Economics 493/593 - History of Economic Thought

Class Materials for Lecture 11

Brief Outline of Topics Covered in Lecture 11:

Karl Marx (ch. 7) pgs. 196-207

Video:

Lecture 11 [Google video] - Fall 2007
Lecture 11 [Media Player] - Fall 2007

 

Economics 493 Lecture 11

Younger Karl Marx

Practice Essay Questions - Midterm 2

Review Questions for Midterm 2
Economics 493/593
Fall 2007

1. Explain Ricardo's theory of comparative advantage.

2. Explain Ricardo's theory of distribution and why Ricardo believed that rent and profit are inversely related and that that profit and wages are inversely related

3. How does hedonism differ from utilitarianism?

4. How did Bentham's utilitarianism lead him to egalitarian reform proposals? Why didn't he advocate complete equality of income? What problems are associated with Bentham's utilitarianism?

5. According to J.B. Say, what was the fourth factor of production? How did the addition of this fourth factor of production this remove potential sources of class conflict from classical theory?

6. What is Say's law? What are the implications of Say's law?

7. Discuss Nassau William Senior's beliefs concerning positive and normative economics.

8. Discuss Nassau William Senior's views on the poor laws. What policies did he help to enact as a member of the Poor Law Inquiry Commission?

9. How did Nassau William Senior's views on rent differ from Ricardo's? How does this reduce class distinctions based upon the receipt of rent?

10. How do Mill's views on utility differ from Bentham's?

11. According to Mill, what are the three types of goods? Which is the most common?

12. What are Mill's views on government intervention?

13. Define and explain the following modes of production: Capitalism, State Capitalism, State Socialism, Utopian Socialism, Anarchism, Marxian Socialism (including the six stages of production), and Syndicalism.

14. What were Marx's views on the writings of Smith, Ricardo, Mill, Bentham, Say, and Senior? Why was he critical of much of what they wrote?

15. How are exchange values determined in Marx's framework? What solution does he suggest for the problem that the prices of goods differ from the value of the labor used in their production when capital/labor ratios differ across industries

16. Explain Marx's theory of exploitation.

17. What are the reasons, according to Marx, for the falling rate of profit over time?

18. Did Marx believe in Say's law? Explain.

19. What are cyclically recurring fluctuations and disproportionality crises?

20. What are the concentration and centralization of capital and how to they lead to the failure of capitalism?

21. Explain the three interpretations of Marx's belief that there would be increasing misery of the proletariat as capitalism developed.

Class Materials for Lecture 10

Brief Outline of Topics Covered in Lecture 10:

Karl Marx (ch. 7) pgs. 187-196

[Note: Here's the anarchy/pirate story I mentioned today: The Pirates’ Code, by James Surowiecki, The New Yorker]

Video:

Lecture 10 [Google video] - Fall 2007
Lecture 10 [Media Player] - Fall 2007

 

Economics 493 Lecture 10

Karl Marx
(1818-1883)

Class Materials for Lecture 9

Brief Outline of Topics Covered in Lecture 9:

Senior, and Mill (ch. 6) pgs. 156-165 as emphasized in class
   Senior is on pgs. 159-161

Video:

Lecture 9 [Google video] - Fall 2007
Lecture 9 [Media Player] - Fall 2007

 

Economics 493 Lecture 9

Autobiography: John Stuart Mill was born in the Pentonville area of London, United Kingdom, the eldest son of the Scottish philosopher and historian James Mill. John Stuart was educated by his father, with the advice and assistance of Jeremy Bentham and Francis Place. He was given an extremely rigorous, some would say harsh, upbringing, and was deliberately shielded from association with children his own age other than his siblings. His father, a follower of Bentham and an adherent of associationism, had as his explicit aim to create a genius intellect that would carry on the cause of utilitarianism and its implementation after he and Bentham were dead.

Mill was a notably precocious child; at the age of three he was taught the Greek alphabet and long lists of Greek words with their English equivalents. By the age of eight he had read Aesop's Fables, Xenophon's Anabasis, and the whole of Herodotus, and was acquainted with Lucian, Diogenes Laërtius, Isocrates and six dialogues of Plato. He had also read a great deal of history in English and had been taught arithmetic.

