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History of economics summary lectures part 1
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History of economicsPlanning
Woensdag 8 sep Lecture 1
Dinsdag 14 sep Working group 1
Dinsdag 21 sep Working group 2
Vrijdag 24 sep Lecture 2
Vrijdag 1 oktober Lecture 3
Dinsdag 5 oktober Working group 3
Dinsdag 12 oktober Working group 4
Vrijdag 22 oktober Lecture 4
Lecture 1 – An introduction
What is history?
It’s about time in the past. It is about great economists. There are school (groups of scholars,
united by a common approach), so not only about individuals or times.
So history of economics means..
- dealing with the past
- engaging with the ideas of past thinkers and with the schools of thought (intellectual
history)
- learning about important debates
- telling a story!
History of economics and other discipline
s
,History of ideas is essential for any good training in social sciences (economics included)
- important for general education – broadening your intellectual perspective
o by engaging with past economists who were often not ‘only‘ economists
o by looking at economics from a multi-disciplinary point of view
- essential for academic culture / your personal vocabulary: an historical introduction
to economics
- demonstrates how to tell a story (for example, a literature review) and how to make
sense of economic theories
- helps find new ideas and get inspired by the writings, the mistakes, and the insights
of the past
- explains the richness, complexity and diversity of today‘s economics
- demonstrates the necessity of pluralism and critical thinking – beyond (seemingly
‘settled‘, ‘uncontroversial‘) textbook economics
- explores how economics interacted with the other disciplines
How to write the history of economics?
Joseph Schumpeter (1883-1950)
History of thought History of analysis
- History is important for its own sake - Whig history: important only as
- Historical context anticipating today’s knowledge
- Schools/ individuals - logic
- concepts/ problems
Why is the history of economics a challenging subject?
- cognitive limitations (people specialize!)
- lack of historicity in standard economics (especially as it is taught at most
universities)
- interpretive difficulties (how to read the past, which is different from the present)
Mercantilism
The first school: Mercantilism
- The name: from Latin mercator - merchant
- The сontext: Europe between 1500 and 1800
o Growth of trade
o Increasing importance of the nation states and struggles between them
What were the questions Mercantilists were asking?
1. What is the source of wealth for the state? (‘theory‘)
- gold and silver
2. What should the state do to become wealthier → and stronger? (‘policy‘)
- imposing taxes on export
- supporting imports (support selling goods to others. The more you buy the less
money you have).
- preference for exporting manufactured goods over raw materials (you create a more
variabele/ expensive product, you can sell it for a higher price)
, - promoting the existence of large and hard-working population (work hard for a small
price) → increasing competitiveness of domestic goods
active/ positive balance of trade (you have to sell more than you buy)
Contributions of Mercantilism
- Importance of money for the growing economy
- Importance of trade
- Reconsidering the social status of merchants! (new ideology supporting business)
- Economics as a part of a political project
- But: from the beginning contested as economic theory. There were conceptual
problems.
- Still alive and well in many protectionist policies.
The idea that you have to support national production, impose trade restrictions, to
increase own competitiveness is still very strong. China: Make you exchange rate
artificially low, the goods are relatively cheaper than compatible goods in other
countries.
Working group 1 - Pre-Classical Economics and Adam
Smith
I. Physiocratic school
- Value theory and policy implications (laissez-faire!)
- Compare and contrast with Mercantilism (from the lecture)
- The importance of agriculture
, II. David Hume and his critique of mercantilism
- Price-specie-flow mechanism
III. The Classical School: Adam Smith
- Wealth of Nations vs. Theory of Moral Sentiments
- Division of Labour
- Value theory (aka what determines the price/exchange value?)
- Distribution theory (aka where does the price go | what determines
profits/wages/rent?)
- Theory of Development
Physiocracy
Physiocratic school
a) Value theory and policy implications (laissez-faire!)
b) The importance of agriculture
c) Compare and contrast with Mercantilism (from the lecture)
Introduction
- A brief (1756-1776) French School of thought
- Historical Context:
o 18th century France: overregulated economy
Extremely strong government hold on the economy, exercising
mercantilist policies.
o Chaotic tax system. If you want to transport goods, you have to pay
unexpected taxes and bribes if you go through a region.
o Feudal Economy
Hardly any free trade. Limited free exchange of goods.
Peasants dependent on their lords
Overall: limits to the free exchange of goods, to the output and pricing (remnant of
Mercantilism)
Major Tenets (mercantilism didn’t work, so they came up with another school. The opposite
op mercantilist school)
- Natural order (and natural rights!)
o The rule of nature: laws govern society just as physical laws govern the
natural world (Newton)
- Laissez-faire, laissez-passer
o “Let people do without government interference”. Let people make their own
decisions.
- Emphasis on agriculture
o Value comes from nature (see Tenet #1). In other words value of a phone
come from the nature. The labor doesn’t create new value.
- Taxation of the landowner
- Interrelatedness of the economy
Value theory
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