great companies affected domestic interests also, and from the other fact that their success aroused the envious hatred of both the squire and the common man against the ‘nabobs.’ Attacks elicited replies, of which it may be worth while to notice the best example that has come to my notice: John Wheeler’s defense of the Merchants Adventurers—among other things against the bureaucratic spokesmen for regulation who know nothing about business (tout comme chez nous). This work mentioned before in Chapters 3 and 6, entitled A Treatise of Commerce, Wherein are shewed the Commodities arising by a well ordered and ruled Trade, such as that of the Societie of Merchants Adventurers is proved to be: Written principally for the better Information of those who doubt of the Necessarinesse of the said Societie in the State of the Realme of England (1601), was also written, as we may add, with impending hostile legislation in view. In my opinion Mr. Wheeler did extremely well, and his argument successfully disposes of some of the points that are invariably raised in discussions about monopoly. His economics is not a bit below the level that we observe in similar popular or political or forensic arguments today. But he contributes nothing to our collection of scientific tools. His analytic economics was, on the whole, not wrong. There was very little of it, however. Because of its prominence, the East India Company at tracted the lion’s share of public attention and hostility. This accounts for a large part of the literature in question. So far as I can see, however, there is nothing in it to interest us except the arguments and counter-arguments about the company’s exportation of monetary metal and about the competition which—though harassed by legislation and administration—it offered to English woolens by its imports of Indian wares. However, these arguments and counter-arguments enter into the general discussion concerning the balance of trade (see sec. 4). Attention is invited to the footnote below. 3 3 Monopolistic policies were related to, though of course not congruent with, the Staple (jus emporii), which will be touched upon in connection with the two other topics we have singled out for discussion. But it is convenient to make its acquaintance right now. For our purposes we must carefully distinguish three different aspects of it. First, corporatively organized traders sometimes hit upon the device of making certain towns centers or entrepots of their trade in order the better to regulate it. The Merchants Adventurers may again serve as an example. John Wheeler in fact argued the advantages of ‘mart towns.’ Second, the towns themselves, which were in a position to do so or to prevail on their territorial governments to help them to such a position, tried to exercise staple rights, that is to say, to force traders to pass through them, to offer their wares for sale, and to submit to other restrictions that were, or were thought to be, profitable to those towns: here the foreign traders did not engineer the staple, but were the victims of it, sometimes in ways that to us look like the acme of irrationality and vexation. This is the type that is usually associated with the term Staple. It spread in the thirteenth century and after—all over Italy (Genoa and Venice being the most powerful centers of it) and then over the rest of Europe, including Russia. It also spread to England, as Edward III’s Ordinance of the Staple shows. Professor Heckscher’s statement to the contrary is not quite understandable to me. From this arose, third, the practice of forcing international trade into prescribed channels for the real or putative benefit of a country as a whole and for the purpose of injuring the foreigner. It is this type that was mainly discussed in the English literature. England—improving on the Spanish example—in fact developed it beyond all precedent. Her participation in the staple policy of the second variety practically ceased, of course, with the loss of Calais in 1558, whereas, e.g. in Venice, it continued to exist until Napoleon’s conquest of that city. But her staple policy of the third type was then in its beginning and a whole century had still to elapse before its legislative bases were completed by the Navigation Act of 1660 and the Staple Act of 1663. The statement one meets so often, to the effect that, so far as England is History of economic analysis 322 concerned, the staple system died in 1558, is therefore misleading and a serious bar to the understanding of a considerable part of the mercantilist literature. Of course, the system gradually shaded off into ordinary protectionism in the modern sense, but this does not justify us in overlooking its peculiar features that were so important a part of the politico-economic scene of those times. [3. EXCHANGE CONTROL] Next let us see how the practical argument stands in the matter of Exchange Control. War, as we know from experience, inevitably induces government control