Economics and Action

Economics and Action

Economics and Action

Economics and Action

Excerpt

Most people, and many indeed of their rulers, believe that economics are of no use in the conduct of public affairs. Yet, some economic conception will be found to underlie every technique or institution. Old and new policies alike bear the stamp of the theories they imply or develop.

The great number of these theories is no sufficient reason for denying their value or for not recognizing their applications. If they are many, it is because the economist, in the last analysis, is trying to influence realities and thus tends to stick closely to events. When his theory no longer allows him to explain phenomena, he sets about modifying it; hence doctrinal arguments and the variations that ensue from them.

In any case, every body of ideas has certain practical conclusions of its own. The interaction of economic theories and policies is seen all through modern history. The mercantile growth of Spain under Philip II, of France under Colbert and of England under Cromwell had already taught the rulers that fluctuations in a country's stock of money are an essential factor in its prosperity or stagnation. In the first modern States, ministers controlled the movement of metallic currency, tried to attract specie, and even restricted goldsmith's work and the wearing of metal embroidery. All of them organized export industries in order to bring in precious metals. Much later, theorists like the German Friedrich List, and the American Daniel Raymond, persuaded countries like Germany and the United States to adopt a similar policy.

In opposition to this system, the classical theory was characterized by a belief in the benefits of laisser-faire and private enterprise, both in order to improve production in each business and to ensure a generally balanced economy, reducing the duration and effects of shortages to a minimum, and making possible at all times the distribution of goods and the employment of all those who wanted to work. From the start, liberalism had both its practical and its theoretical . . .

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