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Mercantilism became the dominant school of economic thought in Europe throughout the late Renaissance and the early-modern period (from the 15th to the 18th centuries). Evidence of mercantilistic practices appeared in early-modern Venice, Genoa, and Pisa regarding control of the Mediterranean trade in bullion. However, the empiricism of the Renaissance, which first began to quantify large-scale trade accurately, marked mercantilism’s birth as a codified school of economic theories.[2] The Italian economist and mercantilist Antonio Serra is considered to have written one of the first treatises on political economy with his 1613 work, A Short Treatise on the Wealth and Poverty of Nations.[10]

England began the first large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). An early statement on national balance of trade appeared in Discourse of the Common Wealth of this Realm of England, 1549: “We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them.”[11] The period featured various but often disjointed efforts by the court of Queen Elizabeth (r. 1558–1603) to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping.

Scholars debate over why mercantilism dominated economic ideology for 250 years.[42] One group, represented by Jacob Viner, sees mercantilism as simply a straightforward, common-sense system whose logical fallacies remained opaque to people at the time, as they simply lacked the required analytical tools.

The second school, supported by scholars such as Robert B. Ekelund, portrays mercantilism not as a mistake, but rather as the best possible system for those who developed it. This school argues that rent-seeking merchants and governments developed and enforced mercantilist policies. Merchants benefited greatly from the enforced monopolies, bans on foreign competition, and poverty of the workers. Governments benefited from the high tariffs and payments from the merchants. Whereas later economic ideas were often developed by academics and philosophers, almost all mercantilist writers were merchants or government officials.[43]

Monetarism offers a third explanation for mercantilism. European trade exported bullion to pay for goods from Asia, thus reducing the money supply and putting downward pressure on prices and economic activity. The evidence for this hypothesis is the lack of inflation in the British economy until the Revolutionary and Napoleonic Wars, when paper money came into vogue.

A fourth explanation lies in the increasing professionalisation and technification of the wars of the era, which turned the maintenance of adequate reserve funds (in the prospect of war) into a more and more expensive and eventually competitive business.