CH. 23

NOTES ON MERCANTILISM, ETC.

3+i

made easy by reference to Professor Heckscher’s greatwork on Mercantilism , in which the essential character-istics of economic thought over a period of two cen-turies are made available for the first time to the generaleconomic reader. The quotations which follow aremainly taken from his pages . 1

(1) Mercantilist thought never supposed that therewas a self-adjusting tendency by which the rate ofinterest would be established at the appropriate level.On the contrary they were emphatic that an un-duly high rate of interest was the main obstacle to thegrowth of wealth; and they were even aware thatthe rate of interest depended on liquidity-preferenceand the quantity of money. They were concerned bothwith diminishing liquidity-preference and with increas-ing the quantity of money, and several of them madeit clear that their preoccupation with increasing thequantity of money was due to their desire to diminishthe rate of interest. Professor Heckscher sums up thisaspect of their theory as follows:

The position of the more perspicacious mercantilists was inthis respect, as in many others, perfectly clear within certainlimits. For them, money was—to use the terminology ofto-day—a factor of production, on the same footing as land,sometimes regarded as “artificial” wealth as distinct from the“natural” wealth; interest on capital was the payment for therenting of money similar to rent for land. In so far asmercantilists sought to discover objective reasons for theheight of the rate of interest—and they did so more and moreduring this period—they found such reasons in the totalquantity of money. From the abundant material available,only the most typical examples will be selected, so as todemonstrate first and foremost how lasting this notion was,how deep-rooted and independent of practical considerations.

Both of the protagonists in the struggle over monetary

1 They are the more suitable for my purpose because Prof. Heckscheris himself an adherent, on the whole, of the classical theory and much lesssympathetic to the mercantilist theories than I am. Thus there is no riskthat his choice of quotations has been biassed in any way by a desire toillustrate their wisdom.