The classical growth theory argues that economic growth will decrease or end because of an increasing population and limited resources Classical growth theory economists believed that temporary increases in real GDP per person would cause a population explosion that would consequently decrease real GDP.
The classical growth theory argues that economic growth will decrease or end because of an increasing population and limited resources Classical growth theory economists believed that temporary increases in real GDP per person would cause a population explosion that would consequently decrease real GDP.
Neo classical general equilibrium theory which is based on Walrasian theory of general equilibrium 2*2*2 model and Marshallian graphical representation
What is history of Economic Thought
Why study History of Economic Thought
Three General Beliefs in the study of History of Economic Thought
History of Economic Thought Vs Economic Thought
Period /Timeline of History of Economic Thought
Since pollution is an externality firms will not undertake to control their pollution. The answer is in government regulations. Coase argues that in perfect competition with laissez faire, govt regulation is not needed. Instead bargaining between the polluters and their victims can lead to an optimal situation. But this pre supposes equality in bargaining, and does not take note of ecological consequences of pollution.
Neo classical general equilibrium theory which is based on Walrasian theory of general equilibrium 2*2*2 model and Marshallian graphical representation
What is history of Economic Thought
Why study History of Economic Thought
Three General Beliefs in the study of History of Economic Thought
History of Economic Thought Vs Economic Thought
Period /Timeline of History of Economic Thought
Since pollution is an externality firms will not undertake to control their pollution. The answer is in government regulations. Coase argues that in perfect competition with laissez faire, govt regulation is not needed. Instead bargaining between the polluters and their victims can lead to an optimal situation. But this pre supposes equality in bargaining, and does not take note of ecological consequences of pollution.
Concept of National Income with GDP GNP NNP& NDPAnkit Singh
It is the detailed study of National Income in a macro economics of a country with the methods of its measurement and concepts related to it like Gross Domestic Product, Gross National Product, Net Domestic Product, Net National Product.
A description about the transition of post colonial states. It states about colonialism, post colonialism and its transition with a practical example from Bangladesh context.
Adam Smith is called the father of modern economics and his book.pdfakashitproduct
Adam Smith is called the \"father of modern economics\" and his book The Weath of Nations, a
fundamental work in the field of economics, is considered the first modern book on economics.
In addition, economics first became a study in 1776 when The Wealth of Nations was published.
Why is the word \"modern\" used in both descriptions? I know that individuals throughout the
centuries and even Aristotle have dabbled with some economic theories, but I do not recall
anyone making any significant contributions to economics before Adam Smith.
Were there important contributions to economics made before 1776? If not, then why do we use
the term \"modern\" even if there was no one in the study previously?
Solution
Direct predecessors to Adam Smith within the classical tradition (maybe a more useful
distinction than modern) include Hume, Locke and Dudley North. Before the classical
economists, there were the physiocrats (18th century), such as Francois Quesnay and Turgot. The
physiocrats emphasised agricultural productivity as a driver of the wealth of nations. They were
contemporaneous with, but also preceded by mercantilists (16th century - 18th century).
Mercantilists mostly concentrated on creating a favorable balance of trade, which would allow
reserves to accumulate in the possession of an absolute ruler. They emphasized government
control of the economy as an extension of state power. The mercantilists had a lot of influence in
the policies of nations, for instance in the form of Colbert. Famous writers might include de
Malynes and Mun. Mercantilists were one of the main targets of Adam Smith\'s critique. The
distinction being that mercantilists believed the quantity of reserves to be the ultimate source of a
nation\'s wealth and so emphasized protectionism, while Smith focused more on trade allowing
inputs to become more productive. In doing so he was very influenced by Quesnay to whom he
had considered dedicating The Theory of Moral Sentiments. The inclusion of gains from trade,
self-interest and competition leading to increased productivity, and division of labor
distinguishes Smith from these earlier writings and forms the link to \"modern\" economics.
