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Sit back and relax in this class -LE
The Main Stuff
All tests 25% Term Paper 25%, pick one school of economic school of thought or pick a scholar within a school and 7 to 10 pages 12 or 14 point Due whenever Extra Credit paper: up to 10% extra - any school of thought. Give your understanding of the school of thought, not necessarily Okraku’s direct quotations. 2-4pg double spaced All tests have cribs 8.5x11 piece of paper, Final Test: Allows double sided
Feudalism
The first elements of European feudalism appeared in France and Germany in the 9th and 10th century It spread to Spain and Italy, the Scandinavian countries then England and eventually the Slavic countries
The Feudal Economy
- Relatively small economic activity
- Primary emphasis was on agriculture
- The primary groups were the king, nobles, knights, the merchants, peasants and the serfs
- The king-controlled money and security
- The merchants-controlled trade
- The serfs controlled the labor
- Lord-vassal relationship Authority was extremely local
- Each feudal manor had one center of God given right of kings and nobles to rule Subordination of BITCHES to men The church was the largest single co-owner of land Few written laws but there were many traditional rights
Breakdown of the Feudal Economy
The Breakdown of the feudal economy Reasons:
- The cities which have been growing in the Middle Ages became increasingly important
- Trade flourished within each country and between countries
- The use of money expanded
- The discovery of gold and silver in the western hemisphere facilitated the growing volume of commence
- Production of goods and services was small scale, but the merchants interceded between the producer and the consumer.
- Merchant Capitalism became very important because they want bitches
- Nations stakes were rising and the most powerful nations were acquiring colonies
- Economic rivalries between nations intensified
Mercantilism 1500-
The major tenets of the mercantilist school
- Gold and silver were the most desirable form of wealth that merchants did equate the wealth of a nation with the amount of gold and silver that the nation had. Export more and Import less.
- Large hard-working population provided an abundance of soldiers and sailors to fight wars to keep the supply of labor high and wages low. Low wages enabled lower prices for exports and thereby raising the inflow of gold and silver.
- Duty free importation of raw materials that could not be produced domestically.
- Great deal of emphasis was put on exports and reluctance to imports
- Nationalism-all countries could not at the same time export more than they import therefor one’s own country should promote exports at the expense of their neighbors. Only a powerful nation could capture and hold colonies, dominate trade routes, and win wars against the nation’s rivals.
- Composition of internal tolls, internal taxes, and the opposition of all other restrictions on the movement of goods.
- Strong central government was needed to promote the mercantilist goal: a. Nationalism b. Protectionism c. Colonialism
Whom did the Mercantilist School benefit or seek to benefit?
- Merchant Capitalist a. The king and government officials b. Individuals in power passed laws that allowed them to get more returns than they would, if these laws were not passed c. Mercantilism bred rent-seeking behavior d. 4% - - 20%
- The government officials in power made the laws and regulations as a way to secure benefits for the (blank) and the royalty
- Gov. officials, judges and law enforcement officers received significant breaks from fines
- Inflow of gold and silver resulted from increased tax collection
What were the Major Tenets of the mercantilist school?
- Rapid growth of economy required more money in circulation Banking was not sufficiently developed
Major tenets of the Physiocrats
- The physiocrat means rule of nature govern human society. All human activities should be brought into harmony gave individuals the right to enjoy the fruits of their own labors as long as it didn’t affect the rights of others
- Laissez-faire -- let people do as they please without government interference. The government should never extend their reach into any economic affairs beyond the minimum essentials to protect life and property.
- Emphasis on agriculture. The physiocrats thought that industry, trade and the professions were useful but sterile agriculture was the most economic activity
- Taxation of the land owner. All taxes imposed on others would be passed on to the land owner. A direct tax on the land owner would be preferable as they were passed on a brig to others.
- Inter-relatedness of the economy. Analyzed the circular flow of the goods and money written the economy. a. goods and services>household>services>firms> repeat
How was the physiocratic school valid, useful, or correct in its time?
- In promoting Laissez-faire, the physiocrats oppose obstacles to capitalist economic development
- By emphasizing the productivity of agriculture, they moved away from the idea that only trade was the way to increase the wealth of the nation
Which tenets became a lasting contribution?
