How Did Enlightenment Ideas Influence Modern Economics?


Adam Smith (1723-1790)

The Enlightenment was a period in world history that roughly corresponds with the eighteenth century, originating in the nations of Britain, France, and the German-speaking kingdoms and then spreading to the rest of Europe and the European colonies. It was a period when philosophers such as Rousseau, Voltaire, and Locke advocated ideas of political freedom, which ultimately influenced movement toward more democratic and republican governments in the late eighteenth and early nineteenth centuries. Although the Enlightenment is known today more for the political ideas that came from it, there were also major changes in economic theories and practices that took place within the milieu of the Enlightenment.

Beginning in the Early Modern Period of world history, roughly during the early sixteenth century, corresponding with the Age of Exploration and the rush to conquer and colonize the New World, a new economic system developed in Europe. The old feudal economy was replaced by mercantilism, which was a financial system whereby the mother country would exploit the resources of her colonies and then sell manufactured goods back to the colonies. The system worked well for some time, but by the eighteenth century, numerous problems became very obvious. Eventually, Enlightenment philosophers such as David Hume and Adam Smith realized that not only was the mercantile system inefficient, it was in many ways anathema to the basic ideas of the Enlightenment. The economic ideas of Smith, Hume, and others were ultimately championed by the leaders of the most powerful countries, which helped to usher in the Classical Gold Standard and modern capitalism.

The Enlightenment proved to be one of the most revolutionary periods in world history as it transformed the way in which societies viewed the relationship between the ruler and the ruled. The movement first began in Great Britain in the late seventeenth century, which was experiencing profound political change, and then spread to France and the German-speaking kingdoms. Some of the basic ideas of the Enlightenment were increased political freedom for all classes, more political equality, and a diminished role of government. Many, but not all, of the most prominent Enlightenment philosophers, were anti-monarchy and most were ardent believers in free trade.

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