Economic system
Chapter 2 - Society
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Welcome to the Economic systems page
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The term is ultimately derived from Ancient Greek οἰκονομία (oikonomia) which is a term for the "way (nomos) to run a household (oikos)", or in other words the know-how of an οἰκονομικός (oikonomikos), or "household or homestead manager".
The earlier term for the discipline was "political economy", by extension then, "political economy" was the way to manage a polis or state, but since the late 19th century, it has commonly been called "economics".
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Core ideas
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A (political economics) overview
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| Earth's biological capacity | ||
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| Each spieces is a specialist with its own unique strategy for extractiong energy from the environment in order to survive | ||
| Everything that is good for the community is good for the individual | Everything that is good for the individual is good for the community | |
| The state is the leading 'agent' | The individual is the leading 'agent' | |
| Accounting is a worldwide network of balance sheets | The metabolism of civilisation | |
| Equity = assets minus liabilities | Human behaviour in relation to economic decision making (in person and in group) |
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| Societal economics | System economics | Personal economics | ||
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| In The Grumbling Hive Mandeville describes a bee community thriving until the bees are suddenly made honest and virtuous. Without their desire for personal gain their economy collapses and the remaining bees go to live simple lives in a hollow tree, thus implying that without private vices there exists no public benefit. | Bernard Mandeville | |||
| The economy is an ecosystem of specialists | It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. | Adam Smith | ||
| Alfred Marshall | The Mecca of the economist lie sin economic biology | |||
| Only if a democratic society follows the Principle of Liberty can its political and social institutions fulfill their role of shaping national character so that its citizens can realise the permanent interests of people as progressive beings. | John Stuart Mill | |||
| Karl Marx | Nothing can have value without being an object of utility. | |||
| Vladimir Lenin | To rely upon conviction, devotion, and other excellent spiritual qualities; that is not to be taken seriously in politics. | |||
| Demand and supply, that is, utility and cost of production, are the two blades of a pair of scissors. | Alfred Marshall | |||
| Capitalism can only be understood as an evolutionary process of continuous innovation and 'creative destruction. | Joseph Schumpeter | |||
| John Maynard Keynes | His General Theory argues that demand, not supply, is the key variable governing the overall level of economic activity. | |||
| Karl Polanyi | Economies are embedded in society and culture. | |||
| Private investment in the public markets is a better road to wealth and economic co-ordination than government spending programs. | Friedrich Hayek | |||
| Jan Tinbergen | Targets are those macroeconomic variables the policy maker wishes to influence, whereas instruments are the variables that the policy maker can control directly. | |||
| "The social responsibility of businessses is to increase its profits". NYT Magazine - 1970-09-13 | Milton Friedman | |||
| Technology is assumed to be constantly improving. Consequently, the products of this technology (the new capital) are expected to be more productive as well as more valuable | Robert Solow | |||
| Elinor Ostrom | Caring for the commons had to be a multiple task, organised from the ground up and shaped to cultural norms. | |||
| Amartya Sen | Governments should be measured against the concrete capabilities of their citizens. | |||
| Joseph Stiglitz | The real debate is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place. | |||
| Paul Krugman | Although globalization has been positive on a whole, since the 1980s the process known as hyper-globalization has at least played a part in rising inequality |
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History of the societal / economical evolution
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The capitalist economy nor the plan economy did not come about in opposition to its religious past, as the followers of the secularisation idea thought. It was precisely created from religion.
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The high medieval church
The people of the high Middle Ages were agog with wonder at great mechanical clocks, new forms of gears for windmills and water mills, improvements in wagons and carts, shoulder harnesses for beasts of burden, the ocean-going ship rudder, eyeglasses and magnifying glasses, iron smelting and ironwork, stone cutting, and new architectural principles. Many new types of machines were invented and put to use by 1300.
However, without capitalism's growth, such technological discoveries would have been idle novelties. They would seldom have been put in the hands of ordinary human beings through swift and easy exchange. They would not have been studied, rapidly copied, and improved by eager competitors. Capitalism also provided local and regional administrative bureaucracies of arbitrators, jurists, negotiators, and judges, along with an international language, canon law Latin.
