History of Economic ideas

(10 points) What was the main argument underlying Adam Smith's Theory of Moral Sentiments?

Impartial observer, opinion based, moral basis, the impartial observer is the same for everyone

(10 points) Discuss the main contributions to economics of David Hume.

he was a liberal Mercantilist, created the price specie flow mechanism and thought that balance of trade would lease to higher quantities of gold and silver.

(10 points) What were the main contributions to economics of Richard Cantillon?

was modern in that (1) he started with the goal of establishing basic principles of economics through the process of reasoning, and, more important, (2) he wanted to collect data to use in the process of verifying his principles

Over the past three centuries, economics has been preoccupied by a different main issue in each century. Briefly review the issues that dominated economics in each century, explain how the issues arose, and why the profession moved on to new issues.

1.How is wealth created 2.what is value? 3.What are the properties of economic equilibrium.

(10 points) What was Hermann Heinrich Gossen best known for? What impact did his ideas have on the development of economics.

Asserted the classical economist had erred in explaining the forces determining relative prices by exclusively emphasizing supply.

Discuss the views of the mercantilists related to raw materials. How did raw materials, both produced domestically and abroad, fit into their system?

Believed that all raw materials in a country should be used in domestic manufacturing. Every in of the country should be used for production.

(10 points) Discuss the main contributions of John Stuart Mill to economics. Which economists had the greatest influence on his work? How influential was Mill, both in his own day, and on those economists who followed him?

Complete restatement of Ricardo just further developed, book was standard for its time. Believed wealth should be redistributed. Problem with this was you take away from the producers incentives. Also if you cut down population you would slow production. Would rather have socialism then what he saw going on in britian at the time

(15 points) Why did the industrial revolution begin in Britain? Contrast conditions in Britain with other nations (such as France, China, Germany) to explain why Britain had such a favorable environment for industrialization.

Cotton imports to Britain gave rise to industry, because now they could get a hold of much needed cotton, this allowed for increase in textile production.

(20 points) Discuss the influence that Sir William Petty had on the key ideas of Adam Smith and Thomas Robert Malthus. Were Smith and Malthus in agreement with Petty, or did they argue against him?

He tried to measure population, national income, exports, imports, and the capital stock of a nation. His methods were crude almost beyond belief, leading Adam Smith to indicate that he had little use for political arithmetic.

(15 points) Who developed the theory of surplus value? How is surplus value created?

Karl Marx came up with the surplus value, which is equal to the new value created by workers in excess of their labor-cost, which is appropriated by the capitalist as profit when products are sold.

15 points) Ricardo identified the three economic factors of production as land, labor, and capital. What determines the payments made to each factor? As an economy progresses, describe how Ricardo expected that payments to each of these factors would change.

Land earns Rent> Labor Earns Wages> Capital earns Profit Dont have to pay rent to land for land to be productive.

(10 points) Economists use simplified models to depict a more complex reality. Discuss the role of simplifying and unrealistic assumptions in economic models. Do such assumptions enhance or detract from a model's usefulness?

Models help simplify whats going on in the real world, they assume away a lot of things but convey a lot of key ideas. Like a road map, you don't need to see shapes or boundaries of cities, you just need to know where you are going and landmarks. These assumptions help economist see the big picture, therefor enhancing the conclusion.

(15 points) Discuss the ideas of the Spanish economists around the time of Adam Smith. What types of ideas did they espouse? Why were their ideas not as prominently known as Smith's? Why did their ideas ultimately have less influence than Smith's?

Money had utility and it was higher in places where it was scarce and lower in places where it was abundant. Where not as prominently know.

(15 points) Explain David Hume's contributions to monetary theory and international finance. In the course of your discussion, describe the effects Hume would have expected from an increase in the quantity of money in a country. Explain the effects both in the country with the increased quantity of money and in other countries.

Price specie flow mechanism, believed that it would be impossible for an economy to maintain a favorable balance of trade continuously as any mercantilists advocated. Balance of trade would increase levels of gold and silver.

(15 points) Discuss the views of the mercantilists related to raw materials. How did raw materials, both produced domestically and abroad, fit into their system?

The mercantilist believed that all raw materials in a country should be used in domestic manufacturing; also they believed that every inch of a country should be used for manufacturing, agriculture, and mining. They believed the exporting of gold and silver should be prohibited, and that import of foreign goods be discouraged as much as possible. They wanted imports to be raw materials that could be finished at home.

