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Lecture Notes-9.26.06

Lecture Notes-9.26.06 - 9.26.06 Lecture Writers all had...

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9.26.06 Lecture Writers all had some aspect of morality in their writings…even if it was different from ours Mercantile system: grew up requiring that government maintained favorable balance of trade…import few goods and protect their own wealth, and export expensive goods. Check in Book 4. Polanyi claims that markets never got to set prices freely. Always had regulation…prices grew up with mercantile system. Free trade meant freer trade, not completely free trade. Trading regulations that were part of the Atlantic economy arose with the recommendation of merchant community within Europe. They benefited from idea of favorable balance of trade. How? o Government created merchant monopolies…licensed some merchants to carry trade and control certain locations. East India trade…government trade that was handed to private trade to become exclusive supplier. The government must then provide some protection to the monopoly. o Got the govnt to put in place protectionist tariffs…artificially inflated prices of foreign goods that might otherwise be cheaper. Steers customers towards “cheaper” product. Could be cheaper bc of economies of scale and other costs . To maintain trade with others (even though it takes longer and is more expensive) and to deter people from importing. o Got the govnt to encourage the export of goods even if home market could absorb them. Bring in foreign currency, which could be used to buy cheaper food. People then produce foreign export market, which distorts home market. o Govnt regulation protecting merchants and their trading system hurt consumers at home. Dampened ability to get cheap goods. Restricted access to innovations according to Smith. Companies that had these monopolies were known as joint stock companies. 5 or 6 people contribute capital and then get return on investment. These are all small companies..not publicly traded companies…a dozen- a few hundred people. A small number of people get govnt to pass policies that hurt everyone else.
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