Even the new emphasis on clerical celibacy played a crucial capitalist role. Its clean separation between office and person in the church broke the traditional tie between family and property that had been fostered by feudalism and its carefully plotted marriages. It also provided Europe with an extraordinarily highly motivated, literate, specialized, and mobile labour force.
The Cistercians, who eschewed the aristocratic and sedentary ways of the Benedictines and consequently broke farther away from feudalism, became famous as entrepreneurs. Being few in number, the Cistercians needed labour-saving devices. They were a great spur to technological development. Their monasteries were the most economically practical units ever in Europe and perhaps the world.
Thus, the high medieval church provided the conditions for F. A. Hayek's famous spontaneous order of the market to emerge. This cannot happen in lawless and chaotic times; to function in capitalism, rules must allow for predictable economic activity.
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Scholastisism and capitalism
Numerous Catholic moral theologians, including Leonardus Lessius (1554 - 1623), laid the foundations for the modern capitalist spirit in the centuries before the Protestant Reformation in Europe. He is considered an important figure in the Catholic theological and philosophical system known as Scholasticism, which was active between the 12th and 17th centuries.
The notion of usury (which initially meant charging interest of any kind for a loan) is a delicate issue and an essential topic of Lessius’ work. Lessius takes the concern of those who condemn usury very seriously, that is, exploiting the weakest parts of the market. He reckons that a businessman must show solidarity and charity toward the participants in the market who are in need but don’t have enough knowledge of the world.
On the other hand, there is a significant change in tradition in the work of Lessius and other Jesuits of his time. We notice a more lenient understanding of what happens in practice. In Lessius’ case, such understanding was based on the Bourse of Antwerp (the first world financial exchange), which he observed empirically. He saw prudent and experienced Christian people in business evaluate the price of money. After seeing them doing this widespread practice, he eventually accepted it; tradition appeared no longer in line with empiric reality. There is a very optimistic anthropology behind his approach: If such custom is so widely spread, even among decent business people, it cannot be evil.
His perspective goes against the intuitions of many people, and even people within the Church, even though they are full of good intentions. Lessius thinks that, in seeking the common good, we are interested in implementing a credit system, for instance, which works very well and implies a system of return on capital. Otherwise, those with savings will never be willing to invest their capital in projects that will be interesting and profitable for everyone in society.
So his notion of public utility, of common good, doesn’t only imply solidarity, which he expresses through the essential notion of charity. Beyond this necessary duty, the common good means that we stimulate business people’s industry and investment mechanisms that enable capitalists to grow rich relatively safely.
Lessius legitimated these legal tools of commercial capitalism precisely for utilitas publica (public utility) and bonum commune (common good). He believed they could favour prosperity for the whole community. His witness at the Bourse of Antwerp confirmed this belief: Its success was accompanied by great prosperity for the public community in this city.
The so-called late Scholasticism of the 16th and 17th centuries developed the idea that divine Providence ensured that people in different parts of the world didn’t have everything they needed for their own subsistence.
Therefore, they legitimated international trade by referring to divine Providence. Some theologians very explicitly praised these encounters between businessmen from different cultures and countries because they thought it contributed to their mutual understanding.
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Calvinism (and capitalism) (16th century)
Since no Calvinist knows for sure whether or not he was chosen, he must work hard and get ahead in life to avoid losing his place next to God if he happens to be chosen.
Capitalism is not so much greedy as rational, orderly, and focused on getting ahead in the world. John Calvin (1509 - 1564) may have meant getting ahead in the world more 'spiritually', but his followers explained it materially. In addition to working hard, Calvinists had to be reliable, diligent, honest, serious, and obedient to authority. These qualities made Calvinists reliable business partners, which further reinforced their success.
The ascetic life of Calvinists (working hard, rationally and systematically, but not being allowed to enjoy the money they earned) generated much profit, which could then be used to invest in new activities. Moreover, given their religious duty to work hard, workers could easily be exploited.
