THE MERCANTILISTS (1500-1750). Medheval economic theory had been dominated by ethical considerations; the economic thought of the early modern period was dominated by political neces sities. Both the feudal system and the tem poral power of the Papacy had been undermined by the growth of the great modern monarchies. The problems and needs of the national States absorbed the best thought of the age. The most pressing problem of the new national govern ments was how to secure greater revenue. Philos ophers and publicists, who would not have stooped to the elucidation of the laws of private wealth. bent their best energies to the solution of problems arising out of the establishment and maintenance of particular States. The problem of the economic thought of the period was, how ever, a larger one than the mere raising of the public revenue. It was requisite that this reve nue should be secured in that form—ready money —which is most easily transformed into armies, navies, and the other material embodiments of national power; and the problem included, in addition, the necessity of finding or creating sonic more productive source of taxation than the backward agriculture of the period. With the problem of the Mercantilists plainly before us, it is easy to understand the characteristic features of the mercantile system which are de scribed under that title. "'Mercantilism," says Schmoller, "in its innermost kernel is nothing but State-tanking—not State-making in a nar row sense, but State-making in the modern sense, which creates out of the political community an economic community." The restrictive regula tions, discriminating laws. and State interference which Adam Smith and his immediate succes sors described as the essential features of mer cantilism, we now know to have been in a sense incidental. State interference was distinctly a minor consideration, minor in the sense that it was not the problem at issue. Moreover, the mercantile system resulted not in a loss, but in a net gain of industrial freedom. Contempo raneously with the imposition of those external restrictions which mark the mercantile economy went a rapid and extensive abolition of internal restrictions which had been far more numerous, bridal, and destructive than the new external regulations which succeeded them. The economic and political unit had merely increased its size. While mercantilism is the most important phe nomenon of economic thought in the sixteenth and seventeenth centuries, it constituted only a part of a widespread and eager investigation of concrete economic facts. It was these studies which gave the political economy of Adam Smith its rich content of concrete phenomena. Money, banking, the rise of prices. population, poor relief, etc., were all extensively discussed in brochures and monographs. The maintenance
of the poor was a constant subject of pamphlet and tract, and in the communistic Utopia of Sir Thomas More we have striking evidence that the problem of poverty was occupying the at tention of the best thinkers of the time. The study of statistics became widespread and actu arial science and the investigation of social sta tistics were carried really to an advanced point. Neither is it correct to refer, as many have done, to the writers of this period as empiricists. Eco nomic study had been divorced from ethics and theology, it is true, but at the hands of Bodin, Grotius, Pufendorf, Hobbes, and Locke, econom ies was developed as an essential part of a gen eral political philosophy. In the De Jure Belli et Pacts of Grotius (1625), particularly, the whole mercantile system is in reality brought to judgment before the greater doctrine of interna tional equity, and we have a new application of the old doctrines of natural law and natural lib erty, doctrines which were destined to play a greater role in modern economic science than the whole mercantile system.
THE PIITSlOcR-1Ts, had been marked by a narrow favoritism of commerce and manufactures; a reaction in favor of agriculture was inevitable. The mercantilist doctrine had been characterized also by an enthusiastic, though not less narrow, nationalism; it was nat ural, then, that the reaction in favor of agricul ture should ally itself with the broad principles of natural law and liberty expounded in the works of Grotius, Pufendorf, and Locke. This reaction in favor of agriculture and industrial liberty found expression in the doctrines of the so called Physiocrats (q.v.). The rise of the school may be dated from Quesnay's first economic mon ograph, which appeared in 1.756. As is im plied in their name, the fundamental doctrine of the Physiocrats is the subjection of economic and political phenomena to 'natural law: which as interpreted by them gave rise to the fa miliar political doctrine of radical individualism, and a certain materialistic conception of wealth which explains in a way all their peculiar eco nomic theories. As Adam Smith noted, the Phys iocrats treated not only of political economy, "but of every other branch of the system of civil government," and their political and economic theories were indissolubly fused in their general doctrine of a beneficent natural law of industrial freedom, according to which the largest produc tion and jnstest distribution of wealth would be best secured by permitting each individual to 'pursue his own interest in his own way.' so long as he did not infringe on the like liberty of others. This theory. perpetuated and popular ized by Adam Smith, has exercised probably more influence upon subsequent thought than any other economic doctrine ever formulated.