At the age of eight he began learning Latin, Euclid, and algebra, and was appointed schoolmaster to the younger children of the family. His main reading was still history, but he went through all the Latin and Greek authors commonly read in the schools and universities at the time, like Horace, Virgil, Ovid, Tacitus, Homer, Dionysus, Sophocles, Euripides, Aristophanes and Thucydides. He was not taught to compose either in Latin or in Greek, and he was never an exact scholar; it was for the subject matter that he was required to read, and by the age of ten he could read Plato and Demosthenes with ease. His father also thought that it was important for Mill to study and compose poetry. One of Mill's earliest poetry compositions was a continuation of the Iliad. In his spare time, he also enjoyed reading about natural sciences and popular novels, such as Don Quixote and Robinson Crusoe.

His father's History of India was published in 1818; immediately thereafter, about the age of twelve, Mill began a thorough study of the scholastic logic, at the same time reading Aristotle's logical treatises in the original language. In the following year he was introduced to political economy and studied Adam Smith and David Ricardo with his father - ultimately completing their classical economic view of factors of production. Mill's compte rendus of his daily economy lessons helped his father in writing Elements of Political Economy, which became the leading textbook exposition of doctrinaire Ricardian economics. Ricardo, who was a close friend of his father, used to invite the young Mill to his house and to walk in order to talk about political economy.

In his Autobiography, Mill described his father's teaching methods:

Such a mode of instruction was excellently calculated to form a thinker; but it required to be worked by a thinker, as close and vigorous as my father. The path was a thorny one, even to him, and I am sure it was so to me, notwithstanding the strong interest I took in the subject. He was often, and much beyond reason, provoked by my failures in cases where success could not have been expected; but in the main his method was right, and it succeeded. I do not believe that any scientific teaching ever was more thorough, or better fitted for training the faculties, than the mode in which logic and political economy were taught to me by my father. Striving, even in an exaggerated degree, to call forth the activity of my faculties, by making me find out everything for myself, he gave his explanations not before, but after, I had felt the full force of the difficulties; and not only gave me an accurate knowledge of these two great subjects, as far as they were then understood, but made me a thinker on both. I thought for myself almost from the first, and occasionally thought differently from him, though for a long time only on minor points, and making his opinion the ultimate standard. At a later period I even occasionally convinced him, and altered his opinion on some points of detail: which I state to his honour, not my own. It at once exemplifies his perfect candour, and the real worth of his method of teaching.

At the age of fourteen, Mill stayed for one year in France, with the family of Sir Samuel Bentham, brother of Jeremy Bentham. The mountain scenery he saw in France made the deepest impression on him, which lead to a lifelong taste for mountain landscapes. The lively and friendly way of life of the French also left a deep impression on him. In Montpellier, he attended the winter courses on chemistry, zoology, logic of the Faculté des Sciences, as well as taking a course of the higher mathematics with a private professor. While coming and going from France, he stayed in Paris for a few days in the house of the known economist Jean-Baptiste Say, who was a friend of Mill's father. There he met many leaders of the Liberal party, as well as other notable Parisiens, including Henri Saint-Simon.

A contemporary record of Mill's studies from eight to thirteen is published in Bain's sketch of his life. It suggests that his autobiography rather understates the amount of work done.

This intensive study however had injurious effects on Mill's mental health, and state of mind. At the age of 20 he suffered a nervous breakdown. As explained in chapter V of his Autobiography, this was caused by the great physical and mental arduousness of his studies which had suppressed any feelings he might have developed normally in childhood. Nevertheless, this depression eventually began to dissipate, as he began to find solace in the Mémoires of Jean-François Marmontel and the poetry of William Wordsworth - his capacity for emotion resurfaced - Mill remarking that the "cloud gradually drew off". ...