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Dutch Golden Age (17the century)
The Dutch Golden Age was a period in the history of the Netherlands that lasted from 1588, when the Dutch Republic was established, to 1672, when the Rampjaar occurred. During this period, Dutch trade, scientific developments, art and overseas colonisation were among the most prominent in Europe. The first half of the period spanned from the beginning of the Eighty Years' War until its conclusion in 1648, with the second half lasting until the outbreak of the Franco-Dutch War. During the period, Dutch colonialists, affiliated with the East India Company and West India Company, established trading posts and colonies in the Americas, Southern Africa, and Asia, which the powerful Dutch States Navy protected. The Dutch also dominated the triangular and Atlantic slave trade during this period.
Energy by wind
During the Age of Sail, the particular routes were also shaped by the powerful influence of winds and currents. For example, from the leading trading nations of Western Europe, it was much easier to sail westwards after first going south of 30° N latitude and reaching the so-called "trade winds", thus arriving in the Caribbean rather than going straight west to the North American mainland. Returning from North America, following the Gulf Stream in a northeasterly direction using the westerlies was easiest. Inland, a necessary condition was a supply of cheap energy from windmills. The invention of the wind-powered sawmill enabled the construction of a massive fleet of ships for worldwide trading and for military defense of the republic's economic interests.
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Industrial revolution (18th - 19th century)
During the Industrial Revolution, cities became urgent centres of production and were able to offer a wide variety of manufactured goods to rural areas, becoming vital centres of production as well as consumption. Europe experienced the development of its major cities during this period. In England, for example, in 1800, only 9 per cent of the population lived in urban areas. By 1900, some 62 percent were urban dwellers.
There was a necessary trade-off in the Industrial Revolution for the working class. Material standards of living were, in some ways, improved, and more material goods were produced, so they were available at lower costs, and factories provided various employment opportunities not previously available. At the same time, working conditions were often horrible, the pay was terrible, and it was often difficult for unskilled workers to move to higher skill levels and escape the working class. The traditional protections of the medieval and early modern eras, such as guilds and mandated wage-and-price standards, were disappearing.
Energy by coal
- Plentiful in England and Western Europe.
- Used in enormous quantities as a source of power – particularly for the steam-powered machinery in textile factories and locomotives.
Iron
- When Englishman Henry Cort created a way to make iron cheaper and stronger, England no longer needed to import iron ore from other countries.
- Essential to the development of new machines in factories and transportation.
Agricultural revolution
- Increased food production to support an increasing population
Scientific revolution
- Encouraged scholars and craftspeople to apply new scientific thinking to mechanical and technological challenges.
Government policies
- Legal reforms that allowed corporations to own and operate businesses.
- Patent laws allowed inventors to benefit financially from the “intellectual property” of their inventions.
- Expanded the Navy to protect global trade.
- Granting monopolies – exclusive rights – to companies who agreed to explore the world and find resources.
| Content source |
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| https://open.library.okstate.edu/culturalgeography/ |
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Utopian socialism (18th - 19th century)
Early socialism, or utopian socialism, is socialism with utopias of a just ideal state, early forms of collective ownership, and socialist movements and theories that arose between the end of the 18th century and 1848. Well-known early socialists were Henri de Saint-Simon, Robert Owen, and Charles Fourier.
François Noël Babeuf (1760-1797) was probably the first author who advocated socialism as a form of government. He founded a conspiratorial association during the French Revolution. He influenced Louis Auguste Blanqui. Henri de Saint-Simon considered only people who provided services and produced goods useful members of society and called the others (the nobility and rentiers) unproductive.
The German-Jewish philosopher Moses Hess (1812-1875) founded the socialist wing of Zionism, the movement that wanted to lead the Jews to Palestine. The German economist Karl Rodbertus (1805-1875) is seen as the founder of state socialism.
The best-known English early socialist was Robert Owen. Born poor, he worked his way up to become an entrepreneur. Unlike most other early socialists, Owen was not only an author. For example, he influenced legislation to protect workers and tried (unsuccessfully) to establish a socialist colony in America.