- By analyzing the laws that govern the circulation of wealth the physiocrats founded economics as science
- The law of diminishing returns Originated ideas of tan shifts
- Frances Quasey 1694- a. Developed circular flow of wealth b. Tableau Economics
- Anne Robert Turgot 1727- a. The law of variable proportion
The classical political Economics English Classical school (1776-1871)
- Adam Smith (1723-1790)
- David Ricardo (1772-1823)
- Thomas Robert Malthus (1766-1884)
- Jeremy Banthum (1748-1852)
- Jane Baptiste Say (1767-1852)
- James Mill (1773-1836)
- Nasau William Semol (1790-1864)
Major Tenets of The Classical School
- The first principle of the classical school lassie fair at government
- The forces of free competitive economy guide population, distribution & the exchange of goods & services was to be self-adjusting and turned to reach for employment without government interview
- The emphasized-on harmony of interests. Each individual seeking his/her own interest instead of serving the best interest of society by seeking their own self-interests, they by proxy help the society of economics
- The classist emphasized on the importance of economic activities. The classist - trading, agriculture, industry
- The classist provided a method of analyzing the economy & the economic laws that operate within it
- Law of comparative advantage, Law of diminishing returns, maximum economic growth & development looked at the economy as a whole Adam Smith
- The father & founder of the English classical school
- Published a book titled, the wealth of nations
- Laissez faire -- minimum intervention by government in businesses
- Advocate of competitive economy
- Advocate of free trade
- Law of absolute advantage Advantages of division of labor
- Greater sale of the worker
- Saving of time
- Increase in production
- Greater use of machinery Day 3 Advantages of free trade
- Free trade ensures natural distribution of products among all nations
- Free trade serves the interest of consumers
- Free international trade extends markets Laissez Faire-Functions of government
- Was to protect society from foreign attacks
- Establish administration of justice
- Borrowing - debt financing Bond financing
Turgot - Physiocrat
Ricardo Tarros Thomas Robert Malthus(1766-1854)(Pessimistic view)
- Essay on the principles of population(1798)
- Principles of political economy (1820)
- Theory of population a. Population increased in a geometric ratio b. World food supply increase in an arithmetic ratio c. Preventive checks on population: reduced birth rate i. Postpone marriage until ready to care for child ii. Do not marry at all if you can never take care of a child. Abstinence 😂 :: ( no fun iii. Did not suggest abortion or prostitution d. Positive checks - take over to control population if preventative checks are ignored/don’t work i. Wars, diseases, hunger… e. Theory of Market glut? i. Insufficiently in aggregate demand would bring about less than full employment economy f. GDP - Gross Domestic Product i. Expenditure approach ii. Income approach iii. Y(aggregate supply)=C+I+G+X(aggregate demand) If aggregate demand isn't high enough, employment will suffer.
William Godwin
Anarchist communist
John Maynard Keynes (1883-1946)
Y=C+I+G+Xy
Jeremy Bentham (1748-1832)
Studied law; never married; Studied econ after law school to spread it in society Wealthy because he never married
When he died, his body was stuffed with a wax head, with a white glove and a cane.
- Utilitarian Principle a. The greatest good for the greatest number Example-- If flint has money, they could build a golf course or a bridge across flint river. More people would use the bridge so they would build that. But flint is poor so we just have potholes. -- Use this as a foundation in developing a set of philosophical and economic doctrines pointing towards reform Utility - Satisfying power Cardinal Utility- measured in Utils- Slice of cheese Diminishing marginal utility- Good x/Beer - Total enjoyment when you drink the beer - Total utility - Dilly Dilly Quantity Total Utility Marginal utility 0 0 0 1 30 30 2 45 15 3 55 10 4 60 5 5 62 2 6 62 0
- Developed the law of diminishing marginal utility of income a. The more money you make, the less useful the additional income is
- Boobs
- According to Bentham, if government intervention enhances the happiness of a community more than it diminishes, then government intervention is justified. Belief in the greatest good for the greatest number led him to advocate the following--
- Universal adult suffrage
- Secret Ballot
- Promote national education
- Public Works
- Prison Reforms
John Stuart Mill(1806-1873)
James Mill - Tabula Rasa, Clean Slate - James Mill tried to imprint as much knowledge on Johns mind as much as possible John proofread his dads’ book on the history of India at age 11 At the age of 13 he began to study political economy 15-18 edited manuscripts of Jeremy Bentham 21 had a nervous breakdown, recovered, and became a productive member of society
- A restatement of classical economics a. Book - “The Principles of Political Economy with Some of Their Applications to Social Philosophy” (1848) was divided into 5 books. i. Production ii. Distribution iii. Exchange iv. The influence of the progress of society on production and distribution v. Of the influence of government Production Analyzed the three factors of production
- Capital - the result of saving. Total amount of capital limits the extent of industry.