There were also \"economists\" long before the 16th century, the connections between them and
economics is we understand it tends to become more tenuous the farther back you go. Iba
Khaldun is a good example, Aristotle (or more likely one of his students) literally wrote a book
called \"Economics\" (this deals with economics in the literal sense of management of a
household), you could also talk about Hesiod\'s \"Works and Days\" (a very old text indeed)
being an example of early economics..
Spanning three centuries of history, from the dawn of the industrial age to modern times, three diverse
thinkers developed their own landmark theories on commerce, labor, and the global economy.
Register to explore the whole course here: https://school.bighistoryproject.com/bhplive?WT.mc_id=Slideshare12202017
The Invention of Capitalism - Michael Perelmanberat celik
The Invention of Capitalism is novel in four major respects. First, it
addresses the question of what determines the social division of labor, the
division of society into independent firms and industries from the per-
spective of classical political economy. It also develops the theoretical
implications of primitive accumulation. Third, this book offers a signifi-
cantly different interpretation of classical political economy, demonstrat-
ing that this school of thought supported the process of primitive ac-
cumulation. Finally, it analyzes the role of primitive accumulation in the
work of Marx. All of these threads come together in helping us to under-
stand how modern capitalism developed and the role of classical political
economy in furthering this process.
The European Unemployment Puzzle: implications from population agingGRAPE
We study the link between the evolving age structure of the working population and unemployment. We build a large new Keynesian OLG model with a realistic age structure, labor market frictions, sticky prices, and aggregate shocks. Once calibrated to the European economy, we quantify the extent to which demographic changes over the last three decades have contributed to the decline of the unemployment rate. Our findings yield important implications for the future evolution of unemployment given the anticipated further aging of the working population in Europe. We also quantify the implications for optimal monetary policy: lowering inflation volatility becomes less costly in terms of GDP and unemployment volatility, which hints that optimal monetary policy may be more hawkish in an aging society. Finally, our results also propose a partial reversal of the European-US unemployment puzzle due to the fact that the share of young workers is expected to remain robust in the US.
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Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
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Poonawalla Fincorp and IndusInd Bank Introduce New Co-Branded Credit Cardnickysharmasucks
The unveiling of the IndusInd Bank Poonawalla Fincorp eLITE RuPay Platinum Credit Card marks a notable milestone in the Indian financial landscape, showcasing a successful partnership between two leading institutions, Poonawalla Fincorp and IndusInd Bank. This co-branded credit card not only offers users a plethora of benefits but also reflects a commitment to innovation and adaptation. With a focus on providing value-driven and customer-centric solutions, this launch represents more than just a new product—it signifies a step towards redefining the banking experience for millions. Promising convenience, rewards, and a touch of luxury in everyday financial transactions, this collaboration aims to cater to the evolving needs of customers and set new standards in the industry.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
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US Economic Outlook - Being Decided - M Capital Group August 2021.pdfpchutichetpong
The U.S. economy is continuing its impressive recovery from the COVID-19 pandemic and not slowing down despite re-occurring bumps. The U.S. savings rate reached its highest ever recorded level at 34% in April 2020 and Americans seem ready to spend. The sectors that had been hurt the most by the pandemic specifically reduced consumer spending, like retail, leisure, hospitality, and travel, are now experiencing massive growth in revenue and job openings.
Could this growth lead to a “Roaring Twenties”? As quickly as the U.S. economy contracted, experiencing a 9.1% drop in economic output relative to the business cycle in Q2 2020, the largest in recorded history, it has rebounded beyond expectations. This surprising growth seems to be fueled by the U.S. government’s aggressive fiscal and monetary policies, and an increase in consumer spending as mobility restrictions are lifted. Unemployment rates between June 2020 and June 2021 decreased by 5.2%, while the demand for labor is increasing, coupled with increasing wages to incentivize Americans to rejoin the labor force. Schools and businesses are expected to fully reopen soon. In parallel, vaccination rates across the country and the world continue to rise, with full vaccination rates of 50% and 14.8% respectively.
