David Hume

Definition

David Hume was an 18th-century Scottish philosopher, economist, and historian known for his influential ideas on empiricism and skepticism. His critiques of mercantilism and contributions to economic thought laid the groundwork for later economists, including Adam Smith. Hume's ideas about human nature, value, and the role of government in economic affairs significantly shaped the development of modern economic theory.

5 Must Know Facts For Your Next Test

1. Hume argued against the mercantilist belief that wealth is measured by gold and silver, advocating instead for trade as a source of national wealth.
2. He emphasized the importance of consumer preferences and demand in determining value, which contributed to the development of supply and demand theory.
3. Hume believed that government intervention in markets often leads to unintended consequences, highlighting the dangers of overregulation.
4. His work 'A Treatise of Human Nature' laid out his views on human behavior, influencing both economics and psychology.
5. Hume's discussions on the 'invisible hand' concept predated Adam Smith's popularization, establishing a foundation for classical economics.

Review Questions

• How did David Hume's critiques of mercantilism influence the development of economic thought?
  • David Hume challenged mercantilism by arguing that wealth should not be measured solely by gold and silver reserves but rather through trade and commerce. He emphasized that trade increases overall prosperity, leading to his perspective on national wealth being derived from productive activities rather than hoarding precious metals. This shift in thinking influenced later economists like Adam Smith, who expanded upon Hume’s ideas about free trade and market dynamics.
• In what ways did Hume's understanding of human nature impact Adam Smith's economic philosophy as presented in 'The Wealth of Nations'?
  • Hume's exploration of human nature provided a philosophical underpinning for Adam Smith’s economic theories. Hume posited that individuals are driven by self-interest and social interactions, which Smith incorporated into his concept of the 'invisible hand' guiding market transactions. By recognizing human motivations, both philosophers underscored the significance of individual choices in shaping economic outcomes, ultimately framing a new understanding of market behavior in 'The Wealth of Nations.'
• Evaluate the long-term implications of Hume's ideas on modern economic policy regarding government intervention.
  • Hume’s skepticism about government intervention laid critical groundwork for contemporary debates on economic policy. His belief that such interference often leads to unintended negative consequences has influenced modern laissez-faire economics and policies advocating for minimal state involvement in markets. This perspective has resonated in various economic theories and practices, prompting discussions on the balance between regulation and free markets, shaping policies that favor deregulation in many capitalist economies today.

Related terms

Empiricism: A philosophical approach emphasizing that knowledge comes primarily from sensory experience.

Skepticism: A philosophical attitude questioning the possibility of certainty in knowledge.

Natural Liberty: The concept that individuals should be free to pursue their own interests in a free market without government interference.