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Communism (1848 - )
The Communist Manifesto (1848) concisely explains Marx and Engels' ideas on economics, class struggle, and revolution, which would later be further developed in Das Kapital and ultimately form the basis of Marxism. Its style is based on the Gothic novel: the Industrial Revolution is presented as a sorcerer who cannot control the forces he has conjured up (the modern working class and explosive population growth), a clear reference to Goethe's The Sorcerer's Apprentice and Mary Shelley's Frankenstein.
Capital: Critique of Political Economy (German: Das Kapital: Kritik der politischen Ökonomie) is the main work of Karl Marx. In this book, which is divided into three (or four) parts, Marx develops a critical theory of the modern capitalist economy, emphasizing the organisation of production. The first part of Capital was published in 1867. The second part appeared in 1885, two years after Marx's death, and the third, both edited by Friedrich Engels, appeared in 1894.
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The Communist Manifesto
The Communist Manifesto, written by Karl Marx and Friedrich Engels in 1848, outlines several core ideas that form the basis of communist ideology:
Class Struggle
The manifesto argues that all of history is defined by class struggle between the ruling class (bourgeoisie) and the working class (proletariat). This conflict is seen as the driving force behind historical developments and social change.
Critique of Capitalism
Marx and Engels present a scathing critique of capitalism, arguing that:
- It leads to the exploitation of workers by the bourgeoisie
- It concentrates wealth and means of production in the hands of a few
- It is inherently unstable and prone to crises
- It alienates workers from their labor and human nature
Historical Materialism
The manifesto proposes that economic systems and social structures evolve through historical stages, driven by changes in the means of production.
Inevitability of Revolution
A central tenet is that capitalism will inevitably lead to its own destruction due to its internal contradictions, resulting in a proletarian revolution.
Abolition of Private Property
The manifesto calls for the abolition of bourgeois private property, arguing that it only benefits a small minority while the majority are deprived of ownership.
Communism as the Solution
Marx and Engels present communism as the solution to the problems of capitalism, envisioning:
- Collective ownership of the means of production
- Abolition of social classes
- A classless, stateless society where "the free development of each is the condition for the free development of all"
Internationalism
The manifesto emphasizes the international nature of the communist movement, famously concluding with the call: "Workers of the world, unite!"
Transitional Measures
The manifesto proposes several transitional policies to achieve communism, including:
- Progressive income tax
- Abolition of inheritance rights
- Centralization of credit and communication
- Free public education
- Abolition of child labor
| Content source |
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| https://www.marxists.org/archive/marx/works/1848/communist-manifesto/ |
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History of the philosophical evolution in economic thinking
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Utopian thinkers
- Thomas More (1478 - 1535)
- In his book Utopia, More describes the political system of a fictional ideal state. He used this book to oppose the economic and political policies of England. The name Utopia is derived from the Greek words ou ("not") and topos ("place") and thus means something like "Nowhereland." Utopia describes the society on the fictional island of Utopia and the islanders' political, social, and religious customs. Utopia is the best society in the world. Everyone focuses on public interests instead of self-interest.
- Tommaso Campanella (1568 - 1639)
- Campanella wrote Civitas Solis (The City of the Sun), a dialogue between the head of the Hospitaller Order and a sailor from Genoa who tells about his favourite city in Ceylon. This city of the sun is governed in a Spartan manner by a high priest with unlimited authority. A military man, a scientist, and someone in charge of social affairs assist him. The people are well educated. The state regulates marriage, work and society. Private property is unknown. Much is done in science. Tommaso's ideal state still occupies one of the most prominent places among the numerous works on utopias.
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Thinkers of the Dutch Golden Age
- René Descartes (1596 -1650)
- René Descartes was a central intellectual of the Dutch Golden Age. Although he served a Protestant state, Descartes was a convinced Roman Catholic. In his theology, he insists on the absolute freedom of God's act of creation. But he also laid the foundation for 17th-century continental rationalism. Rationalism is defined as a methodology "in which the criterion of truth is not sensory but intellectual and deductive". Through his Catholic faith on the one hand and rationalism on the other, he created a dualistic view of man.
