It is important to understand mercantilism, in case of the US history, the regulations of trade, the

colonies, it is important that the students understands the fundamental assumptions behind this
economic system, so first let us know what economics is.

Economics is the study of production, distribution and consumption of goods and services. And we have
4 economic questions and how a society answers this questions.

1. What should we produce?

2. How much should we produce?

3. How should we produce it?

4. Who should consume it?

In a command economy which is based on state control, the government answers this question
mercantilism is a type of command economy it is not a market economy. We got 2 types of economy, a
command economy which has central authority, and market economy which is based on decisions made
by individuals.

So what is mercantilism? Mercantilism is an economic policy that is designed to maximize the exports
and minimize the imports for an economy. It promotes tariffs and subsidies on traded goods to achieve
that goal. Mercantilism comes from the same word merchant and it is the philosophy of trade not only
external trade with other countries, but also internal trade within a country.

The economics assumptions of mercantilism: National wealth is measured in precious metals, wealth is
finite and for a mercantilist there's limited amount of gold and silver, and we can’t get as much as we
want.

Zero sum game- we are here for a competition and that is economic rivalry. A mercantilist sees the
economics as a team sports.

Mercantilists trying to construct economy based on favorable balance of trade, so a Favorable balance
of trade which is the exports exceeds the imports. This is why the British government is trying to control
trade in the colonies, because they believe that not all the colonies needs to trade with any countries
that is why they need to preserve this favorable balance of trade.

Self-sufficiency in the context of mercantilism it is important, because we are able to run our own
economy.

The goal is to promote domestic manufacturing.

Protectionism, government passes laws to discourage trades, to limit foreign competition.

Mercantilism contrast Adam Smith's Invisible hand, because mercantilism is hands on approach.
Some symptoms of this approach are: Subsidies which are cash payments, Monopolies or someone with
exclusive rights and Protective tariffs that stops foreign competitions.

Mercantilism which stresses government regulation and monopoly often lead to inefficiency and
corruption.

References:

https://corporatefinanceinstitute.com/resources/knowledge/economics/mercantilism/

https://www.econlib.org/library/Enc/Mercantilism.html