of economic life and, not less inevitably, creates bureaucracies to administer it which then not merely cling to their powers but automatically strive to expand them. Imports, exports, and foreign exchanges are obviously among the most important of the things to be controlled. The argument for control also applies to conditions permanently verging on war. Moreover we must take into account the spirit induced by war and the incessant threat of war, the frame of mind in which injury to a foreign nation is almost as welcome as gain to one’s own, or, to put it differently, in which the policy of international economic relations merges with a policy of economic warfare and becomes just one of the weapons in the perennial game of power politics. If it be conceded that all this holds true for that epoch, the rationale for its practice in the matter of foreign exchange should be obvious, especially if we do not lose sight of the expansive tendency inherent in all bureaucratic practice. Embargoes on coined and uncoined gold and silver we simply subsume as a necessary complement under exchange control, although in more primitive cases they were the main measure to be taken or even all that it was possible to do. 1 It may be useful, however, to present that rationale in a more general form, that is, without reference to the particular conditions of war economy. In doing so I shall consider perfect exchange control only, that is, the case in which a public authority, holding an effective monopoly of exchange transactions, can requisition and allocate foreign exchange as it pleases. Then, this authority can (a) tide over temporary shortages of foreign exchange which, if not attended to, may produce disproportionate consequences, especially through cumulative processes; (b) facilitate the orderly discharging of debts in situations in which automatic adjustment is impossible owing to inhibitions in the functioning of the international market; (c) prevent or defeat bearish speculation in an exchange market that lacks its normal resilience; (d) prevent undesired 1 The practice of exchange control, as well as the discussion about it, was at the highest level in England. But the former reached its culmination much before the latter, viz. in the reign of Elizabeth in which, under the influence of a persistently favorable course of events, the decline set in also. It then consisted of a control over transactions in foreign exchange, administered by a special public officer, the Royall Exchanger, and was supplemented by an embargo (lifted definitively, after various ups and downs, in 1663 for everything except English coins) and by the Statute of Employment, 1390, which, a member of quite a family of similar measures enacted in many countries, attempted to enforce importers to employ the proceeds of their sales in purchasing English goods. After the First World War there were instances of similar measures in several European countries, e.g., Austria. The Royall Exchanger of course has found plenty of successors in present-day Europe whose practices no doubt differ from his in technique but do not differ at all in principle. The ‘mercantilist’ literature 323 (depressive) effects of automatic adjustment that may ensue even where such automatic adjustment is possible; (e) prevent certain imports or exports and encourage others and thus powerfully influence national production; (f) improve a country’s terms of trade within limits, which may be widened by complementary restrictions, by introducing a monopoly element into its transactions with foreign merchants. Two points remain to be added. First, in order to prove itself the sharp weapon it is capable of being, exchange control not only requires attention to the net result of all the transactions that cross a country’s frontier or to the net results of a country’s transactions with every other country taken separately—the bilateral trade principle of today—but it also requires attention to the transactions in every individual commodity and of every individual trader. This is particularly necessary if full advantage of the discriminatory possibilities of the method is to be reaped. Second, in order to be fully effective as a tool of comprehensive planning, exchange control (plus embargoes on monetary metals) must be implemented by other controls that act directly on the individual transactions themselves. Many such controls have been used at various times but that epoch had a specificum of its own, the institution of the Staple. 2 It is obviously much easier to control exchanges when trade is already controlled by being forced into prescribed channels; and the staple towns with their apparatus of mints, comptrollers, and hostelers (practically jailers of foreign merchants) offered unrivaled administrative opportunities for controlling the exchange market. It should be borne in mind, however, that the two policies while primarily complementary were also to some extent capable of being substituted for one another. 