- Baruch de Spinoza (1632 - 1677)
- Baruch De Spinoza explores the place of human freedom in a world devoid of theological, cosmological, and political moorings. Rejecting messianism and the emphasis on the afterlife, Spinoza emphasized appreciating and valuing life for oneself and others. By advocating for individual liberty in its moral, psychological, and metaphysical dimensions, Spinoza helped establish the genre of political writing called secular theology.
- Bernard Mandeville (1670 - 1733)
- In The Grumbling Hive, Mandeville describes a bee community thriving until the bees are suddenly made honest and virtuous. Without their desire for personal gain, their economy collapses, and the remaining bees go to live simple lives in a hollow tree, thus implying that without private vices, there exists no public benefit. Because it is the vices (i.e., the self-regarding actions of men) that alone, by means of inventions and the circulation of capital (economics) in connection with luxurious living, stimulate society into action and progress.
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Enlightment thinkers
- Thomas Hobbes (1588 - 1679)
- Hobbes was the first modern philosopher to articulate a detailed social contract theory in his 1651 work Leviathan. In it, Hobbes set out his doctrine of the foundation of states and legitimate governments and created an objective science of morality. He argued that to avoid chaos, which he associated with the state of nature, people accede to a social contract and establish a civil society.
- John Locke (1632 - 1704)
- John Locke was an English philosopher and physician. He is widely regarded as one of the most influential Enlightenment thinkers and is commonly known as the “Father of Liberalism.” His writings were immensely influential in developing social contract theory. His theory of mind has been as influential as his political theory, often cited as the origin of modern conceptions of identity and the self. Locke was the first to define the self through a continuity of consciousness. He postulated that, at birth, the mind was a blank slate or tabula rasa.
- Baron de Montesquieu (1689 - 1755)
- In this political treatise, Montesquieu argued for a constitutional system of government and the separation of powers, the end of slavery, the preservation of civil liberties and the law, and the idea that political institutions should reflect the social and geographical aspects of each community. He defines three central political systems: republican, monarchical, and despotic. As he describes them, republican political systems vary depending on how broadly they extend citizenship rights.
- Voltaire (1694 - 1778)
- Voltaire hardly spared anyone in his criticism of French society and existing social structures. He perceived the French bourgeoisie to be too small and ineffective, the aristocracy to be parasitic and corrupt, the commoners as ignorant and superstitious, and the church as a static and oppressive force. Voltaire distrusted democracy, which he saw as propagating the idiocy of the masses. He long thought only an enlightened monarch could bring about change and that it was in the king’s rational interest to improve the education and welfare of his subjects.
- Jean-Jacques Rousseau (1712 - 1778)
- Rousseau’s philosophy of education concerns developing the student’s character and moral sense so that they may learn to practice self-mastery and remain virtuous even in the unnatural and imperfect society in which they will have to live. Rousseau believed in the moral superiority of the patriarchal family based on the antique Roman model. To him, the ideal woman is educated to be governed by her husband, while the perfect man is educated to be self-governing.
- Marquis de Condorcet (1743 - 1794)
- Condorcet’s Sketch for a Historical Picture of the Progress of the Human Spirit is perhaps the most influential formulation of the idea of progress ever written. It narrates the history of civilization as one of progress in the sciences and shows the intimate connection between scientific progress and the development of human rights and justice. According to Condorcet, for republicanism to exist, the nation needed enlightened citizens, and education needed democracy to become truly public. To educate citizens, he proposed a system of free public education.
| Content source |
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| https://courses.lumenlearning.com/suny-fmcc-worldcivilization2-1/chapter/enlightenment-thinkers/ |
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Liberal economic thinkers
- Adam Smith (1723 - 1790)
- Adam Smith did for economic liberalism what John Locke had done for political liberalism, namely, to lay the philosophical foundations on which others would build a distinctive liberal tradition. The widespread appeal of Smith’s economic theories of free trade, the division of labour, and the principle of individual initiative have helped obscure the rich body of political liberalism in his work. Adam Smith, far from being a laissez-faire doctrinaire, aimed to demonstrate that a liberal polity can enjoy the benefits of individual liberty and a free market economy but need not – and ought not to – neglect social cohesion and basic human needs.
