Misselden, Edward
Misselden, Edward
Edward Misselden (fl. 1608–1654) was both an English merchant and a comparatively enlightened mercantilist. As a mercantilist, he made an important contribution to the development of the idea of the balance of trade as an analytical and measurable concept.
Concern over the state of England’s foreign trade moved Parliament in 1622 to appoint a standing commission on trade, and this event stimulated Misselden to write his tract Free Trade: Or, the Meanes to Make Trade Florish (1622). The book attributed the alleged decay of English foreign trade to excessive imports, to the export of bullion by the East India Company, and to the defective enforcement of the regulations of the cloth trade. Misselden contended that the loss of bullion was partly due to the undervaluation of English coin. Consequently he proposed that its denomination be raised, in the hope that the ouflow of bullion would be checked and that, in “the plenty of money,” trade would be quickened and exports increased. He conceded that too much bullion in the form of plate would cause scarcity of money; nevertheless, for a nation to have plate was considered preferable to turning it into coin and sending it out of the kingdom because of its undervaluation. He realized that landlords and creditors would suffer losses if the denomination were raised and advocated that they be protected by a provision that would make contracts negotiated before the raising of the currency payable at the value of the money when the contracts were made. Like other mercantilists, he did not regard higher prices as an evil if they are accompanied by at least an equal increase in money, stocks, employment, or incomes. In effect, this was his answer to the possible objection that raising the denomination of English coin would result in an increase in commodity prices.
Misselden’s second book, The Circle of Commerce: Or, the Ballance of Trade, was written as a reply to Gerard Malynes—“a dastardly combatant”—who accused him of overlooking the role of foreign exchanges as the chief cause of England’s distress. In this book, Misselden appears to have used in print for the first time the phrase “balance of trade,” describing it as “an excellent and politique Invention, to shew us the difference of waight in the Commerce of one Kingdome with another” (1623, p. 116). The notion of balance was well known; it was the actual measurement of trade in the absence of periodic trade statistics that he regarded as a novel idea. “The first End of our Ballance of trade,” he wrote, “is to shew us the state thereof” (1623, gloss on p. 133). Indeed, by multiplying the customs revenue by 20 (a tariff of 5 per cent), Misselden attempted to measure England’s trade balance for the year 1621; he found it in deficit and, using mercantilist arguments, warned of the impoverishment of the people.
Recognizing that international balance does not consist of commodity exports and imports alone, Misselden added such items as re-exports, profits from fisheries, and freight earnings to commodity statistics in computing the balance. Accordingly, he denied Malynes’ accusation that the East India Company had contributed to England’s shortage of money by exporting “Reals of Plate” to the East Indies, asserting that England not only would benefit from increased employment and freight earnings related to these exports but also would, in the net, derive more bullion from the import of Indian commodities and their re-export to “all parts of the World” than it sent to India to purchase them (1623, p. 35).
In contrast to Malynes, who allegedly held the view that the relative value of internationally traded commodities depends upon the value of the exchanges, Misselden argued that the market value of the exchanges is itself dependent upon the relative demand and supply of the respective foreign currencies and, in turn, upon the relative demand and supply of commodities of the respective countries. Misselden did believe that there is a natural rate of exchange that can be determined by melting down metallic money into its pure form. This “fineness” of money is the “center”—or, in modern terminology, the mint par—“whereunto all Exchanges have their naturall propension” (1623, p. 97). In the last analysis, Misselden observed, the exportation or importation of bullion is to be explained by the general abundance or scarcity of commodities, and with some exaggeration, he accused Malynes of having stated the argument backwards.
This controversy probably represents the first time in English history that a question of economic policy produced a war of tracts which exerted an immediate and traceable influence on government policy. The new views of Misselden and Thomas Mun, an official of the East India Company whom he knew and cited with approval, won a definite victory over the older views of Malynes and Milles.
This is not to suggest that Misselden’s writings on economics were the product of objective scholarship; while they represented an advance over those of earlier pamphleteers, his contributions to the balance-of-trade doctrine and to the theory of ex-changes were steeped in pressure-group politics and in particular circumstances. His exaggerated emphasis on national objectives, combined with his failure to disclose his own private trade connections, lends support to those who see English mercantilism as a body of international trade doctrine primarily concerned with the importance of England’s having an excess of exports over imports—and developed for the most part by merchants pleading for special interests.
