Economists-Moral Philosopers: Adam Smith-The Wealth of Nations Karl Marx-Das Kapital
Economists-Moral Philosopers: Adam Smith-The Wealth of Nations Karl Marx-Das Kapital
Adam Smith-The
Wealth of Nations
Karl Marx-Das
Kapital
The Classics
Adam Smith : The Wealth of Nations/
Theory of Moral Sentiments
Adam Smith
Division of Labor is Key
Labor is the basis of wealth;
The division of labor implies economic
interdependence.
Markets are self-regulating systems for
the orderly coordination of the division
of labor.
Adam Smith
Invisible Hand
Adam Smith
Invisible Hand Assumptions:
Our preferences are consistent
We act based on self-interest
Individual Good adds up to
Social Good
Government Ensures Property
Rights.
Adam Smith
Invisible Hand Assumptions:
Enough buyers and sellers as for there not to be
a monopoly
But first
Sohow is it that, as you are saying Mr.
Smith, if value is originating in labor
(therefore we need more workers and
division of labor-population growth and
economic growth), all of the profit is kept
by factory owners?
Conflict theory
All societies are divided into two groups
Owners
Workers
Marx on history
Conclusion
Marxism is an understanding of the nature
of social relationships which you are
expected to evaluate. Recognise that it has
strengths and weakness as a tool of
understanding of our culture.
Entrepreneurship
In reality, some firms exploit opportunities for creating profitable
competitive positions that other firms either ignore or cannot exploit
Seizing such opportunities is the essence of entrepreneurship
Entrepreneurship involves discovery, innovation, and acting on the
opportunities that discovery and innovation create (page 132):
To undertake such things is difficult and constitutes a distinct economic
function, first, because they lie outside the routine tasks which everybody
understands and secondly because the environment resists in many ways
that vary, according to social conditions, from simple refusal either to
finance or to buy a new thing, to physical attack on the man who tries to
product it.
Creative Destruction
Schumpeter believed that innovation causes most markets to evolve in a
characteristic pattern
There are periods of relative stability, when firms that possess superior
products, technologies, or organizational capabilities earn positive economic
profits
These periods are punctuated by fundamental shocks or discontinuities that
destroy old sources of competitive advantage (profits above the norm) and
replace them with new ones
The entrepreneurs who exploit the opportunities these shocks create achieve
positive economic profits during the next period of stability