Economics 493/593 - History of Economic Thought

Class Materials for Lecture 8

Brief Outline of Topics Covered in Lecture 8:

• The Classical School - David Ricardo (ch. 5) [cont.]
• The Classical School - Bentham, Say, Senior, and Mill (ch. 6)

Video

Jeremy Bentham Auto-Icon

Jeremy Bentham: As requested in his will, his body was preserved and stored in a wooden cabinet, termed his "Auto-icon". Originally kept by his disciple Dr. Southwood Smith, it was acquired by University College London in 1850. The Auto-Icon is kept on public display at the end of the South Cloisters in the main building of the College. For the 100th and 150th anniversaries of the college, the Auto-Icon was brought to the meeting of the College Council, where he was listed as "present but not voting". Tradition holds that if the council's vote on any motion is tied, the auto-icon always breaks the tie by voting in favor of the motion.

The Auto-Icon has always had a wax head, as Bentham's head was badly damaged in the preservation process. The real head was displayed in the same case for many years, but became the target of repeated student pranks including being stolen on more than one occasion. It is now locked away securely

Additional Reading

1. Adam Smith: No Lover of Unregulated Banking He..., by Brad DeLong

2. Utilitarianism:

Utilitarianism is the idea that the moral worth of an action is determined solely by its utility in providing happiness or pleasure as summed among all sentient beings. It is thus a form of consequentialism, meaning that the moral worth of an action is determined by its outcome.

Utilitarianism is often described by the phrase "the greatest good for the greatest number of sentient beings", and is also known as "the greatest happiness principle". Utility, the good to be maximized, has been defined by various thinkers as happiness or pleasure (versus suffering or pain), although preference utilitarians define it as the satisfaction of preferences. It may be described as a life stance, with happiness or pleasure being of ultimate importance. ...

The origins of utilitarianism are often traced as far back as the Greek philosopher Epicurus, but, as a specific school of thought, it is generally credited to Jeremy Bentham.[1] Bentham found pain and pleasure to be the only intrinsic values in the world: "nature has placed mankind under the governance of two sovereign masters, pain and pleasure."[2] From this, he derived the rule of utility: the good is whatever brings the greatest happiness to the greatest number of people.

Bentham's foremost proponent was James Mill, a significant philosopher in his day and the father of John Stuart Mill. The younger Mill was educated according to Bentham's principles, including transcribing and summarizing much of his father's work while still in his teens.[3]

In his famous work, Utilitarianism, the younger Mill argues that cultural, intellectual and spiritual pleasures are of greater value than mere physical pleasure because the former would be valued higher than the latter by competent judges. A competent judge, according to Mill, is anyone who has experienced both the lower pleasures and the higher. His famous quote found in Utilitarianism (book) was, "it is better to be a human dissatisfied than a pig satisfied; better to be Socrates dissatisfied than a fool satisfied"[4] demonstrating Mill's distinction between higher and lower pleasures. He justified this distinction by the thought that "few human creatures would consent to be changed into any of the lower animals, for a promise of the fullest allowance of a beast's pleasures."[4]

Like Bentham's formulation, Mill's utilitarianism deals with pleasure and happiness. However John Stuart Mill made a clear distinction between happiness and pleasure; and made it evident that Weak Rule Utilitarianism was focused on maximising happiness rather than pleasure; for the naturalistic fallacy made it clear that what one desires and what is good are not always the same thing. For example a pleasure/desire may be to bully a lonely child, which may produce pleasure, however happiness comes from following virtues rather than desires.

The classic utilitarianism of Bentham and Mill influenced many other philosophers as well as the development of the broader concept of consequentialism. ...

[see also Criticisms and Defense]

Homework #4

Economics 493/593
Winter 2010
Homework #4
Due 2/3/2010

1. Why did Ricardo focus on distribution rather than production?

2. Explain Ricardo's theory of rent and the law of diminishing returns. What policy conclusions did he draw from this analysis?