However, it is not completely smooth sailing from here. According to M Capital Group, the main risks that threaten the continued growth of the U.S. economy are inflation, unsettled trade relations, and another wave of Covid-19 mutations that could shut down the world again. Have we learned from the past year of COVID-19 and adapted our economy accordingly?
“In order for the U.S. economy to continue growing, whether there is another wave or not, the U.S. needs to focus on diversifying supply chains, supporting business investment, and maintaining consumer spending,” says Grace Feeley, a research analyst at M Capital Group.
While the economic indicators are positive, the risks are coming closer to manifesting and threatening such growth. The new variants spreading throughout the world, Delta, Lambda, and Gamma, are vaccine-resistant and muddy the predictions made about the economy and health of the country. These variants bring back the feeling of uncertainty that has wreaked havoc not only on the stock market but the mindset of people around the world. MCG provides unique insight on how to mitigate these risks to possibly ensure a bright economic future.
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How to get verified on Coinbase Account?_.docxBuy bitget
t's important to note that buying verified Coinbase accounts is not recommended and may violate Coinbase's terms of service. Instead of searching to "buy verified Coinbase accounts," follow the proper steps to verify your own account to ensure compliance and security.
USDA Loans in California: A Comprehensive Overview.pptxmarketing367770
USDA Loans in California: A Comprehensive Overview
If you're dreaming of owning a home in California's rural or suburban areas, a USDA loan might be the perfect solution. The U.S. Department of Agriculture (USDA) offers these loans to help low-to-moderate-income individuals and families achieve homeownership.
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2. INTRODUCTION
The Classical School of economics was developed
about 1750 and lasted as the mainstream of economic
thought until the late 1800’s.
Adam Smith's Wealth of Nations, published in 1776
can be used as the formal beginning of Classical
Economics but it actually it evolved over a period of
time and was influenced by Mercantilist doctrines,
Physiocracy, the enlightenment, classical liberalism
and the early stages of the industrial revolution.
3. Adam Smith [1723-1790] is recognized as the
originator of Classical Economics.
John Stuart Mill [1806-1873] is often regarded as the
synthesizer of the school.
4. The main classical economists:
Adam Smith,
David Ricardo,
Thomas Malhtus,
Jean Babtiste Say
John Mill.
5. Classical economics as the predominant school of
mainstream economics ends with the “Marginalist
Revolution” and the rise of Neoclassical Economics in
the late 1800’s.
In the 1870's William Stanley Jevons' and Carl
Menger's concept of marginal utility and Léon Walras'
general equilibrium theory provided the foundations.
Henry Sidgwick, F.Y. Edgeworth, Vilfredo Pareto and
Alfred Marshall provided the tools for Neoclassical
economics.
6. Neoclassical economics is an extension of Classical
economics but, the focus of the questions changed as
well as the tools of analysis.
In spite of the dominance of Neoclassical thought,
Classical Economics has persisted and influences
modern economics, particularly the "New Classical
Economics."
The belief in the efficacy of a “free market” is central
to both classical and neoclassical ideology.
7. While Adam Smith would be regarded as the
originator and leader of the school, David Ricardo
[1772-1823] should be credited with establishing the
form and methods of the school.
The debates between Thomas Malthus [1766-1834]
and David Ricardo about policy issues such as the
"Corn Laws" and the "Poor Laws" contributed to the
focus and form of the school.
Smith was concerned about the nature of economic
growth. Malthus, Ricardo and other classical
economists were concerned about the question of
“distribution.”
8. One important debate among classical economists
was whether there was or wasn’t a “surplus” or “glut.”
Jean Baptiste Say [1767-1832] and Malthus were the
two major protagonists in the question about the
existence of a surplus and its effects on a market
economy.
9. Basic Outline
The formal beginning of the Classical School is with
Adam Smith ‘s [1723 – 1790] publication An Inquiry
Into The Nature And Causes Of The Wealth Of Nations
[1776].
