This document provides an overview of the Mercantilism and Physiocracy schools of economic thought. It discusses the key figures and ideas of each school. Mercantilism prevailed between 1500-1750 and emphasized accumulating wealth through exports. Key thinkers included Mun, Petty, and Colbert. Physiocracy emerged in France in the 1700s and believed that only agriculture is productive. Key figures were Quesnay, Turgot, and Condorcet. Physiocracy reacted against mercantilism and believed in natural laws governing the economy. Both schools contributed early ideas but were later criticized and modified by classical economists.
New Keynesian economics evolved in response to new classical critiques of Keynesian macroeconomics. It incorporates Keynesian ideas like sticky prices and wages to explain short-run economic fluctuations. A key difference from new classical economics is the assumption that prices and wages adjust slowly rather than quickly clearing markets. This allows for involuntary unemployment and a role for monetary policy. A new synthesis has emerged merging tools from both new classical and new Keynesian models.
The document discusses several key concepts in classical economics:
1. Classical economics included a value theory and distribution theory where the value of a product depended on production costs. Distribution of income was explained by costs of production.
2. Under classical economics, a landlord received rent, workers received wages, and capitalist tenants received profits from their investments.
3. Adam Smith was a prominent figure in classical economics and argued that labor is the source of a country's wealth and wealth increases through division of labor and free competition.
4. Physiocrats believed that agriculture was the sole source of wealth for a nation. Rent, wages, and profits were seen as distributions of the agricultural surplus.
We can define heteroscedasticity as the condition in which the variance of the error term or the residual term in a regression model varies. As you can see in the above diagram, in the case of homoscedasticity, the data points are equally scattered while in the case of heteroscedasticity, the data points are not equally scattered.
Two Conditions:
1] Known Variance
2] Unknown Variance
Jean-Baptiste Say introduced several important economic concepts, including distinguishing between factors of production (land, labor, capital) and introducing the concept of the entrepreneur. He is best known for "Say's Law", which states that supply creates its own demand. Say's Law was an important idea in classical economics and implied that general overproduction was impossible. It was based on ideas that savings equal investment, and that people only hold money for transactions, not as an asset. While Say's Law may have been intended to describe an equilibrium condition, it was often interpreted as being true at all times, which many classical economists like Mill disagreed with.
Adam Smith, David Ricardo, Thomas Malthus, and Karl Marx were influential classical economists. Adam Smith introduced concepts like the division of labor and free trade. David Ricardo developed the labor theory of value and the theory of rent. Thomas Malthus believed population growth could outpace food supply increases. Karl Marx viewed history through the lens of class struggle and believed capitalism would be overtaken by socialism and communism.
Hesiod was one of the earliest Greek poets thought to have contributed to the development of economic thought. In his seminal work "Works and Days", he describes the economic conditions of ancient Greece including the rise of private land ownership, inequality between wealthy landowners and peasant farmers, and the acceptance of trade and commerce as means for economic security and escape from hardship. The poem presents early insights into concepts like the scarcity of resources, the relationship between work, wealth, and poverty, and the necessity of work. Hesiod is thus considered one of the first economists for offering observations and advice concerning basic economic life in ancient Greece.
What is history of Economic Thought
Why study History of Economic Thought
Three General Beliefs in the study of History of Economic Thought
History of Economic Thought Vs Economic Thought
Period /Timeline of History of Economic Thought
Adam Smith's theory of value analyzed what regulates exchange values and the elements that govern the exchange value of commodities. He distinguished between value in use, based on a good's utility, and value in exchange. While essential goods like water have value in use, they have no value in exchange. In contrast, diamonds have value in exchange but are not essential. Smith believed for a commodity to have value in exchange it must first have value in use, and it must also be relatively scarce. He argued that in a simple economy without other factors, the labor required to produce goods determines their relative values and rates of exchange. However, he acknowledged this does not hold when considering capital and land.
New Keynesian economics evolved in response to new classical critiques of Keynesian macroeconomics. It incorporates Keynesian ideas like sticky prices and wages to explain short-run economic fluctuations. A key difference from new classical economics is the assumption that prices and wages adjust slowly rather than quickly clearing markets. This allows for involuntary unemployment and a role for monetary policy. A new synthesis has emerged merging tools from both new classical and new Keynesian models.
The document discusses several key concepts in classical economics:
1. Classical economics included a value theory and distribution theory where the value of a product depended on production costs. Distribution of income was explained by costs of production.
2. Under classical economics, a landlord received rent, workers received wages, and capitalist tenants received profits from their investments.
3. Adam Smith was a prominent figure in classical economics and argued that labor is the source of a country's wealth and wealth increases through division of labor and free competition.
4. Physiocrats believed that agriculture was the sole source of wealth for a nation. Rent, wages, and profits were seen as distributions of the agricultural surplus.
We can define heteroscedasticity as the condition in which the variance of the error term or the residual term in a regression model varies. As you can see in the above diagram, in the case of homoscedasticity, the data points are equally scattered while in the case of heteroscedasticity, the data points are not equally scattered.
Two Conditions:
1] Known Variance
2] Unknown Variance
Jean-Baptiste Say introduced several important economic concepts, including distinguishing between factors of production (land, labor, capital) and introducing the concept of the entrepreneur. He is best known for "Say's Law", which states that supply creates its own demand. Say's Law was an important idea in classical economics and implied that general overproduction was impossible. It was based on ideas that savings equal investment, and that people only hold money for transactions, not as an asset. While Say's Law may have been intended to describe an equilibrium condition, it was often interpreted as being true at all times, which many classical economists like Mill disagreed with.
Adam Smith, David Ricardo, Thomas Malthus, and Karl Marx were influential classical economists. Adam Smith introduced concepts like the division of labor and free trade. David Ricardo developed the labor theory of value and the theory of rent. Thomas Malthus believed population growth could outpace food supply increases. Karl Marx viewed history through the lens of class struggle and believed capitalism would be overtaken by socialism and communism.
Hesiod was one of the earliest Greek poets thought to have contributed to the development of economic thought. In his seminal work "Works and Days", he describes the economic conditions of ancient Greece including the rise of private land ownership, inequality between wealthy landowners and peasant farmers, and the acceptance of trade and commerce as means for economic security and escape from hardship. The poem presents early insights into concepts like the scarcity of resources, the relationship between work, wealth, and poverty, and the necessity of work. Hesiod is thus considered one of the first economists for offering observations and advice concerning basic economic life in ancient Greece.
