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econ434notes8 - History of Economic Doctrines Seminar 8...

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History of Economic Doctrines Seminar 8 Jeremy Bentham - 1748-1832 A. A lawyer, not an economist per se; Bentham was focused on reforming the criminal justice system. Bentham believed that: 1. Criminals are merely trying to maximize their utility--get their jollies? 2. "The punishment should fit the crime;" i.e., punishment should be proportional to the harm done. B. Bentham reintroduced utilitarianism, which was a "new" version of the Epicureanism of ancient Greece. In Bentham's version, the utilitarian philosophy favored social policies that would yield "the greatest good for the greatest number of people." [Actually a quote from Helvetius.] C. One objection to utilitarianism, from the Russian novelist Fyodor Dostoyevsky: If everyone else on earth would gain if you cruelly tortured an innocent baby to death, should you do so? Many (most?) of us would say, "NO!" D. Nevertheless, many social policies in all societies are based at least in part on utilitarian principles. Thomas Robert Malthus - 1766-1834 Malthus was a minister who theorized that uncontrollable population growth dooms humankind to a razor's edge existence. The pessimism in Malthus's work account for a widspread assumption that it inspired the English historian and essayist Thomas Carlyle to condemn economics as the dismal science . This has been shown to be incorrect. The fact is that Carlyle was a racist who coined the "dismal science" label when he attacked John Stuart Mill’s book, On Liberty , which advocated an end to slavery, with equal rights for all men and women, and guarantees of rights to privacy, and freedom of speech, religion, and the press.
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Malthus and Aggregate Demand In a long-running disagreement with David Ricardo, Malthus’ emphasized swings in business activity as resulting from "underconsumption" by the wealthy (the poor consumed all their income), which led to "gluts." Malthus' notion of "gluts" was a precursor of the emphasis on Aggregate Demand that is central to Keynesian economics. Malthus believed that disparities in the distribution of income could leave some production unpurchased. In his view, the poor would be forced to spend all their income to survive, but the rich, once they satisfied their desires for luxuries, might not spend all of their income, raising a potential specter of "underconsumption." This idea is echoed in Karl Marx’s theory of business cycles, and Malthus’s concerns that aggregate demand might be inadequate to ensure full employment was cited by John Maynard Keyes as an early insight into some concepts Keynes expressed in his General Theory (1936). Important Point : Production generates income for the producer, so production (GDP?) = income (national income?). Theory of Population This was Malthus’s major contribution - he claimed that people are instinctively prone to breeding surplus.
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