John Stuart Mill’s [1806-1873] book, Principles of
Political Economy with Some of Their Applications to
Social Philosophy, published in 1848 may be regarded
as a synthesis of Classical economics.
The title of Mill’s book is an indicator of the
perception that economics is one component of a
broader concern with social relations.
10. With the publication of William Stanley Jevons’ [1835-
1882] The Theory Of Political Economy, [1871], Carl
Menger’s [1840-1921] Grundsatze Der
Volkswirtschaftslehre [1871], and Léon Walras’ [1834-
1910] Elements D’ Economie Politique Pure in 1874,
economics began the road to “professionalism” and
narrowing of perspective.
11. Major contributors to the Classical
School include:
Adam Smith [1723-1790, founder] Theory Of Moral
Sentiments (1759), Wealth Of Nations (1776),
David Ricardo [1772-1823], On The Principles Of
Political Economy And Taxation (1817),
Thomas Malthus [1766-1834], An Essay On The
Principle Of Population (1789), Principles of Political
Economy (1820), The Measure of Value (1823),
Definitions in Political Economy (1827),
12. James Mill [1773-1836], Elements Of Political
Economy(1821),
Jean-Baptiste Say [1767-1832], Traite D’economie
Politque (1803, English 1821),
Nassau William Senior [1790-1864], An Outline Of The
Science Of Political Economy (1836),
Karl Marx [1818-1883], The Communist Manefesto
(1848), Grundriss Der Kritik Politishen Okonomie
(1859) Das Kapital (1867),
John Stuart Mill [1806-1873, son of James Mill],
Principles Of Political Economy (1848).
13. Foundations of Classical School in
the “Industrial Revolution”
The industrial revolution arose out of the past, took centuries
and included social, intellectual and agrarian revolutions as well
as “industrial” changes
“Scientific revolution,” the rise of “natural law” and the
separation of “knowledge” from theology:
Protestantism [1571]
Martin Luther [1483-1546]
John Calvin [1509-1564]
Nicholas Copernicus [1473-1543]
Francis Bacon [1561-1626] - empiricism
Galileo Galilei [1564-1642] - empiricism
Rene Descartes (1569-1650] - rationalism
Johannes Kepler [1571-1630]
William Harvey [1578-1657] - circulation of blood
14. John Locke [1632-1704] – individualism, the role
and secular justification of property,
Baruch Spinoza [1632-1677] rationalism
Isaac Newton [1642-1727] - mechanical view of
world, “matter in motion directed by knowable
laws”, mathematical concept of rates of change:
PRINCIPIA (1687)
Master of the Mint (1699)
15. G.W. Lebniz [1646-1716] - optimism
David Hume [1711-1776] – positivism
all knowledge derived from and justified by
sense experience
objects of sense experience are atomistic
events constantly conjoined in determinable
ways
game theory and cooperation
Immanuel Kant [1724-1804] reason
16. Scientific societies [gave cohesion and
direction to science]
Royal Society of London (1660)
Paris Academy of Sciences (1666)
Berlin Academy (1700)
St. Petersburg Academy (1724)
„salaried” scientists
American Philosophical Society (1769)
17. Role of technology and
industrialization, examples include;
the building of canals and transportation system [In
England between 1750-1820 3000 miles of navigable
waterways built (often private for profit), in 1750 to
1770 nearly 12,000 miles of turnpikes were built]
1698 Thomas Savery obtained patent for steam pump
for use in Cornish mines, 1712 he made an
atmospheric pump, Newcomen’s steam engine
improved by James Watt in 1769
1709 Abraham Darby made coke from coal, (by 1750 it
accounted of 5% of British steel)
18. 1733 John Kay invented the “flying shuttle,” James
Hargreaves’ “spinning jenny” was invented in 1764 and
Richard Awkwright developed the “water frame.”
Samuel Crompton combined the jenny and water
frame in 1774 and was adapted for steam power by
1790. Eli Whitney invented a mechanical gin in 1793,
Edmund Cartwright patented the power loom in 1785.
