HISTORY OF MERCANTILIST AND CLASSICAL ECONOMIC THOUGHT ADAM
SMITH
Daniel Alves
ECON 350 - Classical Economics
July, 2024
Introduction
In the history of world economic thought, of course, it gave birth to many thoughts of
great figures on economics which are certainly different. In the history of world economic
thought there is mercantilist economic thought and Adam Smith's classical economic thought,
both of which have a very different core of thought in the world of economics. Mercantilism
is an economic theory where the welfare of a country depends on two things, namely how
much assets are stored and how extensive the trade network is. The economic concept of
mercantilism developed from the 15th century to the 18th century which where in the early
modern period when citizens' awareness of the state began to emerge (Lestari et al., 2023).
The term "economy" comes from the Greek, Oikos (family or household) and Nomos
(rules or regulations). While according to the term, namely household management or
household regulations, economics is one of the sciences that studies how humans act and
behave to meet their basic needs, which are developed through activities, consumption,
production, and distribution (Mujib, 2017). According to M.A. Manan, Sharia Economics is a
social science that studies the economic problems of the people inspired by Islamic values
(ANSORI, 2016). Meanwhile, according to Khursid Ahmad, Islamic economics is a
systematic effort to try to understand economic problems and human behavior in relation to
these problems from an Islamic point of view (Fahmi, 2019). So it can be said that Islamic
economics is household management or efforts to meet the needs of life based on Islamic
provisions.
Islamic economics, often known as sharia economics, is based on Islam because Islamic
principles are intrinsically linked to economic activity. Islamic economics also teaches how to
view and analyze every economic situation, as well as the values or principles that must be
upheld to achieve these goals, and how to behave as a person directed by the teachings of
Allah SWT since the beginning of life (Rohmati et al., 2018).
The term "mercantilism" comes from the word merchant, which means trader. According
to mercantilism, any country that wants to develop must engage in trade with other countries.
Foreign trade surpluses earned in gold or silver were a source of wealth, which encouraged
exports and decreased imports. This mercantilism was practiced by a number of European
countries, including Portugal, Spain, England, the Netherlands and France. Mercantilism is an
economic theory that states that a country can be said to be prosperous if it has a lot of assets
or capital and is stored by the State concerned, besides that the volume of global trade is also
considered as an important thing. The rationale of mercantilist economics is a strong national
economic development policy through import restrictions and increased export quotas.
Mercantilist theory is widely used as a principle of international trade for countries in Europe
in order to ensure political unity and national economic strength (Alam et al., 2021).
In the history of economics, the idea that became the foundation for the development of
economics came from Adam Smith in 1770. In the History of Classical Economic Thought,
the Classical School emerged in the range of 1780-1850. In classical economic thought Adam
Smith stated the opposite of mercantilist economic principles, where government intervention
is only a small part to the interests of the state or government, where one of the famous
capitalist economic figures is Adam Smith. Basically, classical economic thought advocates
natural freedom, self-interest, and competition. The differences between these two ideas will
be discussed in the history of mercantilist economic thought and Adam Smith's classical
economics.
Research Methods
This research method is through literature studies or library research in the form of
journals, articles, and e-books on the history of mercantilist and classical economic thought
(Adam Smith). This method is used to explain the history of mercantilist economics, the
figures of mercantilist economic thought and the history of Adam Smith's classical
economics.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
Research Results And Discussion
History of Mercantilist Economic Thought
The term "mercantilism" comes from the word merchant which means "trader". According
to mercantilism, every country that wants to develop must trade with other countries and for
the adherents of mercantilism, the source of the country's wealth is from foreign trade, and
money is the result of trade surplus which is the source of power. So it can be said that
mercantilism is an economic theory that states that the welfare of a country is only determined
by the amount of assets or capital stored by the country concerned and the volume of global
trade is very important (Dzaki & Abadi, 2023).
Mercantilism is an economic thought that emerged in Europe during the period from the
1500 century to the 1800 century (Lailatul Qadariyah & others, 2018). The state has the same
action towards domestic economic activity and the role of international trade which at that
time was aimed at dominating. Mercantilism is also considered the Political Economy of state
building. The center of mercantilism thought is the view that national wealth is reflected in
the precious metal owned by a country, namely gold (Putri & Devina, 2011). Mercantilism
also has several characteristics, including:
Static perception of economic growth
The doctrine of state power
Regulation of economic activity
Restrictions on precious metals trading
Monopoly in trade
Regulation in shipping
Territorial development of colonial territories.
