Effect of economic theory on policies

What impact does economics have on government policy?

Effect of economic theory on policies

Colbertism French finance minister and mercantilist Jean-Baptiste Colbert served for over 20 years. Mercantilism arose in France in the early 16th century soon after the monarchy had become the dominant force in French politics. Inan important decree banned the import of woolen goods from Spain and some parts of Flanders.

The next year, a number of restrictions were imposed on the export of bullion. The height of French mercantilism is closely associated with Jean-Baptiste Colbertfinance minister for 22 years in the 17th century, to the extent that French mercantilism is sometimes called Colbertism.

What is 'Keynesian Economics'

Under Colbert, the French government became deeply involved in the economy in order to increase exports. Protectionist policies were enacted that limited imports and favored exports.

Industries were organized into guilds and monopolies, and production was regulated by the state through a series of more than one thousand directives outlining how different products should be produced. Colbert also worked to decrease internal barriers to trade, reducing internal tariffs and building an extensive network of roads and canals.

Colbert's policies were quite successful, and France's industrial output and economy grew considerably during this period, as France became the dominant European power. He was less successful in turning France into a major trading power, and Effect of economic theory on policies and the Netherlands remained supreme in this field.

Effect of economic theory on policies

Economic history of Canada France imposed its mercantilist philosophy on its colonies in North America, especially New France. It sought to derive the maximum material benefit from the colony, for the homeland, with a minimum of imperial investment in the colony itself.

The ideology was embodied in New France through the establishment under Royal Charter of a number of corporate trading monopolies including La Compagnie des Marchands, which operated from toand the Compagnie de Montmorency, from that date until These were the first corporations to operate in what is now Canada.

Mercantilist policies were also embraced throughout much of the Tudor and Stuart periods, with Robert Walpole being another major proponent. In Britain, government control over the domestic economy was far less extensive than on the Continentlimited by common law and the steadily increasing power of Parliament.

Macroeconomic Policy and Poverty Reduction

With respect to its colonies, British mercantilism meant that the government and the merchants became partners with the goal of increasing political power and private wealth, to the exclusion of other empires. The government protected its merchants—and kept others out—through trade barriers, regulations, and subsidies to domestic industries in order to maximize exports from and minimize imports to the realm.

Effect of economic theory on policies

The government had to fight smuggling, which became a favorite American technique in the 18th century to circumvent the restrictions on trading with the French, Spanish, or Dutch. The goal of mercantilism was to run trade surpluses, so that gold and silver would pour into London.

The government took its share through duties and taxes, with the remainder going to merchants in Britain. The government spent much of its revenue on a superb Royal Navy, which not only protected the British colonies but threatened the colonies of the other empires, and sometimes seized them.

The colonies were captive markets for British industry, and the goal was to enrich the mother country. British mercantilism thus mainly took the form of efforts to control trade.

A wide array of regulations were put in place to encourage exports and discourage imports.

Trickle-down economics - Wikipedia

Tariffs were placed on imports and bounties given for exports, and the export of some raw materials was banned completely. The Navigation Acts expelled foreign merchants from England's domestic trade. The nation aggressively sought colonies and once under British control, regulations were imposed that allowed the colony to only produce raw materials and to only trade with Britain.


This led to friction with the inhabitants of these colonies, and mercantilist policies such as forbidding trade with other empires and controls over smuggling were a major irritant leading to the American Revolution. Overall, however, mercantilist policies had a positive impact on Britain helping turn it into the world's dominant trader and the global hegemon.

Mercantilists believed that to maximize a nation's power, all land and resources had to be used to their highest and best useand this era thus saw projects like the draining of The Fens. The other nations of Europe also embraced mercantilism to varying degrees.

The Netherlands, which had become the financial centre of Europe by being its most efficient trader, had little interest in seeing trade restricted and adopted few mercantilist policies.The economics of the Great Society, whether we consider it from the perspective of economic theory, economic policies, or the consequences of those policies, offers much to criticize and little to praise.

Governments may make policy changes in response to economic conditions. Government regulation of the economy is frequently used to engineer economic growth or prevent negative economic . Apr 15,  · When laissez-faire economics led to catastrophe in , Keynes devised a comprehensive economic theory to replace it.

When Keynesian demand management hit the buffers in the 70s, there was an. The Nixon Doctrine had a more long-lasting economic impact. It provided an entre into involvement the Middle East. It provided an entre into involvement the Middle East. It outsourced protection of the oil supply in the region to the Shah of Iran and Saudi Arabia.

Economic theory predictions and the bulk of academic research confirms that wages are unaffected by immigration over the long-term and that the economic effects of immigration are mostly positive for natives and for the overall economy. Economic Policy reports on current and prospective economic developments and assists in the determination of appropriate economic policies.

The office is responsible for the review and analysis of both domestic and international economic issues and developments in the financial markets.

Effect of Economic Theory on Policies