- An increase in capital gives additional employment to labor.
- All savings are put in investment. Saving = Investment. Distribution
- The laws of production are unavoidable. (Law of diminishing returns). The laws of distribution are manmade. (progressive taxation, regressive taxation, proportional taxation). Once the goods and services are produced society can divide the goods in any way society so desires.
Wages fund theory (theory was wrong)
- Set of funds set aside to pay the wages of labor
Nassau William Senior (1790-1864)
Emphasized the idea of positive economics and normative economics 4 Propositions
- Man desires to obtain additional wealth with as little sacrifice as possible
- Population is limited only by moral and physical evil or by fear of deficiency of goods and services (such as food)
- The law of diminishing returns
- Principle of capital accumulation through savings
Elizabethan poor laws (1601) Reformed in 1832
- Poor Law commission set up in 1832 a. Discouraged the application for relief by people physically able to work. The condition of those receiving welfare should be worse than those of the poor pay wages b. Supported minimum government intervention in the economy c. Opposed to trade unions. Trade unions conspired to refrain trade d. Opposed to English factory legislation which limited hours worked by adults e. Opposed to child labor in factories
Who did the classical school benefit or seek to benefit?
- The classical school served all society the application of classical theories promoted capitol economic growth
- It gave business people respectability that was previously directed to the nobility
- Merchants and industrialists achieved new status and dignity as promotes of the nation's wealth
- Entrepreneurs were assured that seeking profits they are serving society
- The classical ideas helped to promote political social and economic climate that encouraged industry trade and profit making.
How was the classical school valid, useful, or correct in its time? YES! It was
valid, useful, or correct in its time
a. Justified the overthrow of mercantilism which had outlived its usefulness b. Classical school showed that governments were wasteful and corrupt. Less government intervention, better off society is c. By helping to remove the remnants of the feudal system, the classical school promoted business enterprise d. The elevation of the private sector led to maximum expansion of production e. Classical economics enlarged the market by achieving free international trade
Which tenets of the classical school became a lasting contribution?
- The classical economist gave the best analysis of the economic world up to their time it laid the foundation of modern economics as social science
- These tenets became a lasting contribution a. The law of diminishing returns b. The law of comparative advantage c. The notion of consumer sovereignty d. The importance of capital accumulation to economic growth e. It showed that laissez faire was an inadequate economic policy to deal with such topics as economic depression, monopolies, and monopoly power
300 families in a 9 mile square 3m
- Agriculture and handicraft production would dominate
- Subsidence would be product regardless of contribution Children would do the dirty work Workers would be assigned tasks according to their epicure.
- Red bank - N.J. - (1843-1856)
- Brook Farm near Boston MA (1841)
- New Harmony - IN (1825-1889) Christian Socialism Advocate
Charles Kingsley (1819-1875)
Reform Society
- Apply the social principles of Christianity to modern industry life.
- The workers were affected to solace of religion to assuage their pain and given them hope
- The bible was to form the manual of the statesman, of the employer, and the worker
- Property owned by the rich was to be held in trust for the benefits of everyone
- Advocated education factory legislation formation of cooperative societies as a mean of reforming society 1833- child labor laws were passed so they had to work less than 12 hours a day 1844- children had to see a doctor before working in a factory 18xx- children had to work less than 10 hours a day Marxian Socialism
Karl Marx (1818-1883)
Two Worlds Capitalists Workers (Bourgeoisie) (Proletariat)
- Capitalism is a mode of production based on private ownership of the means of production.