In its development, the mercantilist economic system that applies the above cici-citi is
deemed unsuitable for implementation, because:
The realization that commercial activities and economic activities in general are not
absolute, automatic zero-sum-games.
There needs to be freedom of initiative on the part of entrepreneurs to conduct and
develop business according to supply and demand.
The awareness of the middle class to gain freedom in carrying out economic activities in
any sector (Ria, 2020).
Mercantilism was not only adopted and popularized by merchants, but was most
influential and accepted by groups that had power and wealth, both financially and politically
(Hokianto et al., 2023). Mercantilism is a model of economic policy with dominant
government intervention, protectionism and colonial politics, indicated by a favorable foreign
trade balance. Economic thoughts were born in the mercantilists due to the division of labor
that arose in society, the technical division of labor and the territorial division of labor that
would encourage international trade.
Mercantilist economic thinking was a policy that strongly protected domestic industry but
placed controlled restrictions on foreign trade. Industrial protection encourages domestic
competition, and low wage rates encourage exports. There are three main ideas of
mercantilism, namely the balance of trade, the mechanism of precious metal flows, protection
and the Quantity Theory of Money. These three ideas are centered on one mercantilist
doctrine, namely a favorable balance of trade (Suryani & Abadi, 2023).
The core of this mercantilist thinking is:
Gold and silver in particular were the most favored forms of wealth, hence the ban on the
export of precious metals.
Countries should encourage exports and cultivate wealth at the expense of other countries.
In the import-export policy, it is believed that development should be achieved and
managed by achieving the largest possible surplus from the receipt of exported goods that
exceeds the expenditure on imported goods.
Colonization and Ponopolization of trade must be strictly enforceable to maintain the
colonists' perpetual submission and dependence on the mother country.
Opposition to duties, taxes, and internal restrictions on the mobility of goods.
A strong central government must be established to ensure the policy of mercantilism.
The importance of high population growth accompanied by high human resources to
fulfill military interests and strong mercantilist management.
Luminaries of Mercantilist Economic Thought
Jean Bodin (1530-1596)
Jean Bodin is a French scientist who was born in Angers and died in Laon in June
1596 (Sultan, 2019), he is said to be the first person to systematically present the theory of
money and prices, where prices are very profit-oriented (Parakkasi & Kamiruddin, 2018).
Thomas Mun (1571-1641)
Thomas Mun was a wealthy merchant from England. He wrote extensively on foreign
trade. One of his famous works is "England's Treasure by Foreign Trade". He also argued
that to increase the wealth of the country in the usual way is to trade (Mubarok, 2023).
Jean Baptist Colbert (1691-1683)
Jean Baptist was France's chief minister of economy and finance during the reign of
King Louis XIV. His policy objectives were more geared towards the power and glory of the
state than to increase individual wealth.
Sir Williarn Petty (1623-1687)
Sir William Petty was a lecturer at Oxford University and a British economist,
scientist, and philosopher. He wrote extensively on political economy. He thought that work
was more important than land resources.
David Hume (1711-1776)
David Hume was a friend of Adam Smith, they often discussed his trades on
economics, one of his books entitled "of Balance of Trade", which talks about prices that are
partly influenced by the amount of goods and partly determined by the amount of money.
Adam Smith's History of Classical Economic Thought
The classical school emerged at the end of the 18th century and became famous in the
19th century. The classical school was born because of the unsuccessfulness of the previous
schools, it is said to be classic because its ideas have been widely discussed by previous
economic experts. The foundation of classical economics is Individual Freedom (Al-
aryachiyah et al., 2020).
Short Biography of Adam Smith
Adam Smith was a great thinker and scientist who was born in June 1723 in Kirkcaldy on
the east coast of Scotland and Edinburgh. Smith entered Glasgow University at the age of 14
and then received a scholarship to Oxford, where he studied Greek and Latin Classics,
English and French Literature, Art and Philosophy. Around 1751-1763 after graduating he
became Professor of Moral Philosophy at Glaslow University.
Adam Smith's first major work was "Theory of Moral Sentiments". In 1764 Smith went to
France in order to become a tutor for the children of Charles Townsend, a member of the
British parliament, and there Smith met great thinkers in France such as Voltaire, Turgot,
Quesnay, and so on. So that Smith, who started the center of attention of his thought in the
field of logic and ethics, directed his attention to economic issues (Mubarok, 2023).
In 1776 Adam Smith returned from his tour in France to England, for the next ten years he
struggled to complete his magnum opus entitled "The Wealth" of Nations" which was finally
published in 1776 and received a warm welcome and remains a reference material in the field
of economics (Hidayatullah, 2018). Adam Smith, who is a classic western economic figure,
his name is still echoing in the ears of the world. Adam Smith's economic thinking was
developed by many countries in Europe in particular and the world which made Adam Smith
the Father of Economics (Batubara, 2022).
