Kamis, 07 Oktober 2010

Economic Thought

 Mercantilism and Physiocrat

A. Merkantilisme
Mercantile economic system in the period between liberalism and feudalism. Mercantilism describe an economic system prevailing at the beginning of capitalism, and before the industrial revolution.There are two ways to analyze the economic system mercantilism, namely:
1.    Doctrinal Approach
This approach considers mercantilism as a static notion, that frame of mind that summarizes the events on one day and think that man and his ideas arranged in series with the Mercantile extreme and liberal.

2. Policy Approach

This approach saw mercantilism as an important historical process, which focuses on competitive dynamics and the role of political institutions and economic explanations. Policy approach also considers that there are forces working to pull away in the economic system that completes the change of power and wealth.

In his book, Adam Smith said: "The commercials or Mercantile System." He stated about the weakness of the mercantilist system and expose it to the free economic system. According to mercantilist system is a fraud committed by the business in society.
The term comes from the regional mercantilism Mirabeau in 1763, in order to describe systems that are not in accordance with economic ideas that dominate discussion about the economy since the early sixteenth century until almost the end of the XVIII century. Mercantilist adherents are mostly traders. Overall, there is little continuity and consistency among adherents adherents understand mercantilism with Scholastic in the days before. In general, mercantilism, based on some similar ideas, namely the principle and policy statements that look and that comes back over that period.
The main doctrine of mercantilism is thinking about the "balance of trade" which says about that export commodities better than imported from another country, so it can be ascertained that the stock of the kingdom will rise to balance of trade must be returned in the form of money or gold.
The essence of mercantilism is that progress and prosperity of a country depends on the existence of a surplus of exports and imports and increase the reserves of precious metals gold and silver. This reserve is the principal strength of the state of economic progress, so the government must uphold the fundamental strength of the country's economic progress, so the government must enforce its power through military force to expand its influence to other continents to conquer by military force.
Academic problems that arise regarding the mercantilist notion that is the question: does money equal to the capital or the same as prosperity. In terms of balance of payments, balance must be balanced while the trade balance does not, therefore the trade balance is not balanced it should be the gold inflows or export of capital in the form of lending abroad. Therefore, the mechanism of gold flow causes a natural distribution of gold that a country's exports will be equal to imports. Static concept of economic activity as a zero sum game needs to be understood in an atmosphere of pre-industrialized economy is relatively static.
Answers about mercantilist dilemma was raised also by Cantillon who argue that the rise in domestic gold because gold mines increased yield, it will affect the income of miners, which then increase their spending on consumer goods.
Regarding interest rates, the mercantilist emphasizing that interest rates should be kept at a low level to increase trade. Due to the increase in price will increase the amount of money it will not be achieved if the equilibrium interest rate unchanged.

B. Physiocrat

Thought of the French state fisiokrat in emotion is seen as a reaction to the mercantilist policies of Colbert that enhance the industry, but the effects are negligible agricultural sector. Though major tax is a tax imposed by the government land. When Louis XIV and Louis XV died and lost the war with Britain, then France decreases its position in Europe, the loss of colonies of Canada and other countries. Circumstances that caused the movement back to nature that emphasizes the agricultural sector. Compared with Britain, agriculture in France only consisted of a small ownership in ways that ancient, plus the tax burden that caused the French could not match the agricultural revolution in England. Fisiokrat program is eliminating barriers of ownership and limitations in agricultural areas, improve the tax system by reducing the tax becomes just one kind of rent, combining agricultural lands are small and free trade in food ingredients (corn), emulating the British system.
Francois Quesnay a French surgeon suggests the importance of agriculture in the economy of the country. At that time there sucking farmers and determination and levy taxes on agricultural products are carried from one area to another area. Heavy land tax must be remitted to the king and church, while the collection left to the merchant so inefficient. In his Tableau Economique he described the concept of a closed economy as a stationary circular flows are repeated every time. The table was very simple and described the expenditure of a landowner but to describe the essence of a matrix of flow circulation and the reproductive process is repeated, this business can be expressed as a first step the application of scientific methods to the phenomenon of economic problems and thoughts of input-output analysis Vasili Leontieff century XX using the pattern as it approaches and methodologies.
Turgot argued that the essence of agricultural production suffered a setback does not comply with the capital increase to that level. Law of diminishing returns was later developed by David Ricardo and Robert Malthus in the next century. The relevance of the thinking of experts physiocrat for policy issues to do with the stance on such things as the following: the suggestion to eliminate all sorts of regulations that impede trade within and outside the country, particularly on the trade of agricultural materials, free competition in production and trade by removing all forms of monopoly and special things and or easiness of a special nature, simplifying the fiscal system and the enactment of only one type of tax, which taxes the earth in general that the size is determined in proportion to the size of the net product.

Economic Rationale by Crhistianity

After the fall of Rome, the power of the church has increased by making it an institution to increase the spiritual and material strength. In medieval times, aspects of the secular church became the most important pillar of the existence of economic structures.Church ownership of land will be developed and increased to the greatest feudal lord. The combination of secular and spiritual strength to form a harmonious relationship between the doctrine of the church and feudal societies. Harmony is what explains why the church can claim to govern all human relationships and manage the earth as well as providing courses which lead to spiritual salvation.This also explains why the economic doctrine does not match the current environment.

