Mercantilist and Physiocrats School of Thought PDF

Written Report Dilao, Daniella Gwen Apostol, Kyla Khaye Pananguilan, Ysa Mercantilist and Physiocrats School of Thought Mercantilist School of Thought The economic doctrine known as mercantilism appeared between the Middle Ages and the period of the triumph of laissez-faire...

Written Report Dilao, Daniella Gwen Apostol, Kyla Khaye Pananguilan, Ysa Mercantilist and Physiocrats School of Thought Mercantilist School of Thought The economic doctrine known as mercantilism appeared between the Middle Ages and the period of the triumph of laissez-faire. Mercantilism can be dated roughly from 1500 to 1776. Trade flourished both within each country and between countries, and the use of money expanded. The discovery of gold in the Western Hemisphere facilitated the growing volume of commerce and stimulated theorizing about precious metals the merchant capitalists were becoming key figures in the business world. Economic rivalries between nations were intensified. Unsurprisingly, a body of doctrine evolved that superseded feudal concepts promoted nationalism, gave new dignity and importance to the merchant, and justified a policy of economic and military expansion. This body of doctrine became the mercantilist school. The main principles of this school Gold and silver are the most desirable form of wealth. Mercantalist equates the wealth of a nation to gold and silver bullion the nation has. To achieve such power in these eras is to have the metals, they even sold products to an enemy as long as it is paid in gold. Nationalism. In 1500 countries were not allowed to simultaneously export more than they Imported. In this age it is promoting maximizing the exportation rather than importation of one’s country, only those powerful nations can hold economies, dominate trade routes,win wars against the rivals, and compete successfully in international trade. One country can increase its resources only at the expense of another country. The French essayist Michel de Montaigne wrote in 1580, “The profit of one man is the damage of another…. No profit whatever can possibly be made but at the expense of another.”1 Mercantilist nationalism quite naturally led to militarism. The mercantilists imposed “political Lent” on England in 1549, where it was illegal for people to eat meat on specific days of the week to guarantee a local fish market, which in turn creates a demand for sailors. This law was fiercely upheld for almost a century, and it wasn't until the eighteenth century that it was removed from the books of law. Duty-free importation and export restriction of raw materials domestically produce raw materials have a tariffs or taxes, in some time there is this allied the fear of goods where it emphasis on exporting and reluctance on importing. These principle help the merchants to gain some gold and reduce the imported goods on one’s countries consumption. This is supposedly to enhance the wealth of the nation. Prohibitions against the outward movement of raw materials helped keep the prices of finished exports low. During Queen Elizabeth’s reign forbade the export of live sheep. The penalties for violating this law were the confiscation of property, a year in prison, and the cutting off of the left hand. The death penalty was prescribed for a second offense. The export of raw wool was prohibited, and the same penalties were applied in a law enacted during the reign of Charles II(1660–1685) Colonization and monopolization of colonial trade examples of this approach are the English Navigation Acts of 1651 and 1660. Items that were brought into Great Britain and her colonies had to go on English, colonial, or foreign ships. Only England could purchase some colony products, while others were required to touch down in England prior to being shipped internationally. Imports from outside the colonies were either forbidden or severely limited. Colonial production was restricted or sometimes forbidden, to protect dependent territories that would continue to be importers of English goods and providers of inexpensive raw materials. Opposition to internal tolls, taxes, and other restrictions on the movement of goods. Mercantilist writers and practitioners recognized that tolls and taxes could throttle business enterprise and drive up the price of a country’s exports. According to the book, an extreme  example of this is the situation on the Elbe River in 1685 where A shipment of sixty planks from Saxony to Hamburg required the payment of fifty-four planks at toll stations along the way. Consequently, only six planks arrived at the destination. Mercantilists did not favor free internal trade in the sense of allowing people to engage in any trade that they wished. On the contrary, mercantilists preferred monopoly grants and exclusive trading privileges whenever they could acquire them. Strong central government. To achieve nationalism, protectionism, colonialism, and international trade that is unhampered by tolls and excessive taxes requires a central government. Companies that traded internationally were given monopoly privileges by the government. To reduce competition, it limited free admission into home businesses. The government supported agriculture, mining, and industry with subsidies and used tariffs to keep