economic thinkers Flashcards
Who is Adam Smith and what was his belief regarding the market?
Adam Smith (1723-1790) believed in the free market.
What concept did Adam Smith describe that relates to resource allocation?
The ‘invisible hand’ allocates resources in society’s best interests.
What conditions did Adam Smith argue were necessary for a free market to function properly?
No monopolies and low barriers to entry.
What economic concepts did Adam Smith write about?
Specialisation and the division of labour.
Who is Karl Marx and what was his critique of the free market?
Karl Marx (1818-1883) was critical of the free market, arguing it led to a ruling class (bourgeoisie) exploiting the working class (proletariat).
What did Karl Marx predict would happen as a result of exploitation by the bourgeoisie?
The proletariat would rise up in revolution.
What significant political movement was influenced by Karl Marx’s ideas?
The rise of communism in the 20th century.
What was a major flaw in Karl Marx’s ideas regarding economies?
His ideas contained little about how command economies would work.
What happened to many communist countries in the late 20th century?
Many collapsed, leading to the discrediting of communism and command economies.
Who is Friedrich Hayek and what system did he support?
Friedrich Hayek was a supporter of the free market system.
What was Hayek’s view regarding government intervention in resource allocation?
Governments shouldn’t intervene because they lack the necessary information.
How did Hayek view the price mechanism?
As a way for producers and consumers to communicate.
According to Hayek, what determines the price level?
The forces of supply and demand.
Fill in the blank: Adam Smith believed there should be no _______ for the free market to work properly.
monopolies
Fill in the blank: Friedrich Hayek argued that the price mechanism would show what both _______ and _______ want.
producers, consumers
