1V. New Economic Theories

A. LAISSEZ-FAIRE CAPITALISTS

Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue

his own interest his own way. . .

Adam Smith

1. Adam Smith (1723-1790)

a. Wealth of Nations

b. Wealth depends on:

1) Specialization of labor

2) investment

3) profitability

c. Government: leave individuals free to find the most profitable employment of their labor or capital

1. Adam Smith (continued)

d. Duty of government was three-fold

1) Provide defense

2) Maintain civil order

3) Provide public works

e. Acting in his own self-interest, the businessman benefits the whole community

2. Thomas Malthus (1766-1834)

a. Essay on the Principles of Population

b. Population would eventually outstrip food supply

c. Only hope of averting disaster was through late marriage, chastity and contraception

d. Immediate plight of the worker would only become worse

e. Misery of the worker was his own doing

f. Video Clip

3. David Ricardo (1772-1823)

a. Principles of Political Economy

b. Iron Law of Wages: Gave employers permission to keep wages low and oppose labor unions

2B. UTILITARIANS

Greatest good for the greatest number

1. Jeremy Benthem (1748-1832)

a. The founder of utilitarianism

b. believed that individual rights were not that important.

"nonsense on stilts."c. As long as the government

protected its people and treated them decently, it was not oppressive.

d. Approval of an action is just so long as that action has an overall tendency to promotethe greatest amount of happiness

2. John Stuart Mill (1806-1873)

a. One of the forefathers of utilitarianism.

b. "The greatest good for the greatest number"

1) the only way anything can get done is to satisfy the most people possible, no matter the class or rank.

2) very important theory because up until this point the ruling class was a very small aristocracy and the majority had a low quality of life (as a population.)

1. John Stuart Mill (continued)

c. Governments Role

1) to improve the hard lives of workers

2) Government should work to prevent monopolies

3) Give the vote to working class men and women

No Bell Ringer Today

Take our your guided notes on the economists of the industrial era

Study the economists we talked about yesterday and prepare to answer some questions about them (you will be called on randomly)

Review Questions

What was the name of the principle that stated that the govt. should leave businesses alone?

Who thought that society should strive for the greatest happiness for the greatest number?

Which economist came up with the idea that states wages were determined by supply and demand?

Explain what he meant by wages were determined by supply and demand? (give an example)

3Review Questions

What was Ricardos theory called?Name an economist who believed in free-

enterprise.What was Thomas Malthus concerned

about?Who stated it was the governments duty to

protect against monopolies and provide the vote to men and women?

C. SOCIALISM

People as a whole, rather than private individuals, own and operate

the means of production.

1. Robert Owen (1771-1858)

a. A successful mill owner

b. Competition was the root of many problems

c. Cause of evil was a bad social environment

d. Established the community of New Lanark

e. Showed that an employer could offer decent living conditions and still run a profitable business

D. COMMUNISM AND MARX

From each according to their

ability, to each according to their

need.

1. Marxist Philosophy

a. Problems of industrialization could not be solved by reforming society

b. With Friedrich Engels he wrote the Communist Manifesto and Das Kapital

Marxist Philosophy cont.

c. Dialectical Materialism

1) Dialecticalism sees nothing as fixed or final (everything is changing)

2) Nature confirmed dialectical thinking (Charles Darwin)

3) Believed that the forces that shaped history were largely economic

4) History has advanced through class struggle

5) In this way capitalism too would pass away

6) inevitable workersrevolution

42. Marxist System

a. Complete socialismb. All property and means of

production would be owned by the people

c. All goods and services would be shared equally

d. From each according to their ability, to each according to their need.

e. No private propertyf. No exploitation of workersg. Class distinctions would

disappearh. The state (government) would

wither away

3. Flaws in Marx

a. Marx did not foresee government initiated reforms

b. Middle class grew larger instead of shrinking

c. Great wars of the 20th century were fought between nations, not classes

d. Revolutions occurred in agricultural nations, not in industrialized nations

e. The perfect society envisioned by Marx never emerged

f. The state (government) did not wither away, but became totalitarian.

Marx Reading:1. What did Marx mean when he called religion the opiate

of the people?

2. According to Marx, what determined the value of a product? What did he mean by surplus value? What did Marx fail to take into consideration?

3. Describe the society that would emerge from the inevitable workers revolution?

4. Why did the perfect societies envisioned by Marx never materialize?

5. Which force do you think is influencing events the most in the world today: economics, nationalism, race and ethnicity, religion, or technology? Give reasons for your choice.