imports protected. Mercantilists are thorough with their productions and such common interest of merchants required that the government prohibit poor workmanship and shoddy materials. Hence, a strong national government was required to ensure uniform national regulations and laws. Importance of a large, hard-working population. The industrious population provided an abundance of soldiers and sailors ready to fight for the glory and the wealth of nations, although it would keep the labor supply high and wages therefore low. An advantage of low wages is they enable lower the prices of exports, thereby increasing the inflow of gold, reducing idleness, and promoting greater participation in the labor force. During the reign of Henry VIII in Great Britain (1509–1547), 7,200 thieves were hanged. In 1536 it was decreed that “sturdy vagabonds” should have their ears cut off, and death was the penalty for the third offense of vagabondage. In 1547 those who refused to work were condemned to be the slaves of whoever denounced them. A law passed during Queen Elizabeth’s reign in 1572 decreed that unlicensed beggars of fourteen years or older were to be flogged and branded unless someone was willing to employ them; for a second offense they were to be executed unless someone would take them into service; for a third offense, they were to be considered as felons and executed without mercy. William Temple, in his Essay on Trade and Commerce, published in 1770, gave thoughtful consideration to full employment for children: When these children are four years old, they shall be sent to the country workhouse and there taught to read two hours a day and be kept fully employed the rest of their time in any of the manufactures of the house which best suits their age, strength, and capacity. If it be objected that at these early years, they cannot be made useful, I reply that at four years of age, there are sturdy employments in which children can earn their living; but besides, there is considerable use in their being, somehow or other, constantly employed at least twelve hours in a day, whether they earn their living or not; for by these means, we hope that the rising generation will be so habituated to constant employment that it would at length prove agreeable and entertaining to them.3 Prologue of Mercantilism and the Supply of Labor Refer to the book The Evolution of Economic Thoughts: Some proponents of mercantilism argued that to decrease idleness and increase labor force participation, low wages were required. They thought that rises in the wage rate, would allow employees to take home more money each hour and work fewer hours overall. If their parents were able to make more money per hour, some children and other secondary workers would even decide to leave the workforce altogether. The mercantilists overlooked a potentially offsetting substitution effect of a wage rate increase. In a classic 1930 article, British economist Lionel Robbins (1898–1984) explains that a higher wage rate reduces the “price of income.” A wage rate increase means that workers must give up more income (goods) for each hour of leisure consumed, implying that the price or opportunity cost of leisure rises. People purchase fewer goods when their prices rise. In this scenario, employees will buy less leisure and put in more hours; they will replace their now-expensive leisure with labor. Historically, higher wages led to shorter workweeks, which mercantilists saw as negative. However, contemporary economists argue that the economy should focus on maximizing well-being. If people value leisure more than additional income, shorter workweeks can enhance societal well-being. Whom Did the Mercantilist School Benefit or Seek to Benefit? This doctrine benefited the merchant capitalists, the kings, and government officials. It especially benefited those who were most powerful and entrenched and had the most favored monopolies and privileges. According to some historians, mercantilism is best understood as an extreme example of rent-seeking behavior. Economic rent represents surplus earnings/income that indicate a higher-than-expected return on investment. Also, rent-seeking activities are attempted by those who have private parties to increase their profits by securing favorable laws and regulations from the government. This argument holds that the government officials in charge were prepared to enact these laws and rules to administer economic rent to protect their interests and the interests of the royalty they served. In 1721 the use of printed calicoes was outlawed, but production and export were permitted. In the late 1600s, the law required the dead to be buried in woolen shrouds even though religious traditions required linens. In France, mercantilism had a stronger feudal flavor, and the entrenched monopolistic interests were even more successful in getting the government to intervene on their behalf. From 1686 to 1759 the production, import, and use of printed calicoes were prohibited. In armed conflicts and executions arising from the enforcement of these measures, an estimated 16,000 people died, and many more were sent to the galley ships. From 1666 to 1730, France published seven volumes of textile regulations. The dyeing manual alone had 317 articles, which, while ensuring