CEU, Economics Department

Lecturer: Professor Antoin  Murphy
Course: 1 credit

Course Description:

      This course will cover the evolution of  some key issues in economic theory from Mercantilism to New Classical
Macroeconomics. There will be particular emphasis on the development of macroeconomic theory and policy. The
headings of this series of lectures as presented in the outline below are idiosyncratic and deliberately provocative.
The intention to force students to move away from the formalism of economic models so as to ask fundamental
questions about the nature and scope of economics. In tracing the evolution of macroeconomic theory and policy from
mercantilism to new classical macroeconomics the student will be asked to examine and analyse some leading
historical events and the major achievements in this area. Was mercantilism really the dark age of economic theorising?
Why did eighteenth century stock market bubbles arise? Why was there an emphasis on the role of laissez-faire in the
eighteenth century? How did economic writers start to conceptualize the interrelationships between different flows of
income, output and expenditure? How did the tableau économique show the potential for economic growth? How did
Turgot introduce capital into economic analysis?  To what extent did Adam Smith understand the role of money? Why,
after Smith's Wealth of Nations, was economics caricatured as the dismal science? How did Henry Thornton link monetary
theory with banking practice?
   The lectures then proceed to examine the role of money in the macroeconomic model. Is it a veil or does it have a real
role to play in influencing macroeconomic activity? Ultimately these type of questions raise the issue as to which school
of macroeconomic theory one wants to follow. Should it be Keynesianism, post-Keynesianism, monetarism, new classical
macroeconomics (mark 1 or mark 2 versions). The answers can then be used to determine the framework in which to
assess macroeconomic policy in the European Monetary Union and elsewhere.

Course Outline

Mercantilism - Economics as a Zero-Sum Game. Specie fetishism, the fear of goods and the love of money;
protectionism. Should countries run balance of payments surpluses? Absolutism and relativism. Misinterpretations
of mercantilism.

The beginning of macroeconomic theorizing. Sir William Petty.

Convicted Scottish murderer and Prime Minister of France causes Europe's first stock market boom and collapse:
John Law. Hybrids of pre-monetarist and pre-Keynesian theorizing.What is money? Does it have a real role to play in
influencing economic activity? Does money need to be intrinsically valuable?

Anatomies of the Mississippi System and the South Sea Bubbles.. The substitution of junk equities for government bonds.
Are stock market bubbles rational?

Millionaire Irish economist killed by French chef in Albemarle Street or was he?
Richard Cantillon. How to model the macroeconomy. The discovery of the entrepreneur. The circular flow of income. The
monetary approach to the balance of payments. How to use economic theory to make a fortune.

François Quesnay and Physiocracy. How to zig-zag your way through the tableau économique?  Economic activity no
longer a zero sum game - the potential for economic growth.

The rise of monetarism and the monetary approach to the balance of payments
David Hume and Milton Friedman.

The role of capital formation in Turgot’s Réflexions.

Is there goodness in greed?
Adam Smith and the Wealth of Nations.

Henry Thornton and Paper Money

Keynesianism, monetarism and new classical macroeconomics


Bucholz, Todd. New Ideas from Dead Economists (Penguin, 1999)

"Bubble Symposium" Journal of Economic Perspectives, vol. 4. no.2, Spring 1990.

Hutchison, Terence. Before Adam Smith. The Emergence of Political Economy 1662-1776 (Blackwell, 1988)

Murphy, Antoin E. Richard Cantillon : Entrepreneur and Economist (OUP, 1986)

Murphy, Antoin E. John Law Economic Theorist and Policy-Maker (OUP, 1997)

Snowdon Brian, Vane Howard and Wynarczyk Peter. A Modern Guide to Macroeconomics (Elgar, 1994)

Spiegel, Henry. The Growth of Economic Thought (Duke, 1983).

Schumpeter, Joseph. A History of Economic Analysis (1954, re-print Routledge, 1997).

Electronic Texts
Many economics works may be consulted on line. In France the Bibliothèque Virtuelle of the
CHPE contains 370 books, brochures and articles (160 authors) which may be consulted on line.
The address is:
McMaster University also provides the McMaster History of Economic Thought Archive of electronic
texts.  For example if a student wishes to learn more about Richard Cantillon he/she may use the

See also my site at  www.tcd.ie/economics


   Students will be graded on the basis of (1) a short project to be presented in class amounting to 30% of the grade
and (2) an examination which will form the other 70%.

Students may present the project either individually or with one other student. There should be no duplication of these
projects, so students should sign up on a first come/first served basis with the Economics Office indicating which project
they wish to take. Students are asked to sign up and select one project from the list below:

(1) Critically analyse the view that  Sir William Petty was the founder of macroeconomics
(2) Critically review Carl Wennerlind’s article ‘David Hume’s Monetary Theory Revisited. Was He Really a Quantity
      Theorist and an Inflationist?’ Journal of Political Economy, vol. 113, no. 1 (2005)
(3) Critically review the macroeconomic ideas in Richard Cantillon’s Essay on the Nature of Trade in General.
(4) Critically assess the importance of capital in Turgot’s Reflections on the Production and Distribution of Wealth (1769/70)
(5) Analyse the main features of the Bullionist Debate
(6) Critically analyse the view that  Adam Smith was a very weak monetary theorist.
(7) Assess the importance of Quesnay’s Tableau Economique (1758)
(8) To what extent was the Mississippi System (1716-1720) a financial scam or a serious macroeconomic experiment?

The project should be about  1,500 words in length. The project should be word processed according to the standard
practice for articles in economic journals. References should follow the Harvard system, with bibliographical references
within the text listing the author’s last name, date of publication and number of page e.g. (Keynes 1936 : 250). A detailed
bibliography should be provided at the end of each project.  Quotations should be attributed to their authors and referenced
   For sourcing information on these projects students should start with Joseph Schumpeter’s A History of Economic Analysis
(1954; reprints, 1986, 1994, 1997) and Henry William Spiegel’s The Growth of Economic Thought (Duke University, 1971,
1983). Terence Hutchison’s Before Adam Smith : The Emergence of Political Economy (1662-1776) is  useful for the
pre-Smithian literature while Mark Blaug’s Economic Theory in Retrospect covers the post-Smithian literature very well.
Students are encouraged to search out some of the original writings of the authors they are researching by use of the web.
   Plagiarism is a deadly sin. Any sentences or paragraphs taken from another author must be attributed to such an author.
To prevent free riding students in each group will be asked questions about the group project.

Arrangements will be made for the presentation of the projects in the second week of  lectures.