History of Economic Thought Mid-term
Terms in this set (44)
Essay #1: Adam Smith's big ideas (1)
Invisible hand: replacing humans/animal strength with machines. The invisible hand is guiding the market, it'll work itself out. All parties ACT IN THEIR OWN SELF-INTEREST which pushes profits/optimizes production/maximizes resources allocation.
Essay #1: Adam smith's big ideas (2)
division of labor: individuals have specific tasks and roles, which helped the industrial era, growth of total output/trade/rise of capitalism
Essay #1: What did idea 2 (division of labor) emphasize?
importance of productivity, introduced the idea of human capital, assailed mercantilism/tariffs, gov.
Essay #1: What did Adam Smith believe in?
in free market where gov. shouldn't be involved, however, he assumed that everyone wouldn't take advantage of the system, and try to let everyone profit.
Essay #1: Reality of smith?
he was a Utopian, and humans will take advantage of the system because they suck, and helped model the first capitalistic system.
Essay #1: Physiocrats
First modern econ school of thought (1700s), first to think about an econ system, French, pushed capitalism, influenced Smith
Essay#1: Physiocrats "Labor Theory of value"
agriculture was the only activity that produced surplus, (but around this time everything was agrarian)
Essay #1: Physiocrat's lasting contribution
their lasting contribution was its methodological approach to econ.
Essay #2: Causal chain of events that Marx saw in the capitalistic system that led to disaster
Capitalism is unstable, ranks of unemployed swell, bourgeoisie vs proletariat.
Essay #2: what else did Marx believe in?
doesn't believe in private property, the steam mill gives you industiral capitalism, economic change threatens the existing order, class conflicts emerge.
#Essay 3: Veblen and what he said--> Human base: how do people think and how does it affect economic behavior?
"saw economic behavior as socially determined and economic organization as an outcome of ongoing evolutionary processes"
Essay #3: What else did Veblen say. (driving forces)
Minimized the importance of interpersonal motivation. Driving forces were human instincts: emulation, predation, workmanship saw economic change as the result of social and cultural forces.
Essay #3: Veblen's influential work
The theory of leisure class (1899): delineation, productive industry managed by engineers, and the parasitism of business which makes profits for the leisure class. the leisure class are the parasites. they don't contribute to society
Essay #3: Veblen's the theory of business enterprise
(1904) saw the growth of business trusts and corporate power as evolution from: craft production to small business firms to large business enterprises. New Industrial processes impelled integration/provided high lucrative to reward for owners. Businessmen- old order (1%) engineers- innovators.
Essay #3: What was the real driver of economic progress (Veblen)
emulation and instinct. THE THEORY OF BUSINESS ENTERPRISE (1904): new industrial processes impelled integration/provided highly lucrative rewards for owners
short answers: Ancient Empires
rome, greece, ruled by nobility, sentorial (rome), warrior (china/persia). All were oligarchy.
Short Answers: Ancient Empire's affect on economy?
After the fall of Rome went into the Dark Ages because of de-urbanization Everything collapsed. trade/commerce ended. THE DARK AGES
Short Answers: Ancient Empire's What did it lead to?
Feudalism (medieval nobilities collecting rents from serfs for a % of agricultural output) and Agrarian (economies focused on agricultural manor. stayed like this until the Renaissance 1300-1400)
Short answer: Corresponding states in europe
England, France, Prussia
Short answer: what effects did the black death have on manorial system? (feudal system)
killed so many people leading to short labor supply, manor system consolidated the disease. speeded up changes: nobles refused common practice, and allowed serfs to buy their freedom.
Short answer: what effects did the black death have on manorial system? (feudal system) - How did capitalism work and play in the manorial system in Europe?
capitalists were looked own upon because they were the new guys, their ideas conflicted with the current ideas, enclosure movement effect on cities and early capitalism.
what else did capitalism effect manorial system?
change in employment system, free peasants, serfs became laborers (TENANTS), cities transformed, A SYSTEM OF AGRARIAN CAPITALISM ARISES
Short answers: neoclassical theory
everyone is rational, information is uniformly distributed, no concentration of economic power, markets are self-correcting, regulation distorts markets
Short answers: smith's big contributions
self-modeling system: governed by supply and demand signals (generated the "correct" amount of goods which resulted a match deman), division of labor (advocated granting/enforcing contracts, patents, public works), Taxation policy
what is smith's taxation policy?
every state has to contribute toward the support of the gov. in proportion to their abilities to the revenue they use under the protection of the state
Short answer: what was Malthus' grim vision?
diminishing return as more is brought into cultivation. Food grows arithmetically population grows geometrically.
Malthus on landlords
they oppressed the economy. Aristocracy- landlords imposed huge taxes on grain imports and industrialists were forced to raise wages to keep up cause of inflation. it was feudalism vs industrialism, and was the birth of European class struggle.
did Malthus anticipate correctly?
Short answer: what was Ricardo's broad model?
developed the idea of monetarism (quantity theory of money), Law of diminishing returns, advocacy and analysis of free trade, idea of comparative advantage (the labor of theory value)
what did Ricardo reveal about capitalism?
Short answer: Difference between Ricardo's and smith's trade theory?
Ricardo's comparative advantage, and smith is absolute advantage
What is ricardo's comparative advantage?
econ law that shows how protectionism (mercantilism) is unnecessary to free trade.
What is Smith's absolute advantage?
ability of a party to produce a greater quantity of good, product or service than competitors by using the same resources. Ex: international trade.
Short answers: Veblen's work elements today?
"Leisure class", businessmen were leisure class, motivated by profits, engineers were the workers being exploited, businessmen conspired against social machine/didn't contribute to economy/caused break-downs in regular flow of output to profit themselves.
Short answer: Say's law (Veblen)?
Supply creates it's own demand, if people lose their jobs this theory doesn't apply, there can be no aggregate demand shortfall (recessions), not all income is spent, in time of uncertainty, more is saved.
flaw in say's law
paradox of thrift: what is rational for individuals is destructive for the whole. CONTRADICTS SAYS LAW
Short Answers: New lanarck
homes for workers, no children in factories (they go to school), works 10 3/4 a day, open-door managers, no punishments for workers of children
man is the creature of circumstances
New lanarck contribution?
created the Great National consolidated trade union
Short answers: communist manifesto, when was it published
1848, communist in France, in a german settlement by Marx and Engels
what was the bourgeoisie?
they were in charge, and (dominated/exploited the proletariat) produces are its own 'grave-diggers'. the victory of the proletariat are equally inevitable as the fall of capitalism
Short answer: Hobson's economic vision
remove the laissez-faire approach of gov. and the profit oriented nature of the modern economy.
quote on hobson
substitution of social control for private profit-seeking motive in the normal processes of our industries is essential to any scheme of social reconstruction.
Hobson's relationship with imperialism?
his insight is that capitalists must invest abroad. First operate more efficiently when clustered than individual firms isolated
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