Lecture notes History of Economic Thought The History of Economic Thought, ISBN: 9781136742958
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Course
History of Economic Thought
Institution
Rijksuniversiteit Groningen (RuG)
Book
The History of Economic Thought
Lecture notes study book The History of Economic Thought of Steven G. Medema, Warren J. Samuels - ISBN: 9781136742958, Edition: 2, Year of publication: - (recap + lectures)
• Who? Intellectuals, public figures, journalist.
• When? Late 18th – early 19th century.
• Where? Britain
• What? Economic of market society based on labour as source of wealth and creator
of value.
• Before the industrial revolution:
o Malthusian epoch = many growth reversals: little bit of growth followed by bit of
regress.
• After industrial revolution:
o Sustained economic growth.
Industrial revolution; Technology:
• Modernisation.
• Agricultural --> Manufacturing.
o 1762: Hargreaves’ Spinning Jenny.
o 1769: Arkwight’s waterframe.
Most important economic activities now:
• Capital accumulation.
• Machines.
• Creation of factories.
Rise of factory:
• Shift of workers from homes to factories.
• Paid by the shift.
• A great deal of control of people.
• Moving from cottages to the cities.
o Urbanization.
, 1. Eve of the industrial revolution:
Scientific revolution: Started in the late 17th century. Believing in reason, believing in scientific
inquiry, focusing on technology and innovation. Technological progress becomes feature of human
existence rather than people using the same technologies for centuries.
• The Enlightenment (de verlichting).
• Mercantilism: the economic theory that trade generates wealth and is stimulated by the
accumulation of profitable balances, which a government should encourage by means of
protectionism.
• Commodity money: no use off money made of silver or gold anymore.
• Trading monopolies (East India Company).
• Small manufactures, no labour unions.
• Political system dominated by the landed elite.
Trading monopolies:
• The value was created by this privilege given by the king.
, Generation 1; Smith & Hume:
Questions:
• What is wealth?
• How is wealth increased?
• Hoe does trade increase wealth?
❖ David Hume (1711-1776):
In his essay ‘Of Balance of Trade’ (1752) Hume created the first economic model where he argues
that export bans lower production.
Key views of Hume:
• Private property is a result of scarcity.
• Perfect equality would lead to impoverishment.
• Changes in the supply of money can affect consumption and investment.
2. Industrial Revolution Take-off:
• Population growth.
• High wheat prices due to the Corn Laws (1804-1846).
o Country was politically dominated by the landed elite. Those people were interested
in expensive food, because there were the ones selling and producing food on their
land. In order to secure that, they introduced high tariffs on foreign grain. This led to
high food priced, which benefitted the landlords. Against the interest of the workers.
Against the interest of the capitalist or owners of factories who had to pay more to
their workers so they can afford their food.
• Napoleonic Wars (1790-1815):
o Big military effort from Britain against France. Blockade of Britain by napoleon,
Napoleon was trying to weaken Britain by blockade. Which impacted the economy of
Britain significantly.
• Social unrest:
o Anty-technology revolts (Luddities 1811-16)
o Pro-workers rights revolts (Peterloo 1819)
Generation 2; Malthus & Ricardo:
Questions:
• How does population growth affect wealth and its distribution?
• Does population create its own demand (M)?
• How does technology affect labour (R)?
• How does trade increase wealth (R)?
❖ Thomas Malthus (1766-1834):
• Population doubles every dew decades: a geometrical increase.
• Once all the good land is in use, the food supply can not grow at the same rate. at best, we
can hope for an arithmetical increase.
• Result: starvation.
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