3 Now, whatever we may think of the more remote effects of any such policy, especially if practiced by all countries, and whatever we may think of the way in which it was actually worked—legislation was (and is), of course, at all times a highly irrational heap of contradictory measures—it was not simply nonsense in principle and no writer who advocated it under the conditions of that time can be accused of having stood for nonsense. This certainly holds so far as the practical argument is concerned and hence for the practitioners, among whom Sir Thomas Gresham (1519–79) stands out without a peer. 4 John 2 See footnote 3. 3 There is thus nothing astonishing, and especially no contradiction, in the fact that some writers advocated both the staple system and exchange control and others exchange control instead of the staple system. Let us note in this connection that, roughly up to 1600, Free Trade as a program meant developing the staple system and fettering or even breaking up the merchants’ companies. After 1600 it meant forcing the doors of those companies so as to make it possible for every trader to enter them. In both cases free trade meant a sort of ‘trust busting.’ 4 He was a type that can no doubt be found everywhere but of which the English specimens are to this day so much more frequent and so much superior that it may well be called English: the businessman who is just as much a public servant as he is businessman and who, though perfectly successful in looking after his own advantage, serves the state in ways that are beyond the competence of the mere public servant. As a businessman he was a mercer, banker, entrepreneur (paper-milling), and public benefactor. As a public servant he was first ‘factor’ (fiscal agent) for the English crown in the Netherlands—keeping up its credit, managing the course of the English exchange, negotiating loans, acting as buyer of war materials, getting hold, by hook or by crook, of bullion to ship to England, and so on—and then, at home, exchange dictator (Royall Exchanger) and financial expert to Elizabeth—among other things, forcing merchants to lend to the crown by History of economic analysis 324 methods that were akin to holdups yet were so handled as to enhance instead of annihilate public credit: the interested reader should refer to J.W.Burgon’s The Life and Times of Sir Thomas Gresham (1839). [See also Raymond de Roover, Gresham on Foreign Exchange (1949).] We may use this opportunity to notice the two analytic achievements that have been placed to his credit. First, he described correctly enough the rules that apply to the movements of the rate of exchange with reference to the specie points, and he holds priority over Davanzati, who however did a much better job in 1582. To make scientifically articulate a piece of business practice, however well known in the business community, is a service that always deserves recording. Second, there is Gresham’s Law, the proposition that if coins containing metal of different value enjoy equal legal-tender power, then the ‘cheapest’ ones will be used for payment, the better ones will tend to disappear from circulation—or, to use the usual but not quite correct phrase, that bad money drives out good money. This phrase occurs in the Royal Proclamation ‘decrying’ base silver coin in 1560, when Gresham is known to have been the government’s chief adviser in such matters. There is also a memorandum of his (1559) which argues this case. The so-called ‘law’ can be found in many earlier writings. Considering its trivial nature, the question of priority is, however, without interest. Stuart Mill himself could not have suggested a workable alternative, and if he rose from the dead to deny this, we should reply that he did not know enough about the conditions of the time and that it was he who laid himself open to the charge of erroneous reasoning by denying it. But this does not alter the fact that those defensible practical views are generally believed to be associated with inadequate or even downright nonsensical theories. However, the question arises whether there was any theoretical argument at all. In fact practically all the writers who discussed the possibilities of protecting the national exchange and securing an influx of gold and silver money or bullion without reference to the balance of trade or of payments should not be credited or charged with any theory. 5 Precisely in order to be just to them, we must realize how innocent they were of analysis. This will clear them of some accusations which it has become a tradition to direct at them for no better reason than that we take their utterances too seriously and insist on pinning them down to theories these utterances seem to imply. But they did not analyze at all. They had no conception of any but the most obvious relations between economic phenomena. Living at a time when nations braced themselves to match their fighting power, they impulsively resented imports of unnecessary luxuries—that does not imply considered rejection of Adam Smith’s grand commonplace that consumption is the ‘sole end and purpose of all production.’ They looked at the antics of exchange rates and attributed them to the machinations of speculators—exactly as the politicians and the public did in France and Germany after 1919. They felt it was nice for a nation as well as for individuals to have money—and said so without thinking any more about it. They were staunch nationalists—and the foreigner, of course, was an object of aversion and distrust. They 5 It would be apt to call them Primitives (Richard Jones, ‘Primitive Political Economy of England,’ Edinburgh Review, 1847), provided we bear in mind that the primitivity was in the analysis rather than in the practice. The usual term is Bullionists, which I want to avoid because it suggests—as well as do others that have been offered (see E.R.A.Seligman, article ‘Bullionists’ in the Encyclopaedia of the Social Sciences—that there were doctrinal nostra by which to identify them as a distinct group. They were not really a group. Such views as they had in common are also to be found, on a somewhat higher level, among writers with whom nobody would include them. The ‘mercantilist’ literature 325 were most of them what may be termed naively critical of business and of the doings of merchants—as public opinion always was and is. The reader will have caught the point and will excuse me from going on with this argument. Nor would it serve a useful purpose to present examples. 6 There were, however, exceptions. 7 The only one to call for specific attention is Malynes 8 whom we have met before. Behind his recommendations—mainly higher import duties, prohibition of bullion exportation, the staple system, and resurrection of the office of Royall Exchange for the purpose of fixing exchange rates officially—there is more serious theory than has been admitted by a long series of critics who have treated his views with contempt. That he does not merit this, is proved by the fact that, as we shall see, during the whole of that century no other writer surpassed him in clear and full understanding of the international mechanism of foreign exchanges that works through price levels and gold and silver movements—the ‘automatic mech-anism’ to be discussed presently under the heading Balance of Trade. In the Second Part of his treatise, Canker of England’s Commonwealth, he nicely explains how, if a country’s currency falls below its mint par and coin flows out in consequence, then prices will fall in that country and rise abroad ‘where our mony concurring with the monies of other countries causeth plenty, whereby the price of forreign commodities is aduanced.’ This is a considerable theoretical contribution. We must go to the eighteenth century in order to find the argument carried to the conclusion to which it points. Why then did Malynes fail to draw this conclusion himself? I think because he was much more impressed with the shortcomings of that mechanism than he was with the mechanism itself. In particular he complained that, in the small and inhibited markets of his time, operations in exchange so 6 The reader who feels any inclination of this kind is referred to the articles by R.Jones and Professor Seligman quoted in the preceding footnote and to Professor Tawney’s introductory essay in his edition of Thomas Wilson’s Discourse upon Usury (1925). Still it may be well to mention one name at least: Thomas Milles, the customs official, who like a good bureaucrat craved for the regulated trade of the staple, which he describes as the ‘first steppe towards heaven,’ and for the import of bullion, which he describes as the sun, the pilot, and the ‘chylus’ of economic life. His least immature work: The Mysterie of Iniquitie (1611). 7 Such were Marc’ Antonio De Santis (Discorso intorno agli effecti che fa il cambio in regno, 1605), who owes survival to Antonio Serra’s attack upon his theory (see T. Fornari, Studi sopra Antonio Serra e Marc’ Antonio De Santis, 1880); Sir Thomas Culpeper, who in his Tract against Usurie (1621), which has been mentioned already, approached exchange transactions per analogiam of usury as did others and as the scholastic writers had done; the anonymous author of Cambium Regis: or, the Office of His Majesties Exchange Royall (1628); Miguel Caxa de Leruela (Restauración de la antigua abundācia de España, 1631); and quite a number of other Spanish writers. None of these, however, went below the surface or beyond the mere mechanics of the regulation of exchanges. 8 Gerard de Malynes (fl. 1586–1641): A Treatise of the Canker of England’s Commonwealth (1601); Saint George for England, Allegorically described (1601); England’s View, in the Unmasking of two Paradoxes: With a replication unto the answer of Miaster John Bodine…(1603)—a contribution to the controversy between Bodin and Malestroit, in which without really attacking Bodin’s argument, Malynes reasserts the importance of his argument about ‘overballancing.’ Mainly these three publications (and, perhaps his big compilation of legislative material, Consuetudo, vel, Lex Mercatoria, 1st ed., 1622) are of importance at the moment, but I may just as well add the two by which he crossed swords with Misselden: The Maintenance of Free Trade… (1622), and The Center of the Circle of Commerce (1623). History of economic analysis 326 worked out for England that she was selling her goods more cheaply and paying for foreign goods more dearly than was necessary—that is, that her terms of trade were unnecessarily unfavorable—‘wherein chiefly consisteth the…overballancing.’ He perceived the possibility of improving those terms by exchange control (our point (f) above), and further proof that he reasoned correctly upon the matter is provided by the fact that, in considering the objections to his plan (Canker of England’s Commonwealth, Third Part), he mentions first the effect on sales that might be expected from better terms of trade and promptly replies ‘how necessarie our commodities are and what request thereof is in all places’—which means that, in his opinion, foreign demand for English goods was inelastic. Now he may have been wrong in his factual appraisal of the situation. It is even certain that he overestimated both what speculation in exchange can do to harm the interest of a country and what exchange control can do to further it. Overstatement of his point is obvious in the controversy with Misselden. But that is not the point. We are not concerned with the question whether England ‘should have’ accepted his advice. We are concerned with his reasoning. And this, though of course not above criticism, must be primarily listed as a contribution. If we label him a ‘bullionist,’ then the balance of the theoretical argument is not clearly against bullionism. Nor is it true that, so far as his theoretical position is concerned, he was dislodged by Misselden. [4. THE BALANCE OF TRADE] Turning, finally, to the third topic, the proposition that a favorable balance of trade 1 (excess of exports over imports) is a highly desirable or even neces-sary thing at which to 1 The term turns up during the first decades of the seventeenth century (Francis Bacon used it in 1615; see Spedding’s ed., Letters and Life, 1872, vol. VI, pp. 22–3, a reference I owe to Professor Seligman’s article; see also W.H.Price, ‘The Origin of the Phrase “Balance of Trade,”’ Quarterly Journal of Economics, vol. XX, November 1905, p. 157). In Italy it seems to have been used before; see C.Supino, ‘La scienza economica in Italia della seconda metà del secolo XVI alla prima del XVII’ (Memorie della Reale Accademia delle Scienze di Torino, 1888). However, there were several synonyms in use before that. The earliest instance of the concept’s playing any role in an argument occurs so far as I know in the important tract (to which reference will be made again): ‘Polices to Reduce this Realme of Englande unto a prosperus Wealthe and Estate’ (1549), publ. in Tudor Economic Documents, ed. R.H.Tawney and E.Power, Vol. III (1924), p. 311 et seq. The term used is ‘overplus.’ Professor Viner. op. cit., p. 9, mentioned also several others; but I do not think that Malynes’ ‘overballancing’ refers to the same thing. How could it, since Malynes, when confronted with it in the controversy with Misselden, thought it an innovation and a valueless one to boot? A difficulty should be mentioned here. Balance of trade in many instances stands for balance of commodity trade. Very early however, as will be explained in the text, a full list was produced of all the items of the balance of payments and it is safe to say that much of the reasoning of those authors referred to the latter. They were surprisingly slow, however, in inventing a separate term— Sir James Steuart has ‘balance of payments’ in 1767, though Pollexfen has ‘balance of accompts’ in 1697 (see Viner, op. cit. p. 14)—and meanwhile often spoke of balance of trade when they meant balance of payments. We shall always assume this when the argument requires it. There is a special reason why we may do this: under the circumstances of the time, the balance of trade was the most important item and also the one most amenable to management. Hence an author whose real concern was the balance of payments may well have concentrated on the balance of trade. The ‘mercantilist’ literature 327 aim, we first observe that, as regards the practical argument, much of what has been said before applies with equal force to this case. This is as true if we look at the commercial policies of that age merely under the aspect of protectionism as it is if we choose to emphasize specifically the balance-of-trade aspect. For, as has been stressed sufficiently, I hope, the war-economy and the power-politics elements in those policies would in themselves be quite sufficient to remove any tinge of irrationality from a wish to secure as large as possible