British Mercantilism

Mercantilism, Capitalism and Adam Smith

by carolyn smarr

​Did you know that 250 years ago , economics as an academic discipline did not even exist?

​Any discussion of economic issues usually took place in the fields of politics and philosophy.

1. ​In 1776 Adam Smith completely changed this​

2. ​Philosophy- the study of general and fundamental questions, such as those about existence, reason, knowledge, values, mind, and language

3. ​Politics-the activities associated with the governance of a country or area, especially the debate between parties having power.

Multiple Choice

True or False: There was no economic discussion before 1776

• True

• False

Multiple Choice

Economics would become its own study after 1776 .

• True

• False

​Let's look back to the history of what was going on in 16th to 18th Century Europe

• ​ Countries were establishing colonies, receiving their raw materials (Lumber, sugar)

• ​Making finished goods out of them and reselling the products to them

• ​Restricting trade of the colonies to keep the home country's power and wealth

• ​Countries in Europe also traded with other countries trying to export more and get more gold

​Mercantalism

​

1. An Economic theory and practice common in Europe from the 16th to the 18th century

2. It promoted governments gaining wealth through trade with other nations

3. The purpose was to increase their country's wealth and power at the expense of rival nations

4. Countries wanted more gold and silver

5. ​The country was a business trying to export more than they import

​ Watch Video: https://www.youtube.com/watch?v=-wZENqb-g4M

Multiple Choice

Who benefited more under mercantalism?

• The country

• The individual

Multiple Select

Select the true statements about Mercantalism

• Put restrictions on trade of its colonies

• Focused on building wealth for the home country

• Restricted and profited off of colonies and rival nations

• Let people trade frrely for the benefit of all

Multiple Choice

One example of Mercantalism actually led to the American Revoultion.   British  colonists in America grew tired of the restrictions placed on them by the England and  grew weary of paying all their money back to England to buy goods made with their  own resources.

• True

• False

​Who was Adam Smith?

• ​Father of Modern Day Economics

• ​Wrote " An Inquiry into the Nature and Causes of the Wealth of a Nation"

• ​We shorten it to " The Wealth of Nations"

• ​This book would lay the foundation for Modern day economics

​ Adam Smith

• ​Born in Kirkcaldy Scotland in 1723

• He studied and later taught literature, logic, and moral philosophy

• ( remember there was no such study or subject of economics at this time)

• ​He travelled to France and met many European Enlightenment writers and thinkers

• ​He challenged the idea of mercantallism

• ​He argued that a nation would be wealthier if it engaged in free trade

• ​No other Economist has had as much influence as Adam Smith, yet he would not have even considered himself an Economist

Multiple Choice

Adam Smith considered himself an Economist

• True

• False

Multiple Choice

What was the name of Adam Smith's Book

• Das Kapital

• Wealth of the Nations

• Traditional Economic Theory

• Mercantilism will save the Queen

Multiple Choice

Where was Adam Smith born?

• England

• America

• Germany

• Scotland

​The Invisible Hand -Laissez-faire

​

• ​​Adam Smith reasoned that people will behave in a way to satisfy their own self-interest.

• ​A tailor will make clothes as long as people will buy them at a price that satisfies him.

• ​If he makes more clothes than people are willing to buy, he will cut back and make fewer until he finds the balance again

• ​In this way according to Smith, an "invisible hand" guides the market place.

• https://www.youtube.com/watch?v=ulyVXa-u4wE

​

• ​​https://www.youtube.com/watch?v=ulyVXa-u4wE

​​What were Adam Smith’s three natural laws of economics?

​​

1. The law of Self-Interest—People work for their own good.

2. The law of Competition—Competition forces people to make a better product.

3. 3.The law of Supply and Demand- If something is demanded more its production will increase so that supply can match the demand and vice-versa.

​We learned before about the 3 models of Economic systems

• ​Traditional

• ​Command

• ​Market (Free Market)

Multiple Select

From what you already know or have learned in class, which of the 3 Economic systems do you think Adam Smith's ideas match with?

• Traditional

• Command

• Market

• Capitalism

​Free Market Economy Fundamentals

​1. Private Propery Rights-the rights of individuals and groups to own property, resources and businesses

​​2. Limited Government Involvemet-Sometimes the government's economic role is to stay out of the marketplace

-Laissez faire is a French phrase meaning, "leave things alone"

​-Capitalism is an economic system based on private ownership of the factors of production

​3. Voluntary Exchange-trade in which both traders believe what they are getting is worth what they are giving up

​4. Competition and Consumer Sovereignty-Different companies compete for sales trying to offer best deal-consumers are free to purchase the one they want- or the one they feel is the best

​5. Specialization-People concentrate their activities on what they do best-people earn money for their jobs- their jobs are what they do best

Multiple Choice

The right to own property is a fundamental of the Market economy

• True

• False

Multiple Choice

From what you know about Cuba do they seem to follow Adam Smith's ideas?

• Yes

• No

Multiple Select

Which one of Adam Smith's ideas can you see in play today in the UAE?

• Competition between businesses

• People acting in their own self interest to gain wealth and better their lives

• Supply and Demand- if people like it it will do well, if nobody likes it stores close, products are no longer sold

Multiple Select

Consumer sovereignty can be explained as : 

• The idea that consumers have the ultimate control over what is produced

• Consumers must buy what the government tells them to buy

• Consumers can buy or reject whatever products they choose

• There is only one type of product

Multiple Choice

Competiton benefits consumers because brands like Apple and Samsung keep competing to improve their products to gain sales, offering better products and better deals

• True

• False

Poll

Do you believe the ideas of Adam Smith and the believe the fundamentals  of the Free  Market Economy are good?

• Absolutely

• Some are good

• I do not like this system

• I am not sure

• What system?