The University of the West Indies, St.

Augustine
Department of Economics
ECON3008: History of Economic Thought
Tutorial Sheet # 11
You do not need to write out an essay just write out the points and expand
on them. Use this sheet as a guide since the exam we must expand on
these.
The following is the format we are using to answer questions in this sheet

GENERAL INFORMATION
1)
2)
3)
4)
5)
6)
7)

PERIOD
Members
Source of wealth
Government intervention
Functions leading to growth and development
Key ideas
Goal of economic activity.

1. Discuss five (5) main ideas of the Mercantilists and name two (2) of its writers.
PERIOD --- 16th 17th century (1500- mid 1700s (1750s)
MEMBERS- no designated leader
-

English and French merchant-business men

Every man his own economist

Difficulty in generalizing idea (everyone wrote something in their own

interest and thus it was hard to generalize these ideas)

Many merchant raised issues that were in there own interest.(in other
words every merchant developed their own idea of economic issues
that promote his own interest and thus it was difficult to generalize
these ideas)

1 Academic Year: 2015/2016 Semester IIBased on Pre-Classical, Classical School and the Critique of the Classical
School (Marx).

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SOURCE OF WEATLH ---Accumulation of golds, precious metals and bullian

Source of net products essentially exchanged or traded (trade surplus)

GOVERNMENT INTERVENTION ----advocated government interference to stimulate

production and trade
-

Government intervention to make them monopolies by implementing quotas and tariffs.

FACTORS LEADING TO GROWTH AND DEVELOPMENT- monetary

---expansion of money was a stimulus in growth and output (national
output is what they only focused on)
KEY IDEAS- total wealth of world is fixed
-

Trade is a zero sum game

Aim for favorable trade balance (exports greater than imports)

GOAL OF ECONOMIC ACTIVITY- production

WRITERS

Thomas Mann
William Petty
Bernard Mandeville.

2. Who was the founder of Physiocracy and what was his main contribution? Discuss five
(5) main ideas of the school.
PHYSIOCRATE
GENERAL INFORMATION;
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LEADER Francois

Quesnay .| main contribution; Tableau conomique

The tableau is the first analysis of the circular flow of goods and services through the economy.
It represents the origins of macroeconomics. It provides the needs to answer questions about the
distribution of income. For shadows national income accounting and illustrates the notion of an
equilibrium or stationary state.
PERIOD 1750S -1780S
MEMBERS; exclusively French , members wanted to convince others of the worth of Quesnays
economics
- It was a more organized school (consistency in the views shared by all
writers)
SOURCE OF WEALTH
- Agriculture or nature(natural resources
- The net product-land produces a surplus due to productivity of nature
- Nonagricultural activities goes sterile (focused on production of land
and anything else were consider sterile
GOVERNMNET INTERVENTION

laissez-faire role for government they disagreed with mercantilist regulation

on trade and the tax system they supported. Instead a single tax should be
levied on land(TAX on land order is what they agreed upon for land owners)

FACTORS LEADING TO ECONMIC GROWTH AND DEVELOPMENT;

focus on real forces leading to economic development (agriculture and

nature) (focused on land in favor of farmers)

KEY IDEAS

Economic activity governed by natural laws

natural laws are independent of human will and governed by operation of the
economy
Self interest is beneficial
Self regulating market
Tableau conomique illustrates the interrelation of macro-economic sectors.

3. Provide a brief background of Adam Smith and discuss the two (2) factors that
determine the wealth of a nation.
ADAM SMITH wealth of Nations
BACKGROUND INFORMATION (learn date of birth what he studied wrote and yr of
death)
- 1723; born in Kirkcaldy Scotland
- 1737-1740; studied at Glasgow College
- 1740; Smith earned an MA with great distinction at University of
Glasgow
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1751; He was appointed to the chair of logic in Glasgow

University and then the Chair of moral Philosophy in 1752, held this
post until he retired from academic life in 1764;
1753; Smith was a founding member of the Glasgow literary
society
1759; Theory of Moral Sentiments, worked on wealth of
nations in Kirkcaldy where he lived with his mother from 1767 and
1773 and published in 1776
1778; Smith was appointed commissioner of Scottish customs at
Edinburgh, which he kept his death in 1790.

