Question

1- a)What are the basic principles of the mercantilist school? Explain one of them in detail.

b)What are the basic principles of the physiocratic school? Explain one of them in detail?

Answer 1

a) Basic principles of mercantilist school are that gold and silver are considered the most desirable form of wealth, nationalism is propounded, imports of only essential raw materials are duty free, there is colonization and monopolization, internal restriction on free movement of goods and services are opposed, central government is strong in order to increase the wealth.

The major goal of this economy based on such school of thought is increase its own wealth, thus the last principle is of key essence for that, with the central government granting privileges in order to engage in foreign trade, there is restriction in terms of new businesses being set up so as to keep the level of concentration. Exports are encouraged via subsidies while imports are protected via tariffs. There are several government regulations in place governing the production of goods.

b) Basic principles of Physiocratic school are that nations wealth is derived from natural resources and land, free trade is good, and people should be given freedom to make their own choices, free labor is more productive, and industries flourish when they are given freedom.

Thus they emphasized that the wealth of nations was derived from agriculture and that the more surplus in production of agricultural goods the more the wealth of a nation. They were against the mercantilist view of giving no emphasis to agriculture. This emphasized free trade and that there should be an absence of government restrictions by way of laws and taxes.