In 1851, Mill married Harriet Taylor after 21 years of an intimate friendship. Taylor was married when they met, and their relationship was close but chaste during the years before her first husband died. Brilliant in her own right, Taylor was a significant influence on Mill's work and ideas during both friendship and marriage. His relationship with Harriet Taylor reinforced Mill's advocacy of women's rights. He cites her influence in his final revision of On Liberty, which was published shortly after her death, and she appears to be obliquely referenced in The Subjection of Women. Taylor died in 1858 after developing severe lung congestion, only seven years into her marriage to Mill.

He died in Avignon, France in 1873, and is buried alongside his wife.

Class Materials for Lecture 8

Brief Outline of Topics Covered in Lecture 8:

Bentham, Say, Senior, and Mill (ch. 6) pgs. 156-165 as emphasized in class
   Bentham is on pgs. 169-170
   Say is on pgs. 147-148 of chapter 5
   Senior is on pgs. 159-161

Video:

Lecture 8 [Google video] - Fall 2007
Lecture 8 [Media Player] - Fall 2007

 

Economics 493 Lecture 8

Jeremy Bentham Auto-Icon

Jeremy Bentham: As requested in his will, his body was preserved and stored in a wooden cabinet, termed his "Auto-icon". Originally kept by his disciple Dr. Southwood Smith, it was acquired by University College London in 1850. The Auto-Icon is kept on public display at the end of the South Cloisters in the main building of the College. For the 100th and 150th anniversaries of the college, the Auto-Icon was brought to the meeting of the College Council, where he was listed as "present but not voting". Tradition holds that if the council's vote on any motion is tied, the auto-icon always breaks the tie by voting in favor of the motion.

The Auto-Icon has always had a wax head, as Bentham's head was badly damaged in the preservation process. The real head was displayed in the same case for many years, but became the target of repeated student pranks including being stolen on more than one occasion. It is now locked away securely.

Jean-Baptiste Say (1767-1832)
on Say's Law and the Impossibility of Gluts

"It is worth while to remark, that a product is no sooner created, than it, from that instance, affords a market for other products to the full extent of its own value. When the producer has put the finishing hand to his product, he is most anxious to sell it immediately, lest its value should vanish in his hands. Nor is he less anxious to dispose of the money he may get for it; for the value of money is also perishable. But the only way of getting rid of money is in the purchase of some product or other. Thus, the mere circumstance of the creation of one product immediately opens a vent for other products ..."

"But it may be asked, if this be so, how does it happen, that there is at times so great a glut of commodities in the market and so much difficulty in finding a vent for them? Why cannot one of these 11 superabundant commodities be exchanged for another? I answer that the glut of a particular commodity arises from its having outrun the total demand for it in one or two ways; either because it has been produced in excessive abundance, or because the production of other commodities has fallen short."

David Ricardo (1772-1823)
on the Impossibility of Gluts

"No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. 

Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected. Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities."

John Maynard Keynes (1883-1946)
on Malthus and the Possibility of Glut

"The idea that we can safely neglect the aggregate demand function is fundamental to the Ricardian economics, which underlie what we have been taught for more than a century. Malthus, indeed, had vehemently opposed Ricardo?s doctrine that it was impossible for elective demand to be deficient; but vainly. For, since Malthus was unable to explain clearly (apart from an appeal to the facts of common observation) how and why effective demand could be deficient or excessive, he failed to furnish an alternative construction; and Ricardo conquered England as completely as the Holy Inquisition conquered Spain. Not only was his theory accepted by the city, by statesmen and by the academic world. But controversy ceased; the other point of view completely disappeared; it ceased to be discussed. The great puzzle of Effective Demand with which Malthus had wrestled vanished from economic literature. You will not find it mentioned even once in the whole works of Marshall, Edgeworth and Professor Pigou, from whose hands the classical theory has received its most mature embodiment. It could only live on furtively, below the surface, in the underworlds of Karl Marx, Silvio Gesell or Major Douglas. 

But although the doctrine itself has remained unquestioned by orthodox economists up to a late date, its signal failure for purposes of scientific prediction has greatly impaired, in the course of time, the prestige of its practitioners. For professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;? a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.

