b) in what respect did Pettys and Humes economic

analyses extend beyond the typical mercantilist views?

Mercantilism
Gold and silver (bullion) is most desirable form of wealth
nationalism
Assume that the total wealth of the world was fixed
Trade between nations is important
Duty-free importation ofraw materials that could not be produced at
home,protection for manufactured goods andraw materials that could be
produced domestically, andexport restriction on raw materials
Colonization and monopolization ofcolonial trade
Government intervention is important
The goal of economic activity, was productionnot consumption
Importance of Large Hard-working population

SIR WILLIAM PETTY (1623-1687)

Petty was a brilliant thinker who rose from poverty as a weavers son and mastered Latin, Greek,
French, arithmetic, geometry, and navigation by the time he was fifteen years old. He ended life as
a wealthy man after spending time as a sailor, physician (he studied anatomy in Paris with Hobbes),
inventor, surveyor, andmost importantbeing the first economic writer to advocate the
measurement of economic variables.
Pettys Mercantilist views:
He favoured freer foreign trade than many of the mercantilists, for he believed it would circumvent
the widespread smuggling.
He wanted imported goods to be taxed if the same goods are made or grown at home.
He wanted lower tariffs on the imports of raw materials.
Like other mercantilists, favour large population: based upon his concept of increasing returns to
government and lower unit costs.
Favoured poll tax as an incentive to work.
Thieves should become slaves
The unemployed should be hired by the state to work on roads, dredging rivers, planting trees,
building bridges, mining minerals and manufacturing various goods.

Petty as a Forerunner of Classical

Economics
He was a pioneer statistician.
Several of his ideas were later developed in greater
detail by the classical economists.
He tried to measure population, national income,
exports, imports, and the capital stock of a nation.

DAVID HUME (1711-1776)

David Hume was an 18th century philosopher
Born in Scotland and Hume was a close personal friend of Adam Smith
Unequal distribution of wealth is good
When a country purses a mercantilist policy of trade, the steady inflow of
gold (money) results in inflation.
This was known as pricespecie-flow mechanism.
Favourable balance of trade would increase the flow of gold and silver (specie)
into the economy.
The increased money supply would increase the level of price.
Higher prices will lead to a decline in exports and an increase in imports.
For nations with an unfavourable balance of trade, the opposite would occur.
Thus no nation could maintain a favourable balance of trade in the long run.
Money will be shipped abroad, leaving poverty and bankruptcy behind

 The price level is determined by the quantity of money

available
Hume accepted a mercantilist idea that increases in the
money supply could lead to increases in spending,
output and employment.
Hume believed that economic and political freedom
went together