Use of raw cotton increased from 500 tons in 1700 to
2500 tons in 1770 and 25,000 tons in 1800.
Other industries included pottery [Josiah
Wedgewood], chemical [Antoine Lavoisier (1743-
1794), coal industry, railways [Richard Trevithick(1771-
1833) locomotive in 1801]
19. Population 0f Britain rose from about 6 million in
1700 to almost 20 million in 1850.
There was increased urbanization and the growth of
cities.
21. Adam Smith [1723-1790] “founder
of Classical school”
1. The Theory of Moral Sentiments (1759).
2. An Inquiry in to the Nature and Causes of the Wealth
of Nations (1776).
3. Lectures on Jurisprudence.
4. Essays on Philosophical Subjects (1795)
22. 1. The Theory of Moral Sentiments (1759)
Is a discussion of moral forces in society and how they
guide individual behavior into patterns that are
consistent with a workable society; ethics are the
cement of society; moral values are based on human
feelings.
23. Moral Philosophy was a part of his lectures
on Moral Philosophy (ethics)
Natural theology
Ethics
Jurisprudence
Justice in the form of history of law
Expediency [subject matter of WN]
24. People can exist only in societies, need
mutual assistance
may be offered out of love, gratitude, friendship
corruption of morality - propensity to admire rich
and powerful people, scorn poor and weak, should
admire wisdom and virtue
people seek riches for purposes of vanity, not
necessities
sympathy explains the origin and nature of moral
judgment, of approval [propriety of action] and
disapproval
25. sympathy creates a social bond, “everyone” seeks
approval of others, we learn from experience, we learn
rules of morality from observation and experience,
generalize in moral rules (laws?). Smith aware of
appeal of Utilitarianism.
Justice as a negative virtue of avoiding harm to others
Beneficence as positive virtue of doing good
“Justice, on the contrary, is the main pillar that
upholds the whole edifice (society). If it is removed, the
great, the immense fabric of human society, that fabric
which, to raise and support, seems, in this world, if I
may say so, to have been the peculiar and darling care
of nature, must in a moment crumble into atoms.”
26. 2. An Inquiry in to the Nature and
Causes of the Wealth of Nations (1776).
Comprehensive, systematic theory of an economy
Shows connections and relationships among variables
Didn’t focus on single element
Model of workings of an economy shows
Connections of elements in a continually maintained system
How system can continually generate accumulation of wealth
Policy prescription of free trade
27. Human nature
Much of Smith’s work is permeated by a sociological
approach
Humans are interested in those things that are
nearest to us in time and space
Humans want to better their condition
Sympathy holds self interested behavior in check, if
not jurisprudence
28. Smith discusses both Microeconomics and
Macroeconomics, he attempted to explain the
interrelationships of all the elements in an economic
system and justify the use [policy] of free markets.
Free markets advocated to allow the operation of
‘natural forces’
National wealth is the “exchangeable value of the
annual produce of land and labour of a country”
29. The division of labour starts the process of
economic growth and capital accumulation keeps
it going.
Three benefits of division of labour
increase in skill and dexterity
save time in moving from job to job
invention of new machinery
Division of labour is dependent on the “extent of
the market” and capital accumulation.
Division of labour determines the productivity of
labour
30. Economic growth is also dependent on the
proportion of productive to unproductive labour.
Productive labour is that labour that produces
tangible goods that have value in exchange.
Unproductive labour is not useless, it just doesn’t
produce tangible goods to be exchanged.
32. Smith has 4 “prices”
“real” price is the real value of a good determined by the “toil and
trouble of acquiring it.” It “consists of the necessaries and conveniencies
of live which are given for it.” In rudimentary society labour, in other
societies a cost of production. Real prices always the “same.”
“nominal” price is of different values depending on the value of
gold and silver. It is the price in quantity of money.
