Module 5 Flashcards
Aristotle emphasizes
the importance of domestic
production (“____”) and
explains the role of money.
Economy
Scottish writer _____
is often considered the most
important economist the
world has ever known. The concepts
of ____ and _____ that
he explored, and the possibility of
different types of agreements and
interests—such as “_____”—are of recurring appeal
to philosophers.
Adam Smith, Bargaining, Self-Interest, The Common Interest
His writings are
also important because they give
a more general and abstract form
to the idea of the “____”
society that was developed by
his friend David Hume
Commercial
Man is
an ____
that makes
_____.
Animal, Bargains
In other words, “we address
ourselves, not to [another’s]
humanity, but to their ____.”
Self-love
Humans may also depend on this
sort of “_____”,
but they cannot resort to it whenever
they need help, because life requires
“______.”
Fawning or Servile Attention, The Cooperation and Assistance of
Great Multitudes
For this reason, “man is an
animal that makes _____”—and
the _____ is struck by proposing
a deal that appears to be in the
self-interest of both parties.
Bargains
This process was
revolutionized by the invention of
_____, which abolished the need
to ____.
Money, Barter
From then on, in Smith’s
view, only those who were unable
to work had to depend on _____.
Everyone else could come to the
marketplace to exchange their
____—or the money they earned
through ____—for the products
of other people’s ____.
Charity, Labor
This elimination of the need to
provide everything for ourselves led
to the emergence of people with
particular sets of skills (such as
the baker and the carpenter), and
then to what Smith calls a “_____” among workers. This is
Smith’s phrase for ______,
whereby an individual not only
pursues a single type of work, but
performs only a single task in a job
that is shared by several people.
Division of Labor, Specialization
The _____ is the key to establishing
an equitable society, in Smith’s view.
With the freedom provided by the
buying and selling of goods, individuals
can enjoy lives of “_____.”
Market, Natural Liberty
Smith illustrates the importance of
specialization at the beginning of
his masterpiece, _____ , by showing how the
making of a humble metal pin is
radically improved by adopting the
factory system.
The Wealth of Nations
Smith was impressed by
the great improvements in the
productivity of labor that took place
during the ______—
improvements that saw workers
provided with much better
equipment, and often saw
machines replacing workers.
Industrial Revolution
The _____ could not
survive in such a system, and even
philosophers began to specialize
in the various branches of their
subject, such as logic, ethics,
epistemology, and metaphysics
Jack-of-all-trades
Smith says that in conditions
of _____, the market can
lead to a state of ____—
one in which everyone is free to
pursue his own interests in his own
way, so long as it accords with the
laws of justice
Perfect Liberty, Perfect Equality
By equality, Smith is not referring to equality of opportunity, but to equality of
____. In other words, his goal
is the creation of a society not
divided by competitiveness, but
drawn together by ____
based on mutual self-interest.
Condition, Bargaining
His point is
that society as a whole benefits from
individuals pursuing their _____. For the “______” of
the market, with its laws of supply
and demand, regulates the amount
of goods that are available, and
prices them far more efficiently than
any government could.
Own Self-Interests, Invisible Hand
In Smith’s proposed society, a _____
can limit itself to performing just a
few essential functions, such as
providing defense, criminal justice,
and education, and taxes and duties
can be reduced accordingly
Government
Just as bargaining can flourish within national boundaries, so it
can flourish across them, leading to
_____—a phenomenon
that was spreading across the
world in Smith’s time.
International Trade
Nevertheless, when
The Wealth of Nations was first
published, its doctrine of free and
unregulated trade was seen as
revolutionary, not only because of
its attack on established commercial
and agricultural privileges and
monopolies, but also because of its
argument that a nation’s wealth
depends not on its gold reserves,
but on its ______—a view that went
against all economic thinking in
Europe at the time.
Labor
_____ is an incredible
money-creating machine, but Smith
warns against the dehumanizing
effects it can have on workers if it
is used without regulation.
The Production Line
A ____ is a concept,
and as such can exist anywhere—
not only in a designated place such
as a town square.
Market
________
explored the idea that when people
act out of self-interest, they benefit the
whole of society, like the self-interested
behavior of bees benefits the hive.
Mandeville’s Fable of the Bees
Man, in his freedom, rivalry,
and desire for gain, is “led by an
____ to promote an end,
which was no part of his intention”
—he inadvertently acts on behalf of
the wider interest of society.
Invisible Hand
The idea of “_____”
was not new. It was proposed in
1714 by the Dutch writer Bernard
Mandeville in his poem The Fable
of the Bees. This told the story
of a beehive that was thriving
on the “vices” (self-interested
behavior) of its bees. When the
bees became virtuous (no longer
acting in their own self-interest
but trying to act for the good of
the hive), the beehive collapsed.
Spontaneous Order
Smith thought that _____ were key to making society fair.
With the freedom to buy and sell, people
could enjoy “natural liberty.”
Markets, Natural Liberty
Smith saw humans
as having an inclination to “_____” (_______)
and to better themselves. Humans,
in his view, were social creatures
who act with moral restraint, using
“_____” in competition.
Truck and Barter, Bargain and Exchange, Fair Play
Smith believed that
_______ should not interfere
with commerce, a view that was
also held by other Scottish thinkers
around him, including the
philosopher David Hume (p.47).
Governments
An earlier French writer, Pierre de
Boisguilbert, used the phrase _____ (“leave nature alone”),
by which he meant “leave business
alone.”
Laisse Faire la Nature
The term “____” is
used in economics to advocate
minimal government. In Smith’s
view government did have an
important role, supplying defense,
justice, and certain “_____”
(pp.46–47) that private markets
were unlikely to provide, such
as roads.
Laissez-Faire, Public Goods
In an essay in 1945,
titled _____, the Austrian economist
Friedrich Hayek (p.177) showed
how prices respond to individuals’
localized knowledge and desires,
leading to changes in the amounts
demanded and supplied in the
market
The Use of Knowledge in
Society
Second, Smith said that the market
system generates prices that are
“___.” He believed that all goods
have a ____ that reflects
only the efforts that went into
making them.
Fair, Natural Price
Smith described the ways in which
labor, landowners, and capital (here
invested in the horses and plow) work
together to keep the _____
moving and growing.
Economic System
In that case, opportunities for gain
will arise, and prices will increase,
but only until ____ brings
new firms into the market and
prices fall back to their natural
level. ____ is essential for prices are to be fair.
Competition