3. Show graphically that, as population grows and the demand for corn rises, rents and wages go up, while profit falls.

4. What is utilitarianism? How did Bentham's utilitarianism lead him to egalitarian reform proposals? Why didn't he advocate complete equality of income?

Class Materials for Lecture 7

Brief Outline of Topics Covered in Lecture 7:

• The Classical School - David Ricardo (ch. 5)
• The Classical School - Bentham, Say, Senior, and Mill (ch. 6)

Video

Ricardo

Additional Reading

David Ricardo (1772-1823)
on the Impossibility of Gluts

"No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. 

Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities."

John Maynard Keynes (1883-1946)
on Malthus and the Possibility of Glut

"The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo?s doctrine that it was impossible for elective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain. Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of Effective Demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas. 

But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation; a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.

The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand. For there would obviously be a natural tendency towards the optimum employment of resources in a Society which was functioning after the manner of the classical postulates. It may well be that the classical theory represents the way in which we should like our Economy to behave. But to assume that it actually does so is to assume our difficulties away."

Class Materials for Lecture 6

Brief Outline of Topics Covered in Lecture 6:

• The Classical School - Adam Smith (ch. 3) [finish]
• The Classical School - Thomas Malthus (ch. 4) 
• The Classical School - David Ricardo (ch. 5) [beginning of chapter.]

Video

Additional Reading

The Theory of Moral Sentiments (1759)



Malthus

The Peterloo Massacre, 1819: The French Revolution postponed in England many reforms which had been rendered necessary by rapid industrial progress. Radicalism was associated in the public mind with a French origin, and that killed it politically. After Waterloo the tide turned and agitators gained a hearing. The landed interests wished to maintain the late war prices, and the artisan population desired cheap bread. Hence discontent, oratory, and riots which resulted in the loss of life. The most celebrated disturbance of these years is the "Peterloo Massacre" of 1819. On August 16th a mass meeting was arranged by the Manchester radicals to hear Henry Hunt, a speaker who advocated annual parliaments, universal suffrage, and the ballot. A crowd gathered in St. Peter's Fields, and trouble arose between it and the Lancashire militia who were present on the plea of preserving order. The troops charged and killed several persons, to the intense indignation of radical sympathizers in every part of the island.

The adjournment of the preceding meeting, the considerable interval of preparation which had been allowed; a vague feeling perhaps, that such assemblages would not much longer be permitted,---all conspired to render the concourse great beyond all former example. A little before noon on the 16th of August, the first body of reformers began to arrive on the scene of action, which was a piece of ground called St. Peter's Field, adjoining a church of that name in the town of Manchester. These persons bore two banners, surmounted with caps of liberty, and bearing the inscriptions: "No Corn Laws," "Annual Parliaments," "Universal Suffrage," "Vote By Ballot." Some of these flags, after being paraded round the field, were planted in the cart on which the speakers stood; but others remained in different parts of the crowd. Numerous large bodies of reformers continued to arrive from the towns in the neighborhood of Manchester till about one o'clock, all preceded by flags, and many of them in regular marching order, five deep. Two clubs of female reformers advanced, one of them numbering more than 150 members, and bearing a white silk banner. One body of reformers timed their steps to the sound of a bugle with much of a disciplined air; another had assumed to itself the motto of the illustrious Wallace, "God armeth the Patriot." A band of special constables assumed a position on the field without resistance. The congregated multitude now amounted to a number roundly computed at 80,000, and the arrival of the hero of the day was impatiently expected.

At length Mr. Hunt made his appearance, and after a rapturous greeting, was invited to preside; he signified his assent, and mounting a scaffolding, began to harangue his admirers. He had not proceeded far, when the appearance of the yeomanry cavalry advancing toward the area in a brisk trot, exciting a panic in the outskirts of the meeting. They entered the inclosure, and after pausing a moment to recover their disordered ranks, and breathe their horses, they drew their swords, and brandished them fiercely in the air. The multitude, by the direction of their leaders, gave three cheers, to show that they were undaunted by this intrusion, and the orator had just resumed his speech to assure the people that this was only a trick to disturb the meeting, and to exhort them to stand firm, when the cavalry dashed into the crowd, making for the cart on which the speakers were placed. The multitude made no resistance, they fell back on all sides.