“market” price is the “actual price at which any commodity is
commonly sold....It may either be above, or below, or exactly the same
with its natural price.”
“natural” price is “When the price of any commodity is neither
more nor less than what is sufficient to pay the rent of land, the wages
of the labour, and the profits of the stock employed in raising preparing,
and bringing to market, according to their natural rates, the commodity
is then sold for what may be called its natural price.”
33. Wages are:
1. based on bargaining and contract [issue of
combinations of masters and workmen]
2. wages fund argument
3. the amount necessary to bring up a family and more
workers
34. Profits are subject to variations. Wages and
profits are inversely related
for Smith , profits include interest
reduced capital stock increases profit, increased
capital stock reduces profit
profits equalize across industries
35. Rent is a residual
may [or may not] be used for improvements
Wages and profit are causes of price: rent is and effect
beginnings of a differential theory of rent based on
yield and location
Money is regarded primarily as a medium of
exchange. It is the “wheel of circulation” Road
metaphor. Paper money saves resources of extracting
gold and silver.
36. Role of government
provide for national defense,
provide for domestic justice
those thing that it is not “in the interest for any
individual to provide.” [public works, roads bridges,
schools,...]
37. Role of government
Gov’t to prevent workers from becoming as “stupid
and ignorant as is possible” due to division of labour.
39. Taxes
“..subjects of every state ought to contribute towards
the support of government, as nearly as possible, in
proportion to their respective abilities: that is, in
proportion to the revenue which they respectively enjoy
under the protection of the state.”
Should be (1) “certain and not arbitrary,” (2) “levied at
the time, or in the manner which it is most likely to
be convenient for the contributor, and (3) “take as
little as possible out of the pockets of the people.”
40. 3. Lectures on Jurisprudence.
A manuscript on jurisprudence (and other documents)
was burned at Smith’s request about the time of his death.
What we have is based on two sets of notes take by
students who attended lectures given by Smith in the
1762-63 and 1763-64 sessions at the University of Glasgow.
These notes were published in 1886.
Students notes on Smith’s lectures on ethics and
economics are consistent with the Theory of Moral
Sentiments and Wealth of Nations, so there is some
evidence that the lectures Smith gave were consistent with
his writings.
41. 4. Essays on Philosophical Subjects (1795)
Four stages of history
Hunters
Shepherds
Agriculture
Commerce
Protection of Property is primary aim of
government [there are other functions].
Civil Government is in reality instituted for
defense of rich.
43. David Ricardo [1772-1823]
Ricardo was the son of a Jewish immigrant stockbroker
who moved from Spain to Netherlands to Britain.
Entered business as a broker at age of 14, married a
Quaker at the age of 21.
His family disowned him.
With the support of friends he entered market on his own
and within 10 years amassed a fortune [one estimate was
2,000,000 pounds].
His rule was that the market over reacted to most events.
He anonymously gave wealth and maintained two
almshouses.
Studied math and science, encouraged his study of
economics by reading of Smith’s Wealth of Nations in 1799.
44. Retired in 1814 [age 42], studied, wrote, member of
Parliament, founder of Political Economy Club in
London.
Friends included, Malthus, James Mill, J.B. Say.
David Ricardo [1772-1823]
45. David Ricardo [1772-1823]
Representative Publications were divided between
pamphlets and major works:
On the Principles of Political Economy and Taxation,
1817 [written in a single year]
The High Price of Bullion, 1810
The Influence of a Low Price of Corn on the Profits of
Stock, 1815
In protection of Agriculture, 1822
Plans for the Establishment of a National Bank, 1824
46. Ricardo used abstract, deductive, theoretical
reasoning, [an economists’ economist] to create an
analytic approach to economics. Premises lead to
conclusions.
