Front Page Titles (by Subject) Neomercantilism - Literature of Liberty, January/March 1978, vol. 1, No. 1
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Neomercantilism - Leonard P. Liggio, Literature of Liberty, January/March 1978, vol. 1, No. 1 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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“The Relevance of The Wealth of Nations to Contemporary Economic Policy.” Scottish Journal of Political Economy 23 (1976): 171–182.
A new synthesis of areas of economic policy, (e.g., commercial policy, public finance, and the general role of governmental intervention in economic life), which had been influenced by The Wealth of Nations now varies considerably from Adam Smith's classic. The synthesis comes both from the “theory of second best” (from which one invariably concludes that we need governmental intervention) and from “first best” considerations (once one assumes that “externalities” and “public goods” are all-pervasive). The shapers of the new synthesis adopt a philosophical rationale: the market is guilty until proven innocent; while government is never guilty, however criminally or irresponsibly particular governments may have behaved.
By design, much of the terminology and conceptualization in public finance justifies the extension of the role of government, e.g., “merit goods.” But once the state reaches the commanding dimensions which it does in some countries, the market, as a basis for valuing factors used by the government, ceases to have any real meaning. Thus the question of evaluating the efficiency of taxation and public expenditure, and of controlling their magnitude is beyond the bounds of Adam Smith's concept of public finance.
In the sphere of commercial policy, mercantilism has again emerged. It has two aspects. One—the naive—relates to the establishment of a favorable balance of trade. The other—sophisticated—forms the policy to develop an export surplus in “technologically sophisticated” products. We witness the contemporary tendency to replace the mercantilist fallacy (that wealth consists of gold and silver) with the neomercantilist fallacy (that it consists in the possession of high technology). This suggests one of the main reasons why the leading industrial countries have moved a long way toward freedom of trade in industrial but not in agricultural products. These countries recognize that trade interventions have become crude methods to influence resource allocation compared with more effective fiscal alternatives. Moreover, because of its “public goods” character, technological superiority holds the promise of monopoly gains. To maximize these gains requires the largest negotiable market area of ostensibly free competition.
Economists have remained backward in evaluating the evidence on the actual economic effects of governmental economic regulation. This is because (1) the economist of today, in contrast to Adam Smith, has a vested interest in the extension of power of the state—even if only as a convenient reference point for teaching his subject; (2) economists have come to prefer the methods of governmental decision making to those of the individual operating in a competitive market; (3) economists assume better educated (than in Smith's time) public servants upgrade the quality of governmental decision making.
From these considerations, Adam Smith's views against government intervention are not likely to command much of a hearing nowadays.