quality, also stifled innovation and prevented new techniques that could have fostered competition. Under mercantilist regulations, French officials benefited from fines, concessions, and monopoly privileges, while the government gained revenue from these sources. The influx of gold and silver also boosted tax collections and enhanced the country’s ability to finance wars. How Was the Mercantilist School Valid, Useful, or Correct in Its Time? Bullionism made some sense during the shift from a self-sufficient to a money-based economy. As commerce grew rapidly and banking was still developing, having bullion was important. It helped fund wars, pay soldiers, build ships, and handle alliances. British trade with the Baltic and East Indies relied on precious metals because these regions wouldn’t accept paper money. To pay for goods from these areas, Britain used silver and gold from its colonies. Before international finance and trade developed, bullion was crucial for global transactions. Mercantilists understood that more precious metals made tax collection easier, kept prices stable or rising with increased money supply, and supported the growing market economy by reducing interest rates and boosting business. Some mercantilists were also aware that increases in the amount of gold and silver in circulation reduced interest rates and promoted business. Which Tenets of the Mercantilist School Became Lasting Contributions? The mercantilists made a lasting contribution to economics by emphasizing the importance of international trade. Mercantilists developed the idea of the balance of payments, which is still relevant today. However, their overall contribution to modern economic theory was limited. They didn’t fully understand that a country could grow wealthier not just by depleting its neighbors but by finding more resources, producing more, and using labor better. They also missed the idea that countries could all benefit from specializing and trading with each other and that higher wages don’t necessarily lead to less work. But beyond these contributions, the mercantilists (excluding Petty and perhaps Mun) contributed little to economic theory as we know it today. Most of them failed to grasp that a country could become richer not only by impoverishing its neighbors but also by discovering a greater quantity of natural resources, producing more capital goods, and using labor more efficiently. Despite their limited direct contributions to economic theory, mercantilists had a lasting impression on the public's perception of merchants. This was altered by mercantilists, who demonstrated that traders might profit the king and the country in addition to themselves if they followed official regulations. This change allowed aristocrats to marry into affluent commercial families and pursue economic endeavors without losing their social standing, combining aristocracy and commercial success. Mercantilism also indirectly influenced economics by nationalism, which remains strong today. It highlighted the need for central government regulation in areas like weights, measures, and laws, especially when competition alone couldn’t ensure a variety of goods or when trade was too risky without monopoly privileges to encourage investment. Lastly, through the establishment of established trade enterprises that brought new goods to market, expanded investment, and developed new markets, mercantilism shaped contemporary corporations. Along with protecting persons and products in transit, it also lowered trade obstacles, standardized tax rules, and opened up new domestic markets. Physiocratic School of Thought Physiocracy emerged as a response to mercantilism and the feudal system in France, but it still carried some medieval ideas. Strict government regulations, like specifying thread counts in cloth, ensured quality but stifled innovation and adaptation to changing tastes. Corruption and extravagance in the government made fair rule enforcement difficult, and as business grew and competition increased, these rigid rules became unnecessary. Local governments' internal tolls, levies, and tariffs, which impeded the flow of products, held back French industry. The aristocracy imposed onerous restrictions on agriculture, requiring peasants to pay taxes on their land and crops while granting nobles and clergy exemptions. To discourage investment and wealth building, taxes were erratic and were collected by "tax farmers" who kept everything above a set amount they had to pay the government. In addition to having to utilize and pay a hefty price for the lord's millers, bakers, and wine press operators, peasants also had additional expenses and dues when they inherited or sold the land. On peasant fields, nobles hunted, and cultivation was hampered by stringent game regulations. Peasants and their animals were compelled to labor for free on public roads under the corvée system to help others. France controlled the grain trade for centuries, limiting exports and regulating internal travel to guarantee supply rather than developing farmers. Grain shortages in certain regions and surpluses in others resulted from merchants' requirement for permits to move grain between provinces and their strict sales and pricing policies. From their founding in the Middle Ages, guilds