Mhd Anass Kazah

Economic Thought

Paper 1

Dr. Walid Akar

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Economics, study of how human beings allocate scarce resources to produce various
Goods and services and how this production is distributed for consumption among the consumers (demanders) in the society. Economics is historical were it all started 800BC with the pre-classical economics (early pre-classical economics with the Greeks from 800 BC till the 1500s and then we have the late pre-classical economics which was from the 1500s till 1776). And in the later era we had 2 schools of economics, the Mercantilist and the Physicrats. Mercantilism was spread all over Europe and mean while physiocracy was a French school of economic thought which was in the period of time from 1750-1789. These two schools had different ways of thinking when it came to various things such as, wealth and growth, consumption and wages, trade, and money.

The definition of wealth and money for the mercantilists was that the primary duty of the state is to enhance and maintain both national wealth and national power in order to defend the country and National Wealth consists solely or primarily in its supply of precious metals such as gold and silver. And the state or the government used to earn all this wealth by trade. Where the government encouraged exports and discouraged imports so that gold would be in the country which meant to them that they had more power since they are richer, and this will lead to the growth of the country. Whereas the physiocrats had a different idea on wealth and growth which was that wealth is in agricultural production and that growth is acquired when they had more crops which meant more production, and this will lead to a sustenance economy where the country consumes what it produces.
Consumption and wages in the times of mercantilism were a cruel and very greedy to the merchants favor. Since people where forced to consume a low quantity so that exports increase and so that merchants can gain more money and become wealthier, and in their mindset business should increase production to also increase exports. Mercantilism was a combination of high production and low consumption leading to more exports and more wealth and power. And on the wages side, the government said that wages should be low because this will decrease cost of production so that they could have more production. This means that the wages that were given where subsistence wages. And it is also said that the wealth of a nation is the poverty of many individuals. Whereas in the mindset of a physiocrat wages were not an issue where people used to consume what they plant and harvest, so that meant that consumption was dependent what is produced and harvested by the farmer himself.
Trade was a considered very important for mercantilists, where all their wealth and power came from saving up gold and precious metals. They used to encourage exports but discourage imports where the only encouraged import was cheap raw material which was used to employ in producing final products. Mercantilists used to conquer countries and colonize them so that they can sell their products in for the return of gold and silver. Their main goal was production and increase in exports so that they earn more money and not to have high consumption. Where the physiocrats had no idea about trade where they had subsistence economies, eating what they are locally producing. They preferred not to go into trade because their goal wasn’t gold and precious metals or in other words money.
Mercantilists considered money as gold and precious metals since they used to get paid by gold. But like any greedy person on this planet earth they used to love being paid and hated paying money where used to stack gold and not import with it, and due to the increase in exports and gold money increased and in 1650 the first bank ever was established, and this made prices increase in England and Europe generally. Meanwhile physiocrats had interest in money but not like the mercantilists, and that is since they used to buy what they are missing via money.
Finally, mercantilists or physiocrats in my opinion were both wrong since wealth should be spread between the people of the nation and in the hand of the few and also people should depend on something other than agriculture or else we wont ever have improvements and evolution and development in other fields of production like industry or trade and business. For me I think what should rule the world is something that is fair to everyone equally and it is the neo-socialist system where trade is found and equality is a must but unfortunately capitalism is taking over the world.