercantilists did not believe that the market alone could assure this. If the market were left to itself, spending would not always be sufficient, income would be distributed improperly, the money supply would not always be adequate, specie would be lost through excessive imports, the rate of interest would become too high, and the labor force would be too small and insufficiently productive. The result would be a waste of resources and a national wealth and income smaller than England was capable of.
FULL EMPLOYMENT VERSUS LAISSER FAIRE
Hence the mercantilists could not propose a policy of laisser faire, or of complete reliance on the market, because they did not believe the policy could assure full employment and, failing in this important respect, the policy would not serve the national interest. The proper policy was that collection of measures which secured full employment by utilizing the price mechanism. The price mechanism, or free market, was not regarded as an end in itself but as a very useful means of assisting economic growth. The mercantilists looked upon the market in an instrumental way. The classical economists regarded it in the same way. The latter however believed that economic growth required using the market in a different way. They believed the market should be made competitive and used to secure an efficient allocation of resources; and they gave so much attention to establishing a competitive price mechanism that it often has been thought they made the mechanism an end in itself.
The apparent distinction, then, between mercantilist and classical policy was between the goals of full and efficient employment. Yet when the distinction is made in this way, it distorts the intent, if not the letter, of the two policies. Very probably neither the mercantilists nor the classicists would have acknowledged the correctness of such a distinction. The former, I suspect, would have insisted that their policy achieved a greater output, and therefore was more efficient, than a policy which ignored the problem of full employment. The implicit assumption of the mercantilists was that a nation was not free to choose between using all of its resources in one way or another, in order to maximize output, but that the nation had to choose between a policy that would produce full employment and one that would not. The classicists probably would have insisted that once the market had been made competitive and the conditions established for an efficient use of resources there would be no problem of full employment. They would have granted, probably insisted, that unwise interference with the market could create underemployment but they would not have expected underemployment to be a problem once the market was properly organized.
In brief, the mercantilists believed the way to greater output was by increasing the total employment of resources, and the classicists believed the way was by improving the allocation of resources either already employed or likely to be. Who was right? If the two were contemporaries and the debates were held today, the verdict of many economists would be that both were wrong. But in fact each of them addressed themselves to the economic problems of quite different periods and did so with the knowledge of economics that was available in their respective periods. The question of who was right is not a useful question.
The Economic Setting of Mercantilist Policy
What is more useful is to speculate over why the mercantilists attended so closely to the problem of unemployment.41 There was extensive poverty in the period of mercantilism, from about 1500 to 1750 (and later, too, but affecting economic thought differently then). The main cause was unemployment. Another cause was the large proportion of the population that was not in the labor force: children, old people, and many able-bodied adults. In that last group were people who had been out of a job for so long that they no longer expected to find one, people who were born into poor families and never had been able to find work, and a sizable number of people who preferred to be supported by others. This last group consisted of beggars, vagabonds, of those who relied on the relief authorities, their relatives, friends, or whomever else would support them. This group was the object of the policies that the mercantilist writers proposed for increasing the size of the labor force. The group was large and certainly constituted a problem, of a political and social kind as well as economic.
More important however was the problem of unemployment. Even without certain people in the labor force, it was not fully employed. The enclosure movement seems to have been the principal cause of unemployment in the first part of the mercantilist period. By replacing tillage with grazing, the enclosures reduced the amount of labor required in agriculture and drove large numbers of persons into the towns and cities where they were not easily absorbed (to say the least) into the urban labor force. In the last half of the sixteenth century, the export of woolens declined, and there was protracted unemployment in that industry, which was the most important in manufacturing of the time. The transfer of large numbers of workers from one occupation to another is difficult even in the most favorable circumstances; and circumstances in the sixteenth century were not favorable. The guilds were not eager to increase their output at any time, and one easily can suppose they were not pleased by the large numbers of workers who were swept off the land and into the towns to seek employment.
