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Khaldun - 66N KHMDUIV(13324406 AD Mariam Krikorian Ibn...

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Unformatted text preview: 66N KHMDUIV (13324406 AD) '. . Mariam Krikorian Ibn Khaldun has been considered the “father of economics,” 3 term commonly bestowed upon Adam Smith, for his early contributions to ideas propagated in classical economics. His many theories can be classified into the following modem economic topics: — LABOR THEORY OF VALUE, ECONOMICS OF LABOR, LABOR AS A SOURCE OF CAPITAL ACCUMULATION o Khaldun first introduced the labor theory of value (a theory so named centuries later by Karl Marx); he posited that labor is a source of value and that all earnings are value realized from human labor, i.e. obtained through human effort. It is through labor and its efforts that value increases and wealth expands. _— —K-haldunzs~geatwmphasis on the rolerof “extra efiort” later became termed “marginal productivity.” . I “The value ofany commodity, therefore,tothepasonwhopossessesit, andwhomeans nottouse orconsume ithimselLbut to exchange it for other connnodities, isequaltothe quantity of labor which it enables him to purchase or command. Labor, therefore, is the real measure of the exchangeable value of all commodities.” 0 Long before David Ricardo, Khaldun gave the original explanation for the reasons behind the differences in labor earnings; if the demand for labor exceeds its available supply, its earnings must rise. I “A large civilization yields large profits [earnings] because the large amount of [available] labor which is the cause of [profit]." - DEMAND, SUPPLY, PRICES, AND PROFIT 0 As a commodity in demand attracts increased consumer spending, both the price and the quantity sold are increased. 0 There is a direct firnctional relationship between income and consumption. This lead to the theory of consumption function—a cornerstone to Keynesian economics. 0 Profit is a reward for undertaking a risk; this correlates to the modem-day trader’s mantra, buy cheap and sell dear. I “Commerce means the buying of merchandise and goods, storing them, and waiting until thefluctuationofthemarketbringsaboutanincreaseinthepricesofthsse goods. Thisis called profit.” 0 Prices that are too high or too low can have disruptive effects on the market. - MACROECONOMICS, GROWTH, TAXES, ROLE OF GOVERNMENTS, AND MONEY o Khaldun commented on what today is known as the multiplier effect; the upward cycle of growth continues as civilization flourishes and a new wave of total demand is created for the crafts and luxury products, I “The valuerealizedfimnthemincreuses andasaresumprofitsareagainmultipliedmthc town Production there is thriving even more tlnn before. And so it goes with the second and third increase” 0 He regards government as inefficient, yet it plays an important role through its big purchases. These purchases stimulate the economy by increasing incomes, which are further increased by the multiplier effect. 0 Money is a vehicle through which wealth is acquired. Reference: http://www.georgetown.edulfacul_tyloweissilibnhtm ...
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