How and why did economics start?

1. How and why did economics start?

2. The word economic comes from the Greek oikos, meaning “house,” and nomos, meaning “to manage.” An early use in English, the Oxford English Dictionary tell us, would be in a phrase such as “Doth employ her Oeconomick Art … her Household to preserve (1697).” The good household manager acts to preserve the household by making sure it stays provisioned with food and the other necessaries of life. P: 9

3. The meaning in human history referred to self provisioning which was people making sure they had enough to meet the needs of their own homes. • While in ruling families it was different, the taxation that they provided from gold and land, which health was measured by, supported the ruling class. • So the merchant class was small. P: 9

4. The industrial revolution: When did it begin? ~It began in England in the mid-eighteenth century. What changes did it bring? ~Improved trading, and the factories that produced goods increased wealth, and this led to a bigger use of money and markets and increasing of people being employed and earning wages. P: 10

5. The new role played by financial and physical capital in sustaining industrial production transformed what had been a largely stagnant( not moving) situation into one of massive, ongoing change. • Wealth became increasingly identified with business production and profit. At influential merchant class was growing. P: 10

6. The Scottish philosopher • Adam Smith • (1723 – 1790) • He is the most prominent of the classical economists, was fascinated by the process of wealth creation. • He wanted to explore how society was going about providing people with, as he wrote in 1776, the “necessaries and conveniences of life”. P: 10, 11

7. Smith’s Vision: Factory system used the division and specialization of labor. The roles played by capital and markets. Created the groundwork for understanding capitalism. P: 10

8. The “classical school” of economics arose from a desire to understand these emerging relations. • The fact that classical economics rose during the time of the industrial revolution affected not only the content of what was studied (the capitalist industrial system) but also the form by which it was understood, the scientific model and the use of technology. • - This was a time of change in basic ways of perceiving the world. P: 10

9. The Invisible Hand: “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.” Smith means that people’s self-interest is what guides our decisions to act in economics. So, if we let people act as they normally would, then they will meet their needs, trade, and do business in such a way that their lives will improve. If we set up a system that allows for people to do this, they will create, trade and provide all the things we need and want. As wants are found, someone will fill that want. Thus, the invisible hand of our self-interest will guide people to create an economy that will fulfill our needs. P: 13, 14

10. Reference: Nelson, Julie. Economics for Humans. Chicago: The University of Chicago press, 2006. Pages: 10, 11, 12, 13,14, 16.

11. Thank You