Another cause of unemployment was the frequent commercial crises which by their strangeness must have baffled the early economists (no less than the later). Although the fluctuations seem not to have been of regular occurrence, as cyclical movements later were, they were more than occasional and sporadic changes. In addition to these two types of unemployment, which today would be called structural and cyclical, there seems also to have been seasonal unemployment. Urban workers often were out of jobs for about four months of the year. If one can accept Petty’s observations, which, he said, had “visible foundations in nature,” seasonal unemployment was considerable. He stated that the annual wages of workers in the third quarter of the seventeenth century were about seven pounds and that weekly wages were about four shillings. The figures imply the average worker was employed about 35 weeks in the year. Petty’s figures on wages are interesting to compare with his estimates of the cost of living. He said the weekly cost of food was two shillings per person, or about five pounds and four shillings annually and that the yearly cost of clothing was about 30 shillings. This implies the worker had about six shillings to buy shelter and other goods for the year and to provide for his family. One wonders where the money for gin and ale came from (for which the workers were so often scolded), not to mention the pennies spent on ribbons, ruffles, cockfighting, tea drinking, and such things.42
Whatever the accuracy of Petty’s figures, unemployment and poverty seem to have been extensive. The management of those two problems was made more than usually difficult by a factor arising from the Reformation. When the power of the Catholic Church was destroyed, so too was its organized system of charity. An effort was made to place the responsibility upon local governments but they did not accept it entirely. In many areas they refused charity to persons from other localities, a practice which added immobility to unemployment. The guilds did look out for their members, but were unable to care for the newly created poor from agriculture even if they had wished to.
Not only was there less providing for the lower classes, but, after the middle of the seventeenth century, there was less interest in doing so and less concern over the problem of unemployment. Under the Tudors there seems to have been a genuine solicitude for the lower classes, a feeling which perhaps came of the knowledge that disaffection with an absolute monarch can have disastrous results. After the revolution of 1688, the power of the monarchy was severely abridged and therefore it was less responsible for the general welfare, while Parliament could be only a diffuse object of resentment to those who thought the state was not looking after them properly. Elizabeth could say with reason, “Yet this I account the glory of my crown, that I have reigned with your loves.” It is difficult to imagine words of the same sincerity coming from a sovereign after 1688.
The unemployment of the sixteenth and seventeenth centuries was, in the language of today’s economics, the result of (a) frequent deflations, some of them quite severe; (b) the long-run decline of particular industries such as the manufacture of woolens and the raising of grain; (c) the immobility of resources and especially of labor; and (d) the wage and price rigidity caused mainly by the monopolistic practices of the guilds. The unemployment might have been eliminated (one easily can say 300 years later) if labor could have been moved from areas where it was abundant to where it was scarce and if certain wages and prices could have been reduced in order to make increased employment profitable to the entrepreneurs of the age. But the mercantilists seem not to have thought this solution was adequate. Although they did propose to increase labor mobility and to make wages and prices more flexible, they did not rely entirely on these measures. Instead, they appear to have had greatest confidence in measures that had an inflationary effect—those that would have increased total spending by increasing the money supply.
It is interesting to note that Great Britain had a similar unemployment problem about 200 years after the close of the mercantilist period and solved it by methods quite suggestive of the mercantilists’ proposals. After World War I there was substantial frictional employment, and a lowering of money wages was not feasible. A few years after World War II, when the inflationary policies of the Labour Government had shown their effect, a United Nations report on economic stability observed that the frictional unemployment “which had previously been attributed mainly to lack of mobility of labour, melted away, leaving an acute labour shortage.”43 This report was written mainly from the viewpoint of Keynesian economics, which, the reader may have noticed, has an affinity to mercantilist doctrine.
