DominantThoughtsandThinkers

Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,*,Dominant Thoughts and Thinkers,1,Smith: Role of Government and Laissez Faire,protecting society,from invasion,administration of justice,public works,and,public institutions,Every individual. neither intends to promote the public interest nor knows how much he is promoting it.By directing his industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this led by an,invisible hand,to promote an end which was no part of his intention.,Social Physics: Newton in the Economic Universe,2,Smiths Spiral of Growth,National Wealth I,Opportunity for division,of labor,Profit Expectations,Demand for Investment,Increased interest rate,Increased Saving,Accumulation,Increased Demand for,Labor,Higher Wage,Increased Labor Supply,(Reduced Mortality),Employment with increased,Division of Labor,National Wealth II,3,Ricardo & Malthus: Welcome to the Dismal Science,David Ricardo, 1772 1823,Stockbroker/Dealer,Abstraction,Economic Science,Championed capitalists,Opposed Corn Law,Advanced Says Law,Major contributions,Differential rent,Labor theory of value,Theory of distribution,Comparative advantage,Thomas Malthus,1766 1834,Parson,Intuitive approach/preacher,Championed landlords,Favored Corn Law,Advanced Theory of Gluts,Major contribution,Law of population,Whoever wins, workers get dry crust,Diminishing Returns Prevail,4,Ricardo: Value, Distribution, and Growth,Capital-Labor Input,(Capital and Labor are Complements),Marginal Product,(corn),K,1,w*,Rent,Profit,Wage,Bill,5,John Stuart Mill,Principles of Political Economy, 1848,Synthesis of Classical Economics,Economic man, self-interest as motive force,Invisible hand harmony through competition,Minimal government but still a role,Discern economic laws,Says Law,Law of Population,Iron Law of Wages,Law of Diminishing Returns,Law of Comparative Advantage,Mill: Competition, Efficient Production,but,Political Redistribution,can enhance utility,6,Marx: Flavors of Crisis,Invention,Investment,Capital,Widening,Capital,Deepening,Increased,Employment,Decreased,Employment,Rising Wages,Decreased,Wage Bill,Profit,Squeeze,Overproduction,Crisis,Underconsumption,Crisis,Reserve,Army,Decreased,Demand,Increased,Organic,Composition,Falling,Rate,of Profit,Expropriators,are,expropriated,7,Marginalist Revolution,Hermann Heinrich Gossen,Development of the laws of human interaction, 1854.,Obscure amateur Acknowledged by Jevons,Gossens 1,st,Law:,Diminishing marginal utility,allocation of resources,including time,Gossens 2,nd,Law:,Equilibrium where “the last atom of money creates the same pleasure in each pleasurable use.”,MU,x,/P,x,= MU,y,/P,y,Jevons Walras Pareto Clark,Menger - Bhm-Bawerk Wieser Mises,8,Marshalls Principles of Economics,: Themes and Contents,Economics ,a study of mankind in,the ordinary business of life,.,Partial equilibrium analysis representative agents and firms,Supply (costs) interact with demand (utilities),Ceteris paribus, conservative tilt: “,Nature does not leap”,(Marshall),Supply and demand curves,(the Marshallian cross),Value determined by both blades of the scissors,Consumer and producer surplus,Reciprocal demand curves in trade,Elasticity of demand,value,Price decline, increase in real income,Anticipates income and substitution effect analysis,Short-run and long-run supply fixed and variable costs,Elasticity of supply increases with time,Value in short-run depends on demand,quantity,Value in long-run depends on supply,Internal economies, difficulties for competitive market paradigm,External economies (of industry scale),9,Keynes General Theory,What did he say?,Different things at different times,On tariffs,On saving,What did he mean?,Y = C + I,C = C(Y),Propensity to consume,passive,response to income,I = I(i),Marginal efficiency of capital +,animal spirits,instability,S = I spending multiplier ,Income adjusts, not wages and prices,L = L(Y,i), Liquidity preference function,interest rate determined in money market,10,The Neoclassical Keynesian Synthesis,Short run, Keynesian UnemploymentLong run Classical Full Employment,Sir John Hicks,1904 - 1989,Mr. Keynes and the Classics: A suggested simplification,Econometrica, 1937,Goods Market: I = S,Money Market: L = M, ISLM macromodel,i,Y,IS,LM,11,Monetarism in Theory and Practice,Theory,: M, P and Y in short run,M P in long - run,Friedmans restated quantity theory,Expectations augmented Phillips Curve, Vertical long run Phillips Curve, “Monetary mischief”,Practice,: oppose Keynesian activism,Monetary vs. fiscal policy: what matters?,Inherent stability vs. instability of enterprise economy,Policy: Long run vs. short run focus,Varying policy lags “too much too late”,Steady money growth as automatic stabilizer,12,Spectrum of Macroeconomic Thought,Marx,Radical,Political,Economy,Kalecki,Post-,Keynesian,Keynes,Keynesian,(hydraulic,Keynesians),Monetarist,Friedman,New Keynesian,- New Monetarist(?),Lucas,New,Classical,Austrian,Sticky,Wages/Prices,Uncertainty,Disequilibrium,Markets,Clear,In,Long-run,Markets,Clear in,Short-Run,Rat-X,micro,foundations,Policy,Ineffectiveness,Policy,Works,13,Modern GROWTH,Schumpeter: A Vision without a (math) model,but,Economic science does (math) models,Solow: Steady state growth,but,Economic history suggests accelerating progress,Endogenous growth theory: Increasing returns,Paul Romer,Robert Lucas, Jr.,14,