There had been, as regards the progress of such theory, a relatively sterile interlude of about two decades after the first appearance of Mill's Principles. In fact, the list of forerunners of those later developments runs much farther back, into the quite early nineteenth century. In all it produced or included a large "family" of similar-and-different systems of economic theory, created in different countries and centers by different economists and "schools" or groups of them, as schemes of analysis differing among themselves in many important detailed respects, but all involving, in a broad sense, the same general theoretical vision. Jevons led the way in England, and the later English theorists whose styles and views most nearly resembled his and who may perhaps be grouped with him or called "Jevonian"—even though these two were in many ways unlike each other and unlike Jevons, and though all three were equally brilliant, original, and independent—were Philip Wicksteed and F.
They are usually thought of as being diametrically opposed, but they did share one fundamental economic insight: Both understood that the key to economic prosperity is to keep the money circulating. When Smith was writing, those rulers dominated the planet.
Most still ruled by divine right. Their realms were their property, to do with as they saw fit. Smith did engage in microeconomics, analyzing the new way of production that was emerging in Britain at that time. Yet, as the title of his book suggests, his primary concern was macroeconomics.
His explanations and recommendations put him at odds with mercantilismthe dominant economic doctrine of the time. It called for rulers to treat the finances of their realms as anyone would treat the finances of their own household: These rulers were happy to abide by the first two parts of that doctrine.
They were not lax in exercising their power domestically, including controlling economic activity. They were both diligent and imaginative when it came to increasing their incomes, especially the part that came from taxes.
Their spending, however, was another story. They spent money lavishly on themselves, on wars to expand or defend their realms and on exploratory expeditions with the aim of expanding their territory. A small circle of people profited in that system. In a sense, then, Adam Smith was the original supply-sider: He argued that lowering taxes and ending other barriers to business, both domestically and internationally, would spur economic activity, sustain prosperity and in the end make a nation as a whole wealthier.
Since the wealth of nations determined how much money monarchs could get their hands on, it would be in their self-interest to adopt his proposed policies. Enter Keynes One and a half centuries later, the world was mired in the Great Depression.
Capitalism had suffered a massive stroke in Keynes diagnosed the underlying problem as being a shortage of aggregate demand and recommended that government make up that shortfall by borrowing and spending.
His idea was to stimulate a self-sustaining expansion of the economy.
It was a tactic that could be used any time the economy fell below full employment i. The concentration of wealth is an innate tendency within the capitalist economy. Indeed, that system, before and since the Great Depression, has been one gigantic mechanism for channeling money to the principals of businesses.
The Great Depression was precipitated by the infamous stock market crash of Even after re-investing revenues in businesses, those controlling big businesses — especially holding companies comprised of multiple businesses — still had huge amounts of money on their hands.
Like the mercantilist monarchies before them, they spent lavishly on themselves. They also made personal investments on an enormous scale.
It was this personal investing, coupled with the leveraging of businesses in holding companies, which caused the mammoth speculative bubble in the stock market that burst in October Marx had failed to foresee, however, what Keynes saw: To prevent speculative bubbles, it would be necessary to prevent too much money from accumulating in the hands of too few people.
To prevent that from happening, it would be necessary to have high marginal tax rates on high incomes. Government would act as a pump, collecting taxes and returning that money to the private sector via expenditures.
Prior to capitalism, money circulated among very few people. In the pre-Great Depression economy, the principal beneficiaries of big businesses were monetary sponges.
Today, big businesses are themselves monetary sponges. Like the mercantilist system it superseded, the capitalist economy has exhibited a tendency to serve the material interests of a relatively few people extremely well.
Likewise, it has promoted the accumulation of money in large, unproductive pools. Ultimately, the well-being of even the wealthiest people is tied to the performance of the system. The performance of the system is maximized when money is kept circulating — the fundamental economic insight shared by Smith and Keynes.
More on this topic.Adam Smith and Karl Marx are perhaps two of the best known social and economic thinkers in history. Find out more about each man's theory on the.
Download-Theses Mercredi 10 juin The Mathematical Aspect On its formal side then, all "neo-classical" economics represented an early stage of the long, slow development, which still is going on today, of "mathematical economics" or what may be called a gradual "mathematicization" of economic theory.
John Maynard Keynes and Adam Smith: Compared and Contrasted Ideas John Maynard Keynes and Adam Smith were two major, influential philosophers of economic history. Adam Smith, commonly known as the father of modern economics, influenced the growth of economic theory and the evolution of modern and market-based societies.
Today, we are going to explore the ideas of economics and how the economic greats, Adam Smith, Thomas Malthus, David Ricardo, John Stuart Mill, Karl Marx, John Maynard Keyes, and Milton Friedman changed the ways we would forever do business. Other longstanding heterodox schools of economic thought include Austrian economics and Marxian economics.
John Stuart Mill; Karl Marx; Nassau William Senior; Edward Gibbon Wakefield; John Rae; Thomas Tooke; The Stockholm School had—like John Maynard Keynes—come to the same conclusions in macroeconomics and the .