What is history of Economic Thought
Why study History of Economic Thought
Three General Beliefs in the study of History of Economic Thought
History of Economic Thought Vs Economic Thought
Period /Timeline of History of Economic Thought
Adam Smith's theory of value analyzed what regulates exchange values and the elements that govern the exchange value of commodities. He distinguished between value in use, based on a good's utility, and value in exchange. While essential goods like water have value in use, they have no value in exchange. In contrast, diamonds have value in exchange but are not essential. Smith believed for a commodity to have value in exchange it must first have value in use, and it must also be relatively scarce. He argued that in a simple economy without other factors, the labor required to produce goods determines their relative values and rates of exchange. However, he acknowledged this does not hold when considering capital and land.
Econometrics notes (Introduction, Simple Linear regression, Multiple linear r...Muhammad Ali
Econometrics notes for BS economics students
Muhammad Ali
Assistant Professor of Statistics
Higher Education Department, KPK, Pakistan.
Email:Mohammadale1979@gmail.com
Cell#+923459990370
Skyp: mohammadali_1979
This document provides an overview of post-Keynesian economics. It defines post-Keynesian economics, outlines some of its key characteristics such as its focus on effective demand and historical dynamics. It also describes some of the different strands within post-Keynesian theory, including Michal Kalecki's emphasis on imperfect competition and class division. Additionally, it summarizes theories around post-Keynesian income distribution in corporate economies developed by Robinson, Kaldor and Pasinetti, and post-Keynesian employment analysis based on the principle of effective demand determining labor-hire decisions.
This document discusses multicollinearity in regression analysis. It defines multicollinearity as an exact or near-exact linear relationship between explanatory variables. In cases of perfect multicollinearity, individual regression coefficients cannot be estimated. Near or imperfect multicollinearity is more common in real data and can lead to less precise coefficient estimates with wider confidence intervals. The document discusses various methods for detecting multicollinearity, such as auxiliary regressions and variance inflation factors, and potential remedies like dropping or transforming variables. However, multicollinearity diagnosis depends on the specific data sample and goals of the analysis.
Ramsey–Cass–Koopmans growth model is a neo-classical model of economic growth. It explicitly models the choice of consumption at a point in time. And it has made the savings rate endogenous.
This document provides an overview of macroeconomics topics that will be covered in the Macroeconomics 2 course, including integrating classical and Keynesian schools of thought, the development of the New Neoclassical Synthesis, short and long run issues, and applications of macroeconomic models. It also summarizes the key differences between classical and Keynesian economics, including their views on unemployment, flexibility of wages and prices, and the appropriate role of government intervention in the economy.
INDIRECT UTILITY FUNCTION AND ROY’S IDENTITIY by Maryam LoneSAMEENALONE2
- Utility is a measure of satisfaction derived from consuming goods and services. Individuals seek to maximize their utility subject to a budget constraint.
- Indifference curves represent combinations of goods that provide equal utility. The slope of the indifference curve is the marginal rate of substitution (MRS).
- The budget constraint shows affordable combinations given prices and income. Utility is maximized at the point where the MRS equals the price ratio, where the indifference curve is tangent to the budget constraint.
- Using tools like Lagrangian optimization and the envelope theorem, the amounts demanded of each good can be derived as functions of prices and income.
The Romans borrowed most of their economic ideas from the Greeks. They were primarily focused on expanding their vast empire through military power rather than developing original economic theories. While the Romans respected Greek intellectual and artistic achievements, they built upon Greek architecture to develop new solutions required to construct massive cities with high populations. During the decline of the Roman Empire, some philosophers began discussing economic topics and viewed money lending and luxury as harmful, instead favoring simplicity and small family farms. Roman law also established concepts still used in economics like private property, contracts, and definitions of price, money, and loans.
Adam Smith is considered the founder of classical economics. In his seminal work "The Wealth of Nations" published in 1776, he outlined several key ideas:
1) He argued that an "invisible hand" in the free market leads to economic prosperity as individuals pursuing their self-interest ultimately benefit society as a whole.
2) He believed that free trade and minimal government intervention are ideal.
3) He explained that division of labor increases productivity and specialization, and is limited by the extent of the market. Wider markets allow for more division of labor.
4) Smith analyzed factors of production including wages, profit, rent and their relationships in a market economy. He believed competition would
This document discusses stabilization policy, which aims to stabilize the economy and prevent fluctuations in output, employment, and prices that occur during business cycles. Stabilization policy uses monetary policy, fiscal policy, and international measures. Monetary policy involves tools like changing interest rates, reserve ratios, and open market operations to influence the money supply. Fiscal policy involves manipulating public expenditure, taxation, and debt to stimulate or contract the economy. International measures coordinate import/export policies and currency values with other countries. The overall goal is to counteract inflation during booms and spur growth during recessions.
This document provides an introduction to econometrics. It defines econometrics as the application of statistical and mathematical tools to economic data and theory. The document outlines the methodology of econometrics, including specifying a theoretical model, collecting data, estimating model parameters, testing hypotheses, forecasting, and using models for policy purposes. It provides the example of estimating the parameters of Keynes' consumption function to illustrate these steps.
The Harrod-Domar model theorizes that a country's economic growth rate is defined by its savings level and capital output ratio. It was developed in the 1930s-40s by British economist Roy Harrod and Russian economist Evsey Domar. The model shows that increased savings leads to increased investment, production, and capital, fueling economic growth. However, it makes unrealistic assumptions and does not account for factors like development versus just growth. The Solow-Swan model later improved on it by including capital intensity variations.
This document provides an overview of two-variable regression analysis and the concept of the population regression function. It discusses how regression analysis is used to estimate the mean value of the dependent variable based on the independent variable. It introduces a hypothetical example using family income and consumption expenditure data. It defines key concepts like the population regression line and function, and explains how the regression model specifies the dependent variable as a linear function of the independent variables plus a stochastic disturbance term to account for omitted variables.