- The capitalists produced commodities for the exchange in the market.
- To stay competitive, the capitalists must extract as much labor from the workers as possible at the lowest possible cost.
- According to Marxism, the economic interest of the capitalist is to pay the workers as little as possible - just enough to keep the worker alive and productive.
- The workers in turn come to understand that their economic interest lies in preventing the capitalists from exploiting them.
- Social relations of production are inherently antagonistic
- This leads to a class struggle that will lead to the overthrow of capitalism by the workers (by the proletariats)
- The proletariats (the workers) will replace the capitalist’s mode of production with a mode of production based on the collective ownership of the means of production. Socialism and communism. Capitalism → Socialism Socialist slogan: From each according to his/her ability to each according to his/her work Communist Slogan: From each according to his/her ability to each according to his/her need According to Marx:
- The existing society has divided had divided itself into 2 groups. a. The workers b. The capitalists
- The capitalists had concentrated property in the hands of the few and centralized the means of production.
- Capitalists production had given rise to competition
- Capitalism had created a system under which the workers are enslaved and exploited.
Marx’s Theory of Exploitation
Based on the Labor Theory of Value - the exchange value of any commodity depends on the amount of necessary labor needed to produce the commodity. Table - needs 20 labor hours to be produced. If a lazy worker takes 40 hours, it is still worth 20 labor hours. If a machine does it in 5 hours, it is still worth 20 labor hours. Value = C+V+S C = raw material (stored labor) …….V = wages……...S = surplus value Value = V+S
- The nation would no longer be divided into opposing camps of capital and labor. It would be divided into producers and consumers.
Anarchism - Pierre Joseph Proudhon (1809-1865)
- All forms of government are coercive and should be abolished
- The state is the route of all evils
- Property is theft - therefore private property should be eliminated and replaced by collective or public ownership
- Human nature is essentially good if not corrupted by the states and its institutions
- Mutual understanding cooperative and complete liberty would characterize the anarchistic society
Fabian Socialism - Sidney Webb, Beatrice Webb, George Bernard Shaw,
Grahm Wallace, H.G. Wells, Bertrand Rossel, Harold Lasko
- Organized in 1884 in england by a bunch of english intellectuals ^
- Fabian - Roman General - Quintus Fabius Maximus a. Delaying tactic
- Policies a. Nationalization of key industries in Great Britain b. Factory Legislation c. Tax reforms d. Formation of consumer cooperatives e. Government regulation of industries f. Extension of ballot box (voting) g. Education - LSE Questions
- What groups of people did socialism serve or seek to serve? a. The more moderate groups (Utopian Socialism, Christian Socialism) Claimed to represent everyone’s interest, with primary emphasis on the needs and interests of the workers i. They served the workers by arousing the conscience of society and inspiring the middle-class reformers thereby promoting legislature reforms b. The extreme socialist groups (Marxists, Anarchists, Syndicates) proclaimed class warfare against the rich. i. They aimed at promoting the interests of the working class
- Was Socialism Valid, useful, or correct in its time? a. The workers had legitimate grievances against laissez faire capitalism b. The Utopian socialists expressed their disturbed conscience of humanity c. Marxian Socialists dissected contemporary society and exposed the evils d. Validity- The problems of poverty and recurring business depression were not faced squarely by the capitalist e. The socialists performed a service by concentrating on these unsolved problems
- How did Socialism outlive its usefulness? a. Non-socialist groups instituted changes that the socialists advocated b. The Capitalist System undertook reforms without giving up its property, it knew that if little was not given much more would be taken c. The system grew rich and could afford to offer more d. Trade unions, political action groups and the government intervened to ameliorate the conditions of the workers e. New middle class arose the self-employed, the professionals, the engineers, lawyers, the scientists. Society did not polarize into opposing classes
The German Historical School
- Formed as a reaction against the Classical School
- Classical School: a. Emphasized the Labor Theory of value, Laissez faire, and Free Trade b. Methodology was abstract, deductive theoretical models w/ simplistic assumptions c. Placed little emphasis on historical facts i. Economic loss applied to every country and they are valid for all times and all places
The major tenets of the German Historical School
