History of Economic Thought Final

6. Centralization of the means of communication and transportation in the hands of the state

In the U.S., communication and transportation are controlled and regulated by the Federal Communications Commission (FCC) established by the Communications Act of 1934 and the Department of Transportation and the Interstate Commerce Commission (established by Congress in 1887), and the Federal Aviation Administration as well as Executive orders 11490, 10999 -- not to mention various state bureaucracies and regulations. There is also the federal postal monopoly, AMTRAK and CONRAIL -- outright socialist (government-owned) enterprises. Instead of free-market private enteprrise in these important industries, these fields in America are semi-cartelized through the government's regulatory-industiral complex.

Establishing the Roots of Economics -

It was Alfred Marshall (1842-1942) who reconciled these two approaches. He argued that the market price (economic value) was determined by both supply and demand (as also noted by Adam Smith).

Which of the following individuals believe that through Mercantilism a nation is __________ increasing and consolidating the wealth of the nation?

Jean-Baptist Colbert

Adam Smith

Laissez faire

In classical antiquity two distinct words were used to describe human economic _______

Oikonomia and Chrematistic

David Ricardo

(Theory of Wages)-tried to show that economics was not the "dismal science" that its radical and literary critics has supposed

Utilitarianism

-sole contribution to the fundamental problem of the ethical theory -classic defense of the view that we ought to aim at maximizing the welfare of all sentiment creatures, and that welfare consists of their happiness -greatest good for largest number of people

The Concept and Mechanism of The Invisible Hand

1. Smith believed in and prompted the concept of decentralization. Local government is better 2. The private individual knows much more about his or her local conditions than a central government that is thousands of miles away. 3. Centralized administrations is usually uninformed about local situations. Often tends to be abusive and wasteful. 4. Smith: The Invisible Hand-the mechanism that leads people to promote community welfare is the market system that functions via forces of competition (i.e. supply and demand). Note the role of the human factor. 5. To Smith, competition guides the process of production and ensures the the efficient distribution of resources. 6. Competition protects all agents in the marketplace.

six dimensions of the human factor

1. moral capital: sense of right and wrong 2. aesthetic capital: sense of beauty and ugliness 3. human capital: acquired knowledge and skills 4. human abilities: acquired knowledge and skills 5. human potential: yet to be tapped talents, etc. 6. spiritual capital: ability to connect to God and the universal principles

In which century did the great transformation of Europe to market economy begin:

15th century

3. Abolition of all rights of inheritance.

Another Marxian attack on private property rights is in the form of Federal & State estate taxes and other inheritance taxes, which have abolished or at least greatly diluted the right of private property owners to determine the disposition and distribution of their estates upon their death. Instead, government bureaucrats get their greedy hands involved .

which of the following individuals analyzed the ethical foundations of market exchange?

Aquinas

Which of the following Greek Philosophers defended private property ownership, and ______ that is promotes economic efficiency, engenders social peace and encourages the development of moral character?

Aristotle

When I was born I was a vehicle for the portrayal of orthodoxy in theology and an acceptance of Greek and Islamic philosophy and science as means of understanding the world and making it better. My proponents concentrated their time, effort, and scholarship on reconciling faith and reason. They used me as an umbrella under which to organize all knowledge under theology--the supreme authority. Above all, my adherents used a dialectic method and syllogistic reasoning to present their doctrines to all other during their lifetime. Who am I?

Capitalism

.................... believed that a divine providence has ordained the existence of a unit and inherently perfect natural order.

Francois Quesnay

10. Free education for all children in government schools. Abolition of children's factory labor in its present form. Combination of education with industrial production, etc. etc.

People are being taxed to support what we call 'public' schools, which train the young to work for the communal debt system. We also call it the Department of Education, the NEA and Outcome Based "Education" .

Which of the following Greek scholars did not believe that the marketplace is capital ________ regulation?

Plato

2. A heavy progressive or graduated income tax.

The 16th Amendment of the U.S. Constitution, 1913 (which some scholars maintain was never properly ratified), and various State income taxes, established this major Marxist coup in the United States many decades ago. These taxes continue to drain the lifeblood out of the American economy and greatly reduce the accumulation of desperately needed capital for future growth, business starts, job creation, and salary increases.

5. Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.

The Federal Reserve System, created by the Federal Reserve Act of Congress in 1913, is indeed such a "national bank" and it politically manipulates interest rates and holds a monopoly on legal counterfeiting in the United States. This is exactly what Marx had in mind and completely fulfills this plank, another major socialist objective. Yet, most Americans naively believe the U.S. of A. is far from a Marxist or socialist nation.