The document provides an overview of mercantilism and the institutional school of economics. It describes the key ideas and characteristics of mercantilism, including its focus on accumulating gold and silver, maintaining a favorable balance of trade, and promoting national power. It discusses important mercantilist thinkers like Thomas Mun and their policy recommendations. The document also summarizes the decline of mercantilism and introduces the institutional school, focusing on its founders Thorstein Veblen, W.C. Mitchell, and J.R. Commons and their emphasis on institutions and group behavior over individual values.
05 the entropy law and economic processPrabha Panth
In his book, The Entropy Law and the Economic Process, Georgescue Roegen has discussed how by applying the laws of thermodynamics, it is possible to understand the inherent environmentally destruction that follows economic activity.
This Presentation is tailor made for those who are willing to get an overview of Econometrics as to what it means, how it works and the methodology it follows.
J.S. Mill developed Ricardo's theory of comparative costs by introducing the concept of reciprocal demand. Reciprocal demand refers to the intensity of demand one country has for another country's exports. Mill argued that terms of trade are determined by the relative strength and elasticity of reciprocal demand between countries, as represented by their offer curves. While pioneering, Mill's theory makes unrealistic assumptions and neglects supply-side factors, leading some economists to criticize it as an imperfect framework for analyzing international trade.
This document discusses the methodology of econometrics. It begins by defining econometrics as applying economic theory, mathematics and statistical inference to analyze economic phenomena. It then outlines the typical steps in an econometric analysis: 1) stating an economic theory or hypothesis, 2) specifying a mathematical model, 3) specifying an econometric model, 4) collecting data, 5) estimating parameters, 6) hypothesis testing, 7) forecasting, and 8) using the model for policy purposes. As an example, it walks through Keynes' consumption theory using U.S. consumption and GDP data to estimate the marginal propensity to consume.
The document discusses different macroeconomic theories including:
- Classical economists believed in full employment and laissez-faire markets.
- Keynesians believe active government policy is needed to stabilize the economy due to unstable aggregate demand and downwardly inflexible prices and wages.
- Monetarists like Milton Friedman advocated for a monetary rule where the money supply increases 3-5% annually. They believe velocity is stable.
- New Keynesians see the economy as potentially unstable due to changes in investment and supply shocks. They support monetary policy targeting interest rates in the short-run and money supply in the long-run.
This document provides an introduction to a presentation on mercantilism. It lists the group members presenting - Kaniz Fatima, Fariha Ahmad, and Tarich Khalasi - and their student IDs. It then provides an overview of the basic concepts of mercantilism, including that it believes a nation's wealth depends on precious metals and favors exporting more than importing to accumulate gold and silver. It also notes Adam Smith first coined the term "mercantile system" and that mercantilist policies involved tariffs, subsidies, and limiting wages.
This presentation summarizes the economic theory of mercantilism. It introduces the topic and presenters, then defines mercantilism as an early theory of international trade that believed a nation's wealth depended on accumulating gold and silver and having a positive trade balance. It discusses key mercantilist policies like tariffs and export subsidies. It provides an example of China using modern mercantilist policies and summarizes Adam Smith's criticisms of how mercantilism viewed trade as zero-sum and emphasized money over other forms of wealth. The presentation concludes by noting how mercantilist policies were gradually replaced by free trade in Britain and France in the 18th-19th centuries.
Econometrics notes (Introduction, Simple Linear regression, Multiple linear r...Muhammad Ali
Econometrics notes for BS economics students
Muhammad Ali
Assistant Professor of Statistics
Higher Education Department, KPK, Pakistan.
Email:Mohammadale1979@gmail.com
Cell#+923459990370
Skyp: mohammadali_1979
This document provides an overview of post-Keynesian economics. It defines post-Keynesian economics, outlines some of its key characteristics such as its focus on effective demand and historical dynamics. It also describes some of the different strands within post-Keynesian theory, including Michal Kalecki's emphasis on imperfect competition and class division. Additionally, it summarizes theories around post-Keynesian income distribution in corporate economies developed by Robinson, Kaldor and Pasinetti, and post-Keynesian employment analysis based on the principle of effective demand determining labor-hire decisions.
This document discusses multicollinearity in regression analysis. It defines multicollinearity as an exact or near-exact linear relationship between explanatory variables. In cases of perfect multicollinearity, individual regression coefficients cannot be estimated. Near or imperfect multicollinearity is more common in real data and can lead to less precise coefficient estimates with wider confidence intervals. The document discusses various methods for detecting multicollinearity, such as auxiliary regressions and variance inflation factors, and potential remedies like dropping or transforming variables. However, multicollinearity diagnosis depends on the specific data sample and goals of the analysis.
Ramsey–Cass–Koopmans growth model is a neo-classical model of economic growth. It explicitly models the choice of consumption at a point in time. And it has made the savings rate endogenous.
This document provides an overview of macroeconomics topics that will be covered in the Macroeconomics 2 course, including integrating classical and Keynesian schools of thought, the development of the New Neoclassical Synthesis, short and long run issues, and applications of macroeconomic models. It also summarizes the key differences between classical and Keynesian economics, including their views on unemployment, flexibility of wages and prices, and the appropriate role of government intervention in the economy.
INDIRECT UTILITY FUNCTION AND ROY’S IDENTITIY by Maryam LoneSAMEENALONE2
- Utility is a measure of satisfaction derived from consuming goods and services. Individuals seek to maximize their utility subject to a budget constraint.
- Indifference curves represent combinations of goods that provide equal utility. The slope of the indifference curve is the marginal rate of substitution (MRS).
- The budget constraint shows affordable combinations given prices and income. Utility is maximized at the point where the MRS equals the price ratio, where the indifference curve is tangent to the budget constraint.
- Using tools like Lagrangian optimization and the envelope theorem, the amounts demanded of each good can be derived as functions of prices and income.
The Romans borrowed most of their economic ideas from the Greeks. They were primarily focused on expanding their vast empire through military power rather than developing original economic theories. While the Romans respected Greek intellectual and artistic achievements, they built upon Greek architecture to develop new solutions required to construct massive cities with high populations. During the decline of the Roman Empire, some philosophers began discussing economic topics and viewed money lending and luxury as harmful, instead favoring simplicity and small family farms. Roman law also established concepts still used in economics like private property, contracts, and definitions of price, money, and loans.
Adam Smith is considered the founder of classical economics. In his seminal work "The Wealth of Nations" published in 1776, he outlined several key ideas:
1) He argued that an "invisible hand" in the free market leads to economic prosperity as individuals pursuing their self-interest ultimately benefit society as a whole.