d. Evolutionary approach to economics - The social organism is born develops grows and finally decays and dies. i. Society is constantly changing what is relevant economic doctrine for one country at a particular time may be irrelevant for another country or age e. Emphasis on the positive role of government i. If the social organism is the center of study then society and the state occupy the center stage ii. In Germany it was the state that forced industry transportation and economic growth iii. Gave great prominence to the need of the state intervention in economic affairs f. Inductive/historical approach in the study of economics i. Emphasis on the importance of studying the economy historically as part of integrated whole ii. Economics and other social sciences are interdepartmental economics must be treated in combination with other branches of social science g. Advocacy of conservative reform i. The German state should be entrusted with improving the conditions and wellbeing of the workers. The advocates of moderate social changes were referred to as “socialist of the chair”
e. Government found these ideas to be treason, and was in prison, then moved to the US, Pennsylvania, farmer, business person and promoter. Moved back to Germany and killed himself in 1846 f. 1841 he published a book, The national system of political economy. g. Unrestricted imports of manufactured goods hindered the future growth of German industries h. This he thought needed to be done i. Economic unification and economic nationalism of Germany should co through protection ii. Free Trade within Germany iii. High tariffs against imports of manufactured goods to protect newly emerging domestic industries (in today's world this is infant industries argument) iv. Opposed protection of agriculture because agriculture was an old, mature industry and will increase the price of food and manufacturing required cheap food for labor and cheap raw materials v. Development of large-scale industry through protection would enlarge the home market for agriculture i. List popularized the idea of steady stages of economic growth i. The savage state ii. The pastoral stage iii. The agricultural stage iv. The agricultural & manufacturing stage v. The agricultural, manufacturing & commercial stage (here for free trade) j. Every nation should strive and achieve the agricultural manufacturing and commercial stage i. A nation could supply vast populations ii. Return its independence iii. Maintain a powerful navy iv. Extend its area of influence v. Establish colonies for foreign trade vi. Develop arts and science k. How to get to the 5th stage i. It depends on the natural resources a nation posses ii. 1st stage country should enter into free trade with other advanced countries and develop its agriculture iii. 2nd stage country growth of manufacturing should be fostered iv. 3rd stage country development of foreign trade should be aimed at v. 4th stage country protective measures should be adopted vi. 5th stage unrestricted competition at home and in foreign markets l. According to list manufacturing can only be established in the temperate zones only in this climate would foster the necessary intellectual and physical efforts m. The tropics should remain on free trade basis and continue to supply raw materials for exchange of manufactured goods
n. A country in the tropics would make a fatal mistake if it tried to become a manufacturing country o. List advocated the generation of future productive power i. A nation should not be content with the present amount of commodities produced. A nation should increase its productive forces which would lead to the regular supply and uninterrupted flow of goods and services p. Forces to stimulate future production of a nation i. Preservation of morals and social institutions (liberty of .. Freedom of thought and expression, jury by trial, freedom of conscience, christian religion, invention of money and abolition of slavery ii. Preference for manufacturing and agriculture iii. Important features of protection
- That protection should never be granted agriculture because it would increase food prices. This would lead to a higher cost of living and higher wages. This would be detrimental to the growth of industries
- Protection should be adopted only when a nation cannot compete with well-established industries of other countries. After they have fully developed protection should give way to competition.
- Protection is justified only when it is adopted to provide industrial education to a country so that the economy may develop
- Protection is or those countries which have the necessary resources and whose people have the aptitude for individual activities. Production is suitable for countries lying in the temperate zone.
- Protection should not be granted to all branches of industry to the same extent q. Theory of Nationality i. List rejected the idea of cosmopolitanism of the classicists. All individuals did not belong to one nation. Individuals belong to different nations with divergent views on economic and political matters ii. Economics based on nations Differed from the doctrines of individual economics and cosmopolitan economics by Adam Smith
- An individual promotes his own personal interests but the state fosters the welfare of all its citizens.
- An individual may prosper from actions which harm the interest of a nation (eg. slavery may be a public calamity for a country but some people may do well in carrying on the slave trade)
- Activities beneficial to society may injure the interest of certain individuals. Canals and railroads may do good to a nation but wagoners may complain of this improvement (what is good for a state might be harmful to an individual)