When classical economic doctrine developed, circumstances were much different from those of the period of mercantilism. There no longer was the problem of managing a large amount of permanent unemployment. The system of poor relief was improved and contributed much less to labor immobility than formerly. The internal market of Great Britain was much better organized, in the sense of there being greater mobility of labor and of commodities and capital as well. By 1750 the government no longer enforced any important controls over the internal market. The obstacles to price and wage flexibility were much less formidable than they had been in the preceding three centuries. Improvements in transportation, especially after 1800, brought the parts of the internal economy into closer connection and increased the extent of competition. Finally, there was an expansion of British foreign trade, resulting from the decline of the Dutch empire at the end of the seventeenth century, from the weakening of the imperial power of Spain, and from the increased efficiency of British manufactures and shipping which gave the nation a cost advantage in the world market. These circumstances dictated a much wider use of the market as the appropriate economic policy, just as the different circumstances confronting the mercantilists required restrictions on the market.
Comment on the Commentaries on Mercantilism
The interpretation of this chapter makes English mercantilist doctrine a predecessor of economic liberalism. In order that the meaning be clear, it may be compared with other interpretations of mercantilism. Works on the history of economic thought usually abide by the judgment of Smith and Mill—that the mercantilists believed money was wealth and therefore that the nation became richer as it acquired more monetary metal. That the mercantilists should be judged in this way is understandable. If their goal of full employment is neglected, there is no way to explain their preoccupation with the money supply other than to suppose they thought money was wealth. The exposition here of their monetary theory should demonstrate that few of them made the simple error of which they so often have been accused.
Another interpretation looks on mercantilist doctrine as a collection of mistaken ideas, not only in the area of monetary theory but in others as well. The mercantilists in this view are regarded as rudimentary economists who sensed the importance of the problems they faced but were defeated by them. The mercantilists did express certain ideas crudely and did make mistakes (what economists have not?). But there was nothing primitive about their central ideas. The most important aspects of the price mechanism, for example, were understood as long ago as 1549 when Hales’s Discourse was published, and the way he wrote of them suggests they were known even before his time. Modern economics has expressed these principles in more rigorous form but has not altered them. We still believe that unequal rates of profit can cause a reallocation of resources. Indeed only in this century has economics tried to reintegrate monetary and price theory in order to bring together the money and the real sides of the economy—a theoretical achievement sought by the mercantilists.
By a third interpretation, the mercantilists were apologists for the economy of their time. To look upon social thought as a rationalization of prevailing institutions is now commonplace. One is told, for example, that Aquinas was justifying the ways of God to man, that The Leviathan of Hobbes was a defense of the absolute monarchy of the Stuarts, that Adam Smith rationalized the behavior of the burgeoning middle classes, and that the mercantilists justified commercial capitalism. This view makes the motivations of the writer inseparable from what he said. Two conclusions usually are drawn about the mercantilists. One is that their doctrine was meant to explain the circumstances of their time. If this means the mercantilists were interested only in the present, it is wholly correct. Economists always are interested in the problems of the time, some of which are transitory and others nearly everlasting. The other conclusion is that the mercantilists sought to advance private interests by disguising them in a tissue of abstraction. When they wrote in favor of the principle of the free market they really were opposing only those kinds of control which injured particular interests, and when they proposed certain controls they wished to advance these interests. I do not know how such an interpretation could be upheld (in addition to contrary statements in their works, there is the awkward difficulty of uncovering the private thoughts of men who have been dead 200 years and more), nor do I see just what significance the proof would have. Perhaps John Hales was trying to increase the income of corn growers and Thomas Mun wanted greater dividends for the East India Company. Nevertheless, they had something of lasting interest to say.