47. Three basic premises used by Ricardo
1. Rent Theory
2. Malthus’ population theory
3. Wages fund thesis
48. Policy Wonk in Parliament
[elected in Pocket borough in Ireland]
Independent, conscientious, respected often argued
and voted against his own interests, sided with
reformers in political matters
Abolish flogging, for secret ballot, extend suffrage, free
speech, reduce capital offenses, for civil liberties
In monetary matters Ricardo espoused a narrow
quantity theory of money, free trade.
49. Value
Follows Smith in value in use and value in exchange,
focus on value in exchange
Utility is not a measure of value, it is a necessary but
not sufficient condition,assumes utility.
50. Two types of goods
Those which derive value from scarcity, a rare
painting
Those which derive it from the quantity of labour
required to obtain them
relative values depend on the quantities of labour
required
profits and wages [rates] are equalized in all
industries, equality of labour, capital is stored up
labour. There may be differences in the durability of
capital that allow value changes.
51. values, wealth - riches or welfare
“It is true that the man in possession of a scarce
commodity is richer, if by means of it he can
command more of the necessaries and enjoyments of
human life: but as the general stock out of which each
man’s riches are drawn, is diminished in quantity, by
all that any individual takes from it, other men’s
shares must necessarily be reduced in proportion as
this favored individual is able to appropriate a greater
quantity to himself.”
Rent is the result not the cause of value.
52. Distribution
Distribution is fundamental question posed by
Ricardo.
Distribution is related to theory of value in Ricardo.
What principles determine the shares of Labour,
Capital and Land?
3. Correlate the values of products with the incomes
of producers.
“Profits depend on high or low wages, wages on the
price of necessaries, and the price of necessaries chiefly
on the price of food.”
53. “It is the desire, which every capitalist has of diverting
his funds from a less to a more profitable employment,
that prevents the market price of commodities from
continuing for any length of time either much above, or
much below their natural price.”
Distribution
54. “The natural price of labour is that price which is necessary to
enable the labourers, one with another, to subsist and to
perpetuate their race, without either increase or diminution.
The power of the labourer to support himself, and the family
which may be necessary to keep up the number of labourers,
does not depend on the quantity of money which he may
receive for wages, but on the quantity of food, necessaries,
and conveniences become essential to him from habit,
which that money will purchase. The natural price of
labour, therefore, depends on the price of food, necessaries,
and conveniences required for the support of the labourer
and his family. With a rise in the price of food and
necessaries, the natural price of labour will rise; with the fall
in their price, the natural price of labour will fall.”
Distribution
55. Distribution
“With a population pressing against the means of
subsistence, the only remedies are either a reduction of
people, or more rapid accumulation of capital.”
“In the natural advance of society, the wages of labour
will have a tendency to fall, as far as they are regulated
by supply and demand; for the supply of labourers will
continue to increase at the same rate, whilst the
demand for them will increase at a slower rate.”
56. Distribution
“ The natural tendency of profits is then to fall; for in
the progress of society and wealth, the additional
quantity of food required is obtained by the sacrifice of
more and more labour. This tendency, this gravitation
as it were of profits, is happily checked ate repeated
intervals by the improvements in machinery, connected
with the production of necessaries, as well as by
deliveries in the science of agriculture which enable us
to relinquish a portion of labour before required, and
therefore to lower the price of the prime necessary of
the labourer.”
57. Differential Theory of Rents
1. Land of different qualities [productivity]
2. Labour is homogeneous
3. As population increases, the price of corn rises
bringing marginal land into production.
4. Rent accrues to the best land, no rent on the
marginal land.
58. In the long run, wages at subsistence, the rate of
profits fall, rents rise.
When the rate of profit is zero there is not
inducement for further capital accumulation,
welcome the arrival of the stationary state.
61. Thomas Malthus [1766 - 1834]
Son of lawyer
Studied at Cambridge,
Curate in Church of England
Married at 40
Close friend of David Ricardo and opponent in policy
issues
First professor of economics, Haileybury College
[owned by East India Company]
62. Interest in demography, undermining doctrine of
human perfectibility, and economics, particularly
distribution. His theories were popular [ until 1830's]
and had lasting influence on social and economic
thought.
