Mercantilism vs. Physiocratism

Attribute	Mercantilism	Physiocratism
Economic System	Belief in accumulating wealth through trade and a favorable balance of trade	Belief in wealth coming from agriculture and land
Role of Government	Government intervention in the economy to promote exports and accumulate gold and silver	Government should have a laissez-faire approach and not interfere with the economy
Focus	Focus on trade and accumulation of precious metals	Focus on agriculture and land as the source of wealth
View on Taxes	Support for high tariffs and taxes to protect domestic industries	Advocacy for low taxes and minimal government intervention in the economy

Mercantilism and Physiocratism are two economic theories that emerged during the 17th and 18th centuries in Europe. While both theories aimed to improve the economic well-being of their respective countries, they had different approaches and beliefs about how to achieve this goal.

Definition and Origins

Mercantilism was a dominant economic theory in Europe from the 16th to the 18th centuries. It emphasized the importance of accumulating wealth through trade, particularly through a favorable balance of trade. Mercantilists believed that a country's wealth was measured by the amount of gold and silver it possessed, and they advocated for policies such as tariffs, subsidies, and colonial expansion to increase a country's wealth.

Physiocratism, on the other hand, emerged in France in the mid-18th century as a reaction against the mercantilist policies that were prevalent at the time. Physiocrats believed that the wealth of a nation was derived from the productivity of its land, specifically agriculture. They argued that the government should not interfere in economic activities and instead should focus on ensuring a free market for agricultural goods.

Role of Government

One of the key differences between Mercantilism and Physiocratism is the role of government in the economy. Mercantilists believed that the government should actively intervene in economic affairs to promote exports, protect domestic industries, and accumulate wealth. They supported policies such as tariffs, subsidies, and monopolies to achieve these goals.

Physiocrats, on the other hand, believed in laissez-faire economics, where the government's role was limited to protecting property rights and ensuring a free market. They argued that the natural laws of economics would lead to the most efficient allocation of resources and the greatest prosperity for society as a whole.

Views on Trade

Another key difference between Mercantilism and Physiocratism is their views on trade. Mercantilists believed that a country should strive to export more than it imports in order to accumulate wealth. They supported protectionist policies such as tariffs and quotas to restrict imports and promote domestic industries.

Physiocrats, on the other hand, believed that trade should be free and unrestricted. They argued that trade was beneficial for all parties involved and that government intervention in trade was unnecessary and harmful. Physiocrats believed that a country should focus on producing goods in which it had a comparative advantage and engage in free trade with other nations.

Impact on Economic Policy

The differences between Mercantilism and Physiocratism had a significant impact on economic policy in Europe during the 18th century. Mercantilist policies such as tariffs, subsidies, and colonial expansion were widely adopted by European countries in an effort to accumulate wealth and power.

Physiocratic ideas, on the other hand, had a more limited impact on economic policy at the time. However, the principles of laissez-faire economics advocated by the Physiocrats would later influence the development of classical economics and the policies of the Industrial Revolution.

Conclusion

In conclusion, Mercantilism and Physiocratism were two distinct economic theories that emerged during the 17th and 18th centuries in Europe. While Mercantilism emphasized government intervention in economic affairs and the accumulation of wealth through trade, Physiocratism advocated for laissez-faire economics and the importance of agriculture in generating wealth.

Despite their differences, both theories played a significant role in shaping economic policy and thought during their respective time periods. Mercantilism influenced the policies of European countries seeking to increase their wealth and power, while Physiocratism laid the groundwork for the development of classical economics and the principles of free trade.