Economics 107 Lecture Notes (5)

Economics 107 Lecture Notes (5) - Economics 107 Lecture...

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Economics 107 Lecture Notes Professor Appleby Weeks 4, Lectures 8 Notes by Kelly Bowers
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Economic Progress: Scottish Progress -The Scotts’ idea of the commercial stage being one of prosperity put end to the debate as to whether or not the present age is better than the past -Had people reached an improvement point of development? -Is the modern period greater than the ancient period? -Consensus says: yes -Because of economic progress Word Evolution -Progress -“Progress” had always meant to move across the countryside – literally moving, progressing -But: a new word was needed to give a sense of development over time -Individual -Similarly, “individual” was meant to refer to things, not people -Diction changed to reflect the new change in social ideas France An Encyclopedia -Two Frenchmen sought to write an encyclopedia -Not the first, but the most famous -They visited locations, observed objects, -Adam Smith was inspired by the pin factory entry in this encyclopedia -Every educated person had one France’s Make-Up -France had many mathematicians -At the time, they had an absolute monarch with the best army in the world -They had more people and more land than England So why didn’t they have a profound effect on capitalism? -Absolute monarchs were truly absolute -And the monarchy is bankrupt (partially from helping the American colonists in the Revolutionary War) -European governments outside of France oppose the French Revolution -Napoleon comes to power and eventually declares himself emperor in 1804 Theme of lecture : How Thomas Malthus and David Ricardo shaped Adam Smith’s legacy into becoming the basis of modern economic thought? Economics Thinkers Thomas Malthus Theory -Human beings are driven by hunger and sex -If humans have lots of food, they will have lots of children
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-This creates more mouths to feed -These children will have to work harder for their food because a higher population raises the cost of food -Equilibrium -A surplus in food leads to more people which leads to a shortage of food which leads to a smaller population -The population will restore itself to an equilibrium -Disagreement with Ricardo -Malthus did not vilify landlords -He believed instead that rent was a relevant example of savings and investment David Ricardo Theory -The Iron Law of Wages -Competition for labor will keep wages down -Comparative Advantage -Dependent of Free Trade -As long as a country can determine what its production strength is and focus on that, they will do better than if they diversify -Even poor countries -Ricardo brought to a high point a line of reasoning that began with free markets -Mun started this when he express that there was no way
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Economics 107 Lecture Notes (5) - Economics 107 Lecture...

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