On April 26, 1711, David Hume was born.
David Hume was a Scottish philosopher, most famous for his writing on empiricism and skepticism, arguing that there are limits to what we can truly know.
But he also made important arguments about money and trade, and his arguments against mercantilism.
Mercantilism is the theory that a country gets wealthy by exporting more than it imports, since in the process it creates large trade surpluses (and the money wealth that accompany them). Hume understood that money is not intrinsically valuable, and that instead it is the amount (or quality) of stuff you have, not the amount of money, that determines your true wealth. The problem, as he describe it, is that money, absent stuff to buy, only leads to inflation; the true measure of wealth is the useful things that a population has.
To learn more about inflation, watch the short Donald Duck video. Then answer the following questions:
- When one duck generates more money, he can buy lots more stuff. Why doesn’t this work when everyone has more money?
- Why would a duck with a lot of savings fear inflation more than a younger one?
- If Hume is right, what implications does it have for our trade policy today (much in the news)? What should be the goals of our country as far as trade is concerned?
18, April 2018, Inflation cartoon [Digital image]. Retrieved from <google.com>.