Influence on Charles Darwin
Influence on Ricardo
Opposed “poor laws,” in favor of “corn laws”
63. Publications
Essay on the Principle of Population as it Affects the
Future improvement of Society [1789, published
anonymously].
Condorcet believed that through the application of
reason and science it would be possible for the
perfection of humankind.
Godwin believed in the perfectibility of humankind
through the establishment of small societies anarchic,
the dissolution of government and private property.
Only in these small societies, could sympathy and
virtue prevail.
64. Principles of Political Economy [1820]
The Measure of Value [1823]
Definitions in Political Economy [1827]
Publications
65. Population
Malthus’ population theory became a integral part of
classical economics.
It is a mixture of moral judgment and “positive
economics”.
Inflammatory themes
Reasons for economic inequality
Role of self interest, laissez-faire rather than
benevolence in human affairs
The nature of the future and progress
Relation between religion with a benevolent God and
existence of widespread poverty
66. Provided insight for Charles Darwin that led to theory
of evolution and “survival of the fittest.
67. Three propositions
Population cannot increase without food
Population invariable increases if food is available,
“passion between the sexes” is a given
The “superior power of population cannot be checked
without producing misery or vise.”
68. Food production increases arithmetically, limited by
land and diminishing returns.
Population increases geometrically
Function of age at marriage
Natural sexual instinct
Never considered contraception or abortion.
69. Limits to population
Preventative checks
later marriages
abstinence, moral restraint
abortion, contraception, “irregular connections” are
preventative measures, but labeled as vice.
Positive checks
disease, pestilence
Famine
wars
70. Population and wages
Increase wages above subsistence, increase
population, wages fall
Decrease wages below subsistence, decrease
population, wages rise
Wages at subsistence in long run. The result is a
stationary state at subsistence.
In subsequent revisions of the Essay on Population,
Malthus concedes a normal feature of economic
development is “industrialization” which raises the
standard of living of even the poor.
5. Malthus’ population theory is not testable, if a
population is not starvingthere must be preventative
checks.
71. In subsequent revisions of the Essay on Population,
Malthus concedes a normal feature of economic
development is “industrialization” which raises the
standard of living of even the poor.
Malthus’ population theory is not testable, if a
population is not starving there must be preventative
checks.
72. Malthus’ Economics
His 1814 publication [Observations on the Effects of
the Corn Laws] was one of the first to suggest the use
of calculus in economic analysis. However, he
complained that Ricardo was “too abstract.”
2. Malthus was an “agrarian.” Felt that agriculture was
morally superior to commerce [which was exploitive].
As agrarian opposed importation of corn into Britain,
argued for the “corn laws” [tariffs on imports of corn
and bounties on production]
Cheap corn would encourage excessive population
growth. For the same reasons opposed the “poor laws.”
73. Malthusian theory of “Gluts”
Two ways to spend income,
acquisition of goods for consumption
accumulate capital [it follows that Savings =
investment]
Malthus disagrees with Says law. Land owners hire
menial servants, capitalists hire productive ag or
industrial workers. As a result total product rises, total
income of workers is constant [shift from unproductive
to productive employment], capitalists’ demand for
consumer goods is down, result is general glut.
74. In 1818-19 there was a general depression in Britain,
agricultural prices dropped, labour became militant
[Manchester, Peterloo Massacre], concern of
revolutionary danger.
“The interests of no other class in the state is so
nearly and necessarily connected with its wealth,
prosperity and power as the interests of the
landowner.”
75. Imbalance in the circulation of money and
commodities. More goods than workers at
subsistence could consume. Ultimate cause of gluts
was excessive profits, increased capital, improved
technology, and subsistence wages.
76. 1. If you increase wages, you increase population and
wages fall to subsistence.
2. If you increase income share to capitalist they save
and invest, result is more goods.
3. If you increase share to landowner they build bigger
estates, hire more servants,
Notice the problem of gluts is due to over production