ECONOMICS 12: THE ECONOMISTS ANDREW LOWE

TIMELINE
1. Adam Smith 4. Karl Marx 7. Milton Friedman
(1723-1790) (1818-1883) (1912-present)
2. Thomas Robert 5. John Maynard
Malthus Keynes
(1766-1834) (1883-1946)
3. David Ricardo 6. John Kenneth Galbraith
(1772-1823) (1908-present)

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“Ideas that are significant enough to change the world usually

emerge during times of serious trouble. Generally speaking,
the more radical the idea, the more troubled the society it
originates from, if only because it is during times of extreme
crisis that people are most willing to listen to radically
different ideas. Instead of surveying the 225-year time span of
the science of economics, these notes will focus on the seven
visionaries whose ideas have greatly advances economic
thought” (Economics Now: Analyzing Current Issues).
ECONOMICS 12: THE ECONOMISTS
ADAM SMITH
• “Father of Modern Economics”
• “Founder of Capitalism”
• First thinker to outline an
“Economic System” – which for
him was the Free Market
• Brought up in a world with the
main economic idea called
Mercantilism
• Influenced by Voltaire and the
school of economics known as
Physiocrats
• Developed the Laissez-Faire
type of economics
• Believed that government
intervention was not needed
and that people’s natural
pursuit of self-interest would
ultimately benefit society as a
whole
• This ideology came to be
known as Smith’s idea of “the
Invisible Hand”
• Believed that Division of Labour
(specialization) causes an
increase in efficiency
• Smith’s Law of Accumulation
states that profit will lead to
increase production which in
turn leads to increase profit
• Smith’s Law of Population
states that the increase in
prosperity from the Law of
Accumulation will increase the
standard of living and therefore
increase the growth of
population in turn increases the
demand for wages and jobs.
This law keeps the wages from
increasing a substantial
amount
THOMAS MALTHUS
• Had a very dismal view on
humanity and economics as
a whole
• He believed that population
doubles, also known as a
geometrical progression,
about every generation or so
• However, he believed that
food production only grew in
an arithmetical progression,
therefore suggesting that
there would be a shortage in
food
• This predicament is known
as the “Malthusian
Dilemma”
• These ideologies were
unfortunately wrong
because population did not
grow at such a fast rate
because of Positive Checks
and Preventative Checks
ANDREW LOWE
• Positive Checks increase
death rates such as war,
famine, disease, and
epidemics
• Preventative Checks reduce
birth rates such as late
marriages, and sexual
abstinence
DAVID RICARDO
• The Iron Law of Wages is
accredited to him
• This law basic suggests that
the working class will never
be able to step out of their
subsistence level due to
their unchecked rate of
reproduction
• If the working class were
given higher wages, the
standard of living would
increase and therefore the
infant mortality rate would
decrease and birth rates
would increase
ECONOMICS 12: THE ECONOMISTS
• The increase in population
would increase the demand
for monetary income and
therefore the increased
wages would be driven down
again due to the distribution
among the increase in
people
• Absolute Advantage states
that it is advantageous to
trade with another
community with what one
can produce most efficiently
for what they can produce
most effectively
• Comparative Advantage
states the same, even when
a community can produce
both types of products
KARL MARX
• Believes that there always
existed two distinctions: the
exploiters and the exploited
• When the living conditions
become too unbearable for
the exploited, there is a
rebellion against the corrupt
ruling class
• He was very much
Communist at heart
believing in equality
• Marx states, “from each
according to ability, and to
each according to need”
• Believed that the value of
any item is the value of all
the labour used in its
production  Labour Value
• Surplus Value is the is
money “stolen” from the
worker in the form of profit
for the capitalist
JOHN KEYNES
• Economic way of thinking
named after him,
“Keynesian Economics”
• “Keynesian Economics
details and analyzes the
ANDREW LOWE
relationships among
demand, production, and
unemployment, and focuses
on government’s role in
sustaining economic activity
• Living through both world
wars, Keynes thought of the
idea called “deferred
savings”
• This means that people
would invest their money to
the government for the time
being to contribute to the
war efforts. After the war is
finished, they would get
what they invested plus
interest (War bonds). This
idea benefits both the
government and the people
at the most advantageous
times
• Keynes believe that
government intervention is
required to keep
unemployment rates low
• He believed that the
Government could create
jobs by starting small
companies or starting some
government projects
ECONOMICS 12: THE ECONOMISTS ANDREW LOWE

influence the economy is by

regulating the money supply
JOHN GALBRAITH in circulation

• Believes that the real need

in society was for the
production of public goods
serving the common good of
society
• Contradicting Adam Smith,
he believed that instead of
exploring the advancement
of whatever business would
create the most personal
profit, the businesses that
should be erected are those
that satisfy the needs of
society like hospitals for
health care

MILTON FRIEDMAN
• He does not believe in
government intervention
• His ideologies match those
of Adam Smith
• He proposed the abolition of
“minimum wage”
• Belongs to the monetarist
school of thought which
state that the most effective
way for governments to