Economic TheoristsEconomic TheoristsAdam Smith Karl Marx John Maynard

Keynes

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Adam smith1723-1790Adam smith1723-1790

The Father of the Modern economics

• 1776 - wrote “A Study into the Nature and Causes of the Wealth of Nations”

• often seen as the beginning of the study of economics.

• outlines the workings of capitalism

Key ideas from this work

1.The Invisible Hand

2.Self-Interest

3.The Division of Labour

4. Laissez-faire

•business cycle - regulated through the balance of supply and demand

• Individuals acting in their own self-interest create wealth

•Basically assembly line production. Specialization results in increased output.

•The government is to leave the economy alone.

So...what does pure capitalism look like?

KARL MARX and frederick engles

1818-1883 1820-1895

Who...instead of creating something obvious like the disposable razor wrote “The Communist Manifesto” in 1848

it’s nice and short it’s extremely convincing

• The nice thing about reading The Communist Manifesto is:

And this leads to my all time favourite quote:If you’re 20 and not a

communist you have no heart but if you’re

30 and not a capitalist you have no

brain.This, to me, explains why hippies of

the ’70’s are CEO’s today.

Anyway - if satire and politics are your thing I highly recommend reading...

London, 1840: Wagner's latest opera plays to packed houses while disgruntled workers gather in crowded pubs to eat ice cream and plan the downfall of the bourgeoisie. Meanwhile, the Pirate Captain finds himself incarcerated at Scotland Yard, in a case of mistaken identity.

Discovering that his “double” is none other than Karl Marx, the Captain and his crew are unwittingly caught up in a sinister plot that involves intellectual giants, enormous beards, and a quest to discover whether ham might really be the opium of the people.

•Capitalism is evil - and destined to lead to it’s own demise.

the theories of marx

•The workers (proletariat) are being exploited (taken advantage of) by

the owners of business (the bourgeoisie)

•As a result a class struggle is inevitable.

Ultimately the Proletariat will rise up and revolt against the Bourgeoisie resulting the

Dictatorship of the Proletariat

As Marx said: "The proletarians of the world have nothing to lose but their chains. They have a world to win. Workers of all countries: Unite!"

Proletariat Bourgeoisie

•Working Class •Owners of the means of production

a class struggle is inevitable

• It is a simple matter of educating the proletariat

• they do not need to live this way.

• they are blinded by assumed custom and religious belief.

• In the actual Communist Manifesto religion (not ham) is described as the opium of the people.

• generally Marx’s point was that religion works to make people feel better about their poor existence and the exploitation they were living under.

The opium of the people

• Simple really:

The dictatorship of the proletariat (Socialism)

• this creates a new system in which (appointed representatives of) the working class control the government - make all political and economic decisions.

• thus creating a socialist state. • wealth is redistributed to create equality

• Revolutionaries overthrow the government

• the state - not the people - now own all means of production - private property is abolished.

creating a pure communist system

• In time members of such a society will produce according to their ability and consume according to their needs - thus creating a pure communist regime.

• no need for government or central authority

• no need for currency

• no whole nation of the world has ever achieved this level.

So...do we live as Smith would have

us with a “survival of the

fittest” mentality

So...do we live as Smith would have

us with a “survival of the

fittest” mentality

or...do we allow some overseeing authority

control everything, make all decisions, and create a system where a Jones is a

Jones is a Jones

or...do we allow some overseeing authority

control everything, make all decisions, and create a system where a Jones is a

Jones is a Jones

First some economic terminology

• Capitalism - is also known as a market system (and therefore pure capitalism = pure market)as the workings of the market control and direct the economy.

• Communism - as practiced in the real world examples of China, Cuba and the former Soviet Union is actually Socialism in practice.

• In economic terms this system is known as the command system and pure socialism = pure command.

john maynard keynes(Pronounced like ‘DANES’)

• Believed it is possible to eliminate Laissez-faire without reverting to a Dictatorship of the Proletariat

1936 - wrote General Theory of Employment, Interest, and

Money

This outlined the ideas for a MIXED MARKET SYSTEM

mixed market system

• The Mixed Market system, therefore, contains elements of both the command and market systems.

• the resulting combination depends on the political system in place. (i.e. Canada has a great deal more command elements than the United States.)

• Keynes looked at the conditions of the Great Depression and argued that the invisible hand simply was not working - sometimes the government does have to get involved in the

a political/economic spectrum

Traditional Economy

Pure Command Economy

Pure Market Economy

How is the question “What to

produce” answered?

How is the question “How to

produce” answered?

How is the question “For

whom to produce” answered?

Who claims ownership of

the productive resources?

Advantages to this economy?

Disadvantages to this

economy?

Traditional Economy

Pure Command Economy

Pure Market Economy

How is the question “What to

produce” answered?

Custom and Tradition

How is the question “How to

produce” answered?

Custom and Tradition

How is the question “For

whom to produce” answered?

Custom and Tradition

Who claims ownership of

the productive resources?

- family, community,

council

Advantages to this economy?

- stability, certainty

Disadvantages to this

economy?

- lack of initiative, growth,

innovation

Traditional Economy

Pure Command Economy

Pure Market Economy

How is the question “What to

produce” answered?

Custom and Tradition

Central Authority

How is the question “How to

produce” answered?

Custom and Tradition

Central Authority

How is the question “For

whom to produce” answered?

Custom and Tradition

Central Authority

Who claims ownership of

the productive resources?

- family, community,

council

- the central authority

Advantages to this economy?

- stability, certainty

- resources may be

rationally organized to meet goals.

Disadvantages to this

economy?

- lack of initiative, growth,

innovation

- lack of incentives.

- inefficiency- limited/no

freedom

Traditional Economy

Pure Command Economy

Pure Market Economy

How is the question “What to

produce” answered?

Custom and Tradition

Central Authority

Operation of the market

How is the question “How to

produce” answered?

Custom and Tradition

Central Authority

Operation of the market

How is the question “For

whom to produce” answered?

Custom and Tradition

Central Authority

Operation of the market

Who claims ownership of

the productive resources?

- family, community,

council

- the central authority

- the people

Advantages to this economy?

- stability, certainty

- resources may be

rationally organized to meet goals.

- economic freedom

- efficiency- wants and

needs are met

Disadvantages to this

economy?

- lack of initiative, growth,

innovation

- lack of incentives.

- inefficiency- limited/no

freedom

- economic instability and

inequality