How does Adam Smith argue that college teachers should be compensated? Briefly explain the logic behind his argument.

Should be paid by their students

(15 points) Explain Karl Marx's theory of surplus value, making sure to differentiate relative surplus value from absolute surplus value.

Surplus value comes because we have a monetary economy, workers are hired by capitalist, and are paid a salary by capitalist.

(10 points) What were Alfred Marshall's main contributions to economic theory? Discuss how his ideas influenced the development of economics in the 20th century.

That both supply and demand create value, he developed supply and demand concepts. Neoclassical Economics.

(15 points) Who were the physiocrats? What were their main ideas, and how do the policy ideas of the physiocrats compare to those of the mercantilists?

The Physiocrats believe that its wasn't how much gold and silver you had, but the productivity. How much land you had and how much you could produce with the land was how they recognized wealth. On the other had the Mercantilists believed that it was all about the collection of gold and silver (precious medals).

(15 points) What is Say's Law? Discuss the viewpoints on Say's Law held by David Ricardo and Thomas Robert Malthus. Did they agree or disagree? What were the arguments of each?

The argument was over the ability of a capitalist system to maintain full employment of it resources significantly influenced the development of economic theory. Ricardo won the argument says laws states that a capitalist system will automatically provide full employment of its resources and high rates of economic growth.

(5 points) What was the main factor that Adam Smith said was responsible for increasing the wealth of nations?

The wealth of nations is caused by the division of labor.

(25 points) What were the key policy ideas of the mercantilists? Explain the logic of the mercantilist ideas, and discuss whether their policies were oriented toward creating wealth and prosperity. What was it that motivated the mercantilists to support their ideas?

They believed that the accumulation of gold and silver determined the wealth of a nation. Wanted to stop trade of gold and silver, believed in exports over imports, total wealth was fixed, low wages, and economic activity was production not consumption.

33. (10 points) The mercantilists advocated protectionist policies that most economists today would argue reduce a nation's prosperity. Why would they have argued for such policies?

They did not think that trading gold and sliver would make them more wealthy. Wealth is valued by how much gold and silver you have. So trading it away would be trading wealth away.

(15 points) Explain the key idea in Malthus's Essay on Population. Discuss the way in which this idea relates to Adam Smith's views on the future direction of economic progress and prosperity.

believed that population would continue to grow, and resources would continue continue to shrink. Population growth would increase land rents due to scarcity of land.

(15 points) While Ricardo and Malthus agreed on many things, they also disagreed in a few significant areas. Discuss those areas of disagreement, and explain which economist's argument had more merit in each case.

disagreements were over says law and malthus's economic idea. Malthus believed corn laws should be self reliant. Ricardo was against the corn laws because he believed it would be better for an comparative advantage and enable free trade.

(20 points) Compare the ideas of John Locke and Thomas Hobbes. Explain how Locke's ideas on philosophy are related to economics.

ideas where new for his time, he thought that what was yours is yours and the government couldn't step in and take it from you or tell you how to act. Hobbes on the other hand thought that the government should be able to intervene and violate peoples rights. John Locke saw that the level of economic activity in an economy depends on the quantity of money and its velocity, and presented a reasonably complete description of the interrelationships among a country's balance of trade, the quantity of money, and the general level of prices. Locke say people having the power. Government should only protect property rights. Hobbes government runs everything.

(10 points)What were the main contributions of Jeremy Bentham to economics? How did Bentham's work influence the development of economic ideas?

measured happiness by utility, measuring rod of money. He thought that if society could measure pleasure and pain, then laws could be created that would result in the greatest amount of happiness for the greatest number of individuals. Wanted to design laws that would lead to the greatest good for the greatest number. His work influenced Mills and others to unite theory and policy.

(20 points) Adam Smith and David Ricardo had significantly different views on the future of prosperity in a market-driven economy. Explain the views of both economists. Which view do you think is more correct? Which view do you think is more closely related to contemporary economic theory? Be sure to support your answers by referencing the ideas of Smith and Ricardo.

smith saw the economy always growing as long as the division of labor continued. Ricardo believed that the scarcity of resources would still expansion and keep people at a certain level of life. I believe in smith because over time we have expanded exponentially with produce, we have encountered economic hard times and seen decline in resources , but wight he expansion of production we are able to make new forms of materials to keep up with high demand of certain products.