The commanding officer then approaching Mr. Hunt, and brandishing his sword, told him that he was his prisoner. Mr. Hunt, after enjoining the people to tranquility, said, that he would readily surrender to any civil officer on showing his warrant, and Mr. Nadin, the principal police officer, received him in charge. Another person, named Johnson, was likewise apprehended, and a few of the mob; some others against whom there were warrants, escaped in the crowd.

A cry now arose among the military of "Have at their flags!" and they dashed down not only those in the cart, but the others dispersed in the field; cutting to right and left to get at them. The people began running in all directions; and from this moment the yeomanry lost all command of temper: numbers were trampled under the feet of men and horses; many, both men and women, were cut down by sabers; several, and a peace officer and a female in the number, slain on the spot. The whole number of persons injured amounted to between three and four hundred. The populace threw a few stones and brick bats in their retreat; but in less than ten minutes the ground was entirely cleared of its former occupants, and filled by various bodies of military, both horse and foot. Mr. Hunt was led to prison, not without incurring considerable danger, and some injury on his way from the swords of the yeomanry and the bludgeons of police officers; the broken staves of two of his banners were carried in mock procession before him. The magistrates directed him to be locked up in a solitary cell, and the other prisoners were confined with the same precaution. The town was brought into a tolerably quiet state before night, military patrols being stationed at the end of almost every street.

---

Source

From: Charles W. Colby, ed., Selections from the Sources of English History, B.C. 55 - A.D. 1832 (London: Longmans, Green, 1920), pp. 298-300.

Homework #3

Homework #3
Due Wednesday 1/27

1.  What is the role of the state according to Adam Smith? What makes for good taxes?

2. According to Adam Smith, what is the difference between the market price and the natural price? Why is this distinction important?

3. According to Smith, why do wages differ across occupations? What was he trying to explain by making this distinction?

4. Explain Malthus's theory of gluts. What policy conclusions did Malthus draw from the analysis?

Class Materials for Lecture 5

Brief Outline of Topics Covered in Lecture 5:

• The Classical School - Adam Smith (ch. 3) [cont.]
• The Classical School - Thomas Malthus (ch. 4) [unlikely we'll get this far]

Video

Additional Reading

Adam Smith, the "Newton of political economy," may not be quite the "advocate of ‘market forces’, the enemy of government regulation, and believer in something called the ‘invisible hand" as you've been led to believe

The Very Best Short Summary of Adam Smith's Life and Work, by Gavin Kennedy: Chris Berry, Professor of Political Theory at University of Glasgow is a leading expert on the life and work of one of the University of Glasgow's most famous academics, Adam Smith.

He has created a 10 minute talk, published by the University of Glasgow, that describes the making of the man, the global significance of his writing and explains why Smith's work still resonates with us today:

Adam Smith in 10 Minutes, by Chris Berry: Adam Smith was born in Kirkcaldy in 1723.

He entered Glasgow University at the early - but for the time not unusual - age of fourteen.

He studied logic, metaphysics, maths and later Newtonian physics and moral philosophy under some of the leading scholars of the day. In 1740 Smith was awarded a Snell Scholarship (which is still in existence today) to study at Balliol College, Oxford. Smith preferred Glasgow, however, because Oxford’s curriculum was antiquated and he thought the teachers were lazy since, in contrast to Glasgow, their salary did not depend on the number of students taught.

After a period of freelance lecturing, Smith returned to Glasgow University, first as Professor of Logic in 1751 and then a year later as Professor of Moral Philosophy, a post he held until he left academia in 1764.