Although there is a sharp and irreconcilable conflict between economic universalism and mercantilism, Misselden appears not to have been aware of any such conflict. He argued that England had to increase its exports and decrease its imports to achieve and maintain a positive balance of trade; otherwise its trade would decay and its bullion be lost. He failed to mention, however, that the continuous accumulation of the precious metals by one nation cannot but harm the economic interests of other nations. He simply asserted the natural harmony of private and public interests (1623, p. 17). His failure to understand the fundamental elements of a self-regulating mechanism of adjustment is explained by his confusion about interests, as well as by his generally limited conceptualization.
There is always danger in describing the thought of an earlier period by means of terms or concepts that have later taken on different meanings. Thus, when Misselden advocated greater economic freedom or “free trade” he was certainly not defending economic freedom in principle or in general but only specific forms and degrees of economic freedom. Similarly, when he objected to governmental regulation he was not objecting to it in principle but only to specific forms or degrees of regulation. The achievement of formulating a general doctrine of economic freedom, as distinguished from a selective advocacy of specific freedoms, belongs to the physiocrats and to Adam Smith. They, however, do appear to have built up their general case from earlier specific arguments for particular freedoms. Although never entirely original, Misselden, by advocating certain particular freedoms, made a genuine contribution to doctrinal advance. He pointed out elements in the physical and social order of nature that tend to produce a self-operating and beneficial pattern of human behavior; asserted, however naively, the harmony of private and public interests; stressed the role of invisibles and re-exports in the trade balance; achieved considerable generalization in his discussion of exchanges; and devoted particular attention to the rising role of the large-scale merchant and the important contribution he could make to society if left largely to his own devices. All these concepts served as antecedents in the development of the general doctrine of economic free trade.
John M. Letiche
[See alsoEconomic thought, article onmercantilist thought; International monetary economics, article onbalance of payments.]
WORKS BY MISSELDEN
1622 Free Trade: Or, the Meanes to Make Trade Florish. London: Waterson.
1623 The Circle of Commerce: Or, the Ballance of Trade, in Defence of Free Trade . . . London: Dawson.
SUPPLEMENTARY BIBLIOGRAPHY
Friis, Astrid 1927 Alderman Cockayne’s Project and the Cloth Trade: The Commercial Policy of England in Its Main Aspects; 1603–1625. Copenhagen: Munksgaard.
Gardiner, Samuel R. (1883–1884) 1896–1901 History of England From the Accession of James I to the Outbreak of the Civil War: 1603–1642. 10 vols. London: Longmans.
Heckscher, Eli F. (1931) 1955 Mercantilism. 2 vols., rev. ed. London: Allen & Unwin; New York: Macmillan. → First published in Swedish.
Hewins, William A. S. 1892 English Trade and Finance Chiefly in the Seventeenth Century. London: Methuen.
Hewins, William A. S. (1894) 1953 Edward Misselden. Volume 13, pages 498–499 in Dictionary of National Biography. Oxford Univ. Press.
Johnson, Edgar A. J. 1937 Predecessors of Adam Smith: The Growth of British Economic Thought. Englewood Cliffs, N.J.: Prentice-Hall. → See especially pages 57–69 on “Misselden, the Critic.”
Letiche, John M. 1959 Balance of Payments and Economic Growth. New York: Harper.
Schumpeter, Joseph A. (1954) 1960 History of Economic Analysis. Edited by E. B. Schumpeter. New York: Oxford Univ. Press.
Supple, Barry E. 1959 Commercial Crisis and Change in England, 1600–1642: A Study in the Instability of a Mercantile Economy. Cambridge Univ. Press.
Suviranta, Bruno 1923 The Theory of the Balance of Trade in England: A Study in Mercantilism. Helsinki: Suomalaisen Kirjallisuuden Seura.
Viner, Jacob 1937 Studies in the Theory of International Trade. New York: Harper.
Viner, Jacob 1961 The Intellectual History of Laissez Faire. Univ. of Chicago Law School.