of merchants and artisans dominated French trade and industry until 1789. These guilds set pricing, restricted who could work in what trades, and controlled production—all of which frequently resulted in drawn-out, expensive legal battles. For instance, challenges between various trades may last for generations, while organizations in Paris spent millions on legal disputes over many years. In this stiff and outdated framework, physiocratic concepts arose as a welcome diversion, promoting greater flexibility and effectiveness in business dealings. The concepts of the physiocratic school may be summarized as follows: Natural order. The term physiocrat itself means “rule of nature.” According to the idea of it, laws of nature govern human societies just as those discovered by Newton govern the physical world. The physiocrats introduced the idea of natural order to economic thinking. In the economic sphere, the laws of nature conferred to individuals the natural right to enjoy the fruits of their labor provided that such enjoyment was consistent with the rights of others. Laissez-faire, laissez-passer. This phrase, credited to Vincent de Gournay (1712–1759), in effect, means “let people do as they please without government interference.” Physiocrats therefore supported free commerce abroad and the freedom of economic enterprise at home, and they opposed nearly all government, mercantilist, and feudal limitations. Among the several senior mercantilist system officials, Gournay's background allowed him to adopt a laissez-faire stance. Emphasis on agriculture. Physiocrats believed that industry, trade, and professions were useful but unproductive, as they merely recirculated value without creating new wealth. They considered only agriculture (and possibly mining) truly productive because it generated a surplus beyond the value of the resources used. Taxation of the landowner. Physiocrats believed that only agriculture created a surplus, which the landowner received as rent. Therefore, they thought only landowners should be taxed directly, as other taxes would ultimately be passed on to them through higher costs.  They preferred direct taxes on landowners over indirect taxes that increased as they were passed along. The interrelatedness of the economy. Quesnay, in particular, and the physiocrats, in general, analyzed the circular flow of goods and money within the economy Whom Did the Physiocratic School Benefit or Seek to Benefit? The physiocrats' ideas would ultimately benefit peasants by ending their heavy obligations to landowners. However, if their vision had been realized, peasants might have become wage laborers on large farms. Business interests would have gained from the removal of production and trade restrictions. Although the physiocrats didn’t intend to, their support for laissez-faire policies would have promoted industry and helped capitalistic farms in northern France by encouraging free grain trade and the export of farm products. A single tax on agricultural surplus would have reduced land values and shifted the tax burden from commoner landowners to the nobility and clergy, who were otherwise exempt from many taxes. The physiocrats tried to placate the nobility by genuinely defending their right to own land and receive rent. Unlike the American Henry George who, in the 1880s, wanted to tax away all rent, the physiocrats thought that a tax taking one-third of the economic surplus would be sufficient. The physiocrats sought to placate the nobility by supporting their land rights and proposing a tax on one-third of the economic surplus. They believed this would lower the overall tax burden without redistributing wealth from rich to poor. However, their assumption that all taxable surpluses came solely from land was flawed. How Was the Physiocratic School Valid, Useful, or Correct in Its Time? The physiocrats' ideas would ultimately benefit peasants by ending their heavy obligations to landowners. However, if their vision had been realized, peasants might have become wage laborers on large farms. Before the Industrial Revolution, industry had very low productivity, especially in France's handicraft economy during the last years of the ancien régime. Producing luxury goods for the nobility in such a poor country seemed unproductive. In contrast, farming, despite its primitive methods, could yield abundant harvests. These agricultural surpluses often provided the savings needed to spark economic growth and industrial development in France and other countries like the U.S., Germany, Japan, and Russia. In promoting laissez-faire, the physiocrats were opposing obstacles to capitalistic economic development. They unwittingly promoted the French Revolution of 1789, which swept away the numerous obstacles to progress. The physiocrats changed their emphasis from the outdated notion that only trade generates prosperity to the notion that wealth and productivity are driven by agriculture. They favored direct taxes over the indirect taxes that burdened French society and encouraged capital creation by discouraging the wealthy from consuming as much. Which Tenets of the Physiocratic School Became Lasting Contributions? The physiocrats made some significant errors. They mistakenly thought that only agriculture created wealth, dismissing