Evolution of Economic thinking by Bo Yiu Jamee TSAI https://padlet.com/00111231/idaxjkjizh3fyuu en-us 2022-09-27 00:18:07 UTC 2022-09-27 01:11:35 UTC hello@padlet.com 18th century 00111231 https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314572226
  • Scottish economist and philosopher Adam Smith wrote the book, An Inquiry into the Nature and Causes of the Wealth of Nations, advocating for a free and unhindered exchange of goods and services, both within countries and through international trade, which benefits buyers and sellers and increased incomes throughout the population. 
    • this completely changes the way that economic activity was understood and became the backbone of economic theory for the classical school until later in the nineteenth century 
    • major contributions to economic theory: identification of the benefits of specialization and the division of labor --> maximized labor productivity 
    • Other major theories:
    • "labor theory of value": the value, or price of a good is the sum of the value of all the labor that was used in producing the good 
    • the "invisible hand": Smith observed that when private producers are left alone to decide what to produce and how to produce, they are guided by an "invisible hand" (government or authority telling them what not to produce, consumer's demands telling them what to produce). He concluded that when producers supply the goods that give consumers the most utility, they create jobs and wealth for the nation as a whole --> allowing the economy to create maximum utility and productivity 
    ]]>     2022-09-27 00:35:57 UTC https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314572226     19th century - Classic Economics 00111231 https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314592530
  • developed from Adam Smith's theories
  • Considered areas such as utility theory, based on the principle that individuals consume goods and services to maximize satisfaction from consumption 
  • famous economists: David Ricardo, Thomas Malthus, John Stuart Mill and Jean-Baptiste Say 
    • David Ricardo - international trade
    • Agreed with Smiths' theory that countries should specialize in the production of different goods and trade freely to increase global output 
    • Developed a law of "comparative advantage", which became the basis of most international trade theories today 
    Jean-Baptiste Say - "Say's law of markets"
    • favor free markets and free trade (focuses on the supply side of the economy)
    • believes that the production of goods is the source of all demand in an economy: "supply created its own demand"

    ]]>     2022-09-27 00:51:04 UTC https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314592530     19th century - Marxism 00111231 https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314601154
  • German Karl Marx became increasingly influential as a critic of free market Capitalism (perspectives on the 'left' of the ideological spectrum)
  • Believed that workers would rise up to overthrow capitalism and replace it with socialism 
  • Predicted that, eventually, society's ability to produce would grow faster than its ability to consume, causing growing unemployment. Thus, the free market could not be depended upon to serve the best interests of workers and there would be a need for the government to take over the means of production, in a system known as communism.

    • ]]>     2022-09-27 00:58:02 UTC https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314601154     20th century - Keynes 00111231 https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314609275
  • key figures in the development of macroeconomics
  • Keynes saw a more influential role for governments in the economy than classical economists did 
  • Keynes’ book, The General Theory of Employment, Interest, and Money was published in 1936. Keynes' work was very influential on macroeconomic policy-making by western governments in the second half of the 20th century.
  • "Demand-side" theory and "counter-cyclical" government policies : observing that economies typically pass through business cycles fluctuating between rapid rates of growth and recessions, thus governments should increase aggregate demand by using expansionary fiscal policy (increasing government spending and decreasing taxes) and contractionary monetary policy (increasing interest rated and decreasing the supply of money)
    • ]]>     2022-09-27 01:04:30 UTC https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314609275     20th century - Monetarism 00111231 https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314614153
  • Macroeconomic thought was dominated by Monetarism in the 1970s
  • The theory was based on the principle that the supply of money in the economy was the ky determinant of economic growth and inflation 
  • Key economist: Nobel Prize winner, Milton Friedman --> advocated the use of interest rates by governments to control the money supply and the rate of inflation
  • Monetarists believed that by using monetary policy to maintain low inflation a country would achieve sustained economic prosperity
    • ]]>     2022-09-27 01:08:23 UTC https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314614153     21st century - behavioral economics 00111231 https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314618872
  • gives increasing importance to psychology and human behavior in economic decision making 
  • Richard Thaler, won the Nobel prize for his work on Nudge Theory, which looked at how indirect suggestion and architecture of consumption environment can make individuals act in a certain way
  • Behavioral economics allows for irrational behavior and tries to understand why consumers act in certain patterns 
    • ]]>     2022-09-27 01:11:35 UTC https://padlet.com/00111231/idaxjkjizh3fyuu/wish/2314618872