The most cogent of all interpretations of mercantilism is that which makes it a continuation of the ideas of medieval society. This is the view of Schmoller and of Heckscher.44 Schmoller stated the principal tenet of mercantilism was the identity between political and economic institutions, such that the economic conduct of the individual was made to conform to the objectives of the state. Mercantilism was thus a system of national power and one of a number of forms which idealism as a political philosophy can take. Prior to the twentieth-century dictatorships, the most notable expression of idealism was medieval society. In their remarks on economic conduct, the Schoolmen stated that free individual behavior was inimical to the welfare of society. They accepted the Aristotelean notion that exchange was “unnatural” because it caused men to lose sight of the proper use of commodities, which was consumption, and to make an improper use of them, which was unlimited accumulation.45 In the Aristotelean and medieval conception, exchange is condemned if its purpose is anything more than the satisfaction of limited wants. It is wrong if it becomes a means of expressing acquisitive desires because they are improper in themselves. In its practical aspect, the conception condemns exchange as a useless act and proposes it be controlled. This was the prevailing medieval view after about the twelfth century. There were exceptions to it. And as time passed the doctrine gradually altered from an explicit condemnation of exchange to the prescribing of rules under which exchange was permissible, and at last to a justification of exchange. One of the writers of the transition period was the Italian, Francesco Patrizi, who stated about 1480 that “they which trade in merchandise with modesty and do take no usury . . . and they which do not lie . . . I deem them worthy to be enriched with the benefits of a commonwealth.”46 In the next century, the Spanish Jesuit Molina (whose work now is attracting attention) expressed liberal ideas of exchange.
In English mercantilist writings I have found only one statement that in any way suggests the prevailing medieval idea about exchange. It is Cary’s assertion that buying and selling “whereby one man lives by the profit of another, brings no advantage to the public.” However, one cannot be certain that Cary endorsed the medieval idea. His observations of the price mechanism were anything but medieval. Admittedly, the mercantilists stated that self-interest was inimical to the public good, but the statement is, I believe, of no significance. The kind of economy they proposed could not possibly have operated without the expression of self-interest, just as the economy proposed by the classicists could not have operated without it. They too condemned self-interest, but neither they nor the mercantilists believed it wholly bad or even mainly so, and they did not want it suppressed. Both wanted the power it gave to men to be used in the national interest. Hales wrote about enclosures:
To tell you plainly, it is avarice that I take for the principal cause thereof, but can we devise that all covetousness may be taken from men? No, no more than we can make men to be without ire, without gladness, without fear, and without all affections. What then? We must take away from men the occasion of their covetousness in this part. What is that? The exceeding lucre that they see grow by these enclosures, more than by husbandry. And that may be done by any of these two means that I will tell you: either by minishing the lucre that men have by grazing, or else by advancing of the profit of husbandry, till it be as good and as profitable to the occupiers as grazing is.47
To exploit the selfishness in men, to reward them for it, to see in it a power for good as well as harm—there were ideas as remote from the ruling thought of the middle ages as ideas could be. One cannot discover the roots of English mercantilist doctrine there. They took hold after the power of medievalism in England was spent. The direction of the doctrine was not to the past but to the future—to the ideas of classical economics, however much it disdained its predecessors.
 Alfred Marshall, Principles of Economics (8th. ed., London, 1938), p. 755.
T. E. Gregory, “The Economics of Employment in England, 1660-1713,” Economica, I (1921), 1.
Jacob Viner, Studies in the Theory of International Trade (New York, 1937), pp. 74 et seq.
E. A. J. Johnson, “The Mercantilist Concept of ‘Art’ and ‘Ingenious Labour,’ ” Economic History, II (1931), 240.
J. M. Keynes, The General Theory of Employment Interest and Money (New York, 1936), p. 341.
Eli F. Heckscher, Mercantilism (London, 1935), II, 323.
E. Lipson, A Planned Economy or Free Enterprise (London, 1944), ch. 2.
Edmund Whittaker, A History of Economic Ideas (New York, 1943), pp. 141-142, 145-147.
T. W. Hutchison, “Berkeley’s The Querist and Its Place in the Economic Thought of the 18th Century,” British Journal for the Philosophy of Science, 4 (1953-54).
 John Hales, A Discourse of the Common Weal of This Realm of England, ed. Elizabeth Lamond (Cambridge, 1893), pp. 59, 98.
Tudor Economic Documents, ed. R. H. Tawney and Eileen Power (London, 1924), III, 323.
Edward Misselden, Free Trade, or the Meanes to Make Trade Florish (London, 1622), p. 4.
Sir William Petty, Economic Writings, ed. Charles Henry Hull (Cambridge, 1899), I, 34, 31.
A Select Collection of Early English Tracts on Commerce (London, 1856), pp. 581, 582.