- Adam Smith's assumptionsː
- Economic growth depends on capital accumulation
- Economy works best through the interaction of self-interested individuals
- Liberty implies free competition, free movement, free shift of capital and freedom from government interventions
- Adam Smith's assumptionsː
- Adam Smith did for economic liberalism what John Locke had done for political liberalism, namely, to lay the philosophical foundations on which others would build a distinctive liberal tradition. The widespread appeal of Smith’s economic theories of free trade, the division of labour, and the principle of individual initiative have helped obscure the rich body of political liberalism in his work. Adam Smith, far from being a laissez-faire doctrinaire, aimed to demonstrate that a liberal polity can enjoy the benefits of individual liberty and a free market economy but need not – and ought not to – neglect social cohesion and basic human needs.
- Jeramy Bentham (1748 - 1832)
- Jeremy Bentham, the English moral philosopher, jurist, social reformer, political economist and founding father of modern utilitarianism, was born in London on 15 February 1748. His ambitious father, also a lawyer, had plans for young Jeremy to become Lord Chancellor of England, not only making his name but also his fortune in the process. According to Jeremy Bentham’s theory of legislation, utilitarianism is an ethical foundation that determines that morality and legislation should be organised to provide the greatest happiness for the greatest number. Bentham stressed that actions should be measured according to the contribution they made to the general happiness of society. Property is nothing but a basis of expectation, the expectation of deriving certain advantages from something we are said to possess as a consequence of the relation in which we stand towards it. Property and law are born together and die together. Before laws were made there was no property; take away laws, and property ceases.
- Jeramy Bentham's assumptionsː
- Punishing criminals was an effective way, because it decreased the likelihood of future crime
- Law must protect people's economic and personal goods
- Jeramy Bentham's assumptionsː
- Jeremy Bentham, the English moral philosopher, jurist, social reformer, political economist and founding father of modern utilitarianism, was born in London on 15 February 1748. His ambitious father, also a lawyer, had plans for young Jeremy to become Lord Chancellor of England, not only making his name but also his fortune in the process. According to Jeremy Bentham’s theory of legislation, utilitarianism is an ethical foundation that determines that morality and legislation should be organised to provide the greatest happiness for the greatest number. Bentham stressed that actions should be measured according to the contribution they made to the general happiness of society. Property is nothing but a basis of expectation, the expectation of deriving certain advantages from something we are said to possess as a consequence of the relation in which we stand towards it. Property and law are born together and die together. Before laws were made there was no property; take away laws, and property ceases.
- David Ricardo (1772 - 1823)
- Less well-known than Adam Smith, Ricardo is nevertheless his intellectual and philosophical equal. He is credited alongside Smith with founding the classical school of economics. Inspired by Smith and driven by his friend, James Mill (father of John Stuart Mill), Ricardo provides a historical bridge between the economic and political liberals through his own writings. His practical knowledge of the money and foreign exchange markets heavily influenced him. He is chiefly remembered today for his exposition of the principle of comparative advantage, the idea that nations can maximise their output and wealth by specialising in producing goods at which they are relatively most efficient, trading with other countries to realise the gains from such specialisation.
- David Ricardo's assumptionsː
- The principle of comparative advantageː trade increses the rate of profit and leads towards a more efficient division of labour
- David Ricardo's assumptionsː
- Less well-known than Adam Smith, Ricardo is nevertheless his intellectual and philosophical equal. He is credited alongside Smith with founding the classical school of economics. Inspired by Smith and driven by his friend, James Mill (father of John Stuart Mill), Ricardo provides a historical bridge between the economic and political liberals through his own writings. His practical knowledge of the money and foreign exchange markets heavily influenced him. He is chiefly remembered today for his exposition of the principle of comparative advantage, the idea that nations can maximise their output and wealth by specialising in producing goods at which they are relatively most efficient, trading with other countries to realise the gains from such specialisation.