2) He believed that free trade and minimal government intervention are ideal.
3) He explained that division of labor increases productivity and specialization, and is limited by the extent of the market. Wider markets allow for more division of labor.
4) Smith analyzed factors of production including wages, profit, rent and their relationships in a market economy. He believed competition would
This document discusses stabilization policy, which aims to stabilize the economy and prevent fluctuations in output, employment, and prices that occur during business cycles. Stabilization policy uses monetary policy, fiscal policy, and international measures. Monetary policy involves tools like changing interest rates, reserve ratios, and open market operations to influence the money supply. Fiscal policy involves manipulating public expenditure, taxation, and debt to stimulate or contract the economy. International measures coordinate import/export policies and currency values with other countries. The overall goal is to counteract inflation during booms and spur growth during recessions.
This document provides an introduction to econometrics. It defines econometrics as the application of statistical and mathematical tools to economic data and theory. The document outlines the methodology of econometrics, including specifying a theoretical model, collecting data, estimating model parameters, testing hypotheses, forecasting, and using models for policy purposes. It provides the example of estimating the parameters of Keynes' consumption function to illustrate these steps.
The Harrod-Domar model theorizes that a country's economic growth rate is defined by its savings level and capital output ratio. It was developed in the 1930s-40s by British economist Roy Harrod and Russian economist Evsey Domar. The model shows that increased savings leads to increased investment, production, and capital, fueling economic growth. However, it makes unrealistic assumptions and does not account for factors like development versus just growth. The Solow-Swan model later improved on it by including capital intensity variations.
This document provides an overview of two-variable regression analysis and the concept of the population regression function. It discusses how regression analysis is used to estimate the mean value of the dependent variable based on the independent variable. It introduces a hypothetical example using family income and consumption expenditure data. It defines key concepts like the population regression line and function, and explains how the regression model specifies the dependent variable as a linear function of the independent variables plus a stochastic disturbance term to account for omitted variables.
The document provides an overview of mercantilism and the institutional school of economics. It describes the key ideas and characteristics of mercantilism, including its focus on accumulating gold and silver, maintaining a favorable balance of trade, and promoting national power. It discusses important mercantilist thinkers like Thomas Mun and their policy recommendations. The document also summarizes the decline of mercantilism and introduces the institutional school, focusing on its founders Thorstein Veblen, W.C. Mitchell, and J.R. Commons and their emphasis on institutions and group behavior over individual values.
05 the entropy law and economic processPrabha Panth
In his book, The Entropy Law and the Economic Process, Georgescue Roegen has discussed how by applying the laws of thermodynamics, it is possible to understand the inherent environmentally destruction that follows economic activity.
This Presentation is tailor made for those who are willing to get an overview of Econometrics as to what it means, how it works and the methodology it follows.
J.S. Mill developed Ricardo's theory of comparative costs by introducing the concept of reciprocal demand. Reciprocal demand refers to the intensity of demand one country has for another country's exports. Mill argued that terms of trade are determined by the relative strength and elasticity of reciprocal demand between countries, as represented by their offer curves. While pioneering, Mill's theory makes unrealistic assumptions and neglects supply-side factors, leading some economists to criticize it as an imperfect framework for analyzing international trade.
This document discusses the methodology of econometrics. It begins by defining econometrics as applying economic theory, mathematics and statistical inference to analyze economic phenomena. It then outlines the typical steps in an econometric analysis: 1) stating an economic theory or hypothesis, 2) specifying a mathematical model, 3) specifying an econometric model, 4) collecting data, 5) estimating parameters, 6) hypothesis testing, 7) forecasting, and 8) using the model for policy purposes. As an example, it walks through Keynes' consumption theory using U.S. consumption and GDP data to estimate the marginal propensity to consume.
The document discusses different macroeconomic theories including:
- Classical economists believed in full employment and laissez-faire markets.
- Keynesians believe active government policy is needed to stabilize the economy due to unstable aggregate demand and downwardly inflexible prices and wages.
- Monetarists like Milton Friedman advocated for a monetary rule where the money supply increases 3-5% annually. They believe velocity is stable.
- New Keynesians see the economy as potentially unstable due to changes in investment and supply shocks. They support monetary policy targeting interest rates in the short-run and money supply in the long-run.
This document provides an introduction to a presentation on mercantilism. It lists the group members presenting - Kaniz Fatima, Fariha Ahmad, and Tarich Khalasi - and their student IDs. It then provides an overview of the basic concepts of mercantilism, including that it believes a nation's wealth depends on precious metals and favors exporting more than importing to accumulate gold and silver. It also notes Adam Smith first coined the term "mercantile system" and that mercantilist policies involved tariffs, subsidies, and limiting wages.
This presentation summarizes the economic theory of mercantilism. It introduces the topic and presenters, then defines mercantilism as an early theory of international trade that believed a nation's wealth depended on accumulating gold and silver and having a positive trade balance. It discusses key mercantilist policies like tariffs and export subsidies. It provides an example of China using modern mercantilist policies and summarizes Adam Smith's criticisms of how mercantilism viewed trade as zero-sum and emphasized money over other forms of wealth. The presentation concludes by noting how mercantilist policies were gradually replaced by free trade in Britain and France in the 18th-19th centuries.
History of economic thought: MercantilismMahmoud Touny
This document provides an overview of the history of economic thought, beginning with mercantilism. It discusses key thinkers and schools of thought that evolved over time, including Adam Smith and classical economics, Marxism, marginalism, neoclassicism, Keynesianism, and the Chicago school. It focuses on explaining mercantilism in more depth, covering its origins, key figures like Thomas Mun, theories around bullion and trade balances, and criticisms from Adam Smith and later economists.
Mercantilism political polarization (2).pptxUmar266202
Mercantilism was the dominant economic system between the 16th-18th centuries in Europe. It focused on accumulating gold and silver by maintaining trade surpluses through maximizing exports and minimizing imports. Nations would establish colonies to import raw materials and export finished goods, in exchange for precious metals. Key aspects included imposing tariffs, subsidies, and monopolies to expand a nation's wealth and military power through international trade. While initially successful for nations like Britain and France, mercantilism was replaced by free trade economic theory by the mid-18th century.