 Sir William Temple, Works (Edinburgh, 1754), II, 59-60.
Nicholas Barbon, A Discourse of Trade ([London, 1690] A Reprint of Economic Tracts, ed. Jacob Hollander, Baltimore, 1905), p. 32.
Josiah Child, A New Discourse of Trade (5th ed., Glasgow, 1751), pp. 54-56.
Sir Dudley North, Discourses Upon Trade ([London, 1691] A Reprint of Economic Tracts, ed. Jacob Hollander, Baltimore, 1907), pp. 25, 27.
Charles Davenant, An Essay Upon Ways and Means of Supplying the War (London, 1695), p. 143.
John Law, Money and Trade Considered, with a Proposal for Supplying the Nation with Money (London, 1720), p. 11.
Daniel Defoe, The Complete English Tradesman, etc. (London, 1732), II, 109, 111.
John Cary, A Discourse on Trade (London, 1745), p. 82.
Josiah Tucker, A Brief Essay on . . . Trade (2nd ed., London, 1750), p. xii.
The Right Rev. George Berkeley, The Querist (Glasgow, 1751), Queries 46, 47, 168.
Malachy Postlethwayt, Great Britain’s Commercial Interest Explained and Improved (2nd ed., London, 1759), II, 367, 370-371, 377.
 Petty, op. cit., I, 33, 269. Barbon, op. cit., p. 32.
Defoe, op. cit., II, 118. North, op. cit., pp. 25, 27-28.
 Hales, op. cit., p. 127.
 Cary, op. cit., p. 12.
Thomas Mun, England’s Treasure by Forraign Trade (New York, 1903), p. 8.
 Cary, op. cit., pp. 96-102. Defoe, op. cit., I, 318-319.
Berkeley, op. cit., Q. 214. Davenant, op. cit., p. 103.
Postlethwayt, op. cit., II, 389.
 Defoe, op. cit., II, pt. I, 109, 115-116. Postlethwayt, op. cit., II, 405.
Gerard Malynes, Consuetudo, vel, Lex Mercatoria: Or the Ancient Law Merchant (London, 1656), p. 65.
Hales, op. cit., p. 67.
 Misselden, op. cit., p. 107.
 Child, op. cit., pp. 54-56, 127. Tucker, op. cit., p. 83.
Barbon, op. cit., p. 16. North, op. cit., p. 12.
Tawney and Power, op. cit., III, 340, 342. Hales, op. cit., p. 60.
Gerard Malynes, The Maintenance of Free Trade (London, 1622), p. 79.
Petty, op. cit., I, 9, 243. Davenant, op. cit., pp. 56-60.
Berkeley, op. cit., Q. 47.
Malachy Postlethwayt, The Universal Dictionary of Trade and Commerce (London, 1774), cap. “Forestalling,” “Engrossing,” “Regrating.”
 Postlethwayt, Great Britain’s Commercial Interest, etc., II, 425.
Petty, op. cit., I, 274-275.
Thomas Man, The Benefit of Procreation (London, 1739), pp. 20-21.
 Misselden, op. cit., pp. 29-30.
Malynes, The Maintenance of Free Trade, p. 39.
Temple, op. cit., I, 129. Barbon, op. cit., p. 41.
Child, op. cit., p. ix. Law, op. cit., p. 17.
Early English Tracts, p. 318.
 Misselden, op. cit., pp. 116-117.
Malynes, The Maintenance of Free Trade, pp. 39-40.
Law, op. cit., p. 17.
 Petty, op. cit., I, 48; II, 445. North, op. cit., pp. 17-19.
 Law, op. cit., p. 11.
 Hales, op. cit., pp. 87, 127. Temple, op. cit., I, 131-132.
Cary, op. cit., p. 2. Tucker, op. cit., p. iiin.
Petty, op. cit., I, 269; II, 445. Mun, op. cit., p. 66.
Child, op. cit., p. 55. North, op. cit., pp. 25-26.
Berkeley, op. cit., passim.
