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[NOTE: This abstract was submitted on the Economic History Abstract 
service, but will be of interest to some historians of economics as 
well.--RBE] 
 
EHS Abstract Submission 
 (c) 1998 EH.Net 
----------------------------------------------------------- 
Name:  Guillaume Daudin 
Email:  [log in to unmask] 
Institution:  London School of Economics 
 
Co-author:  None 
 
Title:  A Mercantilist Model of Growth and Trade in 18th Century France 
 
Internet Address of abstracted work:  Not available on the internet. 
 
By mail: 
London  School of Economics 
21, Godfrey Street 
London SW3 3TA 
United Kingdom 
 
Language:  English 
 
Abstract: 
Early cliometrics challenged the traditional vision of the role of European 
empires, slavery colonies and worldwide trade domination.  They easily 
showed that the external sector was so marginal compared to European 
domestic economies that gains could only be of minor significance.  This of 
course was in contradiction with the whole of economic thought before the 
rise of liberalism starting in the mid 18th century. 
 
By using modern formal economic tools, this paper shows that it is possible 
to justify and even defend the mercantilist view of the relations between 
world trade and domestic prosperity.  The tools it uses are endogenous 
growth theories and "thick-thin-market" multiple-equilibrium macroeconomic 
models developed in the '80s to explain the persisting under-utilization of 
production factors in the long run.  This was the case of peasant labour in 
Ancien Regime economies.  The way out of this low equilibrium was the 
extension of domestic trade, alongside with the development of 
proto-industrialization and market agriculture:  subsistence goods could be 
replaced by goods exchanged on a much wider basis, leading to a better use 
of production factors.  Considering the high scale of this kind of 
exchange, this could only be done through intermediaries.  However, trade 
had a cost and traders had to deal with opportunistic behaviour, lack of 
information, uncertainty, the costs of transport and conversation and the 
financial burden of capital immobilized in inventories.  All this required 
specific knowledge, social capital and circulating capital.  As all but the 
last of these production factors had a very strong depreciation rate and 
could be socially accumulated only with difficulty, long-run global 
extension of domestic trade was only possible if the stock of circulating 
capital extended as well.  This extension of the stock of circulating 
capital depended crucially on the development of monetary aggregates.  The 
paper emphasizes the fact that the stability of this expanding financial 
system required a steady increase of its monetary base, i.e., mainly of the 
stock of precious metals in the domestic economy.  This explains the 
chryshedonism of many mercantilists, which followed from an awareness of 
the economic role of money which was lost in classical and neoclassical 
thought.  Precious metals and high-powered financial assets were only to be 
found on the world market, either through exportation of goods or the 
taking over of world trade, which is equivalent to the exportation of trade 
services.  The actual organization of world trade was deeply uncompetitive 
for many reasons: the very high entry cost in it for a trader community, 
the oligopolistic behaviour of trader communities and the willingness of 
the states to intervene.  This allowed for supra-normal profits to be 
generated for individuals.  According to an heart of growth mechanism, 
these profits were the basis of accumulation and the increase of the 
circulating capital stock in the domestic economy. 
 
The study of Ancien Regime economies requires abandoning the use of the 
simple '50s and '60s economics which were developed to understand modern 
economies.  This has already begun for micro-analysis.  We hope this paper 
helps macro-analysis to catch up. 
 
 
Bibliography:  Daudin, Guillaume.  "A Mercantilist Model of Growth and 
Trade in 18th Century France."  Paper presented at 1998 Cliometrics 
Conference, Washington University, St. Louis, May 8-10, 1998. 
 
Subject:  D 
Geographical Area:  4 
Country/Region: France 
Time Period:  6 
 
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