Hume International Trade Theory

David Hume International Trade Theory

The work of the philosophers during this period of transition to a new economic society was of incalculable value. They attacked existing ideas from an objective viewpoint, clarifying the economic issues and indicating the probable direction of future developments. No systematic analysis of economic life was attempted by them, this job they left for economists, who benefited, however, from their philosophic work. This in the main describes the relation which existed between David Hume and Adam Smith. Hume (1711-1776) was a learned man, able to write on many subjects with lively style and penetrating insight. He was never exhaustive about any of his interests, but his ability to survey critically and evaluate many aspects of human life in terms of history placed him in the front rank of the world's philosophers. His writings in economics consist of a few scattered essays. In the main these writings attacked the mercantilist ideas on the value of money and the importance of foreign trade. Hume denied that a nation's wealth was dependent upon the accumulation of bullion. In fact, he went so far as to state that regardless of the quantity of money, trade could be carried on effectively; for prices tended to adjust to the quantity of money in circulation. On the other hand, he contended, a nation's wealth consisted of its people and its industry; a nation would by natural forces and without effort get the money it required for its economic activity. One of his most amazing statements was to the effect that England's economic success depended upon the growing prosperity of countries in Europe, since only if they were prosperous could English merchants sell them goods. The basis for such a statement was Hume's idea of a territorial division of labor; consequently he condemned any artificial barriers to trade.

Furthermore it was his belief that should foreign commerce cease, the stimulation which it had already produced in the desires and ambitions of men would find expression in the improvement of domestic commerce and industry to the greater benefit of the people.

A host of other writers might be mentioned as forerunners of the new era in commerce and trade. Exhaustive research has shown that all the elements of Adam Smith's doctrine of free trade were available before The Wealth of Nations was written, very often in obscure writings and in fragmentary form. For example, Paterson and Gervaise warrant mention as early free traders. Many minds helped to prepare the way for the new ideas and new methods that soon were to challenge men's thoughts.