International business: THEORIES OF INTERNATIONAL TRADERoni Kumar
This document provides an overview of several theories of international trade, including mercantilism, absolute advantage theory, comparative advantage theory, the Heckscher-Ohlin model, and the Porter Diamond model. It discusses the key principles and features of each theory, provides examples to illustrate the concepts, and notes some criticisms of the earlier theories like mercantilism. The document is an assignment on international business theories of trade that is organized by topic with headings and includes references.
This document provides an overview of mercantilism and bullionism. Mercantilism aimed to increase a nation's wealth, as measured by its stock of precious metals, by maintaining a positive balance of trade through exports exceeding imports. Nations pursued economic nationalism and self-sufficiency through policies like tariffs and subsidies. Colonies helped provide raw materials and captive markets to maintain a favorable trade balance. Bullionism held that a nation's economic health depended on its supply of gold and silver, acquired through international trade.
The document discusses the economic theory of mercantilism, which emerged in 16th century Europe during the Commercial Revolution. Mercantilism held that a nation's wealth came from its stock of gold and silver, and that the government should work to promote exports and discourage imports to maximize these precious metals. It describes how mercantilism aimed to enhance states' economic power through building wealth and achieving a favorable balance of trade. The theory influenced development of economic nationalism and protectionist policies in Europe during this time period.
1. Module II of the course covers international business theories and trade policy, including mercantilism, absolute advantage theory, comparative cost theory, Hecksher-Ohlin theory, and product cycle theory. It also covers instruments of trade policy such as tariffs, subsidies, import quotas, and anti-dumping policies.
2. Mercantilism held that nations benefit from accumulating gold and silver, and advocated for government regulation of international trade to generate wealth. Absolute advantage theory proposed that nations specialize in goods they can produce at lower absolute costs.
3. Comparative cost theory built on this by arguing that nations can both benefit from trade even if one has an absolute advantage in all goods, by
Chapter Two_Mercantilism: In International Trade Theory.pptxCarla Kristina Cruz
This document discusses mercantilism as an international trade theory. It defines mercantilism as recommending that a country aims to maintain a trade surplus and sees trade as a zero-sum game. It advocates for government intervention to achieve a trade surplus. The key aspects of mercantilism involve restricting imports while accumulating gold and promoting exports through subsidies and monopolies. Examples are given of how mercantilist policies were used by countries like England, France, and under the British Empire in India. Criticisms of mercantilism include that it promotes inefficiency and that it justified imperial policies. Modern and neo-mercantilist policies are also discussed.
Mercantilism was the dominant school of thought in Western European economics from the 16th to late 18th centuries. It focused on accumulating gold and silver and viewed international trade as a zero-sum game where one country's gain resulted in another's loss. Key aspects included prohibiting certain imports, subsidizing exports, accumulating precious metals, and establishing colonial monopolies where colonies could only trade with their parent nation. While criticized by later economists like Adam Smith and David Ricardo, some modern policies like currency manipulation and subsidies are seen as forms of neo-mercantilism.
This document provides an overview of macroeconomics, including its origins, development, and current state. It discusses what macroeconomics is and the key factors it analyzes like GDP, unemployment, inflation. It reviews the major schools of thought in macroeconomics including classical economists, Keynesians, monetarists, and new classical economists. It details the key ideas from each school. It also discusses the origins of macroeconomics in the Great Depression and John Maynard Keynes' work developing theories to explain short-run economic fluctuations.
1) Economics is the study of how societies allocate scarce resources for production, distribution, and consumption of goods and services. It analyzes how individuals and organizations make choices given scarcity and unlimited wants.
2) A mixed economy combines elements of market economies like private property and supply/demand pricing with government intervention through regulation, public services, and ownership of key industries. It aims to benefit from different economic systems while limiting disadvantages.
3) The central problems that all economies face are how to allocate scarce resources efficiently given unlimited human wants. The basic questions are what and how much to produce, how to produce it, and who receives what is produced.
This document discusses the history and concepts of economic globalization. It defines economic globalization as the increasing interdependence of world economies through cross-border trade, capital flows, and spread of technologies. Key points include:
- International organizations like the IMF and World Bank help facilitate global economic cooperation and stability.
- International trade routes like the Silk Road date back millennia, though globalization accelerated in the late 20th century.
- The Bretton Woods system established rules for international monetary management in the postwar era. This system tied currencies to gold and aimed to reduce economic nationalism.
- Neoliberalism advocates free movement of goods, capital and services across borders, while limiting state intervention in markets
Mercantilism is an economic theory that believes countries need large amounts of gold and silver to be wealthy. It benefits large businesses and governments who receive protectionism. Mercantilist ideas were promoted by rulers to increase national power through acquiring gold, which allowed for larger armies and colonies. While mercantilism declined historically, neo-mercantilist policies still exist today with countries restricting imports to stimulate domestic production and employment.
This document provides a summary of different economic theories from Physiocrat to Institutional Economics. It discusses the key ideas and contributors of each theory over time including Physiocrat, Mercantilism, Classical Economics, Keynesian Economics, Neo-Classical Economics, New Classical Economics, New Keynesian Economics, Structural Economics, and Institutional Economics. The document is a group assignment report submitted by 5 students at the Sri Lanka Institute of Information Technology for their Fundamentals of Economics course. It includes an introduction, discussion on each theory in turn, and references section.
Mercantilism was an economic policy that dominated European economic thinking and practice from the 16th to the late 18th century. It aimed to increase national wealth and power by imposing strict controls over colonies and trade. Key aspects included encouraging exports and discouraging imports, maintaining a positive balance of trade, and accumulating gold and silver. The ideas of mercantilism were influential in Europe during this period and laid the foundations for modern capitalism and ideas of economic nationalism.
May - August 2022 Class Presentation on Introduction to class and Internation...GeorgeKabongah2
This document provides an introduction to international economics. It discusses what international economics entails, including international trade and finance. It outlines some key concepts in international economics like microeconomics, macroeconomics, and trade theory. It also summarizes the evolution of trade theories from mercantilism to modern trade theories. Mercantilism viewed trade as a zero-sum game and advocated for policies to achieve favorable balances of trade, while classical theorists like Adam Smith argued trade could be mutually beneficial through concepts like absolute and comparative advantage.
Final Class Presentation on Introduction to class and International Economics...GeorgeKabongah2
What is Economics
What is international economics about?