industry and trade as unproductive. As industry and trade grew in France, their views became outdated. They also believed only landowners should be taxed, assuming land was the sole source of surplus. This led to the flawed idea that wealthy industrialists didn’t need to pay taxes. This perspective influenced later thinkers like John Stuart Mill, who suggested taxing future rent increases, and Henry George, who pushed for a "single tax" on all rent. The physiocrats mistakenly idealized the capitalistic farmer as central to French economic development. In reality, industrialists and laborers became more crucial as agriculture's role diminished. Additionally, small peasant farmers, not large entrepreneurs, were more common in France. If the nobility had retained land ownership, a land tax would have controlled luxury spending. However, after the Revolution, the small peasants who inherited the land would have faced most of the tax burden. The physiocrats made several lasting contributions to economics. They established economics as a social science by analyzing wealth and goods circulation, influencing modern economic flow diagrams and national income accounting. Turgot, a physiocrat, first stated the law of diminishing returns, and they pioneered the analysis of tax shifting and incidence, crucial in microeconomics. Their advocacy for laissez-faire economics also shifted focus to the role of government in the economy. MERCANTILIST SCHOOL Thomas Mun - English writer on economics and he is known for the director of the East India Company - Mun lays out reasons for why trade was in general a good thing for England so long as exports exceeded imports, the drain of species from a country in any one trade area did not matter. - Mun’s most famous work, England’s Treasure by Foreign Trade, and the most important chapters of this book for the purposes at hand are chapters 2, where Mun states that the most effective way of increasing a nation’s wealth is to trade. He further states that trade will be an effective strategy so long as a country “sells more to strangers yearly than we consume of theirs in value.” Gerard Malynes - an independent merchant in foreign trade - showed how an outflow of precious metals could lead to fall in prices at home and a rise in prices abroad - suggested that higher import tariffs should be levied and exports of bullion prohibited because a country’s growth was related to the accumulation of precious metals. Charles Davenant · Charles Davenant was the son of the famous poet and playwright, Sir William Davenant, who dealt with taxes, imports, and exports, and Charles Davenant followed in his father’s footsteps. During his lifetime, Davenant served as a member of parliament. Davenant is considered a mercantilist, and as such, he was a strong advocate of a favorable balance of trade. He was also, however, an eclectic and did not follow the mercantilist stereotype. · In his argument on the East-India Trade, for example, he argues against an embargo on imported textiles from India. In general, Davenant believed that trade should occur only where there were natural incentives for those directly involved. The state, he believed, should oversee imports and exports and yet seldom interfere with specific trade routes. · And in an essay on the Probable Means of Making the People Gainers in the Balance of Trade (1699), Davenant argues that a kingdom can reap the benefit of the entire value of an exported product if it is made from domestic raw materials. · Davenant was sufficiently enlightened to say that the wealth of a country is what it produces, not its gold or silver. He strongly advocated for a favorable balance of trade as key to national wealth. Jean Baptiste Colbert - Represents the heart and soul of mercantilism, which is called Colbertism in France - His ideas were focused on state intervention in the economy, the promotion of exports, and a systematic approach to taxation and industry. - His policies were designed to promote exports while restricting imports to enhance the flow of bullion into France, thereby enriching the state - This intervention in the economy was aimed at creating uniformity in production, which he believed was essential for the state's prosperity - Colbert's policies aimed to strengthen national wealth through stringent control over trade and manufacturing, while also fostering a favorable balance of trade. Sir William Petty He is best known for his political arithmetic, which made him a father of economic statistics and national income accounting, in addition to being the first person to develop modern census techniques. His political arithmetic (written in 1672 and published in 1691) was to analyze economic and social conditions, and it aimed to put emphasis on using numbers and statistics, which represented a shift in economic thought. Petty had a lot of economic ideas, which turned out to be important. He was one of the first individuals to realize that income equals expenditure in a well-specified way of understanding the macroeconomics that was related to his work in collecting data. He had an understanding of the velocity of money. Petty recognized that the velocity of circulation—the rate at which money changes hands—can be as important as the quantity of the same work. He argued for the value