Compare Mercantilism With An Embedded Institution Essay

, Research Paper

In this essay I will try to answer the proposed essay question: ?Compare and contrast ancient/medieval and mercantilist economic ideas on the market as an embedded institution.? I will begin by discussing ancient/medieval economic ideas and talk a little bit about Thomas Aquinas.

The entire premise begins where there is a large piece of land and the owner of the land, lord of the manor (landlord) who is usually a military person, has peasants working on his land to cultivate it in return for their labour they remain on his land. The manor takes a portion of whatever is produced on his land. In this situation people will travel to towns to exchange their goods for goods that they need. This constitutes an exchange which satisfies peoples wants and not for making money. The next progression in the ancient medieval society is the guild (which are similar to unions) they produce one product and they have a monopoly with respect to that product. In order to manufacture the product you have to be a member of that particular guild which in turn wipes out all competition. Therefore this is not a market economy due to the fact that they have zero competition and there is a set price and buyer. We begin to see a change when the merchants are introduced into the equation. Merchants specialize in making money. They buy from a landlord at a set price and then sell it to a consumer for a higher price. Aquinas tends to favour the peasant – manor relationship, he feels that it is a more stable society and he feels that merchants should not take a profit when reselling to the consumer. Though he will justify a profit if it is for a reasonable purpose, i.e.: transportation costs or for charity. Aquinas wrote on the idea of a just price. I found this article and thought it was a few of the points the writer makes are interesting:

“The just price of things is not fixed with mathematical precision,” writes Aquinas in the summa theologiae (IIa-IIae q.77 a.1), “but depends on a kind of estimate.” And the people doing the estimating are the buyer and the seller.

Applying this thought to buying and selling, Aquinas articulated the idea of a “just price.” A just price is nothing but being in the middle between cheating and being cheated.

Modern economists may sneer at the idea of a just price because it is nothing for which they can write an equation. But Thomas never asked for mathematical precision. He just asked people to listen to their own consciences.

Aquinas observes that Matthew 7:12 exhorts us to do unto others what we would want them to do unto us. “But no man wishes to buy a thing for more than its worth,” reasons Thomas. “Therefore no man should sell a thing to another man for more than its worth.”

Aquinas does not hesitate to call an unjust price sinful. “It is altogether sinful to have recourse to deceit in order to sell a thing for more than its just price, because this is to deceive one’s neighbor so as to injure him,” he writes.

A “just price” is not something that a committee or government can decide. Instead, it requires individual cultivation of character and virtue. We can do this, neither by denouncing money nor by exalting it, but by using it justly.

Keep a tally of all the bargains you find this year. If it adds up to more than your charitable contributions, then are you not cheating the poor?

“All goods must be measured by some one thing. Now this unit is in truth demand, which holds all things together,” writes Aristotle. “But money has become by convention a sort of representative of demand; and this is why it has the name ‘money’ [nomisma in Aristotle??s Greek] – because it exists not by nature but by law [nomos] and it is in our power to change it and make it useless.”

A “just price” is the representation our conscience makes of supply and demand. It is the measure not just of our own needs and demands, but of what others need and what the common good demands.(Chris Morrisey)

Mercantilism (1600 to 1800) was essentially an effort to achieve economic unity and political control. The source of all wealth lies in selling more to a nation that you buy from them.(Lecture notes). The idea was pursue wealth to make the nation wealthier not for personal wealth. Under a mercantilist policy a nation sought to sell more than it bought so as to accumulate bullion. Besides bullion ( Bullionism was the belief that the economic health of a nation could be measured by the amount of precious metal, gold, or silver, which it possessed. The rise of a money economy, the stimulation produced by the influx of bullion from America, the fact that taxes were collected in money, all seemed to support the view that hard money was the source of prosperity, prestige, and strength.)(Rempel) raw materials for domestic manufacturers were also sought, and duties were levied on the importation of such goods in order to provide revenue for the government. The state exercised much control over economic life, chiefly through corporations and trading companies. Production was carefully regulated with the object of securing goods of high quality and low cost, thus enabling the nation to hold its place in foreign markets. Treaties were made to obtain exclusive trading privileges, and the commerce of colonies was exploited for the benefit of the mother country.(Allen)

The purpose was to make the nation wealthy so large armies could be constructed and other nations could be taken over.