Summary

Summary Smoelenbook thinkers

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Course
Economic challenges (E_MUE_ECMS)

Institution
Vrije Universiteit Amsterdam (VU)

This smoelen book covers all thinkers in the Economic Challenges field. Everything you need to know about these thinkers is in this summary; important dates, publications, terms, etc. A part has also been highlighted, these were the most important topics in my year, according to the lecturer. At th...

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Uploaded on October 23, 2022
Number of pages 17
Written in 2021/2022
Type Summary

economics
principles of economics
wealth of nations
capitalism
socialism
democracy
table economique
leisure class
business cycle
economic behavior
das kapital
communist manifesto
principle of population
oikonomikos
games of economic behavior
says law

Institution
Vrije Universiteit Amsterdam (VU)
Education
Minor Economics
Course
Economic challenges (E_MUE_ECMS)

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Thinkers economic challenges
Xenophon
- Pupil of Socrates: Xenophon’s book Oikonomikos is a Socratic dialogue about
household management and agriculture. Very famously describes how production
of household can be efficient.
- A good manager strives to increase the size of economic surplus he supervises:
this is accomplished through skill, order and the division of labour.
- An increase in both quantity and quality of goods is attributed to the division of
labour; there is a relationship between population concentration and the
development of specialized skills and products
o Smith (200 years later): division of labour is limited by the size of demand.
- Developed an intriguing concept of wealth
o Wealth is gained when the individual experiences subjective use value in
consumption; is consumption harmful then it cannot be wealth.
o Doesn’t judge what is or isn’t wealth
- Use value versus exchange value

Plato
- Attributed the emergence of a city to specialization. Athens: commerce and ocean
navigation, Sparta: agriculture and army.
- Start of a theory of exchange: specialization  mutual interdependence  reciprocal
exchange  trade
- Market not capable of self-regulation, requires administrative control
- Ideal State ruled by a philosopher-king
 Plato is not an economist because he did not believe in the market system organizing the
trade. Plato thinks trade has to be organized administratively (not self-regulating; so key idea
of economy is missing in Plato).

Aristotle
- Pupil of Plato. Mentor of Alexander the Great
- Telos (purpose of things) & Eudaimonia (strife for happiness)
- Strong normative perspective
o Book V: concepts of justice
o Book I: nature of household and state
- Theory of a just price
o Three types of justice
 Distributive justice
 Corrective justice
 Reciprocal justice/justice in exchange
o Just price a harmonic mean
- The accumulation of wealth
o Two types of economic activity
 Oeconomia (housekeeping) = natural
 Chresmatistike (profit making) = unnatural
o Essence of economic activity is enabling a good life in the polis

, o Telos of money is simplification of trade. Money does not exist to multiply itself.
o Demanding interest (usury) is highly unjust

Ibn Khaldun (islam; 1332-1406)
- History of civilization
o political, sociological and economic analysis of cycles in dynasties
o discusses effect of division of labour on productivity, influence of tastes on demand,
choice between consumption and capital accumulation, impact of taxes on
production.
 Not an economist but was writing an ambitious project; history of civilization (with economic
analysis; change and dynasty in power).

Thomas Aquinas
- Ethical aspect of prices: Doctrine of the just price
o The just price is the current price, which depends on location,
time and risk of transportation
o It’s not so much about what the actual price is, but more about
what the price should be.
- Introduction of indigentia: price varies with need  influence of
demand on price
- But if market price doesn’t cover production costs, production will stop
 influence of supply on price
- However, the Scholastics fail to clearly distinguish the influence of
demand and supply on prices
 ‘I don’t think he is an economist; still talking about just prices rather than actual prices. Still
has difficulties disentangling demand and supply from each other. But here are some
element of economic thought in his writing’. (teacher during lecture)

David Hume
- Criticism on mercantilism
- Price-specie flow mechanism
o If you export more than you import; gold flow into your country  there is more
money into your country  prices domestically will go up (geld is minder waard;
inflatie?).  increase in prices on domestic market will make this good less
interesting for other countries to import  you export less because you loose your
competitive advantage (your goods become more expensive).  discourage export,
encourage import (goods from other countries will be relatively cheaper)  gold
flows out of the country.
o In short; a consistent positive balance of trade is impossible because of the flow
mechanism.

Francois Quesnay
- Founder of ‘les economistes’ later named the Physiocrats
- Tableau economique

, o First attempts to model an entire economy: zig-zag model
o Circulair flow of money
- Flow of money = flow of blood
- Mentor of Anne Robert Jacques Turgo, pleader for tax reforms under Louis XVI
- Physiocratic theory of rent: agricultural surplus (= gift of nature) is paid by the farmers to the
landowners as rent.

Adam Smith
- The theory of moral sentiments (1759)
o Study of human emotions, how emotions are interlinked and
the role of emotions in the establishment of our moral
judgement
o When people are confronted with moral choices, they
imagine an Impartial spectator
- Meets Quesnay, Turgot and the physiocrats
o "Physiocracy is, with all its imperfections, the nearest
approximation to the truth that has yet been published upon
the subject of political economy." - A. Smith
- Wealth of Nations
o Division of labor
 Productivity not only determined by technology, also
depends on organization of labour & size of the
market
 Innovations + division of labour  tremendous economic growth
o Price theory
 Diamond-water paradox
 Nominal & real prices, market price & natural price
 Labour theory of value
 Price theory for an advanced society: shift of labour theory of value to more
general cost-of-production theory.
 Natural price of goods Is the sum of: natural wages (labour) + natural profit
(capital) + natural rent (land).
  price is a function of rent and rent is a function of price  circular
reasoning that renders cost-of-production theory invalid
o Invisible hand
o Growth theory
 Growth theory on basis of interaction between two laws of motion
 Law of accumulation
 Law of population
o Role of the government
 State has four tasks
 Prevent monopolies and guarantee a competitive environment
 Protect society from foreign threats
 Protect internal order against injustice and oppression
 Provide public goods (roads, army, healthcare, education)
o Consumer interest

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