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econ434notes10

econ434notes10 - History of Economic Doctrines Lecture 10...

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History of Economic Doctrines Lecture 10 The Close of the Classical System NOTE: Distinction between “classical” economics and “neoclassical” economics is that neoclassical economics resulted from the introduction of calculus, primarily by French “engineers” [Dupuit and Cournot] in the 1830s or so, by the Austrians von Thünen, von Mangoldt, Menger, Wieser, and von Böhm-Bawerk, by Walras and Pareto at Lausanne [in Switzerland], by Jevons and Edgeworth in Cambridge, England, and by John Bates Clark in the United States. John Stuart Mill The “magnificent dynamics of the classical system” [a phrase drawn from William Baumol] was summarized by its last significant practitioner, John Stuart Mill (1806-1873), who was even more renowned as a philosopher than he was as the most prominent economist in the England of his era. Curiously, despite his reported mastery of advanced mathematics by age 10, Mill was the last important analytical economist to formally integrate little if any calculus into his economic analysis. 1. Programmed kid: rigorous academic upbringing-- Greek and Latin at age 3. Emotionally fragile. Mill had a mental breakdown at the age of 20. Then Mill met his wife, who helped him cope with his depression and altered his views about things 2. Utilitarian -- follower of Jeremy Bentham who was drawn to Auguste Comte’s logical positivism. 3. Mill’s Principles of Political Economy : A “ classical liberal :” free markets are usually efficient. a. Elaborated Ricardo’s theory of rent and Smith’s ideas on wages and labor. b. Asserted that theorizing must correspond to the real world. c. Solved the problem of pricing in joint production; e.g., beef and hides. [The sum of the prices must be equal to the average costs of production.] d. Pointed out that GDP is whatever people want it to be (the “shmoo” concept).
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