Criticism Of The Mercantilist

833 Words4 Pages
International trade and commerce has been discussed widely in economic writings ever since the rise of merchants and the mercantilist ideology. Even before that trade between nations has existed as a part of daily economic life. The theories about international trade started formulating with the mercantilist thought and were continued in the writings of most prominent economists of the classical and neo-classical doctrines. The mercantilists were of the idea that it is possible to increase the wealth of a nation only at the expense of other nations and trade cannot be mutually beneficial to all nations. However, this strand of thought was soon disregarded with the acceptance of Smith’s absolute advantage theory and later, the more widely acknowledged…show more content…
Thus a positive balance of trade would be followed by a fall in exports and a rise in imports caused by the rise in domestic prices and domestic money supply. This would rebalance the balance of trade in all the nations that are part of trade and would in the long run disrupt the flow of bullions. Hume, who was a proponent of free laissez faire trade, also comments on the benefits of international trade. He argued that the mercantilist concept of one country getting wealthier at the expense of other countries was flawed, and that an increase in the real wealth in one country would get percolated to other countries through imports, and thus international trade would bring prosperity in all…show more content…
Ricardo believed that a country should specialize in the production of those commodities which can be produced using the nation’s resources in the most efficient manner and exchange it for foreign commodities which would lead to a rise in the profits in each country. Thus trade based on comparative advantage leads to increased profits, savings, capital, production and thus standard of living of the public. He theoretically proved that even though the Portuguese produce both cloth and wine using less labour, trading can be beneficial for both England and Portugal. Ricardo proved using simple mathematics that trading in commodities based on individual advantages in the form of reduced costs and efficient utilization of resources, can be mutually beneficial to each

    More about Criticism Of The Mercantilist

      Open Document