Economics 1776 Lecture Notes - Lecture 6: Physiocracy, Scholasticism, Mercantilism
18 Jun 2018
School
Department
Course
Professor
Finish&talking&about&Smithian&Revolution,&Monday&is&second&on&two&TMS&
discussions,&Wed&(pg.&13-30,&95-99,&340-346,&539-541)&and&Friday&(189-193,&
411-422,&781-788,&869-873?)&are&both&dedicated&to&Wealth&of&Nations
•
Readings&for&next&week
Theories&of&the&"just&price"&(with&clear& moral&implications&for&individual&
behavior)
○
Little&role&for&markets&or&especially&competition
○
Little&concern&with&any&economy-wide&aggregate
○
Pre-Renaissance:&Scholasticism
•
Subordination&of&economic&activity&to&"reasons&of&the&state"
○
But&"reasons&of&state"&became&corrupted&by&conflating&the&nation's&
interests&with&producers'&interest
○
Metal&bullion&as&the&essence&of&national&wealth
○
Hence®ulation&of&foreign&trade&to&produce&an&inflow&of&specie
§
Promotion&of&industry&by&seeking&cheap&imports&of&raw&materials
§
By&contrast,&protective&tariffs&on&imports&of&manufactured&goods
§
Encouragement&of&exports,&especially&manufacturers
§
Emphasis&on&increasing&population&(national&military&purpose&as&
well)
§
Preference&for&low&wages
§
Perceived&need&for&top-down&direction&of&economic&….
§
Mercantilists&defined&national&wealth&by&precious&metals&-->&metal&made&
weapons,&could&be&traded&for&mercenary&soldiers
○
16th&and&17th&Centuries:&Mercantilism
•
Emphasis&on&agriculture&as&the&origin&of&all&wealth
○
18th&Century&France:&Physiocracy
•
Conclusions&drawn&from&first&principles&grounded&in&logic&or&
observation
§
Establishing&causal&mechanisms&to&explain&observed&phenomena
§
Situating&those&mechanisms&within&the&systemic&laws&of&a&
harmonious&universe
§
Essential&for&the&support&of&sociability□
And&then:&deriving&a&system&ofðics&-- for&the&individual&and&for&
society&-- from&those&laws
§
The&underlying&agenda:&creating&a&"science&of&man"&to&match&Newton's&
science&of&the&universe
○
A&new&understanding&of&the&role&of&individual&self-interest
§
A&new&understanding&of&the&competitive)market)mechanism
§
Implications&for&what&became&"microeconomics"
○
Following&Hume,&acceptance&of&the)population's)standard)of)living)
as)the)primary)measure)of)a)nation's)economic)success
§
Implications&for&what&became&"macroeconomics"
○
Trade&in&land:&primogeniture,&entail,&etc
§
Trade&in&labor:&guilds,&the&apprenticeship&system
§
Foreign&trade&in&goods:&tariffs,&import&monopolies
§
Domestic&trade&in&goods:&government-granted&monopolies&private&
collusion
§
Smith's&more&concrete&"economic"&policy&agenda:&opposition&to&specific&
impediments&blocking&free&and&competitive&trade&in&England&and&Scotland&
(all&seen&as&disruptions&of&the&harmonious&natural&order&of&the&universe)
○
The&Structure&of&Smith's&Contribution
•
Smith's&first&book&(he&was&36)
○
A&work&of&moral&philosophy,¬&"economics"
○
Was&TMS and&intermediate&step&on&the&way&to&The)Wealth)of)Nations?&
("the&Adam&Smith&Problem")
○
Central&motiviating&idea:&the&role&of&human&imagination&(a&Newtonian&
"first&principle,"&and&taken&from&Hume)
○
"sympathy"
§
The&ability&to&think&as&a&"spectator"
§
From&that,&the&role&of&the&"impartial&spectator"
§
Consequent&value&place&on&"praise-worthiness"
§
Key&implications&of&imagination
○
"there&are&evidently&some&principles&in&his&nature,&which&
interest&him&in&the&fortune&of&others,&and&render&their&
happiness&necessary&to&him"
□
"nature,&when&she&formed&for&society,&endowed&him&with&an&
original&desire&to&please,&and&an&original&aversion&to&offend&his&
brethren"&(is&"Nature"&God?
□
Man's&intrinsically&sociable&nature:&sympathy
§
Hence&an&echo&of&Hutcheson&on&benevolence
§
But&a&replacement&for&Hutcheson's&"moral&sense"
§
The&basis&for&"sociability"&(including&commerce)
§
Some&basic&assumptions&in&TMS&(sometimes&illustrated,&but&no&justified)
○
"that&great,&benevolent,&and&all-wise&Being,&who&directs&all&the&
movements&of&nature;&and&who&is&determined,&by&his&own&
unalterable&perfections,&to&maintain&in&it,&at&all×,&the&greatest&
possible&quantity&of&happiness"&(is&this&"Being"&God?)
§
Hence&a&harmonious,&rather&than&discordant,&universe
§
Diving&preference&for&human&happiness
○
A&Stoic&conception&of&happiness&within&the&harmonious&universe
○
Adam&Smith,&The$Theory$of$Moral$Sentiments$(1759)•
Sympathy&as&distant&from&pity:&the&ability,&in&our&imagination,&of&putting&
ourselves&in&others'&places&-- and&our&awareness&that&we&are&doing&so
○
Sympathy&as&Fellow-Feeling:&The&Role&of&Imagination•
"nothing&pleases&us&more&than&to&observe&in&other&men&a&fellow-feeling"
○
But&sympathy&is¬&motivated&by&self-interest&(does&Smith&therefore&
avoid&the&"Mandeville&trap"?)
○
The&Desire& for&Mutuality•
Approaches&to&"Economics"&before&the&Smithian&Revolution
9/15/17
Friday,&September& 15,&2017
10:09&AM