Christianity formed an organic growth in a favorable environment to spread their ideas. Along with the passage of time, Christianity spread among the people and social classes are different. Life in the world to be lived and arrangements should be made to provide accommodation to worldly career with social and economic institutions of the environment. Slavery, property, and live side by side is part of the institution.

The Father of Church
John Chrysostom (347-407 AD), given the praise as God's economy, which makes certain goods to be divided equally. Private property arising from human imperfections responsible for the occurrence of conflicts and disputes. Wealthy people can save himself only by distributing the wealth, if they hold, they will harm themselves and others.
Basil (who established the rules to be Benedict's spiritual ancestor, highlighting the ideals of egalitarian: "love whoever loves his neighbor as himself, then he will not have more than their neighbors.

The most dominant form of economic organization in the Middle Ages of feudalism. Feudalism is a system of distribution and production where land ownership is not absolute nor divorce tasks, such as the Roman past, and diharapkam come again in modern times. Instead, the king is the repository of all the legitimate property rights. The purpose of "ownership" at the production level that is solely the rights in the use of results, although this right is likely to be a hereditary duty.

Feudalism began to grow and adapt as the land controlled by the nobility. Most of the production generated in each region are not traded in the market but traditionally regulated. Under feudalism, land ownership is not absolute because there is division in it.Divisions tend to simple and idealistic, land controlled by the king then he donate the leading nobles with large packages form which is then leased to major tenants and major tenants will rent it again at a lower tenant.


For the feudal, the economy is often arranged in the form of agricultural land manor that is maintained to provide for themselves and carried out by various workers, peasants and workers. Manor meiputi vast piece of land that belonged to a nobleman or a church.Centers house manor manor is equipped with weaponry to prevent the entry of looters. Slaves who worked on the manor bound to the land which it worked because without a strong statement he tida will be allowed to leave the manor. There is a kind of slave compensation in the form of a small portion of the crop land is host to simply maintain the life and guarantee physical security. Because at that time the slave is the target terempuk to take his goods by the robbers.

Guild System

Increasingly expanding market functions and the cities began to grow. Increased trading activity and nascent small industrial centers.Services produced by glass artisans, masons and other experts must be purchased and artisans are usually incorporated in such a union at that time called guild system. Guild is a business activity at that time, one can not work if it is not a member of the guild. Guild members is limited to artisans or skilled workers, industrial workers with varying levels of expertise also unskilled labor. So the guild is an exclusive union.

The Church
Church became one of the important forces in the Middle Ages, which became the liaison between the Pope as a religious leader and emperor and princes who recognize the church and secular parties. Church teachings about the economy comes from the Bible, the teachings of Aristotle. Economic teachings of the church tried to minimize sin and maximize charity. For the church, is a big sin if you sell goods is greater than its value.

Charity and Sin
Based on existing resources at the time, charity practiced in a large scale in the Middle Ages, both by the church that provides a large portion of his fortune to this activity as well as people who are loyal as a form of homage. According to the sense charity is seen as the main solution to the problem of scarcity in the Middle Ages.
In addition to charity, medieval theologians try to set standards of virtuous behavior that will protect the believers from sin. In medieval times, the progress of thought was not born as a spur to change that drastically, but this does not mean no progress at all. On the supply side / supply, repair and did not experience shortages during this century there are many technological advances. Among several factors that affect demand for goods, precision regarded as virtues in the Middle Ages, but only practiced in certain cases. Property merypakan obligation bonds to be practiced not just charity but also of freedom and generosity.

Sin of Usury
Prohibition against interest in medieval Roman law as opposed to allowing interest at 12% per annum on money lending, and 50% of the loan accordingly. Medieval thinking about the interest that is equated with usury is derived from the teachings of the father of the old agreement that is rented in a free, do not expect anything.
The attitude of the clergy of interest can not be explained by the term economic benefit of the church. During the church to do the accumulation of wealth, the ban would turn the state into economic disadvantage because of the balance of the lease more than borrow. As far as concerns the economy of attention. The first society in the Middle Ages is a primitive society and most are farmers, which bans interest suitable to be applied.

New description of Saint Thomas Aquinas (1225-1274) on usury in the summa clarify some arguments about the prohibition of interest is supported by the Canonist and religious scholars. On the basic concept derived from Roman huku, a distinction was made between goods that can be consumed or not, and between loans, contracts or leases. With a lease contract that rent people not only get the goods back, but the rent. But it is different with the borrowing of items that can be consumed as wine and grain yield which does not produce or usufruct, such as homes and agricultural land. In the case of consumer goods, the use of exclusively eliminated, because that's when the owner angrily asking more than what he means disewakannya yield over or exceed the user. By doing this, it means violating justice. St.Thomas Aquinas analyzes the human needs. First, he asserts that the double value of the goods has been established by Aristotle.Secondly, he introduced a requirement in the formulation of the price. He was also thinking about the value that is determined by the demand on the basis of human desire.

Martin Luther
Martin Luther (1483-1546), worried about the commercialism understood in his time, and his views on economic activity is more adapted to the patristic thought and primitive economic life in the early Middle Ages. Luther's thought on the subject justify medieval period, including the Doctrines of usury and of the just price.

John Calvin
If Luther's thinking is very influential in Germany, then the thought of John Calvin (1509-1564) spread throughout much of the western world. Calvin made aware by the ancient doctrine of destiny against the desire to be free. Economic success is now not only has a pecuniary rewards but also should be interpreted as an indication that saves.


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