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Economists-Moral Philosopers

Economists-Moral Philosopers. Adam Smith-The Wealth of Nations. Karl Marx-Das Kapital. Adam Smith propounded a theory of economic development that is still influential today. Economies will grow if they have the right kind of government.

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Economists-Moral Philosopers

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  1. Economists-Moral Philosopers Adam Smith-The Wealth of Nations Karl Marx-Das Kapital

  2. Adam Smith propounded a theory of economic development that is still influential today. Economies will grow if they have the right kind of government.

  3. Smith was a prominent member of the Scottish enlightenment. • Born in Kirkcaldy 5 June 1723 • Kidnapped by ‘tinkers’ at age of three • School in Kirkcaldy • 1737—University of Glasgow • Mathematics and natural philosophy

  4. Smith’s person • He was middle sized and stout. • Many friends • Quiet and often appeared distracted: • “He was the most absent man in company that I ever saw, moving his lips and talking to himself and smiling in the midst of large companies.” (Alexander Carlyle) • When asked his opinion, he responded with a lecture.

  5. Smith’s famous work was An Inquiry into the Nature and Causes of the Wealth of Nations, 1776 • Nature? Not the accumulation of precious metals but the standard of living of the population • Causes? Ultimately reduced to the right state policy

  6. Analysis of the Wealth of Nations starts from an unusual premise. • Theory of Moral Sentiments assumed people had ‘sympathy’ for other human beings. • Wealth of Nations assumes people are selfish. • Moralists usually condemned this, but Smith argued that it is socially useful:

  7. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our necessities but of their advantages.”

  8. Smith argued that the pursuit of self-interest increased prosperity generally by making the market system work.

  9. Each individual seeks “only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention…By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.”

  10. Self-interest can be harnessed to promote general prosperity by creating appropriate institutions. • The state should promote free exchange and secure property. • Two avenues lead these policies to increase prosperity • Raising productivity through the division of labour • Raising investment

  11. Smith thought the legitimate functions of the state were: • National defence • Establish property rights • Establish legal system • Promote free trade • Invest in trade-promoting infra-structure Laissez faire describes this policy orientation.

  12. The Classics • Adam Smith : The Wealth of Nations/ Theory of Moral Sentiments • Karl Marx: Capital, Communist Manifesto

  13. Adam Smith • Division of Labor is Key • Labor is the basis of wealth; • The division of labor implies economic interdependence. • Markets are self-regulating systems for the orderly coordination of the division of labor.

  14. Adam Smith • Invisible Hand

  15. Adam Smith • Invisible Hand – Assumptions: • Our preferences are consistent • We act based on self-interest • Individual Good adds up to Social Good Government Ensures Property Rights.

  16. Adam Smith • Invisible Hand – Assumptions: • Enough buyers and sellers as for there not to be a monopoly

  17. Invisible Hand – Assumptions: • Perfect Information that backs up our economic decisions

  18. Invisible Hand – Assumptions: • No Externalities

  19. But first… So…how is it that, as you are saying Mr. Smith, if value is originating in labor (therefore we need more workers and division of labor-population growth and economic growth), all of the profit is kept by factory owners?

  20. Conflict theory • All societies are divided into two groups • Owners • Workers • Our society is capitalist. • Owners are bourgeoisie • Workers are proletarians

  21. Marx on history ‘The history of all hitherto existing society is the history of class struggle.’

  22. Owners and workers • Owners exploit workers and live off the money which the workers earn • Members of classes bind together in the pursuit of their common interests. • Workers put up with this inequality because: • They are oppressed wage slaves and cannot fight the system • They are indoctrinated by ideology and religion into believing what they are told by the powerful.

  23. More from Marx • Technical progress, the growth of knowledge, and conflict among classes all foster perpetual change. • Capitalism as an economic system is irrational in the sense that it stands in the way of making good the ability of modern science and technology to meet human needs.

  24. Conclusion • Marxism is an understanding of the nature of social relationships which you are expected to evaluate. Recognise that it has strengths and weakness as a tool of understanding of our culture.

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