Financial History 139 (Fall 2021) - Page 40

BOOK REVIEW
BY JAMES P . PROUT
Trade and Nation : How Companies and Politics Reshaped Economic Thought
By Emily Erikson
Columbia University Press , 2021 298 pages with bibliography and index $ 37.00
For most non-academic readers of economic history and thought , Adam Smith ’ s The Wealth of Nations ( 1776 ) is about as far back in time as they care to go . Smith gave us a clear-eyed view of how he thought businesses and economies work or should work . Specialization , the invisible hand , free trade , etc . were all concepts he wrote about that still animate discussions more than 240 years later .
Less known to the general reader is that Smith ’ s observations and conclusions — and his motivation for publishing — owed considerable intellectual debt to writers who are less well known . In the decades of the 1600s , there was an active and broad community of authors who observed , reasoned , wrote and argued over the nature and interplay of individuals and enterprises engaged in economic activity . At the time , of course , they did not call it economics , but that is what it was .
According to Yale Professor Emily Erikson in her book , Trade and Nation :
How Companies and Politics Reshaped Economic Thought , the period 1580 to 1720 was an inflection point in the evolution of Western economic thinking . She focuses on England during this time period and identifies some key writers , as well as their motivations for writing . Important to know is that Erikson is a sociologist and attempts to go beyond simply describing emerging themes . Using tools common in sociology , she subjects tens of thousands of publications of the period to machinebased analysis to create data sets which shed light on motivations , affiliations and relationships among economic writers of the 1600s . The visual representations of her quantitative results on pages 148 and 160 are something you don ’ t see often in business history books .
Erikson starts out by outlining the medieval view of trade , business and exchange . At the time , these activities were largely observed through the lens of religious teachings . Moral values were front and center and , hence , concepts of gain , growth and general prosperity took a back seat to salvation . Economic actors ( my words , not theirs ) were supposed to seek to achieve “ fair exchange ” rather than advantage or profit . Money was seen as a necessary evil and charging interest was , well … just evil . As the 1600s unfold , “ fair exchange ” as a recurring phrase in business publications is replaced , and key words like trade , politics , travel , finance and companies take a greater prominence . Morality begins to give way to commerciality .
At the center of this shift was the lowly merchant , whose societal status in England at the time was anything but lofty . Although many were rich and accomplished , their wealth came not from land , title or closeness to the Crown , but by buying and selling , often in foreign markets . We meet three of the most important authors of the time : Gerard de Malynes , Edward Misselden and Thomas Mun . They publicized and debated such themes as bullionism , wool and cotton trade , balance of trade and Crown-chartered companies .
These were more “ modern ” themes , and their arguments had only the thinnest veneer of moralism applied . Of course , the East India Company makes an appearance — de Malynes and Mun , anti ; Misselden , pro . They intended their arguments and observations to be public in nature , aimed at influencing Parliament and the Crown to adopt or change then current approaches to spurring national wealth . They stirred controversy and debate , and some of the back and forth was of a very nasty variety . Merchants were locked out of a place at the policy table and took to writing as an outlet to publicize perceived inefficiencies and unfair advantage . Resentment is usually a good motivator of intellectual debate .
Erikson goes again to quantitative analysis to explore this more deeply . Publications , authors and institutions are mathematically correlated . This allows us to view the larger corpus of publications , and to explore the relationships — networks , in her words — that existed between authors . We then travel across the North Sea to Holland , where the merchant class was at the center of decision-making , and so the impetus to discuss new economic themes was less acute .
The book has a clearly academic focus — there are phrases that flow regularly in the world of sociology that would have a hard time making it in a popular business history book . And the data set information is hard to navigate for the layman . But in publicizing a phase in economic thought that may be well known to some , but is less well known to others , it is an interesting read . Have a pencil at hand .
In her conclusion , Erikson returns to Adam Smith , reminding the reader that Smith was not some heartless capitalist , but a moral philosopher . His work argued that government intervention frequently hurts the less financially advantaged , and that morality did have a large part to play in how we should think about economics .
James P . Prout is a lawyer with more than 30 years of capital market experience . He now is a consultant to some of the world ’ s biggest corporations . He can be reached at jpprout @ gmail . com .
38 FINANCIAL HISTORY | Fall 2021 | www . MoAF . org