Economists of our time
When we buy, sell or gain something material, we rarely see the forces of economics at work. We never consider the consequences our purchases make on the laws of supply and demand, the distribution of wealth and prices, or the forces that accompany them like wages, profits or losses, even of the production process. It is hoped that this paper will give a better understanding of some economic principles at work in the market place the next time we buy something.
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Economics basically has to do with production distribution and consumption of goods and services (Encarta, 2008). From the word “oikonomos”, dealing with efficient management of the house (PID). Economists are individuals mainly interested in the processes that people, businesses and authorities come up with ways to atain their objectives in the most efficient and effective way (Encarta, 2008). Throughout history, economics was linked with some of the age’s greatest thinkers. The Greek philosophers Aristotle and Plato discussed in their writings the issues of trade, money and possessions (Encarta, 2008). The Romans lived by the philosophies of the Greeks, both showing a displeasure of trade with other states (Encarta, 2008).
Economics, as a seperate field of study apart from the disciplines of moral philosophies, began with the publishing of the five-book series “Wealth of Nations”, authored by the Scot Adam Smith (1723-1790) (Rasmussen, 2008). This book, along with Smith’s “Theory of Moral Sentiments”, are two of Smith’s important contributions to literature (Rasmussen, 2008). Aside From Smith, we will follow the progression of the economic theory from Smith to the works of British economist David Ricardo, finally reaching the works of John Stuart Mill.
Prominent economic minds
In his book “Wealth of Nations”, Smith tried to discuss and explore the reasons behind a nations’ wealth (Rasmussen, 2008). In his work Smith, he began a critical analysis of the system of economics (Rasmussen, 2008). His theory of “Classical” economics centers on the factors or elements in the production process, mainly Labor, Capital, and Land as the driving factors in the process important to the generation of wealth in a country (PID). Smith is also a believer in the Invisble Hand (PID), but critical of mercantilism (Rasmussen, 2008). He is of the belief that a stable and sound system of economics would consist of a self-replenishing system wherein the system would be able to satiate the needs of the people (PID). In his theory, Smith incorporated the ideas of “laissez-faire” or the classic theory of economics, and some of the Physiocrats’ ideas (PID). (Francios Quesnay, the founder of the Physiocrat school, thoerizes that all wealth is derived from agriculture, thus, the flow of wealth is from the farmers to the people (Encarta, 2008). Laissez-faire, on the other hand, stipulates the “greatest number with the greatest theory”- leaving it up to individuals to allocate limited resources within the framework of the economy to reach high levels of satisfaction (Kurz & Lager, 2000).
British born David Ricardo (172-1823), unlike the Scot Adam Smith who focused his theory on the generation of wealth, primed his economic study to the distribution of wealth (PID). In his most important work, “Principles of Economy and Taxation” (1817) (Encarta, 2008), he integrates a theory value into the theory of distribution (Moffat, 2008). Ricardo offered several reasons on the long-range system of distribution of the wealth (Encarta, 2008). He centered his theory on the increase of the population and of capital, that an increase in the population will hold back the increase of wages (PID). He avers that an increase in the number of people will ultimately result in a dearth of farm lands (Encarta, 2008). His labor theory, which led Karl Marx, stated that one’s wages are to determined by the price of food, which in turn is set by the production costs (Encarta, 2008). Eventually, his theories came to called the “Ricardian” school of economics (Moffat, 2008).
John Stuart Mill
British born John Stuart Mill (1806-1873) is considered as the last of the great Classical economists (PID). He was an economist, philosopher, political theorist, all rolled into one (Wilson, 2007). In his work, “Principles of Political Economy and some of the applications to Social Philosophy (1848), Mills elaborated on the works and theories of John Malthus and Ricardo, but followed a different tact from the two (Wilson, 2007). Mills deviated from Ricardo and Malthus’ view that workers can be taught to limit their numbers (Encarta, 2008). His book allows for a higher and nobler end of the economic system, that there could be higher motivations present, aside from the fact that economics is geared toward
satisfaction of self-interest and material gain (Wilson, 2007). Even as he shared the the belief in the laissez-faire theory as did Ricardo and his father, Mills was concerned about self-development, in his belief was afforded by the system (Wilson, 2007). Like Ricardo, he also held the belief that gains made would slowly be diminished and the need to create new capital would no longer be needed (Wilson, 2007). This development would make society to be interested in more non-worldly ends, thus making the problems of the society disappear (Wilson, 2007).
Which is at play?
Though most of the theories presented here have at one time or another been displayed in the U.S economy, none is more prominent than Mills’ theory. As people tend to be more materialistic, more and more individuals want to become involved in charity or other humanitarian activities to somehow assuage their guilt in their drive fro more material and worldly gain. People somehow want to make an effort, some superflouos as it seems, believe that if they make a small “pitch” to making society a little better, all would just fall into place. As Mills put it, somehow it takes society to act and change the circumatances in that society (Wilson, 2007).
Kurz, H.D., Lager, C. (2007). Input-output analysis and the classical economic theory. June 1, 2000. Economic Systems Research, volume 12, number 2, pp. 139-140. Retrieved July 3, 2008, from SociologyIndex website.
Moffat, M. (2008). The life and works of David Ricardo – a biography of David Ricardo.
Retrieved July 3, 2008, from About website.
MSN Encarta. (2008). Adam Smith. Retrieved July 3, 2008, From MSN Encarta Online Encyclopedia website.
MSN Encarta.(2008). David Ricardo. Retrieved July 3, 2008, from MSN Encarta Online Encyclopedia website.
MSN Encarta. (2008). Economics. Retrieved July 3, 2008, from MSN Encarta Online Encyclopedia website.
Public Information Department. Great economists and their times.
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Rasmussen, H. (2008). The life and works of Adam Smith – a biography of Adam Smith. Retrieved July 3, 2008. from About website.
Wilson, F. (2007). John Stuart Mill. January 3, 2002, revision July 10, 2007. Retrieved July 3, 2008, from the Stanford Encyclopedia of Philiosophy website.