1. Abolition of private property in land and application of all rents of land to public purpose.

The courts have interpreted the 14th Amendment of the U.S. Constitution (1868) to give the government far more "eminent domain" power than was originally intended, Under the rubric of "eminent domain" and various zoning regulations, land use regulations by the Bureau of Land Managementproperty taxes, and "environmental" excuses, private property rights have become very diluted and private property in landis, vehicles, and other forms are seized almost every day in this country under the "forfeiture" provisions of the RICO statutes and the so-called War on Drugs..

Using an appropriate diagram, present in a step-by-step fashion how economic growth begins and remains sustained in the Smithian Economy. After having done so, what are the major components of the Natural Price according to Adam Smith? Using supply and demand analysis-with an appropriate/illustrative graph, explain briefly how the Natural Price is determined in the Smithies Economy.

The major components of the natural price are A, B and C on the diagram. In using supply and demand analysis, A is a high point but when it goes down to point B the market price is dropping and therefore quantity or output is rising. Inversely, you can look at point C and the line in which point C is on and it shows that both price and quantity are increasing, however, quantity and price will eventually reach a cap (or an all time high). This comes about when a product is introduced to the market or some innovation is being done. I I-----A\------/---------Pm I-----B\-----/C---------Pn I \ / I___________________________________

Jeremy Bentham & Samuel Colerage

Utilitarianism

4. Confiscation of the property of all emigrants and rebels.

We call it government seizures, tax liens, "forfeiture" Public "law" 99-570 (1986); Executive order 11490, sections 1205, 2002 which gives private land to the Department of Urban Development; the imprisonment of "terrorists" and those who speak out or write against the "government" (1997 Crime/Terrorist Bill); or the IRS confiscation of property without due process.

9. Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country.

We call it the Planning Reorganization Act of 1949 , zoning (Title 17 1910-1990) and Super Corporate Farms, as well as Executive orders 11647, 11731 (ten regions) and Public "law" 89-136.

8. Equal obligation of all to work. Establishment of Industrial armies, especially for agriculture.

We call it the Social Security Administration and The Department of Labor. The National debt and inflation caused by the communal bank has caused the need for a two "income" family. Woman in the workplace since the 1920's, the 19th amendment of the U.S. Constitution, the Civil Rights Act of 1964, assorted Socialist Unions, affirmative action, the Federal Public Works Program and of course Executive order 11000. And I almost forgot...The Equal Rights Amendment means that women should do all work that men do including the military and since passage it would make women subject to the draft.

7. Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.

While the U.S. does not have vast "collective farms" (which failed so miserably in the Soviet Union), we nevertheless do have a significant degree of government involvement in agriculture in the form of price support subsidies and acreage alotments and land-use controls. The Desert Entry Act and The Department of Agriculture. As well as the Department of Commerce and Labor, Department of Interior, the Evironmental Protection Agency, Bureau of Land Management, Bureau of Reclamation, Bureau of Mines, National Park Service, and the IRS control of business through corporate regulations.

John Stuart Mill

born in London, -Son of James Mill, a philosopher, -educated by his father, -whom was given fatherly advice from Jeremy Bentham, -shielded from other boys of his age, -learned Greek at age 3, Latin a little later, -well trained economist @ age 20, -learned that there was more to life than devotion to the public good and an analytically sharp intellect. • most famous writings- System of Logic (1843), Principles of Political Economy (1848), On Liberty (1859), Utilitarianism (1861) • System of Logic (1843), -Attempted to give an account of knowledge, -Besides "the Logic of Consistency," a formal logic, Mill thought there was a "Logic of Proof," -Logic of proof-shows how evidence proved or tended to prove the conclusions we draw from evidence, -This led to the analysis of causation, and to an account of inductive reasoning, which is the starting point of most of Mill's thoughts Inductivepremises versus Deductiveevidence (compliment each other and arrive at the same conclusion)

Which of the following was of the greatest interest to the ancient Greek philosophers?

economic and organizational efficiency

In the Medieval time period, economic activities and analyses focused mostly on:

justice

The Human Factor

the dimensions of the Human factor sustain the workings and application of: 1. The rule of law; 2. Political Harmony 3. A Disciplined Labor Force 4. Just Legal Systems; and 5. Respect for human dignity and the sanctity of life, and social welfare. • The significance of the human factor • The six dimensions of the human factor (6 institutions): 1. Moral capital sense of right and wrong 2. Aesthetic capital: sense of beauty and ugliness 3. Human capital: acquired knowledge and skills 4. Human activities competencies required for performance excellence (ability to apply what you learn) 5. Human potential: yet to be tapped talents, ect. 6. Spiritual capital: Ability to connect to God and the Universal Principles ^^^^^^^^^^^^^^^^^^^^^if you want the 6 institutions to change you have to change the people.

