Assignment 1

⦁ Describe the context in which mercantilists were writing. How do they view
wealth? What policies did they recommend?

Mercantilists believed money was wealth. The mercantilists wrote in the context where
the nation-state was becoming the primary political unit and exploration and colonization
were opening up avenues for economic growth. The mercantilists believed that a
surplus of exports amounts to earning income. They pushed for government
intervention to regulate trade and legalize monopolies. They could also be referred to as
bloody colonists as they believed one nation's economic growth led to another nation's
loss.

⦁ What is the Physiocrats’ view of wealth? What are the implications of this theory?
The physiocrats believed that land was the main source of wealth and they described
every other class as sterile. During this era, Quesnay described economics in terms of
the human body circulating blood to survive the economy worked the same way but the
term which was used was the net product. They divided the society into three classes;
productive, proprietry and sterile classes. The implication of the physiocrats' view was
industrial capitalism. Unlike the mercantilists, the physiocrats argued that the
government should refrain from interfering with the economy. They also believed in
spending rather than saving.

⦁ Explain the concept of ‘surplus’ and its distribution in the Classical approach.

The concept of surplus in the classical approach is the remaining units of production
remaining after the necessary production needs have been met. Classical economists
explained the distribution of surplus as production and costs. In the sense that
production was a process that required inputs such as labour, land and capital and
these inputs inquired about costs like wages, interest and rent.
⦁ What is the Labour Theory of Value in the classical approach?

The labour theory of value simply put means that the value of a product is determined
by the amount of labour both physical and mental put into it.