The celebrated optimism of traditional economic theory, which has led to economists being looked upon as Candides, who, having left this world for the cultivation of their gardens, teach that all is for the best in the best of all possible worlds provided we will let well alone, is also to be traced, I think, to their having neglected to take account of the drag on prosperity which can be exercised by an insufficiency of effective demand. For there would obviously be a natural tendency towards the optimum employment of resources in a Society which was functioning after the manner of the classical postulates. It may well be that the classical theory represents the way in which we should like our Economy to behave. But to assume that it actually does so is to assume our difficulties away."

Class Materials for Lecture 7

Brief Outline of Topics Covered in Lecture 7:

Ricardo (ch. 5) pgs. 126-141

Ricardo

Video:

Lecture 7 [Google video] - Fall 2007
Lecture 7 [Media Player] - Fall 2007

 

Economics 493 Lecture 7

Midterm 1

Midterm 1

Practice Essay Questions - Midterm 1 (Updated)

Review Questions for Midterm 1
Economics 493/593
Fall 2007

1. Why does the book choose to begin the study of the evolution of economic thought around the year 1500?

2. What factors were important in the transition from feudalism to capitalism? Discuss each factor.

3. Discuss the main features and policies associated with mercantilism.

4. Why did the mercantilists focus on exchange as the source of wealth? What was the role of the government under mercantilism?

5. What was Thomas Mun's major contribution to mercantilist ideas?

6. Discuss the ideas and contributions of Sir William Petty.

7. Discuss the ideas and contributions of Bernard Mandeville.

8. Discuss the ideas and contributions of Richard Cantillon and David Hume.

9. Who were the Physiocrats? What policies did they advocate, and what problems did their policies address?

10. Discuss the ideas and contributions of Francois Quesnay. Explain Quesnay's Tableau Economique. Why is the table important in the history of economic thought?

11. Discuss the ideas and contributions of Anne Robert Turgot. Why was Turgot dismissed from his duties as finance minister in 1776?

12. According to Adam Smith, what are the four stages of economic and social development? What are the characteristics of each stage? How did the progression through the stages illustrate the invisible hand at work?

13. What is the role of the state according to Adam Smith? What makes for good taxes?

14. What determines the market price and the natural price of a good according to Adam Smith's value theory? How does this determine the flow of resources in an economy? Why was this an important contribution?

15. What reasons did Adam Smith give for increases in productivity brought about by the division of labor? What is the most fundamental division of labor? How does productive labor differ from unproductive labor, and why did he make this distinction? Ultimately, what is responsible for the wealth of nations?

16. Why does Smith believe an unequal distribution of income is socially important?

17. Why does Adam Smith believe in free international trade? Are tariffs ever acceptable?

18. Explain Adam Smith's value theory, including his three theories of relative prices. What problems does this theory have?

19. Why did Adam Smith believe wages would differ across occupations? What is the wages fund doctrine?

20. What did Smith think would happen to the rate of profit over time? What reasons did he give for his conclusion?

21. How does Smith measure economic welfare?

22. What important policy debates provide the background for Malthus' work? How did the works of Godwin and Condorcet influence Malthus?

23. Explain Malthus' population theory. What policy implications did Malthus draw from this analysis?

24. Explain Ricardo's theory of rent and the law of diminishing returns.

[Note: Though the distribution is not entirely uniform, this works out to an average of four question per class]

Class Materials for Lecture 6

Brief Outline of Topics Covered in Lecture 6:

Malthus and Ricardo (ch. 5) pgs. 108-126 (as emphasized in class)

Malthus


Ricardo

Video:

Lecture 6 [Google video] - Fall 2007
Lecture 6 [Media Player] - Fall 2007

 

Economics 493 Lecture 6

Class Materials for Lecture 5

Brief Outline of Topics Covered in Lecture 5:

Adam Smith (ch. 4) pgs. 89-105

Video:

Lecture 5 [Google video] - Fall 2007
Lecture 5 [Media Player] - Fall 2007

 

Economics 493 Lecture 5