Alfred Marshall

• Early Life: -Marshall was born in Clapham (London) in England-on July 26, 1842. -His father was a cashier in the Bank of England-and was moderately well-to-do. -Marshall went to Merchant Taylor's School at age nine. -His father wanted him to take orders in the Algonquian Church. • Taught math at Cambridge for nine years. -married in 1877 -Principal of the University College of Bristol until 1881 -Marshall also held other educational administrative positions (e.g. Balliol College-Oxford-1883-85; Cambridge-Chair of Political Economy-1885-1908. -Marshall died in 1924. • His View of Economics-Marshall defines political economy is: -A study of humankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and use of the material requests of well-being The Natural and Market Price: -Using the analysis of demand and supply, Marshall develops a diagrammatic framework to explain the relationship between the Natural Price and the Market Price. The natural price is the price that the market will always go back to-the economy is in a state of rest when it gets to the natural price. -To Marshall, demand has a significant impact on value. - Marshall presents a detailed analysis as to how the gap between the Natural Price and Market Price are bridged in his principals of economics textbook-published in 1890.

Karl Marx (1818-1883)

• His Challenges to and Criticisms of Classicism-Jewish, prodigy, he and his family ended up in Germany • Born at Trier, Prussia in 1818 and died in 1883 (Jewish) -He entered the University of Bonn at age 17 to read Law—where he enjoyed partying—and failed. -Went to University of Berlin (George Hegel, 1770-1831) and Ludwig Feuerbach (1804-1872). • Hegel's Dialectical Process—Progress in Society ThesisAntithesisSynthesis (and repeat) • Marx's Dialectical Materialism Thesis (the relations of production)rules of the game (static)----------Antithesis (forces of production--technology (Dynamic)--synthesis (new relations of production (and then back to thesis) • Karl Marx—His Life, with his PhD from the University of Jena (1841), he returned to Bonn—looking for a teaching position. Marx married Jenny von Westphalen in June 1843 and moved to Paris where he founded his own journal—The DeutschFranzosische Jarbucher. He finally settled in London in 1849. • KM's writings & works available 1. Thesis on Feuerbach-1845 2. The German Ideology- 1846 3. The Poverty of Philosophy-1847 4. Communist Manifesto -1848 5. Wage Labor and Capital-1848 6. A Contribution to the critique of political economy-1859 7. Theories of Surplus value-1863 ^Theories of Surplus Value ^Capital: Volume I-1876 ^Capital: Volumes • The creation of the surplus value (profit) -the firmlabor powerproduces commoditiessurplus value -why are people paid minimum wage? The workers have to come back to sustain their life (survival) • The Impact of Capitalist Accumulation Process-to Marx, therefore: -Capital accumulation transforms the workplace into a despotic, degrading, alienating environment, one which mutilates the laborer into a fragment of a man and destroys every remnant of charm in his work. -Capital accumulation produces the concentration of wealth at one pole and an accumulation of misery, agony of toil, slavery, ignorance, brutality, mental degradation, at the opposite pole. --Poverty and misery are not capitalism's negligence but it's imperative (i.e., they are its inevitable progenies—Marx's primary message) • The Impact of the Capitalist Accumulation Proces -Humans Alienated and deprived of their own powers. ^Implications: ^loss of inner self, ^ruled controlled, and directed by powers, ^on going subjugation and manipulation ^filled with the sense of powerlessness and passivity ^the laborer exists to satisfy the needs of capital. ^Along with the constantly diminishing number of magnates—Power of Influence—of capital...grows the mass of misery, oppression, slavery, degradation, exploitation, but with this too grows the revolt of the working class...The knell of capitalist private property sounds. The expropriators are expropriated [Karl Marx, 1967].

J.B. Clark's continued

• J.B. Clark concludes, therefore, that: -the return to capital is justified by the fact that capital is productive: the return is not robbery, but honest, fair and just (so also to land). -The distribution of income that results from perfectly competitive markets is an ethically correct distribution in that it rewards the factors of production according to their economic contributions to the social products. • Returns to Factors of Production -According to J.B. Clark returns to factors of production are distributed as follows: • The conclusions of JB Clark: -the worker is not unfairly untreated. The wage paid to labor it its true remuneration. -The worker's return, money wages, does not reveal any exploitation by the capitalist. -The value of money wages given to the worker is honest, fair, and just. -Karl Marx got it all wrong. -His view: "From each according to ability and to from each according to need" is • Critical Issues JB Clark sadly overlooked -in his analysis of the ethics of return to labor, JB Clark overlooked many factors. Among these factors are: -inheritance -educational achievements -poverty tends to breed poverty -discrimination -conclusion based on perfectly competitive markets. Yet monopolies do exist! -the ethical implications of marginal productivity theory -the Marxian labor theory of value holds that labor is exploited and, therefore, questions and social legitimacy of payments or landlords and capitalists. -The marginal revolution was an attempt to the productivity of land and capital as a means of establishing the social legitimacy of rents, profits, and interest. • Establishing the Roots of Economics -the new economics of marginal utility and general equilibrium: established the roots of economics. Values on the demand side of the market: In consumer preferences. -The old labor theory of value: had focused on the supply side of the market and had explained value and price in terms of production costs, which were reduced ultimately to costs of labor time.