of full employment. Had some good examples of division of labor. Petty recognized the economies associated with the specialization of labor and division of tasks. He expressed the general benefits of having a large and growing population. He favored a large population as he based his position on the concept of increasing returns to government, which would reduce the unit cost of governing a larger population. PHYSIOCRATIC SCHOOL Francois Quesnay · a very influential 18th-century French economist · He was the leader of the school of thought called the physiocrats, and this gets off the ground in the late 1750’s, and he leaves a mark upon economic thinking for a long time. · In 1758, he published Tableau economique, or it can translate to English as ”economic table." It is representing the circular flow of funds through the economy, where he details his famous zigzag diagram that shows who produced and who spent what in an attempt to understand and explain the causes of growth. The diagram is intended to be used for what we would now call comparative statistics. That is, you would introduce some change in funds or economic activity at some point in the diagram, and then, by following the zigzags, you would trace how this would affect the overall economy. · The tableau breaks down society into three classes: the farmers were the productive class, who created economic value. Those who were moving around the value were the merchants, where it is called the proprietors. And the next class called sterile, who was charging the farmers a free for using the land and consumed everything they produced and left no surplus for the next period. · Consistent also with his view that agriculture is the dynamic sector and the source of economic surplus Anne Robert Jacques Turgot - Was born of a noble family of Normandy and was a very important French economist in the 18th - He served for two years as French essentially finance minister in the 1770's, and during that, he did quite a bit to liberalize taxes, bring internal freedom of trade, and take away some of the power of the guilds. - He was a brilliant and important writer on economics, and his main book was published in 1770, and it is called Reflections on Formation and the Distribution of Riches. - Turgot’s most important contribution to economics was to point out that capital is necessary for economic growth and that the only way to accumulate capital is for people not to consume all they produce. - One of Turgot’s greatest contributions in the realm of economic theory was correctly presenting the law of diminishing returns. He said that a doubling of expenditure in agriculture will double the product. He recognized that agricultural productivity was fundamental for the overall economic health of a nation. MERCANTILIST SCHOOL The mercantilists made significant contributions to economics by emphasizing the importance of international trade and developing the concept of the balance of payments, which tracks a nation's transactions with the rest of the world. Despite these achievements, their understanding of economic theory was limited, as they failed to recognize that all nations could benefit from specialization and trade, and that higher wages would not necessarily lead to reduced labor participation. However, the mercantilists indirectly influenced economics by elevating the status of merchants, who were previously viewed with disdain by the aristocracy. They argued that when merchants' activities were guided by the government, they could enrich both themselves and the nation. This led to greater acceptance of business ventures by the aristocracy, who eventually merged with wealthy commercial families. Additionally, mercantilism promoted nationalism by advocating for central government regulation to standardize trade practices. This played a key role in the economic development of Europe, expanding internal markets, and laying the groundwork for modern economic systems. PHYSIOCRATIC SCHOOL The physiocrats made some significant errors in their economic theories. They incorrectly viewed industry and trade as unproductive, a notion that became increasingly inaccurate as these sectors developed in France. This mistaken belief led to another error: the idea that only landowners should be taxed since only land could generate a surplus. This concept allowed wealthy industrialists to avoid taxes by claiming they did not contribute to wealth. The physiocratic tax theory influenced later economists like John Stuart Mill and Henry George, who both proposed taxing land rent. The physiocrats wrongly believed that capitalistic farmers were the key to French economic growth. In reality, industrialists and laborers played a more crucial role, while agriculture's importance declined. Additionally, small peasant farmers, not large farm entrepreneurs, became typical in France. The physiocratic idea of taxing landowners would have been effective if the land had remained with the nobility. However, after the French Revolution, when small peasants owned the land, they would have borne the tax burden. Despite their mistakes, the physiocrats made lasting contributions to economics. They were the first to examine society as a whole and analyze the laws governing wealth and goods circulation, laying the foundation for