summary new ideas from dead economists 4th edition buchholz

summary new ideas from dead economists 4th edition buchholz 1 / 3

summary new ideas from dead economists 4th edition buchholz 2 / 3

summary new ideas from dead economists 4th edition buchholz

Adam Smith:

Inspired by physiocrats, who believed that the wealth creation comes from production, in particular from agriculture. While he does not believe in mercantilism, which assume that wealth comes from commodities, gold and silver.

‘The Theory of Moral Sentiments’:

When confronted with moral choices, people decide on the basis of sympathy, not selfishness. Smith states that everybody has adviser (imaginary) who carefully considers and advices. Related to Freud’s ‘super-ego’, conscience that restrains humans from certain acts and makes them feel guilty when they do not listen.

‘The Wealth of Nations’:

Uncover causal laws that explain how to achieve wealth. Humans have a desire to bettering our condition. Exchange and trade are common to all men. In order to increase wealth of nations these natural desires should be exploited. Self-interest motivates more powerfully and consistently than kindness. Governments should not repress self-interested people.-Free market: market determines demand and price. Prices and profits signal entrepreneurs what to produce and what price to charge.-Division of labour: lifts output in three ways. (1) Worker develops more skill in particular task (specialization). (2) Workers waste less time changing between tasks. (3) Specialized workers are more likely to invent machinery.First two increasing productivity and third for technological advancement. Division of work by task, leads to divergence in wages.-Division of labour among towns and countries: free trade among manufacturers, suppliers, towns, cities is necessary to bring wealth to a nation.Towns for example can also specify. Only import good in which another country has an absolute advantage.-A Theme for the Common Man: under market system also the poor and politically impotent can prosper. In contrast, under a centrally guided system, political power determines economic position (friends of king can grow rich). Smith believed that assembly line could rob workers of their intelligence and spirit (loses creativity). Public education as remedy for public dullness. Educated workers more likely to invent.-Labour is chief engine of economic growth, accelerating when: (1) labour supply increased, (2) labour subdivided, (3) labour quality rose through new machines. As long as new ideas for profitable investment and invention continued to spring from imaginations and free exchange was permitted, economic growth would go forward. Resulting in higher living standards for society at large.-Policies and practice: Smith fired salvos at many contradictory restrictions that limited trade and the division of labour for the benefit of identifiable groups. Does not like monopolies granted by government. International trade should be stimulated. Trade restrictions and protection from foreign producers will ultimately lead that people pay higher prices for products than needed. ‘Infant industry’ could be an exemption, but only for a few years.However, he argues that exemptions will be hard to unwind.-Smith’s role for governments: 1 national defence, 2 administering justice through court system, 3 maintaining public institutions roads, canals, bridges, education.-Buchholz: unregulated economy, like US economy, produces more marketable innovations than other countries.

Malthus:

An Essay:

Population swelling and spreading at an explosive pace, while the food supplies only inch along.Based on data provided by Benjamin Franklin that population doubles every 25 years. Malthus concluded that food output could never keep up with that pace. Power of population is so superior to the power of the earth to produce subsistence for man, that premature death (war, famine, plagues) must in some shape visit the human race. Nevertheless, life is a blessing according to Malthus.

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