Professional Documents
Culture Documents
Why did economics as a field of study show up in the middle Ages and not before?
national political units individuality Commerce material wealth thought and invention
Mercantilists
Tenants and thoughts include emphasis on building national power, building exports and accumulation of money Josiah Child was 17th century mercantilist. Jean-Baptiste Colbert was French Minister of finance from 1661 to 1683. Bernard Mandeville, a social satirist, wrote The Fable of the Bees David Hume questioned the mercantilist assumptions of his day.
Physiocracy
The Physiocrats rose in reaction to Cobert The Tableau Economique highlighted key thoughts Held a laissez-faire attitude Important social impact
Adam Smith
Smith published The Wealth of Nations in 1776 The starting point of wealth is a division of labor which allows people specialize The propensity to trade is the second building block Smith thought the invisible hand would guide people who act in their own self interest to provide benefits for each other and for society
Thomas Malthus
Malthus studied at Cambridge, became a minister in the church of England and a professor of history and political economy Malthus wrote and discussed mainly his principles on population Malthus began with two postulates
First, that food is necessary Second, that the affection between the sexes would continue
Thomas Malthus
Malthus leave the population and the food supply would grow with different rates
Population would grow geometrically The food supply would grow arithmetically Therefore population would out strip the food supply, and mass starvation would result
David Ricardo
Ricardos economic career focused on inflation in the distribution of income He believed that increasing the money supply during the bullion controversy caused inflation Malthus and Ricardo had differing views of economics and debated till Ricardo died.
Marginalist Thought
Marginalism applied the concepts of physics to economics The Marginalists theorized about how people valued and demanded goods and services
Alfred Marshall
Marginal thinking led to the formation of the demand curve Marginal costs of production led to the formulation of the supply curve Marshalls writings ended the dispute over value Marshall developed economic diagrams still in use today
Austrian economics
The Austrians responded to the concept of market socialism They saw the market as the best mechanism for calculating , coordinating and making choices. The Austrians saw markets and competition as a method for discovering information In the Austrian view, prices were an information signal in the market. They thought the competition led to desirable decentralized social planning. They also proposed that the business cycle was created based upon expansions and contractions of the money supply.
Socialist Responce
The market socialists proposed an involved version of pure socialism in which the free markets would determine both buying and selling prices. But the means of production would be socially controlled. Oscar Lange epitomize this new market socialism.
Who won?
We must take various factors into account and trying to decide which side won in this debate
Each side thought it had prevailed over the other The feelings about winners and losers were based on timing At the time of the debate it was commonly felt that the socialists had won Current thought is that the Austrians have scored the victory. However one must define what socialism really is. To the economists from the nineteen thirties, our present economic system would be considered socialism.
Keynesian Economics
He tried to give reasons for the Great Depression
He distinguished between the decision to save and the decision to invest He criticizes stock market investors in the disease of speculation. Keynes claimed that a lack of effective demand caused economic problems. He believed that when savings increased and investment was discouraged, buying power, and in turn production, would decrease, causing a vicious circle to develop.
Keynesian Economics
He felt the businesses had two choices when demand fell. They could respond to the lack of demand by cutting wages or laying off workers. He defended the governments ability to pump up demand. He wanted the government to inject money into the economy.
Milton Friedman
Friedman brought market oriented thinking and economic freedom into public discourse
He believed that the system of fixed exchange rates would not work. And twenty years later it collapsed. In 1952 he argued for an all volunteer army, which was later adopted. He argued for school vouchers in 1962 He proposed both replacing welfare with cash payments and instituting a negative income tax He supports the flat rate income tax He proposed that government should cease printing money and let private enterprise handle it. He opposed Social Security because he thought people took it for granted