an influx of universally acceptable money. Therefore the only question to raise is the one concerning the theoretical argument. Let us split it into two parts: (a) how far did the ‘mercantilist’ economists themselves take account of that association of both their recommendations and their arguments with the conditions of their time which imparts logically defensible meaning to the latter, though it does not of course—never forget this—‘justify’ them in any other sense; and (b) what did they contribute to economic analysis or else what provable errors did they commit in their reasoning? [(a) The Practical Argument: Power Politics.] There cannot be any doubt concerning the first question. ‘Mercantilist’ writers—least of all the Italians, of course—were keenly alive to the power-politics element, as in fact they could not have helped being. In England in particular, the City from which most of the leading writers hailed was a pillar of aggressive foreign policy which, as is abundantly clear from what has been said before, suited the business interests to perfection even where it was not directly inspired by them. Of course this is not always explicitly stated. Imperialist urges rarely are. But it lurks behind the concern of our authors about the wealth of the king, behind their talk about the decay of the English power, 2 behind their fears for England’s safety, behind the attitude that Hume was to criticize in his essay Of the Jealousy of Trade (1752), behind their insistence on the vital importance of the navy and, in connection with it, of shipping and shipbuilding. Of special interest, however, are those cases in which the power (or safety) argument is not only put forth unmistakably but is also opposed to the profit argument: for whatever we may think of this from other angles, it marks progress in economic insight. Two well-known examples will suffice. In his Discourse about Trade (1690) Child defends the policy of the Navigation Acts by the power argument while admitting that, from a purely economic point of view, there may have been a strong case against them. In his Discourses on the Publick Revenues and on 2 Complaints about that decay were so frequent as to constitute a most interesting phenomenon of political psychology. Little of what we may term social psychoanalysis is required in order to understand what it meant. Parallel with them went complaints about a wholly imaginary economic decay—in the mind of the merchant class, power and prosperity were of course inextricably associated—which were characteristic of a large group of writers: Fortrey, Coke, ‘Philanglus,’ Bellers, and Pollexfen may be mentioned as examples. History of economic analysis 328 the Trade of England (1698), Davenant goes further still. 3 [(b) The Analytic Contribution.] To answer the second question—the one about contributions to, and errors in, analysis— is not so easy. Some contributions there are. They will present themselves in the proper light if we look at them, as it were, ex ante, and not, as critics invariably do, from the standpoint of later analysis for which it was the most important contribution of the ‘mercantilist’ writers to have paved the road and which in fact grew out of their work. But as soon as one dives into that literature, one cannot fail to be struck by two things. First, though pieces of genuine analytic work can be found occasionally and attempts at analysis more frequently, the bulk of the literature is still essentially preanalytic; and not only that, it is crude—the work of unprofessional or even uneducated minds that frequently lacked the rudiments of the art of exposition: much of that literature was popular in the most distressing sense of the word. Perception of this fact, of which some of those writers were themselves painfully aware, should not only teach us forbearance, particularly with respect to individual dicta—on the strength of which an author should never be condemned until we have satisfied ourselves that he actually makes improper use of them—but should also warn us that we are in constant danger, reasoning from our own sublime heights, of misunderstanding what those simple fellows really wanted to say. To be sure there are a considerable number of writers to whom this does not apply. But this only leads up to another difficulty. If we want to be just to the age, we must clearly separate substandard chaff from valuable wheat. How will the economics of our own age come off two or three hundred years hence, if critics take it into their heads to judge it by everything that has been written on economic subjects during the last decade? But what, beyond a rather small group of performances on which we may all agree, is the 3 The nature of that antagonism between power and profit does not seem to have been always understood. Some critics, especially those who see nothing in the writings of the English ‘mercantilists’ except ‘special pleading’ for class or even personal interests, have argued that