(productivity depends of division of labor used example of pin sized factor to illustrate how
specialization and division allows for increase in productivity)
NB according to smith the wealth of a nation what we today call the income of a nation
depends on
1) The productivity of labor

2) Proportion
of
laborers
productively employed

who

are

usefully

or

Because he assumed that the economy would automatically achieve full employment of
its resources he examined only those forces that determined the capacity of the nation to
produce goods and services.(pg 91-93 4th ed textbook)

1) The productivity of labordepends on division of labor

it is observed fact that specialization and division of
labor increases productivity of labor, Smith illustrated
the advantages of specialization and division of labor
by borrowing from past literature. One example that
measured output per worker in a factory producing
straight pins (go to text for more)
Smith perceived serious social cost; Social
disadvantage of division of labor is workers are given
repetitious task that soon become monotonous the
division of labor depends upon what Smith called the
extent of market and accumulation of capital
2) Proportion of laborers who are usefully or productively
employed-------------------Accumulation
of
capital
according to Smith determines the ratio between the

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number of laborers who are productively employed and

those who are not so employed.
Labor employed in producing vendible commodity is
productive labor. Whereas labor employed in producing
a service is unproductive.
Capital is required to support the productive labor
force and therefore the greater capital accumulation,
larger proportion of total labor force involved in
productive labor.
4. Who was responsible for Economics being called a dismal science? Discuss the main
theory related to this economist.
5. Both Adam Smith and David Ricardo were classical economists who adopted a
deductive method and advocated free trade. However, there were several differences
between these economists. Discuss their ideas on international trade, value and their
purpose for studying economics.
6. State Karl Marxs five (5) Marxian Laws of Capitalism. In addition, discuss his theory
of value and the idea of exploitation.

7. Multiple Choice Questions:

i.

In the middle of the 18th century, the French thinkers known as Physiocrats, maintained that the
true basis of wealth is: a) manufacturing, b) free trade, c) agriculture, d) mercantilism.

ii.

For Mercantilists such as Thomas Mun a nation could become rich by: a) importing more
goods than it exported, b) keeping its labor force as well paid as possible, c) exporting
more goods than it imported, d) encouraging emigration.

iii.

Adam Smith published his book, An Inquiry into the Nature and Causes of the Wealth of
Nations, in: a) 1676, b) 1776, c) 1876, d) several editions, beginning in the 1890s.
The French Physiocrats Francois Quesnay and Robert Turgot: a) worked in the court of
Louis XV, b) taught at the University of Paris, c) operated as revolutionaries, opposing
the monarchy, d) were international bankers.

iv.

v.

According to Adam Smith, the "invisible hand" referred to the law of: a) conservation of
matter, b) supply and demand, c) separation of powers, d) conservation of energy.

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vi.

A laissez faire economy: a) supports the interference of government in trade as much

as possible b) supports the interference of government in trade as little as possible c)
supports that the government decide what an economy should produce d) supports that
the government should tax heavily goods and services produced by members of society.

vii.

The Ricardian model of comparative advantage is based on all of the following

assumptions except: a) only two nations and two products, b) product quality varies
among nations, c)labor is the only factor of production d) labor can move freely within a
nation.

Using the data of Table 1.1, answer questions viii. and ix:
Table 1.1Output Possibilities for the U.S. and the U.K.
Output per Worker per Day
Country

Tons of Steel

Televisions

United States

45

United Kingdom

10

20

viii. The United States has the absolute advantage in the production of:
a) Steel
b) Televisions
c) Both steel and televisions
d) Neither steel nor televisions
ix.The United Kingdom has a comparative advantage in the production of:
a) Steel
b) Televisions
c) Both steel and televisions
d) Neither steel nor televisions
x.

David Ricardo's "iron law of wages" argued that

a) employers should increase wages to help workers rise into the middle class
b) increasing wages ultimately would add to the problem of poverty
c) if workers had more income, they would have fewer children
d) all of the above
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xi.

According to Karl Marx, capitalists, who own the means of production, exploit the
___________.
a) Communists
b) bourgeoisie
c) proletariat
d) serfs

xii.

Who wrote the Communist Manifesto with Marx? a) Vladimir Lenin ,b) Friedrich Engels,
c) Joseph Stalin, d) John Stuart Mill.

xiii.

What is the name for Marx's theory of human history? a) Historical Materialism, b)
Hypothetical Materialism, c) Historical Idealism

xiv.

To change the relations of production, Marx thought _____________ was often required.
a) legislation, b) new technology, c) ideology, d) revolution.

xv.

Karl Marxs dialectical materialism theoretically follows a sequence: (a) synthesis

thesis antithesis. (b) antithesis synthesis thesis. (c) thesis antithesis synthesis.
(d) thesis synthesis antithesis.

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