ECON103 Group Midterm Project Paper
1. Summarize and explain the essence of the key contributions to economic thought of each of the 4 Classical economists, Karl Marx and John Maynard Keynes.
Adam Smith's key contributions to economic thought are; The Theory of Moral Sentiments and The Wealth of Nations. The Theory of Moral Sentiments was concerned with how human morality depends on sympathy between agent and spectator, or the individual and other members of society. Smith suggests that conscience arises from social relationship. His goal was to explain the source of mankind's ability to form moral judgments, in spite of man's natural inclinations towards self-interest. He proposes a theory of sympathy which means that observing others makes people aware of themselves and the morality of their own behavior. Smith used the term “an invisible hand” in The Wealth of Nations. His belief is that, when an individual pursues his self-interest, he indirectly promotes the good of society. Smith argued that self-interested competition the free market would benefit the society as a whole by keeping the prices low while still building in an incentive for a wide variety of goods and services. He also added that productive labor should be made more productive by deepening the division of labor. This means that under competition lower prices and thereby extended markets.
John Stuart Mill's key contributions to economic thought are; The Theory of Liberty and Utilitarianism. His general idea on liberty showed that individuals are free to do what they want as long as he is not harming others. It is also acceptable if he harms himself but it is prevented if individuals did a serious harm to themselves that may also harm others and destroy property. We, individuals are intelligent enough to make decisions and choose any religion that we want. But government should intervene when it is for the protection of society. Mill's major contribution to utilitarianism is his argument for the qualitative separation of pleasures. Jeremy Bentham said that all forms of happiness are equal, whereas Mill argues that intellectual and moral pleasures (higher pleasures) are better than the physical forms of pleasure (lower pleasures). Mill distinguishes between happiness and contentment, claiming that the former is of higher value than the latter. Mill's argument is that, simple pleasures tend to be preferred by people. Thus, it is not the greatest happiness that matters, but the greatest amount of happiness altogether.
David Ricardo's key contributions to economic thought are; Labour Theory of Value, Economic Rent and Comparative Advantage. The Labour Theory of Value states that the relative price of two goods is determined by the ratio of the quantities of labour required in their production. Ricardo illustrates that “exchange value” is not the same as “value in use”. He states that the capital employed in production must be made up of wages only. Ricardo himself realized that production may be made up of capital and machinery, but still it doesn't change the principle that he is trying to figure out in his chapter. Machinery may add to one measure of value without adding a single amount on the other measure of value. He said that accumulation of capital adds riches without decreasing the value of things to be traded, which may bring the various economic factors to a win-win. Noticing the growth of actual value-in-use may allow people as corporations and laborers, both rich and poor, to realize this and see a way and means forward. Ricardo defined rent as the difference between the produce obtained by the employment of two equal quantities of capital and labor. This theory said that when one part of land is being used for cultivation, rent will not exist, but when a several parts of land are utilized, rent will be charged on the higher parts. He believed that in the process of economic development, the first one that will benefit are...
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