the power argument can only have been introduced to camouflage the profit interest and that the scribbling merchants must therefore have believed in the balance-of-trade argument independently of the power element. I think that this is bad sociology—we only impair our diagnosis by shutting our eyes to the fact that the imperialist urge is a stark reality that roots in other soil than that of the economic self-interest of the individual. But even disregarding this, we must distinguish two quite different things within the argument inspired by business interest: power and profit may conflict as regards immediate results and yet power may eventually lead to still higher profits, especially in an age of buccaneering imperialism. Hence there is no contradiction between the perception that the balance-of-trade argument, on the first plane of reasoning, needs support from the power argument, and the proposition, on the second plane of reasoning, that the power argument issues in another profit argument in the long run. I can see no point in sneering at Child’s formula: ‘foreign trade produces riches, riches power, power preserves our trade and religion’ (with Louis XIV on the other side of the channel), but the argument can, if critics so wish, be made purely economic and still remain tenable, with the balance of trade in no other role than that of an intermediate link. [A long essay by J.A.S., ‘Zur Soziologie der Imperialismen’ (Archiv für Sozialwissenschaft und Sozialpolitik, 1919), bearing on this subject, is now available in English: Imperialism and Social Classes (ed. with introd. by Paul M.Sweezy, 1951).] The ‘mercantilist’ literature 329 wheat? Here, every one of us must rely on his personal evaluations of analytic quality—the only kind of value judgments that are both permissible and unavoidable in a history of scientific economics—a matter in which often the only agreement attainable will be the agreement to differ. Second, we have had ample opportunity already to observe that the views of the economists of that period—if indeed it be permissible to speak of economists at all for a period in which the profession was in process of emergence but had not really emerged as yet—were as uniform as are those of the economists of any other period but that they were not more so: individuals and groups differed from one another, in fundamentals and in details, as much as economists always have, and they fought one another’s views and methods accordingly. The widespread opinion to the contrary has resulted in another injustice. The critical historian, after having set up a ‘uniformed’ man of straw, misses the fact that much of what is most objectionable from the standpoint of later analysis (or politics) had been rejected or corrected within the period. The historian has indeed a method of dealing with this fact when it stares him in the face: those who took what to him seems to be a more correct view are either visited with more lenient strictures or else they are excluded from that imaginary unit under the heading of heretics or forerunners. But this method is a doubtful one to say the least. We have noticed, and tried to understand, the protectionist current of the times; we have also encountered the opinions that a number of writers held on the subject of protection. We shall naturally expect the writers we are considering under the heading of Balance of Trade to have completed the list of protectionist arguments. This expectation is not disappointed. We find the infant-industry argument, which, excepting perhaps the case of English woolens, must in the circumstances of the period be assumed to underlie any recommendation of protection to domestic industry that is not expressly motivated in a different way. We find the military, the key-industry, and the general-autarky arguments. We find the employment argument. We find the argument that today has come into such prominence in connection with the multiplier approach, namely, that so far as protection succeeds in producing an excess of exports it will stimulate the business process by increasing domestic expenditure. Foreign investment plays no role, or next to none, in their analysis except in a short-run sense: some of them pointed out that a temporary export of coin may be a necessary link in a series of transactions that eventually nets an export surplus. English instances—we shall confine ourselves to English ones although the Continent would also furnish a crop—are given below. They will also add to our modest collection of names. As we should expect, the infant-industry argument turns up in the times of Elizabeth, when England experienced her first industrial boom, and pervades the literature under discussion to the end, that is, to the threshold of the industrial revolution, when Sir James Steuart put considerable emphasis on it. We are primarily interested in cases where protection is recommended only for a limited time or where the element of ‘infancy’ is otherwise stressed in such a way as to remove any possibility of doubt about the character of the argument. Thus, Arthur Dobbs in An Essay on the Trade and Improvement of Ireland (1729–31), Part II, expressly stated that ‘premiums are only to be given to encourage manufactures or other improvements in their infancy’ and that further help would be in vain ‘if after their improvement they cannot push their own way.’ Yarranton (England’s Improvement by Sea and Land, to Outdo the Dutch without Fighting, to Pay History of economic analysis 330 Debts without Moneys, to Set at Work all the Poor of England …1677, 2nd part, 1681) recommended protection to linen manufacture but only for a period of seven years. Andrew Yarranton found a biographer enthusiastic enough to call him ‘the genuine founder of political economy in England’ (see P.E.Dove, Elements of Political Science, 1854, App.). Although this is of course absurd, it was perhaps a healthy reaction against the neglect that had fallen upon his name. Yarranton was a versatile man of many trades and cannot, in some of the lines of his activity, agricultural technique in particular, be rated higher than as a popularizing projector. But in economics he was more than that. Though there are no analytic conquests to his credit, many of his suggestions and many of his comments on German and Dutch conditions imply a theoretical schema; so does the fact that, even in his most daring flights, he consistently stops short of nonsense. He paid little court to the balance of trade. He believed that the prosperity of neighboring countries was a gain to England. Improvement of credit facilities would reduce the rate of interest from 6 to 4 per cent (observe the limits which guard the statement against an indictment that without them would be dangerously near at hand). Employment and cheap food (the latter being sure to make cheap products [he says ‘cloth’]) are the goals to aim at. In fact we can herewith quote him as an authority for all the arguments mentioned in the text, as we have quoted him and shall quote him on other topics. The military argument has been dealt with already. The key-industry argument is present in the discussion on foodstuffs and the production and exportation of wool. The general-autarky argument was developed in Germany rather than in England (for France, see J.Nowak, L’Idée de l’autarchie économique, 1925). For the employment argument we have just had an example in Yarranton. It occurs from the first (see Clement Armstrong, ‘A Treatise Concerning the Staple and the Commodities of this Realme,’ c. 1519–35, Tudor Economic Documents, III, pp. 90 et seq., especially p. 112; see also John Hales, Discourse of the Common Weal, 1549?). Protectionist legislation, motivated by the unemployment argument, is of course still older by at least a hundred years and is rarely absent from the more considerable books. Malynes, Misselden, Child (who makes it the criterion of the advantage that accrues to the mother country from colonies), Barbon, Locke, Petty—all have it. Let us notice in addition: John Cary, Essay on the State of England…(1695), which to judge from its being reissued a number of times and from Locke’s commendation must have been a considerable success; John Pollexfen, whose whole case for prohibiting the exportation of wool and the importation of manufactured goods is based upon the employment argument; John Bellers, Essays About the Poor, Manufactures, Trade…(1699); and ‘Philanglus’ (W.Petyt), Britannia Languens or A Discourse of Trade (1680). Some of the ‘mercantilist’ writers went to surprising, in fact to Keynesian, lengths. There is nothing startling in Sir William Petty’s saying that it is better to produce useless things than not to produce at all: this only shows his concern about the conservation of the efficiency of labor. But others sometimes expressed themselves as if they thought that the national advantage to be reaped from foreign trade consists exclusively in the employment it gave. And this in turn logically led to that position which looks so absurd when judged from the assumptions of the nineteenth- century ‘liberals,’ and has in fact been called absurd by Professor Viner (op. cit. p. 55; the reader finds examples on the two preceding pages), namely, that a trade is the more advantageous to a country the higher is the total labor cost of the exports as compared The ‘mercantilist’ literature 331 . he crossed swords with Misselden: The Maintenance of Free Trade… (1622), and The Center of the Circle of Commerce (1623). History of economic analysis 326 worked out for England that she was. Pay History of economic analysis 330 Debts without Moneys, to Set at Work all the Poor of England …1677, 2nd part, 1681) recommended protection to linen manufacture but only for a period of. Navigation Act of 1660 and the Staple Act of 1663. The statement one meets so often, to the effect that, so far as England is History of economic analysis 322 concerned, the staple system