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The Role of Government

Updated on March 27, 2017

The role of government has changed over time and not without reason. Throughout history people have improvised different methods of exchange for goods and services in addition to creating, innovating, and enhancing them. Although government is certainly necessary for ensuring certain basic human rights, opinions vary widely over its use. To adjust to these opinions, government has changed its outlook over the years. As we characterize different views on the role of government, starting with mercantilism and ending with classical economics, we will learn influences of government policies and regulations today.

Government in the mercantilist era was set up in favor of merchant capitalists, the kings, and government officials. They were rent seeking and strove to increase the amount of bullion in the kingdom. They used methods like tariffs, taxes, and monopolies to keep wealth in favor of the government and the aristocracy. Canon law and Roman law, which originated from religious doctrines, provided a foundation for government that helped to implement its regulations. Government was very normative in its guidance to the masses, suggesting to people what they ought to do rather than letting them decide for themselves. Although it would never thrive today, mercantilism served its purpose to government by drawing households into the market economy and promoting nationalism.



The physiocrats were the first to introduce lassaiz-fare, “letting the people do as they please without government interference.” They believed government had too many regulations and they stood in opposition of the oppressive tax system (salt taxes, production tax, chief direct tax, customs and duties tax, road tax). They were intrigued by the natural order of things, and they believed that every person had the right to enjoy the fruits of their own labor, so long as it was consistent with the rights of others. Since agriculture was thought to be the only means of surplus for the physiocrats, they advocated a government regulated tax on landowners (one-third of economic surplus) rather than workers, which leveled out the overall tax burden. This shift in taxation benefited peasants while also protecting the interests of the nobility. The physiocrats became some of the first to challenge government with ideas that would eventually influence the classical school of economics and its organizers.

The classical school of economic thought enhanced thought of the previous schools, as well as eliminated invaluable thought. Classical economists such as Adam Smith, David Ricardo, Thomas Malthus, and John Stuart Mill advocated for an even more lassaiz-faire form of government than the physiocrats had, and certainly more than the mercantilists. They saw that tariffs restricting the importation and exportation of goods was ineffective and believed that the free market within a country, as well as internationally, would provide a better standard of living overall. They argued that when an individual ventured out for his or her own benefit, that person indirectly contributed to the well-being of another. Government should have therefore only interfered with individuals and the free market to regulate imperfections and keep a balanced budget.

Influencing government regulation, Jean-Baptiste Say’s law of markets concluded that people do not desire money alone, they desire what can be obtained with money. This lead to the idea that the production of a single good opened a vent to obtain other goods, with money acting as a medium for exchange. With this open vent the economy would be able to grow because people would have more options and be able develop new ideas to accommodate those options. This was just one of the ways that Say demonstrated the benefit of the free market to his peers.

David Ricardo’s theory of comparative advantage was an idea that altered government to let companies participate in more free trade. The Evolution of Economic Thought uses an example of wine and cloth to illustrate the benefit of comparative advantage. Portugal specializes in the production of wine and England in the production of cloth, even though Portugal can produce more units of wine and cloth per unit of labor than England. The result when Portugal specializes in wine, and England in cloth, is an increase in overall units of wine as well as cloth. This theory showed that policies such as the Corn Laws were inefficient and encouraged government to open itself to a freer form of international exchange.

As we have seen, government has indeed evolved over time. We see governmental change through a period mercantilism and its emphasis on exports rather than imports, to the physiocrats introducing lassaiz-faire policies, to the classical school developing those policies and developing newer and more efficient ones. Overall what we see is the breaking down of a mercantilist government in favor of its officials and the nobility, ultimately leading into the free market of the classical school. Many great philosophers worked together throughout history finding ways to make life easier for everyone instead of a few. Today we look back on these great economic thinkers and their laws and theories in an effort to improve our own.

Sources

Brue, Stanley L., and Randy R. Grant. The Evolution of Economic Thought. Mason, OH: Thomson/South-Western, 2007. Print.

"AmosWEB Is Economics: Encyclonomic WEB*pedia." Web. 04 Mar. 2016.

"Classical Economics." Web. 04 Mar. 2016.

"Pre-1800 Economic Thought, Including Mercantilism." Web. 04 Mar. 2016.

"Roman Law." Web. 04 Mar. 2016.

"Salt March." Web. 04 Mar. 2016.

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