Important issues in international trade.
History and present state of world trade flows
History of the development of trade theory
The Ricardian model of trade
Empirical evidence and policy results
This document provides an overview of international business theories and the nature of international business. It discusses several classical and modern theories of international trade, including mercantilism, absolute advantage, comparative advantage, Heckscher-Ohlin theory, country similarity theory, product life cycle theory, and Porter's national competitive advantage theory. It also summarizes key aspects of the nature of international business, such as globalization, cultural diversity, legal/regulatory frameworks, and inherent risks.
The document provides an overview of several theories of international trade, including mercantilism, absolute advantage, comparative advantage, Heckscher-Ohlin theory, and product life cycle theory. It discusses key aspects of each theory such as how they explain patterns of trade and specialization between countries. Mercantilism stressed accumulating gold by encouraging exports and discouraging imports. Absolute advantage argued that countries should specialize based on where they are most productive. Comparative advantage built on this by recognizing even without an absolute advantage, trade can benefit countries. Heckscher-Ohlin theory focused on specializing based on a country's most abundant resources. Product life cycle theory examined how products are traded as they progress through different stages.
Similar to 1. Mercantilism and Physiocracy.pdf (20)
Every business, big or small, deals with outgoing payments. Whether it’s to suppliers for inventory, to employees for salaries, or to vendors for services rendered, keeping track of these expenses is crucial. This is where payment vouchers come in – the unsung heroes of the accounting world.
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions.
KYC Compliance: A Cornerstone of Global Crypto Regulatory FrameworksAny kyc Account
This presentation explores the pivotal role of KYC compliance in shaping and enforcing global regulations within the dynamic landscape of cryptocurrencies. Dive into the intricate connection between KYC practices and the evolving legal frameworks governing the crypto industry.
Fabular Frames and the Four Ratio ProblemMajid Iqbal
Digital, interactive art showing the struggle of a society in providing for its present population while also saving planetary resources for future generations. Spread across several frames, the art is actually the rendering of real and speculative data. The stereographic projections change shape in response to prompts and provocations. Visitors interact with the model through speculative statements about how to increase savings across communities, regions, ecosystems and environments. Their fabulations combined with random noise, i.e. factors beyond control, have a dramatic effect on the societal transition. Things get better. Things get worse. The aim is to give visitors a new grasp and feel of the ongoing struggles in democracies around the world.
Stunning art in the small multiples format brings out the spatiotemporal nature of societal transitions, against backdrop issues such as energy, housing, waste, farmland and forest. In each frame we see hopeful and frightful interplays between spending and saving. Problems emerge when one of the two parts of the existential anaglyph rapidly shrinks like Arctic ice, as factors cross thresholds. Ecological wealth and intergenerational equity areFour at stake. Not enough spending could mean economic stress, social unrest and political conflict. Not enough saving and there will be climate breakdown and ‘bankruptcy’. So where does speculative design start and the gambling and betting end? Behind each fabular frame is a four ratio problem. Each ratio reflects the level of sacrifice and self-restraint a society is willing to accept, against promises of prosperity and freedom. Some values seem to stabilise a frame while others cause collapse. Get the ratios right and we can have it all. Get them wrong and things get more desperate.
13 Jun 24 ILC Retirement Income Summit - slides.pptxILC- UK
ILC's Retirement Income Summit was hosted by M&G and supported by Canada Life. The event brought together key policymakers, influencers and experts to help identify policy priorities for the next Government and ensure more of us have access to a decent income in retirement.
Contributors included:
Jo Blanden, Professor in Economics, University of Surrey
Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
Rt Hon Sir Stephen Timms, former Chair, Work & Pensions Committee
Nigel Waterson, ILC Trustee
Jackie Wells, Strategy and Policy Consultant, ILC Strategic Advisory Board
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...Donc Test
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck maria r mitchell.docx
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck maria r mitchell.docx
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck maria r mitchell.docx
Economic Risk Factor Update: June 2024 [SlideShare]Commonwealth
May’s reports showed signs of continued economic growth, said Sam Millette, director, fixed income, in his latest Economic Risk Factor Update.
For more market updates, subscribe to The Independent Market Observer at https://blog.commonwealth.com/independent-market-observer.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
1. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 1/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
1
Dpt of Economics, TMJM Government College Manimalakunnu
Module III
MODULE III: Major Schools of Economic Thought
Mercantilism (Thomas Mun, William Petty) and Physiocracy (Francis Quesnay
and
Turgot), Basic postulates of Classical and Neo-Classical economic thought (Adam
Smith, Ricardo, J.B. Say, Malthus, J.S. Mill, Jeremy Bentham, Alfred Marshall,
A.C. Pigou and Walras,) Socialist and Marxist Economic Thought (Saint Simon,
Sismondi and Karl Marx,
Keynesianism (Keynes as a critique of classical Economics and Monetarism
(Milton Friedman). Contribution of Indian Economists-Kautilya, Dadabhai
Naoroji, Amartya Sen and J.N. Bhagawathi).
A. Mercantilism
Mercantilism was the earliest school of thought in economics that
prevailed in Europe between 1500 and 1750 AD. Although mercantilism was
visible in Western Europe, it had strong presence in England and
throughout
France. The unique feature of mercantilism as an economic philosophy was that
it argued for accumulation of wealth through promotion of exports. The ideas
of Thomas Mun William Petty, Gerard de Malynes laid the foundations of
, etc.
mercantilism.
Relevance of mercantilism
The contribution of mercantilism is that it provided the early thinking in
economics in Western Countries. It was with mercantilism that thinkers and
countries started making an approach to economy building. In this context, it
served as the earliest school of thought to economic policies.
Another significa of mercantilism is that it triggered or started new
nce
ideas in economics including and the classical economics.
Physiocracy But
2. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 2/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
2
Dpt of Economics, TMJM Government College Manimalakunnu
mercantilism’s major contribution is that it created a widely criticized but
secretively followed policy of export promotion and import restriction to maximize
national wealth. Even now, several countries and economic policy makers stick
on to mercantilist approach of ‘beggar thy neighbor policies’.
Important mercantilist thinkers
Mercantilism rose to prominence with the rise of nation states. Several
thinkers who provided early and perhaps primitive ideas for nation making were
considered as mercantilists. The main mercantilist thinkers are: Thomas Mun,
Gerard de Malynes, William Petty and Jean Baptiste Colbert.
