ADVENTURES IN ECONOMICS

ADITH VENUGOPAL*

Abstract
The invisible hand- 1776 Adam smith suggest leave self-interested
traders to compete with one another.
The Paradox of Thrift Savings and spending habits that influence the
economy.
The Philips Curve- Balance of inflation rate and Unemployment rate.
John Maynard Keynes Theory to overcome great depression.
John Nash Theory- Equilibrium theory.

*MBA student, SNGCE, Kolenchery

Key words; Equilibrium, savings & investment, wages & employment,

market structure.

INTRODUCTION
Adventures in economics
Economics is a dynamic science - changing to reflect the shifting trends
in economic affairs, in the environment, in the world economy, and in society at
large. According to Adam smith who is known as the father of economics, he
told that economy is concerned with an enquiry into the nature and causes of
wealth of nations. The early economists called economics, the science of
wealth. The study of economics has passed through several decades merging
with several theories that made the wealth and welfare of the world, is cracking
with new inventions. We here interested to familiarise the major adventures
theories related to the wealth of our nations contributed by them, which is
directly related to the wealth of each of people in the nation . In this literature
review we make an attempt to familiarise

the theory of invisible hand,

Keynesian theory, the paradox of thrift theory, john nashs equilibrium theory
and the Philips curve. Adam smith in his work the wealth of nations he
formulated the key theories of market driven economics. Then we go through
the theory of j.M Keynesian. He criticised says low supply create its own
demand. The Philips curve shows the relationship between employment rate
and inflation and its reflection on growth of the Nations. In 1949, an economist
wrote a paper which 45 years later was to win a Nobel prize for economics. He
earned a doctorate in 1950 with a dissertation on non-cooperative games. He is
none other than John Nash. His theory is renowned as Nashs Equilibrium
theory.

Need for Study

The study is to make an awareness about the most famous as well as relevant in
our current economic scenario. as we are the core part of the economy we must
have the knowledge about the different adventures and brilliant works by the
devoted personalities in the world. We horned them with the Nobel Prize. The
efforts and sacrifices they had taken are appreciated and we are bound to receive
and recognise their adventures contributions .here we try to expose the major
adventures in the economics by some of the economic scholars

John Maynard Keynes

John Maynard Keynes is considered by many to be the greatest economist
of the twentieth century. His major work, the general Theory of Employment,
Interest, and Money, had a profound impact on macroeconomics, both thought
and policy. Keynes was born in Cambridge, England, on June 5, 1883. He
studied economics at Cambridge University, where he became a lecturer in
economics in 1908. During the World War I, Keynes worked for the British
treasurys representative at the Versailles Peace Conference. He resigned from
the British delegation at the conference to protest the harsh terms being imposed
on the defeated countries. His resignation and the publication of the Economic
Consequences of the Peace (1919) made him an international celebrity.
In 1936, Keynes published The General Theory. It was a time of world
recession (it has been estimated that around one-quarter of the U.S labour force
was unemployed at the height of the Depression) and Policymakers were
searching for ways to explain the persistent unemployment. In the book, Keynes
suggested that an economy could come to equilibrium at less than potential
GDP. More important, he argued that government policy could be altered to end
recession. His analysis emphasized aggregate expenditures. If private
expenditures were not sufficient to create equilibrium at potential GDP,
government expenditures could be increased to stimulate income and output.
This was a startling concept. Most economists of the time believed that
government should not take an active role in the economy. With his General
Theory, Keynes started a revolution in macroeconomics