Neoclassical Economist-demand (marginal utility)-both demand and supply (finishing KM's work)

• Karl Menger (1840-1921)- thus, to Menger it is the marginal utility that determines the demand for an item. • Stanley W. Jeyoens (1835-1882)-Stanley Jevons added a new dimension to Karl Menger's marginal analysis. He argues that: utility diminishes at the Margin. -that is: the more ones has of a particular commodity, the less satisfaction one gets from consuming another unit and the less one is willing to pay for it. • Leon Walras (1837-1910) 1. Walras was the son of French economist, Augustine Walras. 2. His father was a school administrator 3. • Leon Walras (1837-1910) -he introduced general equilibrium analysis. -Demand and supply forces work hand in hand to achieve a general equilibrium. J.B. Clark's (1847-1938) Ethical Conclusion -under perfectly competitive markets, each factor of production would receive a return equal to the value of its marginal product (VMP). This return measures the contribution of a factor both to the particular product of being produced and to society.

Mill

• Mill was one of the earliest feminists (1806-1873) • Overall philosophy- "the overall aim of his philosophy is to develop a positive view of the universe and the place of humans in it, one that contributes to the progress of human knowledge, individual freedom, and human well-being." • Most important thing you can learn at birth- 1. Thinking • Major contributions 1. Social theory- individual should be free as long as it doesn't harm others. Social Liberty- limit on society's power over the individual. Political Theory- political democracy-extensive participation of citizens & enlightened competence of rulers. 3. Political economy- economic democracy-very limited regulation by gov't except in a few specific areas like taxation. • Dealing with the economizing problem? 1. Control the population 2. Wage-fund: (a) labor, wages and growth (b) if work force grows faster than capital, wages fall (c) If wages fall below subsistence level, population would decrease from disease and starvation 3. Competition: drives efficiency & higher production • John Adam's says Constitution of the USA---------(a) God \ (b) moral

Classical Economists

• Thomas Malthus (1766-1834) ---The Theory of Population, David Ricardo (1772-1823) ----The Theory of Comparative Advantage, Jean Baptist Say (1776-1832) ---Say's Law of Markets, Jeremy Bentham (1748-1832)—Utilitarianism

John Maynard Keynes

• a student of Alfred Marshall, describes him as follows: As a scientist he was, within his own field, the greatest in the world in a hundred years. • (drawing on the board-was created by John Maynard Keyenes • John Maynard Keynes (1883-1946) The Keynesian Revolution • His personal life: -education at Eton and Cambridge 1. Philosophy and Economics 2. A student of Alfred Marshall (1842-1924) 3. He studied Monetary Economics 4. Worked with government on problems of Indian finance at the Treasury 5. Lectured at Cambridge 6. Comfortable social class • He loved to participate in the stock market. -He lost his wealth in the stock market crash of 1929. -He barrowed money; starting over again; and made fortune in the 1930s • Say's Law says Supply creates its own demand • The Climate of Opinions on Economics—1930s -Say's Law of Market Dominated Savings—the supply of and demand for investment funds are always in equilibrium. -Any differences between supply of and demand for investment funds are settled by market forces. • The Diagnosis of the General Theory: -an economy in depression could stay there. There was nothing inherent in the economic mechanism to pull it out. One could have "equilibrium" with unemployment, even massive unemployment. • (Graph of aggregate demand) • AD=consumer spending + investors + government + (exports-imports) • Keyne's Recommendation----(a) good times- government should prepare for next time by saving (b) in bad time you should spend. - Keyne's say you should only barrow money in bad times when you didn't do well (didn't save) in the good times • Prosperity depended on investment. If business spending for capital equipment fell, a spiral of contraction would begin. Only if business investment rose would a spiral of expansion. • Implications for Long-Range Social Policy 1. Thrift was not always a virtue. 2. High levels of spending might be more necessary than savings in an advanced, developed economy. 3. Keynes advocated for a more egalitarian distribution of income, plus restrictions on unearned income, as a means of achieving better economic health in the long-run, since the rich tended to save a larger proportion of their income than did the poor.