The mid-eighteenth century saw a period of intense intellectual activity, known as the Scottish Enlightenment. Universities were key players in this outburst of enquiry, with Glasgow a major force. Smith himself is of course the figure of overwhelming historical significance. But he was not alone. Smith’s fellow professoriate included pioneering chemists William Cullen and Joseph Black, as well as engineer and inventor James Watt who also worked at the University). Another historically important figure is a pupil of Smith’s, John Millar. Who became Professor of Jurisprudence and the author of a key work in what we would call historical sociology.

The seeds of Smith's two great books were sown in his professorial years. The Theory of Moral Sentiments appeared in 1759 and drew on his lectures. It went through six editions in his lifetime. Smith’s intellectual range as a lecturer was extensive. Beyond courses in philosophy and jurisprudence he also discussed history, literature and language. He maintained his interest in science and wrote an essay on the history of astronomy. This is notable not only for the breadth of Smith’s knowledge but also as an attempt to link the development of different astronomical accounts to a basic human propensity to seek order.

Although his second great book the Wealth of Nations was published in 1776 we know that he had already considered many of its leading themes at Glasgow as he lectured on as he put it: 'those arts which contribute to subsistence, and to the accumulation of property, in producing correspondent movements or alterations in law and government'. In 1787 Smith was elected Rector of the University and in a letter of thanks remarked that he remembered is professorial days as 'by far the most useful and therefore as by far the happiest and most honourable period of my life'.

If Smith of popular repute is the ‘father of capitalism’, the advocate of ‘market forces’, the enemy of government regulation and believer in something called the ‘invisible hand’ to produce optimum economic outcomes then he would be a disappointed parent. All his work is deeply steeped in moral philosophy. Indeed the simple fact that the final edition of the Moral Sentiments containing extensive revisions appeared in 1790, the year of his death, tells us is that Smith’s commitment to the moral point of view endured alongside and beyond the publication of the Wealth of Nations.

The Moral Sentiments is a leading example of a particular approach to moral philosophy – one that regards it not as sets of rationally or Divine ordained prescriptions but as the interaction of human feelings, emotions or sentiments in the real settings of human life. In many ways it is a book of social and moral psychology. What we can call economic behaviour is necessarily situated in a moral context. But more than that the key theme of the book is an opposition to the view that all morality or virtue is reducible to self-interest. Indeed his opening sentence declares that everyday human experience proves that false, he writes: "How selfish soever a man may be supposed, there are evidently some principles in his nature which interest him in the fortune of others, and render their happiness necessary to him, though he derive nothing from it except the pleasure of seeing it".

Our morality is founded on certain truths about human nature. Everyone is capable of sympathy, or fellow-feeling, and that ability enables us to imagine what we would feel if we were in the situation of another and, once we have made that imaginative move, we can then judge whether those feelings are appropriate. We have to learn about ‘situations’ but Smith believes that happens because humans are social creatures.

Smith illustrates the natural fact of human sociality by likening society to a mirror. It is this responsiveness to others - pleasure in their approval, pain in their disapproval - that Smith used to explain why the rich parade their wealth while the poor hide their poverty. The rich value their possessions more for the esteem they bring than any use they get from them and it is this disposition to "go along with the passions of the rich and powerful" that establishes the foundation for distinctions of status. And it is this desire for esteem that explains the incentive, we all possess, to better our condition. This is one of the links between the Moral Sentiments and the Wealth of Nations. In many ways the moral interactions Smith describes in Moral Sentiments bear on the practices that characterise his contemporary commercial society. The very complexity of that society meant that the bulk of inter-personal dealings were with strangers.

A ‘society of strangers’ is a commercial society which Smith identifies in the Wealth of Nations as one where 'everyman is a merchant'. A commercial society's coherence - its social bonds - do not depend on love and affection. You can coexist socially with those to whom you are emotionally indifferent. As Smith famously said:

it is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love and never talk to them of our own necessities but of their advantages. Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow-citizens

Nothing in this means that Smith is denying the virtuousness of benevolence. When Smith came to write the Wealth of Nations he made it clear that the ‘wealth’ lay in the well-being of the people. This covered not only their material prosperity but also their moral welfare. Accordingly he thought to be in poverty is to be in a miserable condition and commerce is to be praised for improving human life.