The Paradox of thrift

People generally believe that saving is good and that more saving is better.
However, if every family increased its saving, the result could be less income
for the economy as a whole. In fact, increased saving could actually lower
savings for all households. An increase in saving may provide an example of the
paradox of thrift. A paradox is a true proposition that seems to contradict
common beliefs. We believe that we will be better off by increased saving, but
in the aggregate, increased saving could cause the economy to be worse off. The
paradox of thrift is a fallacy of composition: the assumption that what is true of
a part is true of the whole. It often is unsafe to generalize from what is true at
the micro level to what is true at the macro level.
Nash Equilibrium
In game theory, the Nash equilibrium is a solution concept of a noncooperative game involving two or more players, in which each player is
assumed to know the equilibrium strategies of the other players, and no player
has anything to gain by changing only their own strategy. If each player has
chosen a strategy and no player can benefit by changing strategies while the
other players keep their unchanged, then the current set of strategy choices and
the corresponding payoffs constitute a Nash equilibrium.
Stated simply, Amy and Will are in Nash equilibrium if Amy is making the best
decision she can, taking into account Will's decision, and Will is making the
best decision he can, taking into account Amy's decision. Likewise, a group of
players are in Nash equilibrium if each one is making the best decision that he
or she can, taking into account the decisions of the others in the game
Applications
Game theorists use the Nash equilibrium concept to analyze the outcome of
the strategic interaction of several decision makers. In other words, it provides a
way of predicting what will happen if several people or several institutions are
making decisions at the same time, and if the outcome depends on the decisions
of the others. The simple insight underlying John Nash's idea is that one cannot
predict the result of the choices of multiple decision makers if one analyzes

those decisions in isolation. Instead, one must ask what each player would
do, taking into account the decision-making of the others.
Nash equilibrium has been used to analyze hostile situations like war and arms
races (see prisoner's dilemma), and also how conflict may be mitigated by
repeated interaction (see tit-for-tat). It has also been used to study to what extent
people with different preferences can cooperate (see battle of the sexes), and
whether they will take risks to achieve a cooperative outcome (see stag hunt). It
has been used to study the adoption of technical standards, and also the
occurrence of bank runs and currency crises (seecoordination game). Other
applications include traffic flow (see Wardrop's principle), how to organize
auctions (see auction theory), the outcome of efforts exerted by multiple parties
in the education process, regulatory legislation such as environmental
regulations (see tragedy of the Commons), and even penalty kicks
in soccer (see matching pennies).
The invisible Hand
In economics, the invisible hand of the market is a metaphor used by Adam
Smith to describe the self-regulating behaviour of the marketplace. Individuals
can make profit, and maximize it without the need for government intervention.
The exact phrase is used just three times in Smith's writings, but has come to
capture his important claim that individuals' efforts to maximize their own gains
in a free market may benefit society, even if the ambitious have no benevolent
intentions
He suggested that the self interested trades compete with one another, the
invisible hands shows who charge less. Leave people alone to buy and sell
products. That means the tendency of market drive towards an equilibrium
point. Where MB=MC.
- Free individuals expressing themselves the freedom of choice
- Free individuals expressing themselves using there resources in freedom
of enterprise.
This free people with that government intervention

(from graph) in surplus

This free people with that government intervention with that anything like
that happening, having a tendency to drive equilibrium to these particular point.
In shortage: Free individuals when there is a shortage have a tendency to arrive
equilibrium point. The invisible hand automatically drive them towards these
points.
These individuals (customers and business) going to do that best for them. In
terms of freedom of choice.
Business- Going to do that best for them in terms of freedom of enterprise
Customers- Going to do best for them in terms of freedom of enterprise
If the market do not in equilibrium the invisible hand forces to the
equilibrium point.

Philips curve
Alban William Housego (A. W. Bill Phillips), MBE (18 November 1914 4
March 1975) was an influential New Zealand economist who spent most of his

academic career at the London School of Economics (LSE). His best-known

contribution to economics is the Phillips curve, which he first described in 1958.
An economic concept developed by A. W. Phillips stating that inflation and
unemployment have a stable and inverse relationship. According to the Phillips
curve, the lower an economy's rate of unemployment, the more rapidly wages
paid to labor increase in that economy. The theory states that with economic
growth comes inflation, which in turn should lead to more jobs and less
unemployment. However, the original concept has been somewhat disproven
empirically due to the occurrence of stagflation in the 1970s, when there were
high levels of both inflation and unemployment.

CONCLUSION
The theories we have presented are from to the major stream of economics
which forms the fundamentals of the study of wealth of Nation. In the theory of
invisible hand, Adam Smith suggested that to leave self interested traders to
compete with one another. The findings of this theory are still evident in our
economy. In Paradox of thrift theory we have a clear explanation on the
relations between savings habit and employment rate in an economy .In
Keynesian theory, John Maynard Keynes inferred that a proper balance should
be maintained between aggregate supply and aggregate demand for the
incremental growth of the GDP. All the above mention; theories have a greater
impact on the smooth and efficient functioning of an economy.