History of Economic Thought Lecture 1 Flashcards
Pre Adam Smith “Economists”:
- Aristotle
- Scholastics
- Mercantilists
- Pre-Classicist David Hume
- Physiocrats and Quesnay
Natural price
price emerging under free and effective competition, without monopoly, recourse waste and deceitful behaviour
Who came up with “Natural price”?
Scholastics
Which pre-Adam Smith “economists” were against mercantilists?
Pre-Classicist David Hume
Physiocrats and Quesnay
Contours for later developed quantity theory of money
Pre-Classicist David Hume
National Accounts Model
Empirical knowledge about model parameters
Agriculture is basis for economic wealth
laissez faire, laissez passer
Physiocrats and Quesnay
laissez faire, leissez passer
Physiocrats and Quesnay
Government should promote free competition and free trade
Which 2 revolutions led to start of classical thought?
- Scientific revolution
2. Industrial Revolution
List 5 main ideas of Classical School:
- Limited government intervention
- Self-interested economic behaviour
- Harmony of interests
- All economic resources and activities important
- Economic laws
Who wrote “The Wealth of Nations” (1779)?
Adam Smith
Adam Smith’s Labour theory of value
Relative prices are determined by relative production costs
Adam Smith in the book ‘Price Theory” first put focus on:
Labour productivity, but no role of demand in formation of prices
Adam Smith agreed with the Scholastics that:
wages/rents/profits all tend towards the “Natural Price”
Market price
Price that prevails in the market: supply VS effectual demand
Why Adam Smith thinks competition is good for the economy efficiency?
resources are devoted to most efficient uses, output is max.
Adam Smith criticised ___ for ___:
Mercantilists for restricting international trade
What are 3 government functions according to Adam Smith?
- Protect society against violence and foreign intervention
- Protect individuals against injustice and oppression by other members
- Keep public work and institutions alive
When is “Public Good” first mentioned?
By Adam Smith when he describes the role of government (maintenance of public work and institutions)
According to Adam Smith, what drives Economic Growth?
Capital Accumulation
Who first mentions “efficient wage”?
Adam Smith in the Theory of Wage Fund
During what times Thomas Malthus grew up?
English colonial times
Who came up with the Population Growth
Theory?
Thomas Malthus
What is implicitly mentioned in Thomas Malthus’s Population Growth Theory?
Diminishing Marginal Returns
What mechanisms does Thomas Malthus introduce to keep population growth down?
Preventive checks (reduce birth rates) Positive checks (increase death rate, famine, diseases)
Who came up with the Theory of Market Gluts?
Thomas Malthus
What does Theory of Market Gluts mean?
Potential insufficiency of effective demand -> workers cannot buy back total output -> landlords should consume to avoid glut of good on market and hence prevent market stagnation and unemployment, spending creates effective demand without adding to production costs
What is Thomas Malthus’s Population Theory in Economic Policy?
No government relief to the poor, make people have fewer children
What is Thomas Malthus’s Theory of Market Gluts in Economic Policy?
Prevent abolishment of Corn Laws, so no free trade, enrich landowner, avoid stagnation
Who was the #1 Fan of Corn Laws?
Thomas Malthus
What did Thomas Malthus’s Theory of Market Gluts showed today?
Awareness of problem that lack of demand could lead to unemployment
Who later build on the Thomas Malthus’s Theory of Market Gluts?
John Maynard Keynes