Adam Smith's Classical Economic Thought
In the history of economics, the root of the idea that became the foundation for the
development of economics came from Adam Smith in 1770 (Aprilianty et al., 2023). Adam
Smith is one of the classic economic thinkers, one of his books entitled "The Wealth of
Nations" is often considered as evidence of the rise of modern economic thought (Kirana et
al., 2023). In the book The Wealth of Nations, Adam Smith revealed that "the main problem
we always encounter is collecting money" (Cholidiyah, 2018). According to Adam Smith, the
market is always in perfect competition, classical theory also emphasizes that the state should
not interfere or be called "No Intervetion". As a proponent of natural liberty, Smith believed
in a frugal but strong government.
According to Adam Smith, there are three purposes of government, namely:
Raise the country from a low level of racism to the highest level of prosperity by
peaceful means.
Provide low taxes
Provide fair and tolerant service
In international trade, Adam Smith defended free trade and free markets. This he assured
about economic freedom would help free the world from mercantilism and excessive state
intervention. From the explanation above, it can be concluded that the main focus of Adam
Smith's thought is the "improvement" of individuals through simplicity and good behavior.
In the History of Classical Economic Thought, the Classical School emerged in the range
of 1780-1850. This classical school of thought can be considered as the basis for the
emergence of capitalist economics, where government intervention is only a small part in the
interests of the state or government. Classical economic thought advocates natural freedom or
liberalism, self-interest, and competition (Galuh et al., 2022). Adam Smith stated that if each
individual is given the freedom to develop their capital, then welfare will be realized (Azizah,
2019).
According to Skoulsen (2009), classical economic thought basically advocates natural
freedom or liberalism, self-interest, and competition. The following is an explanation of the
classical school according to Skoulsen:
Freedom is the right to produce and exchange (trade) products, labor, and capital.
Self-interest is the right to do one's own business and to help the self-interest of
others.
Competition is the right to compete in the production and trade of goods and
services.
Besides Adam Smith, there are several other classical economic figures, namely Jeremy
Bentham (1748-1832), Thomas Robert Malthus (1766-1834), Jean Baptiste Say (1767-1832),
Robert Owen (1771-1858), David Ricardo (1772-1823), Antoine Augustin Cournot (1801-
1877) and Jhon Stuart Mill (1806-1873). The principle of regulating economic life is based on
market mechanisms and price theory is a central part of their thinking with income
distribution determined by market mechanisms (Hapsari et al., 2022).
In brief, the essence of the classical economic model developed by Adam Smith and other
classical figures from generation to generation consists of 4 general principles, namely:
Thrift, hard work, good self-interest and generosity towards others are policies that
should be supported.
The government limited its activities to regulating regions, strengthening private
property rights and defending the country from attack.
On the Economic front, the country should adopt a policy of Laissez Faire non-
intervention (Free trade, low taxes, and minimal bureaucracy).
A classic gold or silver standard will prevent countries from depreciating their
currency.
Smith also stated two theories, namely the theory of value and the theory of capital
accumulation, in the theory of value, goods have two values, namely use value and exchange
value. Whereas in the theory of capital accumulation, Smith said that to get a big profit is by
investing.
Adam Smith's Core Thought:
Strongly in favor of keeping government interference in the economy to a
minimum.
The need for specialization or division of labor so that labor productivity increases.
Smith supports international free trade between countries.
Smith rejected monopoly power that would corrupt the market.
Establish a tax system to finance public expenditure
The need for capital accumulation through austerity and capital investment is an
important key to economic growth.
Conclusions
From the history of mercantilist economic thought and Adam Smith's classical
economics, it can be concluded that the thinking of the two is different, in mercantilism the
welfare of a country is only determined by the amount of assets or capital stored by the state,
the welfare of the country can be achieved by state intervention, reducing imports and
increasing exports. According to mercantilism, the wealth of the state comes from foreign
trade, and money is the result of trade surplus. The core of mercantilist thought was the
balance of trade, the mechanism of precious metal flows, protection and the quantity theory of
money. When there began to be many criticisms of the theory of mercantilism at the end of
the 18th century, the classical economic thought of Adam Smith appeared with his book
entitled "The Wealth of Nations", Adam Smith stated that he defended free trade and free
markets. The classical theorist also gave freedom to individuals in developing their capital,
and the state should not interfere in the economy because economic freedom will help free the
world from mercantilism and excessive state intervention.
