WPHECN #5 History of economic thought

http://en.wikipedia.org/wiki/History_of_economic_thought - tile policy was undesirable to strive for a favourable balance of trade it is, would be un desirable. said Hume, in any case impossible. Hume held that any surplus of exports that might be achieved would be paid for by imports of gold and silver. This would increase the money supply, causing prices to rise. That in turn would cause a decline in exports until the balance with imports is restored. The circular flow See also: Bernard Mandeville, John Law, Pierre le Pesant de Boisguilbert, and Victor de Riqueti Similarly disenchanted with regulation on trademarks inspired by mercantilism, a Frenchman name Vincent de Gournay (1712-1759) is reputed to have asked why it was so hard to laissez faire, laissez passer (free trade, free enterprise). He was one of the early physiocrats, a word from Greek meaning "government of nature", who held that agriculture was the source of wealth. As historian David B. Danbom wrote, the Physiocrats "damned cities for their artificiality and praised more natural styles of living. [17] Over the end of the seventeenth and They celebrated farmers." beginning of the eighteenth century big advances in natural science and anatomy were being made, including the discovery of blood circulation through the human body. This concept was mirrored in the physiocrats' economic theory, with the notion of a circular flow of income throughout the economy. Fran**ois Quesnay Fran**ois Quesnay (1694-1774) was the court physician to King Louis XV of France. He believed that trade and industry were not sources of wealth, and instead in his book, Tableau **conomique ( 1758, Economic Table) argued that agricultural surpluses, by flowing through the economy in the form of rent, wages and purchases were the real economic movers. Firstly, said Quesnay, regulation impedes the flow of income throughout all social classes and therefore economic development. Secondly, taxes on the productive classes, such as farmers, should be reduced in favour of rises for unproductive classes, such as landowners, since their luxurious way of life distorts the income flow. Pierre Samuel du Pon t de Nemours, a promin en t Ph ysiocrat, emigrated to th e US an d h is son foun ded DuPon t, th e world's secon d biggest ch emicals compan y. Jacques TurgotJacques Turgot (1727-1781) was born in Paris and from an old Norman family. His best known work, R**flexions sur la formation et la distribution des richesses (1766, Reflections on the Formation and Distribution of Wealth) developed Quesnay's theory that land is the only source of wealth. Turgot viewed society in terms of three classes: the productive agricultural class, the salaried artisan class (classe stipendice) and the landowning class (classe disponible). He argued that only the net product of land should be taxed and advocated the complete freedom of commerce and industry. In August 1774, Turgot was appointed to be Minister of Finance and in the space of two years introduced many anti-mercantile and anti-feudal measures supported by the Jacques Turgot wan ted King. A statement of his guiding principles, given to the King were to abolish all taxes "no bankruptcy, no tax increases, no borrowing." Turgot's except th ose on lan d. ultimate wish was to have a single tax on land and abolish all other indirect taxes, but measures he introduced before that were met with overwhelming opposition from landed interests. Two edicts in particular, one suppressing corv* *es (charges from farmers to aristocrats) and another renouncing privileges given to guilds inflamed influential opinion. He was forced from office in 1776. The Wealth of Nations See also: Industrial revolution and Anders Chydenius Adam Smith (1723-1790) is popularly seen as the father of modern political economy. His publication of the An Inquiry Into the Nature and Causes of the Wealth of Nations in 1776 happened to coincide not only with the American Revolution, shortly before the Europe wide upheavals of the French Revolution, but also the dawn of a new industrial revolution that allowed more wealth to be created on a larger scale than ever before. Smith was a Scottish moral philosopher, whose first break was The Theory of Moral Sentiments ( 1759). He argued in this that people's ethical systems develop through personal relations with other individuals, that right and wrong are sensed through others' reactions to one's behaviour. This gained Smith more popularity than his next work, The Wealth of Nations, which the general public initially [18] Yet Smith's political economic magnum opus was ignored. successful in circles that mattered.Adam Smith , th e fath er of modern political econ omy. Context William Pitt, the Tory Prime Minister in the late 1780s based his tax proposals on Smith's [19] Smith was ideas

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