Class summary 9/28

Mercantilism --- progressive corporatism

Econ system:

Restrictions on what to sale

Limits on productions --- farmers cannot produce more than a certain amount

Price control

Wage control --- Maximum wage

Two groups of people:  

         a. French Physiocrats (Quesnay) first one observed economy is changing 

         b. Scottish Moral Philosophers

Why do we need to have firms: it’s more sufficient to have a special groups of people to produce certain products.

Firms Individual exchange in labor market

STUFF gets made:

Individuals provide ideas stuff to firms, firms give payments back to individuals

INDIVIDUALS  ß---------------------à  FIRMS

                                 Payments & Stuff

Factor Markets  (Individuals give stuff and get payments)

Goods Markets  (Firms give stuff and get payments)

Income=EXPENDITURES=(C-T)+I+G+NX

The more you separate productivity and consumption, the more productive both parts might be.

Sources of wealth

Phys	Merc	SMP
Production only in agriculture	King’s bank account Gold (currency) Positive trade balance	Commerce

David Hume:

(Laws of economic could stand on their own)

Mercantilism:

All the trades are “zero sum”

“KING” (DUTY) manages trade: 1. Restrict imports  (GOLD leaves country)

                                                             2. Promote exports (GOLD gets into country)

“Price-Specie Flow Mechanism” ---Price will adjust according to the situation

(LAW OF ONE PRICE)