Recently, the former chairman of the federal reserve, Alan Greenspan, said that he finally realizes that a free market can not go unchecked. Why did he say this? It is quite obvious that the system we have now doesn’t work, you can tell just by looking at our current economy. By letting businesses, such as Wal-Mart, grow to astronomical sizes, being worth more than most small countries, yet still pay their workers a minimum wage, is unbelievable. Sowell quotes the New York Times, saying “Can’t a retail behemoth pay more?” and goes on to ask “why should any of us pay more than we have to?”.
Describe and compare the policies of mercantilism and laissez-faire. Mercantilism versus Laissez-Faire Mercantilism was a method of controlling profit in which the industry and trade were a means of strengthening the state rather than the individual. Laissez-faire was a (phrase coined by LeGendre), in economics, is a free market. "Free" in the sense that the government cannot intervene using taxes, or regulating minimum wage. In the beginning stages the European economic theory, mercantilism, was always in conflict with laissez-faire policy.
English economist John Maynard Keynes was one of the most influential people of the 20th century. As described in The General Theory of Employment, Interest and Money that he published in 1936, Keynes believed that the free market could not be trusted to determine fair prices and provide employment during recessions, but rather that during hard times governments should intervene and create artificial aggregate demand at the expense of a balanced budget. Primarily as a result of world events, his theories became the dominant economic policies in developed countries of the western world for almost three decades, especially in the United States and the United Kingdom. This essay will examine how the Great Depression and World War II led to rise of the Keynesian consensus in the early 1940s, and how the end of the Bretton Woods system, the oil crises of the 1970s, and stagflation led to its unravelling just thirty years later. The failures of economic policies employed during the Great Depression left the American government more open to the ideas of Keynes.
Undermine the self-initiative that defines the American spirit. Lack solid stances and clear direction since liberalists believe society is in a constant state of growth and flunctuation. According to Marx, workers produce more than what they get as their wages from their employers. The capitalist employers get the services of labour cheap but they sell the goods, produced by labour, at a rate higher than the amount spent on wages and upkeep of the factory. They appropriate this excess or surplus value by exploiting the labour as profit.
Wealth and Poverty, written by George Gilder, is a depiction on how to increase wealth and curtail poverty. Gilder argues thoroughly throughout the book that society has been misled by popular economic theory and by general culture attitudes into only having a small percentage of wealthy people and having the majority of people in society living in poverty. He documents the ways in which the blighting of incentive has crippled productivity in society and shows how the essence of capitalism is not greed but giving by investing money and energy. Gilder states that the “golden rule” of economics is the idea that the good fortune of others is also finally ones own. The scientific basis of the golden rule is in the mutuality of gains from trade, in the demand, generated by the engines of supply, in the expanded opportunity created by growth, in the usual and still growing economic futility of war (Gilder, 9).
When it comes to economics, Adam Smith and David Ricardo were two of the most influential writers in history. They both are credited with publishing the basic theories on why nations should trade openly with each other and abandon any mercantilism doctrine they might hold. The theories of these two men were paramount in kick-starting the system of international trading we use today. Adam Smith In 1776, Adam Smith’s published his most important book An Inquiry into the Nature and Causes of the Wealth of Nations, more commonly known as “The Wealth of Nations.” In this document Smith was credited with being the first to accurately describe capitalism. However, at the time, the term capitalism had not yet been created, and it was referred to by Smith as “a system of perfect liberty.” In addition to capitalism, Smith also outlined the theory of Absolute Advantage in “The Wealth of Nations.” Simply put, this theory states that a nation should concentrate its resources on the commodities that it can produce more efficiently than any other country.
What was Keynes fundamental criticism of Neo-Classical Economics? The Neo-Classicals assumed that full employment would naturally occur guided by market forces. In equilibrium the economy would always be at full employment. Keynes argued that equilibrium was possible at less than full employment so that if unemployment occurred it would not always be automatically corrected. 4.
Many intellectuals during the Enlightenment explored new ideas in political economy; Adam Smith in his 1776 An Inquiry into the Nature and Causes of the Wealth of Nations was one of the most influential figures for the Americans. Smith admitted the mercantile system worked, yet criticized its principles. Expounding a doctrine of individualism, Smith was one of many voices stating that the economy, like the individual, should be free from detailed regulation from the state. Economic, as well as individual, self-interest and its outcome in the market should be allowed to function without state regulation. Although it was indeed approved by the First Continental Congress, the practice of mercantilism was replaced with a Smith-oriented form of liberalism in post-Revolutionary
His stance is that Americans should take notice of “the realities of outsourced manufacturing, financialization of the economy, and growing income disparity.” He does not propose any action against the rich, but instead provides information that demonstrates his negative thoughts towards the 1% richest Americans. Mike Lofgren’s ideology and stance about the wealthiest citizens is something I have in common with him. This article has provided me more inspiration to change the state of America’s economy in a positive manner, at least positive for the 99%. His statistics have provided me with insight about how truly unethical the United States’ government is, and while reading this article inspires the reader to take action against such dishonest
Friedrich Hayek Hayek recognized connections between three theories thus influencing his perspective of the economy. These three theories are: The Business Cycle Theory, Capital Theory, and Monetary Theory (www.econlib.org/library/Enc/bios/Hayek.html). Hayek argued that “the major problem for any economy is how people’s actions are coordinated” ( www.econlib.org/library/Enc/bios/Hayek.html). The price system of the free market unintentionally coordinated action of the people and that it was a spontaneous order. In this instance, the word ‘spontaneous’, means that coordination was not by anyone’s design but through a slow evolution resulting from human actions (www.econlib.org/library/Enc/bios/Hayek.html).