Thomas Mun (1571-1641)
Thomas Mun was a successful businessman and a director of East India
Trading Company. He provided the basic trading principles for the Company and
the trade related policies of the British period.
Mun’s work “A Discourse of Trade from England into the East Indies,”
-
(1621), was a remarkable explanation about the way in which trade can be used
to promote wealth of England.
Mun advocated the doctrine of “favorable balance of trade” that can be
described as the best example for mercantilist ideology. The doctrine argued
favorable balance of trade as the only means of increasing the wealth of England.
William Petty
William Petty who advocated mercantilists policies was the major
contributor to the philosophy. Petty was described as a self-made man, born as
son to poor clothier. He is considered to be the first proper . His first
economist
work – ‘Treatise on Taxes and Contributions’ provided tax reforms and trade
policy reforms in England. His attempts to quantify economic and demographic
characteristics and to apply empirical methods helped lay the foundation for
to
Classical Economics. Petty’s contributions were supposed to be superior to other
mercantilists.
3. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 3/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
3
Dpt of Economics, TMJM Government College Manimalakunnu
Major features of mercantilist philosophy
Mercantilism, as the earliest school in economic thought, has contributed
significantly to the development of the subject. The Mercantilists had certain
unique principles:
• Maximise exports and minimize imports to create national wealth
• A country’s wealth depends upon the amount of gold it has
• Beggar thy neighbor policy is needed to accumulate wealth
• Government policies should be aggressively made to enhance national
wealth
• Encourage domestic production and restrict consumption
1. Importance to exports and trade surplus
At the heart of mercantilism is the view that maximising net exports is the
best way to national prosperity. Mercantilists were keen on foreign trade
especially exports.
For them, the best way of ensuring a country’s prosperity was to minimize
imports and . This will generate gold inflows and the country’s
maximise exports
gold stocks. This gold indicates its wealth.
Accumulating gold was thought to be necessary for a strong, powerful
state. Countries such as Britain implemented this policy in the colonial period
to protect its traders and maximise national income. The Navigation Acts passed
in Britain severely restricted the ability of other nations to trade between England
and its colonies. The British trade policy in India was based on the mercantilist
policy.
2. Believers of bullionism: a country’s wealth depends on the quantity of
gold it has
Mercantilists are known in history as believers of “bullionism”. The belief
that a country’s wealth is stored in gold was the main notion of the mercantilists.
For them, gold is wealth and gold creation process through more production,
4. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 4/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
4
Dpt of Economics, TMJM Government College Manimalakunnu
more exports and less imports is the way to create wealth. Later, Adam Smith
corrected this by that wealth depends upon the quantity of goods and
proving
services produced and not on gold.
3. Beggar thy neighbor policy
For the Mercantilists, for a country to be wealthy, it has to reduce gold
outflow to other countries. Ensuring gold inflow and restricting the outflow will
make the country better off. This idea had important consequences for economic
policy. As a result, countries adopted policies to discourage imports and income
flows to other countries, thereby reducing neighbor’s welfare.
According to the mercantilists, total wealth in the world remains constant.
Here, one country’s d y
wealth can be increase only b decreasing some other
country’s wealth. This is possible only through more exports and restriction on
imports. Such import restriction will reduce the wealth or gold of the partner
countries. In this way, making other countries beggars is the way one country
can attain wealth. This approach of the mercantilists is known as beggar thy
neighbor policy.
The policy was followed by Britain and France during the Napoleonic Wars.
The warring governments tried to block opponent’s exports. Fewer exports would
supposedly result in economic chaos as gold supplies Blocking gold
declined.
supply was supposed to be the most devastating way to defeat the enemy.
4. Encourage domestic production and reduce domestic consumption
The main theme of mercantilism was to encourage domestic production. Once
production is enhanced, maximum of that should be exported. This means that
domestic consumption has to be restricted. Given imports are restricted, a
country can ensure gold inflows and wealth.
Role of strong government policies
A basic principle of mercantilism was strong government policies and
interventions to wealth accumulation.
allow Tax policies should be designed to
5. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 5/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
5
Dpt of Economics, TMJM Government College Manimalakunnu
encourage maximum production and minimum consumption. Similarly, trade
policies should be designed to maximize exports and minimize imports.
All these mercantilist ideas to wealth creation and trade advocated strong
government policies. In Western Europe several countries tried the mercantilist
policies to promote national welfare.
Criticism of Mercantilism
As the earlies philosophy, the mercantilist principles suffered from several
t
faults.
1. Gold is not wealth: It is not gold that is wealth, rather is the quantity of
it
goods and services.
2. Beggar thy neighbor policies are not good to enhance national welfare: Making
other countries poor is neither desirable nor needed to achieve prosperity.
Actually, countries can achieve prosperity by increased production and trade.
3. Mercantilist philosophy is colonial: The mercantilists prescriptions were
practicable in the colonial world and not in the open world like today.
4. Too much government control will spoil the economic system: The
mercantilists advocated high level of government policies to regulate the
economy. This type of controls will misguide the economy by discouraging
entrepreneurship.
5. Mercantilists believed in implicit conflict of interest among international
community: The impact of mercantilist thinking on economic policies were
irreversibly damaging. Now, several countries are trying to block imports from
others whereas making several ways to promote exports. Hence, the protectionist
trade policies were one of the undesirable contributions of mercantilism.
Mercantilism is thought to have begun its intellectual eclipse with the
publication of Adam Smith’s "Wealth of Nations" in 1776. A simple interpretation
of the economic history suggests that Smith’s ruthless advocacy for free markets
was squarely opposed to regulation-heavy mercantilist doctrine. Still,
6. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 6/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
6
Dpt of Economics, TMJM Government College Manimalakunnu
mercantilism contributed to the development of the economics science in later
periods.
B. Physiocracy
Physiocracy was an early school of economic doctrine prevailed in France
in the middle of the 18th century. Physiocrats are considered as the first school
of economic thought and is considered as the founders of economic science. They
were supposed to be the first to understand the general principles in economics.
Based on that, they developed a theoretical system in economics.
Francois Quesnay, R.J. Turgot and Marquis de Condorcet were the major
proponents of physiocracy.