 See Edgar J. Furniss, The Position of the Laborer in a System of Nationalism (Boston, 1920).
 Petty, op. cit., I, 308.
 Petty, op. cit., I, 23. Temple, op. cit., II, 380.
Berkeley, op. cit., Q. 381. Child, op. cit., ch. 2.
 Daniel Defoe, True Born Englishman in Essays and Studies by Members of the English Association, collected by A. C. Guthkelch (Oxford, 1913), IV.
Tucker, op. cit., p. 56.
John Deacon, A Treatise Intitvled; Nobody is my name, etc. (London ). The pages are not numbered.
 Tucker, op. cit., p. 57.
 Temple, op. cit., I, 119.
Postlethwayt, Great Britain’s Commercial Interest, etc., II, 367.
 Petty, op. cit., I, 32.
Defoe, The Complete English Tradesman, I, 56.
 Hales, op. cit., p. 57. Petty, op. cit., I, 48. North, op. cit., p. 13. Davenant, op. cit., p. 109. Defoe, Complete English Tradesman, etc., II, 79-80.
 Hales, op. cit., p. 59.
 Hales, op. cit., pp. 78, 49, 46.
Adam Smith, The Wealth of Nations, ed. Edwin Cannan (New York, 1937), p. 421.
 Malynes, Consuetudo, etc., p. 67.
Ibid., p. 2.
Cicero De re publica, trans. C. W. Keyes, iii, 22.
 See Vol. 2, pp. 20-21.
 Petty, op. cit., I, 9, 243.
 Barbon, op. cit., pp. 13, 16. North, op. cit., p. 34.
Law, op. cit., p. 4. Smith, op. cit., p. 28. Berkeley, op. cit., Q. 24.
 Child, op. cit., pp. 55-56, 80.
Davenant, An Essay on the East India-Trade, quoted by Whittaker, op. cit., p. 147.
 North, op. cit., p. 13.
 Temple, op. cit., I, 120. Barbon, op. cit., pp. 27-28.
North, op. cit., p. 14.
Cf., however, Philip W. Buck, The Politics of Mercantilism (New York, 1942).
 Temple, op. cit., II, 41, 42. Petty, op. cit., I, 301.
Defoe, The Compleat English Gentleman, ed. Karl D. Bulbring (London, 1890), p. 147.
Barbon, op. cit., p. 20. Davenant, op. cit., passim.
 Temple, op. cit., II, 366.
Ibid., II, 35, 46, 51.
Cf. David Hume, “Of the First Principles of Government,” Essays Moral, Political, and Literary in Philosophical Works (Edinburgh, 1826), III.
Daniel Defoe, The Compleat English Gentleman, passim.
 Hales, op. cit., pp. 50-51; italics added.
 Malynes, The Maintenance of Free Trade, pp. 3-4, 5.
Child, op. cit., pp. xxvi-xxvii.
Postlethwayt, Great Britain’s Commercial Interest, etc., II, 371.
North, op. cit., pp. 27-28. Mun, op. cit., ch. xv.
Davenant, An Essay on Ways and Means of Supplying the War, p. 139.
 Tucker, op. cit., p. 74.
Postlethwayt, Great Britain’s Commercial Interest, etc., II, 377.
North, op. cit., p. 12. Smith, op. cit., p. 423.
 See D. C. Coleman, “Labour in the English Economy of the Seventeenth Century,” Economic History Review, 2nd series, VIII (1956), no. 3.
 Petty, op. cit., I, 244, 305.
National and International Measures for Full Employment. Report by a Group of Experts Appointed by the Secretary-General (United Nations, Lake Success, New York, 1949), 25.
 Gustav Schmoller, The Mercantile System and Its Historical Significance (New York, 1896), p. 7.
Heckscher, op. cit., II, 324.
 Aristotle, Politics, i, 9.
 Francesco Patrizi, A Moral Methode of Civile Policie. Etc., trans. Rycharde Robinson (London, 1576), pp. 9-10.
 Cary, op. cit., p. 4. Hales, op. cit., pp. 121-122.