- John Stuart Mill (1806 - 1873)
- John Stuart Mill, philosopher, economist, journalist, political writer, social reformer, and, briefly, Liberal MP, is one of the most famous figures in the pantheon of Liberal theorists and the greatest of the Victorian Liberal thinkers. An essential aspect of his new political thought was his concern to combine the democratic requirements of government accountability with a role for an elite of cultivated persons – independent intellectuals and public moralists like himself.
- John Stuart Mill's assumptionsː
- Society is responsible for protection its citizens, but should not interfere with the rest
- Truly freedom is the right to take care of yourself
- The bases of economy is competition
- Workers can participate in the capital of factories
- John Stuart Mill's assumptionsː
- John Stuart Mill, philosopher, economist, journalist, political writer, social reformer, and, briefly, Liberal MP, is one of the most famous figures in the pantheon of Liberal theorists and the greatest of the Victorian Liberal thinkers. An essential aspect of his new political thought was his concern to combine the democratic requirements of government accountability with a role for an elite of cultivated persons – independent intellectuals and public moralists like himself.
| Content source |
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| https://liberalhistory.org.uk/themes/liberal-thought/ |
| R. Peet - Theories of development - The Guilford Press - 2015 |
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Social economic thinkers
- Karl Marx (1818 - 1883)
- Marx’s (early) writings are dominated by an understanding of alienation, a distinct type of social ill whose diagnosis looks to rest on a controversial account of human nature and its flourishing. He subsequently developed an influential theory of history—often called historical materialism—centred around the idea that forms of society rise and fall as they further and then impede the development of human productive power.. His labour theory of value asserts that the value of a commodity is determined by the quantity of socially necessary labour time required to produce it. Capitalism can be distinguished from other forms of commodity exchange, Marx argues, in that it involves not merely the exchange of commodities, but the advancement of capital, in the form of money, with the purpose of generating profit through the purchase of commodities and their transformation into other commodities which can command a higher price, and thus yield a profit.
- Karl Marx's assumptionsː
- Labour-intensive industries ought to have a higher rate of profit than those which use less labour
- Exploitation is defined as the unequal exchange of labor for goods: the exchange is unequal when the amount of labor embodied in the goods which the worker can purchase with his income is less than the amount of labor he expended to earn that income
- All capitalist profit is ultimately derived from the exploitation of the worker
- Karl Marx's assumptionsː
- Marx’s (early) writings are dominated by an understanding of alienation, a distinct type of social ill whose diagnosis looks to rest on a controversial account of human nature and its flourishing. He subsequently developed an influential theory of history—often called historical materialism—centred around the idea that forms of society rise and fall as they further and then impede the development of human productive power.. His labour theory of value asserts that the value of a commodity is determined by the quantity of socially necessary labour time required to produce it. Capitalism can be distinguished from other forms of commodity exchange, Marx argues, in that it involves not merely the exchange of commodities, but the advancement of capital, in the form of money, with the purpose of generating profit through the purchase of commodities and their transformation into other commodities which can command a higher price, and thus yield a profit.
| Content source |
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| Stanford Encyclopedia of Philosophy |
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- Friedrich Engels (1820 - 1895)
- Friedrich Engels was a theoretical giant. He was the most broadly educated man of his time, with an encyclopedic mind. He had a deep knowledge of economics and history and a passionate interest in philosophy, science, literature and even military tactics. He explained that socialism is not an ahistorical blueprint for society but a system of socio-economic relations. This system, in turn, requires certain material conditions—the development of large-scale industry and monopolies, a strong working class, and the interconnectedness of the world market—in order to rise and flourish. Engels was far ahead of his time, especially regarding scientific questions. He saw in the processes of nature a confirmation of the laws of dialectics. "It was not a question of imposing the dialectical laws on nature from without, but of discovering them in her and developing them out of her."
