In most arts and sciences – from astronomy to zoology – the Renaissance represents a qualitative watershed in human history, and historians are generally united in considering it a period of unprecedented intellectual ferment. Echoes of da Vinci, Galileo and Machiavelli still resound in the way we approach art, science and human coexistence, and it is noticeable how these developments came ‘out of Italy’ (Braudel 1991). As a precondition for this, the Renaissance was also a period when the productive powers of small European city states allowed a large part of the population to live free from poverty. Where feudalism had provided wealth for the very few and misery for most, the city states of the Renaissance for the first time witnessed a situation where artisans, merchants and public employees filled the ranks of a new middle class.

The Debate on Mercantilism: A Brief Overview

In this picture, the economics profession stands out with a completely different view of the period. The fact that 300 years of economic theory and practice tend to be lumped together under the label of ‘mercantilism’, as if it were a homogeneous mass, alone points to a rather superficial treatment of a long period with much variety. The common view today is that mercantilism was ‘an irrational social order’ (Ekelund & Tollison 1981: 6), the basic feature of which was that economists collectively made the serious mistake of confusing gold with wealth. This practice is referred to as the ‘Midas Fallacy’ (chrysohedonism), after the mythological king whose touch converted everything to gold. Starting with Adam Smith, this Midas Fallacy has been the common interpretation of mercantilism, the one also found in today's histories of economic thought. The Midas Legend had, however, been known as a warning since Roman times, and the mercantilists themselves used it to explicitly refute this view of wealth (Barbon 1696). Two American authors have offered what appears to be an alternative interpretation of mercantilism, that of a society seeking rents, presumed to be non-productive (Ekelund & Tollison 1981).

Both these standard interpretations, of mercantilism, and of pre-Smithian economics in general, present us with serious problems.