Physiocracy means rule of nature. They believed in the natural law and
thus advocated no-intervention by the government. Physiocracy believed that
only agriculture has productivity.
For them, productivity in agriculture depends on nature, and hence the
government hast to tax agriculture.
Importance to agriculture
Physiocracy is also known as the ‘Agricultural System’. Physiocracy was a
theory of wealth and it argued that only agriculture has productivity. Economic
thinkers who contributed to the growth and development of physiocracy have
been called as physiocrats. Their emphasis on agriculture has earned them the
name - agricultural school.
According to Karl Marx, "the Physiocrats insist that only agricultural
labour is productive, since that alone, they say, yields a surplus-value".
The "Tableau Economique", a single page illustration, prepared by
Quesnay shows how an entire economy function. Quesnay adopted a scientific
approach in developing early economic ideas.
7. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 7/11
Discover more from:
EC 32
Document continues below
Micro Economics 1
Mahatma Gandhi University
4 documents
Go to course
0. Syllabus - Microeconomics -1
Micro Economics 1 100% (1)
2
Micro and macro - Lecture Notes
Micro Economics 1 None
7
Cobweb model
Micro Economics 1 None
2
Development planning
Development planning and Project Analysis 100% (2)
2
Technological Backwardness
International Economics 100% (2)
6
The Kaldor Model of Distribution
International Economics 100% (2)
6
8. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 8/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
7
Dpt of Economics, TMJM Government College Manimalakunnu
Believers in natural law
The physiocrats, like many other thinkers of the eighteenth century,
subscribed to the idea of a "natural order". Physiocrats believed in the existence
of natural law which governs the universe. They showed that unchanging laws
governed all economic processes.
Physiocracy was against mercantilism
Physiocracy may be defined as a reaction against Mercantilism and its
concepts. The physiocrats believed that the mercantile policies instead of doing
any good have done great harm to the nations. So, they revolted against the
mercantile policies.
According to Gide and Rist, “Physiocrats must be credited with a
foundation of the earliest school of economists in the fullest sense of the term.
The entrance of this small group of men into the arena of history is a most
touching one”.
The factors that gave rise to Physiocracy:
In 1750, France provided a favourable climate for the emergence of
physiocratic ideas. There were many economic, political and social factors that
were responsible for the rise of physiocracy. Firstly, physiocracy was essentially
a revolt of the French against Mercantilism. Under Colbert the famous Finance
Minister of France, Mercantilism was carried to an extreme degree.
The mercantilists were ordinary people who emphasised only foreign trade.
But the physiocrats realised the importance of various economic activities and
their relation. In the physiocratic system all social factors like production and
distribution are connected. In short, the physiocrats were reformers. Following
are the main ideas of physiocrats.
9. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 9/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
8
Dpt of Economics, TMJM Government College Manimalakunnu
1. Natural Order:
The physiocrats had firm faith in the philosophy of natural order.
According to Gide and Rist, “The essence of physiocratic system lay in their
contribution of natural order”.
Natural order has been defined by the physiocrats as the providential order
made by God for the welfare of mankind. It is universal and unchangeable.
The classical economists’ invisible hand has its origin in the physiocratic
idea of natural order.
2. Net product
In the doctrine of net product, the physiocrats introduced the fundamental
idea of . In the physiocratic system, agriculture has been given
economic surplus
a dominant place because of its important role in the economic development of
a country. Agriculture is the only sector which yields net product or surplus
produce.
Several economic theories of the Physiocrats went useless with time. But
their approach to the study of economics was an invaluable
contribution. Classical economists modified several of the physiocratic
principles.
3. Tableau Economique or the Circulation of Wealth
Physiocrats illustrated how wealth produced by the agriculturists gets
circulated among the different classes of the society. Here, the tableau
Econoicque prepared by Quesnay shows wealth distribution in the society. The
physiocrats must be credited with being the first school of economists who
analysed the problem of distribution.
The Tableau Economique is based on the existence of a social structure;
land is owned by the landlords but cultivated by the farmers who became the
productive class. The net product or surplus produced by the productive class
is used for the satisfaction of sterile and proprietary classes. The tableau
10. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 10/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
9
Dpt of Economics, TMJM Government College Manimalakunnu
economique assumes constant prices for the commodities. Further, it assumes
that the harvest is 100 percent and the expenses of the productive and
unproductive classes are equal.
The tableau economique is not relevant today as agricultural is not the
sole productive activity. Similarly, its wealth distribution technique is outdated.
Still it is important to understand the importance of growth models.
Major economists of physiocracy
Physiocracy is often described as Quesnay and Turgot school because of
the dominance of these two thinkers in developing physiocratic ideas.
RJ Turgot
Turgot is considered as the French Adam Smith Turgot subscribed to the
.
idea that free trade in grains was the best way of resolving scarcity. His book -
Reflections on the Production and Distribution of Wealth, which published ten
years before Smith’s . Both have same set of ideas like non-
The Wealth of Nations
intervention by the government natural order etc. Turgot recognized the function
of the division of labor, investigated how prices were determined, and analyzed
the origins of economic growth. Turgot advocated the laissez fare policy.
Turgot’s major contribution was the importance he given to capital. Since
then, economic ideas have given a vital place to capital. He argued that the only
way to accumulate capital is for people not to consume all they produce.
Francois Quesnay
Francois Quesnay was a French intellectual who laid the foundations of
the first school of thought in economics – Physiocracy. Quesnay produced several
ideas in managing the economy and advocated laissez fare policy. He criticised
mercantilism and proved that restriction of trade reduced the welfare of masses.
Quesnay advocated reducing taxes, eliminating regulations on trade and
argued for freeing the economy from the government’s tough controls.
11. 06/11/2023, 09:52 1. Mercantilism and Physiocracy
about:blank 11/11
I SEM METHODOLOGY OF ECONOMICS I SEM 2021
10
Dpt of Economics, TMJM Government College Manimalakunnu
A major contribution of Quesnay was the Tableau economique. It was a
short diagram that systematically illustrated the flow of economic activities in an
economy.
In this zigzag diagram, a circular flow in the economy showed the
producers, consumers and other classes. The defined three classes:
Tableau
landowners, farmers, and others—called “sterile” classes—who consumed
everything they produced and left no surplus for the next period. Significance of
Tableau Economique is that it pioneered a methodology of illustrating economic
activities in graph or table.
*********