The great achievement of the Wealth of Nations was to discern the principles of order in the seeming chaos of commercial or market behaviour – it wasn’t random, it could be reduced to some simple principles. It was for this reason that Smith was described as the Newton of political economy. It is no idle fact that the full title is Inquiry into Nature and Causes of the Wealth of Nations.

He identifies basic principles such as the human propensity to ‘truck, barter and exchange’ that he argues underlies the division of labour but says that this depends on a market and that requires some institutional structures like those that uphold justice such as government and how that in turn mutually relies on principles of public finance.

All of this is placed by Smith into a historical narrative. In his Glasgow lectures he had outlined an account of four stages of social organisation focused around the characteristic form of economic endeavour – hunter-gatherer, herder, farmer, commerce - and in the Wealth of Nations he gives a set-piece account of the transition from the farming to commerce. This process of social change was not brought about by deliberate human policy. This fact reveals for Smith a general truth about social life, namely, that it is pervaded by unintended consequences. This supports the widely-held view of Smith as an opponent of attempts to direct ‘the market’ but, in fact, what he really opposes is the attempt to direct individual’s activities, their ‘natural liberty’ to pursue their own ends in their own way. This is itself a ‘moral’ position and Smith never abandons that perspective.

In the opening chapters of the Wealth of Nations, he celebrates the productiveness of the division of labour with the example of pin-makers but later notes that those whose lives were spent performing a "few simple operations" were rendered "stupid and ignorant" and were incapable of "forming any just judgment concerning many even of the ordinary duties of private life". The 'morality' into which these individuals are socialised is defective; the 'mirror' in which they see themselves reflects back to them to their "mutilated" condition. This is the probable course of events, says Smith, unless "the public" takes remedial steps by instituting a subsidised system of elementary schooling. This example clearly illustrates how Smith's social and moral theories cannot be fully understood in isolation and must be seen as a whole.

Adam Smith’s legacy has had global impact and it is fitting that the work of a world-historical figure was forged in this world-class University.

Homework #2

Homework #2
Due Wednesday 1/20

1. Why is the Tableau Economique important in the history of economic thought?

2. Why was Turgot dismissed from his duties as finance minister in 1776?

3. What is the significance of the specie flow mechanism?

4. According to Adam Smith, what are the four stages of economic and social development? What are the characteristics of each stage?

Class Materials for Lecture 4

Brief Outline of Topics Covered in Lecture 4:

The Classical School - Forerunners (ch. 2)
The Classical School - Adam Smith (ch. 3)

Video:

Additional reading:

Adam Smith

Two famous quotes from the Wealth of Nations:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual value of society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.

And:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

Class Materials for Lecture 3

Brief Outline of Topics Covered in Lecture 3:

The Physiocrats (ch. 2)
The Classical School - Forerunners (ch. 2)
The Classical School - Adam Smith (ch. 3)  [first part of chapter if we get this far]

Video:

Additional reading:

François Quesnay, 1694-1774

The humbly-born François Quesnay trained himself in medicine, rising to become a physician in Louis XV's court and the leader of a sect of Enlightenment thinkers known as the Physiocrats or the économistes. The working-class boy who could not read until he was 11 was eventually elected to the Academy of Sciences and hailed as the "Confucius of Europe", the "modern Socrates", by his gentlemen-disciples.

Born in Méré to a family of laborers, Quesnay was orphaned at thirteen.  He learned to read from a household medical companion and quickly acquired a voracious appetite for more books and more learning. After a brief apprenticeship, some schooling at Saint-Côme, and marrying a Parisian grocer's daughter (a huge step up in social status), Quesnay set himself up as a country barber-surgeon in Mantes.  His (rapid) self-education and skills shone through and, recommendation upon recommendation, he gradually climbed up the greasy pole, entering into the service of local aristocrats.  This gave him some time to do more reading, studying and writing.   

