econ434notes7 - History of Economic Doctrines Session 7 T...

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History of Economic Doctrines Session 7 The “Liberal” Tradition: Classical Economics II If you laid all the economists in the country end to end, they’d never reach a conclusion. George Bernard Shaw Issue: Economics contains many different schools of thought. How do we ascertain reality? The parable of the blind men and the elephant: A number of blind men were asked to describe an elephant after each had inspected the beast. Every blind man who felt a different part f the elephant [ leaf = ear | trunk = firehose | leg = tree trunk | tail = rope | torso = wall | tusk = spear | etc. ] was convinced of his correctness, and thought all the rest wrong. Perspectives and “schools’ of thought” differ depending on what is perceived to be “correct.” Is any paradigm correct? Unlikely. Perhaps “pragmatism” is the best approach to decisionmaking. The pragmatic method is to try to identify the practical consequences of a theory. If it works, use the theory. If a theory fails to perform as expected, try a different theory. And don’t expect one theory to be so general that it explains everything. Moreover, there is no requirement of logical consistency between the theories that are applicable to different problems. For example, in physics, the stochastic logic underpinning Brownian movements is inconsistent with the deterministic logic of Einstein’s theory of relativity. A general theory that encompasses all phenomena may be impossible, and the quest for such a general theory, doomed. L IBERAL (Free-Market) E CONOMICS 1. Began with Richard Cantillon (1680-1734), Francois Quesnay (1694-1774), and Adam Smith (1723-1790). All rejected the “divine right of kings” as an appropriate mechanism to govern economic activity, favoring instead market solutions to economic problems. 2.
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This note was uploaded on 01/12/2010 for the course ECON 434 taught by Professor Byrns during the Spring '09 term at UNC.

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econ434notes7 - History of Economic Doctrines Session 7 T...

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