- Friedrich Engels' assumptionsː
- Early humans were able to form complex thought processes and achieve higher levels of consciousness, which included abstraction, generalization, and future planning
- Capitalism is an exploitative system, it creates a class struggle between the bourgeoisie (business owners) and the proletariat (working class)
- The competitive nature of capitalism forces the bourgeoisie to constantly innovate and reduce costs, ultimately leading to overproduction and economic crises
- Friedrich Engels' assumptionsː
- Friedrich Engels was a theoretical giant. He was the most broadly educated man of his time, with an encyclopedic mind. He had a deep knowledge of economics and history and a passionate interest in philosophy, science, literature and even military tactics. He explained that socialism is not an ahistorical blueprint for society but a system of socio-economic relations. This system, in turn, requires certain material conditions—the development of large-scale industry and monopolies, a strong working class, and the interconnectedness of the world market—in order to rise and flourish. Engels was far ahead of his time, especially regarding scientific questions. He saw in the processes of nature a confirmation of the laws of dialectics. "It was not a question of imposing the dialectical laws on nature from without, but of discovering them in her and developing them out of her."
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Do you want to know more?
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Economic/political movements
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| Link | |
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| https://en.wikipedia.org/wiki/Economic_system | |
| Capitalism | https://en.wikipedia.org/wiki/Capitalism |
| Socialism | https://en.wikipedia.org/wiki/Socialism |
| Communism | https://en.wikipedia.org/wiki/Communism |
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Concepts
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| Get a grip on the neo-classical economic views, ideas and concepts | |
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| Investopedia | https://www.investopedia.com/financial-term-dictionary-4769738 |
| IEG | https://websites.umich.edu/~alandear/glossary/intro.html |
| GPET | https://webhome.auburn.edu/~johnspm/gloss/ |
| Britannica | https://www.britannica.com/money/economic-system/Market-systems |
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| Get a grip on plan economic views, ideas and concepts | |
|---|---|
| Investopedia | https://www.investopedia.com/terms/c/centrally-planned-economy.asp |
| Britannica | https://www.britannica.com/money/economic-planning |
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The Nobel Prize in Economic Sciences (The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel)
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| Link to the Nobel Prize in Economic Sciences | |||
|---|---|---|---|
| 1978 | Herbert Simon | https://www.nobelprize.org/prizes/economic-sciences/1978/simon/facts/ | |
| 1998 | Amartya Sen | https://www.nobelprize.org/prizes/economic-sciences/1998/sen/facts/ | |
| 2002 | Daniel Kahneman | https://www.nobelprize.org/prizes/economic-sciences/2002/kahneman/facts/ | |
| 2009 | Elinor Ostrom | https://www.nobelprize.org/prizes/economic-sciences/2009/ostrom/facts/ | |
| 2024 | Daron Acemoglu
Simon Johnson James A. Robinson |
Power and institutions |
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Different ways to manage wealth at state level
In 1965, Britain and Norway divided the North Sea shelf using a median line to delineate their territories. By September 1969, oil was discovered in British waters, followed by a discovery in Norwegian waters three months later. While the emergence of such a vast resource might appear to promise prosperity, it does not always translate into increased national wealth.
In 1971, Norway introduced the "Ten Oil Commandments," a set of principles designed to ensure that the newfound wealth would benefit all Norwegians in the present and future generations. These commandments laid the foundation for what became the Government Pension Fund Global (commonly referred to as the oil fund), a structured and institutionalized approach to managing resource revenues for the collective good. Norway's commitment to prudent resource management allowed the country to amass extraordinary wealth; by the 2008 financial crisis, the oil fund had grown sufficiently to acquire a stake of 0.5% in all publicly traded companies worldwide.
In contrast, Britain failed to adopt a comparable strategy. Long before the 2008 financial crisis and continuing thereafter, the profits from its oil reserves were primarily siphoned off by a select few, leaving the broader population with little to show for this immense resource.
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