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Quotation of the Day…

… is from page 268 of Jacob Viner’s 1968 International Encyclopedia of the Social Sciences essay, “Mercantilist Thought,” as this essay is reprinted in the 1991 collection, edited by Douglas Irwin, Jacob Viner: Essays on the Intellectual History of Economics:

The emphasis on international comparisons, on ratios, which was highly relevant in the political sphere in a world of power politics, whether the power was expected to serve national aggression or national security, was often carried over to the economic sphere, where it had little relevance. It could and did lead to gross confusion about the nature and significance of national wealth and national economic well-being.

DBx: No one, except perhaps Adam Smith, has done more than did Jacob Viner to expose mercantilism’s contradictions and folly. Mercantilism is the thoughtless application, to an economy, of notions that, if valid, are valid only when applied to organizations such as business firms or governments. Unlike an economy – say, the Virginia economy, the American economy, or the global economy – organizations such as business firms and governments have meaningful boundaries and can sensibly be spoken of not only as having purposes, but purposes the fulfillment of each of which is agreed to by those who found, operate, and work for these organizations.

For example, the American economy is not a real thing with a purpose. Instead, “American economy” is a mere name given to the set of on-going economic activities of each of the hundreds of millions people within the United States – hundreds of millions of people each of whom chooses his or her economic goals, and pursues these goals as he or she deems best – sometimes alone but often with the conscious cooperation of other individuals. These pursuits are constrained by general rules (formal and informal), by legislation, and by the economic activities of others. But these pursuits are not all part of one grand plan. (Only in a genuinely socialist economy is there one grand plan which all individuals are obliged to act to carry out.)

Each individual – each person, household, firm, club, and not-for-profit organization (including each government) – has a set of purposes. Each has a budget. Not so for the American economy. And so it is simply mistaken to treat the American economy as if “it” saves or invests – as if “it” consumes or produces – as if “it” profits or loses – as if “it” has debts or credits – as if “it” has a set of purposes that all Americans aim, or ought to be made to aim, to pursue.

Mercantilism, when it is not (as it often is) merely a bag of baloney, is a careless category error. This error is a bottomless source of intellectual and ethical confusion, absurd policies, and camouflage for predation.


Pictured above is the mercantilist writer Thomas Mun.