economics as a social science. Quesnay's economic table anticipated modern economic tools like the economic flow diagram and national income accounting. The law of diminishing returns, often attributed to Malthus and Ricardo, was actually first stated by the physiocrat Turgot. They also pioneered the analysis of tax shifting and incidence, crucial in applied microeconomics today. Lastly, by advocating for laissez-faire, they brought attention to the role of government in the economy. The physiocrats made some significant errors in their economic theories. They incorrectly viewed industry and trade as unproductive, a notion that became increasingly inaccurate as these sectors developed in France. This mistaken belief led to another error: the idea that only landowners should be taxed since only land could generate a surplus. This concept allowed wealthy industrialists to avoid taxes by claiming they did not contribute to wealth. The physiocratic tax theory influenced later economists like John Stuart Mill and Henry George, who both proposed taxing land rent. The physiocrats wrongly believed that capitalistic farmers were the key to French economic growth. In reality, industrialists and laborers played a more crucial role, while agriculture's importance declined. Additionally, small peasant farmers, not large farm entrepreneurs, became typical in France. The physiocratic idea of taxing landowners would have been effective if the land had remained with the nobility. However, after the French Revolution, when small peasants owned the land, they would have borne the tax burden. Despite their mistakes, the physiocrats made lasting contributions to economics. They were the first to examine society as a whole and analyze the laws governing wealth and goods circulation, laying the foundation for economics as a social science. Quesnay's economic table anticipated modern economic tools like the economic flow diagram and national income accounting. The law of diminishing returns, often attributed to Malthus and Ricardo, was actually first stated by the physiocrat Turgot. They also pioneered the analysis of tax shifting and incidence, crucial in applied microeconomics today. Lastly, by advocating for laissez-faire, they brought attention to the role of government in the economy. Merchantilist Brue and Grant’s text likely presents the Mercantilist School as the leading economic theory in Europe from the 16th to the 18th centuries. The authors might explain how Mercantilism focused on accumulating wealth, especially in the form of gold and silver, and promoted a positive trade balance by encouraging more exports than imports. The text probably also discusses the state’s role in regulating the economy to achieve these goals, using tools like tariffs, monopolies, and colonial expansion. The authors likely do a good job of placing Mercantilism within its historical context, linking it to the rise of nation-states and colonialism, which helps readers understand why wealth accumulation and a trade surplus were so important at the time. The critique of Mercantilism in the text might highlight its simplistic view of wealth as a fixed amount and its failure to recognize the benefits of free trade. However, a balanced analysis should also acknowledge that Mercantilism reflected the economic realities of its era—where military power and wealth were closely connected—and that it contributed to the development of later economic theories, despite its shortcomings. The text might also discuss how Mercantilist ideas were gradually challenged and replaced by Classical Economics. However, it is important to note that Mercantilism’s emphasis on state intervention and trade policy continues to influence modern economic strategies, making it more than just a historical concept. Physiocratic School Brue and Grant likely describe the Physiocratic School as a response to Mercantilism, emerging in 18th-century France. The text probably emphasizes the Physiocrats’ belief that agriculture was the foundation of all wealth and their support for laissez-faire economic policies. The authors might discuss François Quesnay’s “Tableau Économique” as an early effort to model the economy. They likely highlight the Physiocrats’ groundbreaking role in promoting free markets and limited government intervention, which influenced later thinkers like Adam Smith. The text probably also explores the Physiocrats’ focus on natural economic laws, marking a significant shift from the interventionist approach of the Mercantilists. A potential critique is the Physiocrats’ excessive focus on agriculture as the sole source of wealth—a view that, while pertinent to France at the time, did not fully consider the rising importance of manufacturing and trade. Brue and Grant might touch on this limitation, but a more in-depth analysis could examine how the Physiocrats’ ideas were both forward-looking and limited by the economic conditions of their era. The text might discuss how the Physiocrats’ theories contributed to the development of Classical Economics, especially their impact on Adam Smith. However, a critical analysis should also address the limitations of their ideas in the context of a rapidly industrializing world and how their theories were eventually replaced by more comprehensive economic models.