Quesnay's numerous tracts on surgery cemented his reputation.  He was particularly keen on elevating the status of surgery into a medical science (much to the medical establishment's horror).  The King's edict of 1743 separating surgeons from barbers and the later creation of a royal college of surgeons was partly his doing.   

In 1749, on the strength of a strong recommendation, Quesnay became  the personal physician of the King Louis XV's mistress, the Madame de Pompadour. Quesnay settled in Versailles, finally entering the highest circle of power.  He was elected to the Academié des sciences in 1751 and fell in with the philosophes, who curiously sought out the little country surgeon who had so bravely challenged the great doctors. 

Quesnay's interest in economics arose in 1756, where, hoping to draw on his country background, he was asked to contribute several articles on farming to the Encylopèdie of Diderot and d'Alembert.  Quesnay delved into the works  of the Maréchal de Vauban, Pierre de Boisguilbert and Richard Cantillon and, mixing all these ingredients together, Quesnay gradually came up with his famous economic theory. 

In 1757, he met the Marquis de Mirabeau, his first convert.  He was followed by Mercier de la Riviere and DuPont de Nemours and several others.  In 1758, Quesnay wrote his Tableau Économique -- renowned for its famous "zig-zag" depiction of income flows between economic sectors-- to explain his doctrine.  It became the founding document of the Physiocratic sect -- and the ancestor of the multisectoral input-output systems of Marx , Sraffa and Leontief and modern general equilibrium theory. (See our analysis of Quesnay's Tableau).   

Quesnay began with the axiom that agriculture is the only source of produit net (net product, or surplus of output above cost).  He believed that manufacturing and commerce were "sterile" as (in his view), the value of their output was equal to the value of their inputs.  Only land, Quesnay reasoned, produced more than went into it. The wealth of a nation, Quesnay argued, lies in the size of its net product.   

Quesnay opposed the mercantilist doctrines of Colbert, which still held in the French court, believing that they concentrated too much on propping up industry and commerce rather than agriculture.  Influenced by Vincent de Gournay, an advocate of laissez-faire, Quesnay wished to see many of the Medieval rules governing agricultural production lifted, permitting the economy to find its "natural state".   The natural state of the economy was conceived as the balanced circular flow of income between economic sectors and thus social classes which maximized the net product.  In these concepts, Quesnay saw analogies to the circulation of human blood and the homeostasis of a body. 

Quesnay was largely responsible for the distinction between the ordre naturel (nature's order) and the ordre positif (positive, i.e. human-idealized, order).  A good government, Quesnay argued, should follow a  laissez-faire policy so that the ordre naturel could emerge.

Quesnay went on to write numerous articles on economics in 1766-8 in the Journal de l'agriculture, du commerce et de finances and in the Ephémérides du Citoyen under pseudonyms like M.N., M.H., M.A., M. de Isles, etc. (sometimes having his alter-egos enjoin in journal debates with each other).  His 1766 formule article is perhaps his clearest presentation.  However, it was presentations, commentaries and elucidations upon Quesnay's system by Mirabeau (1760, 1763),  Mercier de la Riviere (1767) and DuPont de Nemours (1767) that gave Quesnay's ideas a more systematic feel.  Their worship of Quesnay knew no bounds.   

Homework #1

Economics 493/593
Winter 2010
Due on Wednesday 1/13

Homework #1

1. List and briefly explain the major tenets of the mercantilist school.

2. Choose a country that is currently attempting to use economic policy to affect their trade balance and interpret those policies from a mercantilist perspective. In what way do the policies fit the mercantilist framework? In what way are they different?

3. What was Thomas Mun's most notable contribution to mercantilist thought? Explain.

4. Why did mercantilists try to achieve full employment?