Mercantilism and Keynesianism.

The article informs that nothing is so indestructible for the evaluation of scientific and political ideas as the history of those ideas. It teaches us that conceptions that claim novelty and originality have been nearly always, during the course of history, not only conceived but refuted. Its knowledge can therefore prevent scientific discussion from moving always in circles. It can prevent undertaking hopeless economic experiments for the testing of which the past has already paid. The main conclusion of the Mercantilists is"in Keynes' formulation" that "a favourable balance (of payments in international trade), provided it is not too large, will prove extremely stimulating." This stimulation happens, according to the Mercantilists, by a simple mechanism: The favourable balance of payments draws precious metal into the country. This increases the circulating purchasing power. This again means increased demand for labor and thus higher production. Prices have to be raised ever anew by the creation of new money in order to provide the necessary stimulus for the maintenance of the boom. The ever-renewed issuance of new money, however, leads, in the long run, to the ruin of the currency. Law's experiment, in any case, ended in severe economic depression, the bankruptcy of his bank, and the devaluation to zero of the paper money it issued.