1. Keynes defended the mercantilists on the grounds that a favorable balance of trade was the only feasible means available to a country at that time of lowering domestic interest rates and increasing home investment and employment. See J. M. Keynes, General Theory of Employment, Interest and Money (New York: Harcourt, Brace and World, Inc., 1936), chapter 15. Heckscher argued in rebuttal that unemployment in mercantilist times was essentially voluntary and not sensitive to changes in aggregate demand. See Eli Heckscher, Mercantilism, trans. Mendel Shapiro, 2 vols. (London: George Allen and Unwin Ltd., 1934).
2. The two great writers on mercantilism were, of course, Heckscher, Mercantilism, and Jacob Viner, Studies in the Theory of International Trade (New York: Augustus M. Kelley, Publishers, 1967; first published, 1937).
3. Mark Blaug, Economic Theory in Retrospect (Homewood, Ill.: Richard D. Irwin, Inc., 1968), p. 11.
4. In particular, we refer to the work of George J. Stigler, “The Theory of Economic Regulation,” Bell Journal of Economics and Management Science 2 (Spring, 1971): 3–21; Cordon Tullock, “The Welfare Costs of Tariffs, Monopolies, and Theft,” chapter 3 in this volume; Anne O. Kmeger, “The Political Economy of the Rent-Seeking Society,” chapter 4 in this volume; and Richard A. Posner, “The Social Costs of Monopoly and Regulation,” chapter 5 in this volume.
5. On the latter point see the hint of a suggestion by Friedrich A. Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), p. 163. 7Figure 14.2 adjusts for the monopoly welfare loss involved if the market solution is p
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