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In the earlier days of recorded history nations traded to obtain more goods especially those they couldnt produce themselves which seems like a logical enough motive But by the 17th century this motive for trade gradually eroded The desire for goods was replaced by the desire to accumulate gold instead This seemingly irrational motive for international trade which came to be called mercantilism colors some nations international economic policy to this day Mercantilism flourished during the 16th and 17th centuries especially in England France the Netherlands Spain and other West European countries Mercantilist states felt that the primary objective of trading internationally was to export as much as possible while limiting imports and accumulating gold in return They felt that gold as supposed to goods represented true wealth By the 18th century it was generally acknowledged that a favorable balance of trade meant exporting more than importing and accumulating a surplus of gold in the process But in the Wealth of Nations first published in 1776 the Scottish economist-philosopher Adam Smith argued that nations as well as individuals gain when they specialize in what they can do best and trade Not however by trading goods for gold but goods for other goods The revenue he said of the person to whom it is paid does not so properly consists in the piece of gold as in what he can get for it or in what he can exchange it for Smith 499 This heretical statement set the stage for a controversy that has persisted for more than two hundred years If Smith was right as most economists nowadays believe he was then there is no place in a rational world for measures to restrict trade through artificial barriers such as tariffs and import quotas Smith also elaborated how people gain by pursuing their own self-interest Its not from the benevolence of the baker the brewer or the butcher that we expect
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