Quismundo, Lyanne Mae M.

History of Economic Thought

3E1

Ideas/ Concepts/ Discoveries in Mercantilism

Tariffs imposed against the importation of goods

Significance Then and Now

Tariffs were imposed by the state (throne,
statesmen, members of the parliament) during the
rise of mercantilism to discourage the importation
of foreign goods that can be produced
domestically and raw materials that are abundant
in supply.
The use of tariffs is still practiced in our present
economic system because of three major reasons.
First, tariffs serve as a source of revenue. The
income from tariffs provides the government with
a source of budget or fund. Second, tariffs protect
domestic industries. It makes the domestic firms
or companies more competitive. The domestic
industries, especially those who supply raw
materials and produce finished goods, always
make it to a point where they could achieve the
demand of the consumers. Also, the locally made
products are given more priority than the
imported ones. Lastly, tariffs remedy trade
distortions. There are some laws or rules that
present in one country that are damaging to the
domestic industry of the importing country. Tariff
is a significant regulator of free trade.

Separation of the Church and State by Niccolo

Machiavelli (1500s)

The separation of the church and state was

imposed in the early times because of the
confusion of the roles of the King and Pope. For
monarchies, they believed that the King rules the
entire state including the churches within its
boundaries. On one side, according to the Catholic
Doctrine, the Pope has the power over all the
churches and indirectly over the state. The
contradiction was solved by drawing the line
between the church and the state.
The purpose of the separation of church and state
today is for the government not to meddle with
any religious activities. For instance, the local or
national government of a country may favor only
one or only a few religions. This will surely be
discriminating to the others, and people might be
forced to have that religion even though its
against their will and beliefs just because the
government or the state favors that religion. A law
cannot be passed in aid of one religion or in aid of

all religions, and no person must be punished for

professing his/her beliefs or disbeliefs. The
government as a whole cannot also participate in
any of the activities of any religious sectors. This
for the sole reason of having equality.
Movable Type invented by Johannes Gutenberg
(Printing Revolution in the 1500s)

The movable type is a system of printing and

typography that uses movable components to
reproduce the letters, numbers, and other
elements that can be found in a document. The
invention of printing with movable type gave rise
to economic literature written by lay people during
the 1500s.
Through this movable type, economic literatures
of the past were recorded and are still alive and
preserved up to now. And these economic
literatures were studied and developed into the
modern economic system that we have today. The
movable type also led to the development of
printing. Today, we already have printing press
that makes use of more effective and efficient
printers.

Quantity Theory of Money from the Reply to the

Paradoxes of M. Malestroit by Jean Bodin (1530s1600s)

The quantity theory of money refers to the

proposition that changes in the quantity of money
supplied, other things constant, lead to
approximately equal changes in the price level.
This holds true from the 1600s up to now because
of the concept of too much money chasing too
few goods. In other words, more money results to
inflation (rise in the general level of prices).
Through the knowledge of the quantity theory of
money, inflation can now be prevented by the
Central Bank through regulating the circulation of
money by increasing or decreasing the interest
rate.

Political Economy (term coined in 1615)

Mercantilism is a political economic system that

believed that there is a fixed amount of wealth in
the world. It means that if one country gains
wealth, the other losses it. As a result, each
country strived to have more amount of export
than imports. Because of this they were able to
balance trade over the years.
Today, political Economy can be understood as a
study of how a country is managed or governed,
taking into account both political and economic
factors. It is still significant in the modern

economic system because through this the

relationship between an individual and the society,
and between markets and the state can be further
studied and developed to a more effective system
where the demand of the consumers can be easily
attained and the domestic industries can be
protected.
National Income by Sir William Petty (1623-1687)

The concept of national income during the

mercantilist times symbolizes the status quo or the
standard of living of the people. And this standard
of living collectively predetermines the economic
prosperity of a nation.
Today, the national income has contributed more
on how effective and efficient the present
economic system is. It helps the central bank make
the right decisions when it comes to budget
allocation, money supply, and taxation. It serves as
an instrument in economic planning such as
making fiscal policies. It helps in monitoring the
progress of the different sectors of the economy.
And lastly, it symbolizes the countrys economic
status and the country can be classified whether
its developed, developing, or under developed.

Marginalism by the Physiocrats (1756-1776)

References:
http://en.wikibooks.org/wiki/Political_Economy/General
http://www.arlinc.org/pdf/doerrimportance305.pdf
http://www.britannica.com/EBchecked/topic/467600/political-economy
http://www.businessdictionary.com/definition/marginalism.html
http://www.economicshelp.org/blog/glossary/tariffs/
http://www.encyclopedia.com/topic/Quantity_theory_of_money.aspx
http://www.investopedia.com/articles/05/010705.asp
http://www.investopedia.com/terms/m/marginalism.asp
http://www.meti.go.jp/english/report/data/gCT9904e.html
http://www.slideshare.net/snehasisbr123/national-income-final-15530797
Prof. Cunningham. 2006. ECON205W

Marginalism is how much extra use is gained from

incremental increases in the quantity of goods
created or sold, and how those measures relate to
consumer choice and demand. Marginalism is
important in the early times up to now because
this assists the businesses to determine the
required levels of activity for their services and the
quantity of products that need to be produced.