The international political economy of early modern copper mercantilism: Rent seeking and copper money in Sweden 1624-1776

In 1624-1776 Sweden minted intrinsic value copper coins, alongside silver coins. One purpose behind introducing the copper standard was to use its monopoly position at the European markets to manipulate the international copper prices, implementing a kind of copper mercantilism. This paper presents a model of an early modern copper monopolist that could price discriminate between two different uses for copper: copper for export and copper for minting. The paper concludes that authorities did not completely conform to this rent-seeking model, since there were also other considerations behind minting policy, such as providing a stable monetary system. The model shows that under profit-maximisation minting should have been even higher and the price of copper money lower, but at periods minting and prices approached the optimal state. In the 17th century, the market for copper money was probably too small relative the huge copper production, but by the 1720s and 1730s, when copper production had declined, the copper standard functioned more smoothly.

► The Swedish copper standard in 1624-1776 was based on international copper monopoly. ► The paper presents a model of a copper monopolist able to price discriminate. ► International copper prices had little impact on the exchange rate of copper money. ► Under certain circumstances, the copper standard was fully rational. ► Under profit-maximisation minting of copper coins should have been larger.