Three Influential Economic Philosophers

1. Three Influential Economic Philosophers

2. An economic system has four purposes… • A community and its government organize themselves…

3. To decide what products and services they will generate and • How the community and government will generate these products and services. • Finally, the system decides who these products and services will be distributed to.

4. Adam Smith wrote “Wealth of Nations” in 1776 • Smith lived when most European nations with colonies followed the economic theory of merchantilism. • This theory believed the governments of mother countries should manipulate their colonies’ economies to enrich themselves. • One example was England’s insistence their North American colonies purchase manufactured goods from England, and only England. • Smith disagreed with merchantilism.

5. He believed markets alone should answer the three allocation questions. • He believed that governments should operate in a “laissez faire” manner. • Smith claimed market forces would determine price and quantity traded. He called this the “invisible hand.” • The government should provide only unprofitable services and military for defense, according to Smith.

6. In the United States for example, the federal government operates the US Postal Service and Amtrak Passenger Rail Service. • Both are necessary public services that may not be profitable for private businesses.

7. Karl Marx wrote the Communist Manifesto in 1848. Marx lived during the European Industrial Revolution. • He saw class struggle everywhere as a result of capitalism.

8. Marx’s view of history and the future. • Capitalism created a working class “proletariant” and a class of business owners “bourgeoisie.” • Workers created wealth for owners. • Government supported owners against workers. Homestead Steel Strike 1892. • Workers should unite and take over govt. • Classes would disappear as people would become economically equal. • Government would “wither away” as unnecessary.

9. In the 1917 Russian Revolution, Marxist thought was often quoted as the guiding light behind the removal of Czar Nicholas and his family. The Union of Soviet Socialist Republics was based upon Marx beliefs. • In the 1948 Chinese Civil War, Mao ze Dung quoted Marxist ideas when rising to power creating the Peoples Republic of China’s communist economic system. • By the 1970s, one third of the world’s people lived in communist economies.

10. John Maynard Keynes wrote General Theory in 1936. • Keynes was born in England in 1883. • During the 1920’s, unemployment in England was 20%. • He wrote The General Theory of Employment, Interest and Money in 1936 during the Great Depression in the US.

11. Keynes believed demand in an economy included private consumption and government spending. • Why shouldn’t government, thought Keynes, fill the shoes of business in a recession by investing in public works and hiring the unemployed? • The General Theory advocated deficit spending during economic downturns to maintain full employment. • Deficit spending occurs when the government spends more money than it collects in taxes in one year.

12. Effect of Keynesian economics in United States • At this time governments had always balanced their budgets. • The US government put people to work during the Great Depression citing Keynesian Economics.

13. What are your thoughts about these men and their economic theories? • Adam Smith • Karl Marx • John Maynard Keynes ? ?

14. Peoples’ Republic of China(PRC) • President of PRC, Xi Jinping. (she-chin-ping) • Since 1980, free enterprise is growing quickly in PRC. • Alcoa, Walmart and Google are doing business in PRC today.

15. United States of America • President Obama has suggested a higher minimum wage for workers. • He also supports universal health care for all Americans.