Skip to content

Instantly share code, notes, and snippets.

@rgardner

rgardner/study_guide1.md

Last active August 25, 2024 23:26
Show Gist options
  • Save rgardner/9530244 to your computer and use it in GitHub Desktop.
Save rgardner/9530244 to your computer and use it in GitHub Desktop.
Download ZIP
Political Economy Study Guide
Raw
study_guide1.md

3/4/14 #Texts & Ideas: Political Economy Midterm 1

##Part I: The Civic and Christian Tradition of Political Economy ###Assumptions of Liberalism

  • humans are rational
  • individual is unit of analysis
  • individuals should have freedom to make own decision
  • commerce seen in positive light
  • the state is separate and distinct from the Market
  • the state should have clear limits

###Elements of Civic and Christian Tradition

  • views that occur again later
    • political engagement is a virtue (Civic)
    • building the Good Life in this world (Civic)
    • Democratic Participation - Rule for the people not the ruler (Civic)
    • Conceptions of Property (Christian)
  • views liberals will react against
    • hostility toward commerce, money-making, and credit
    • division of society into groups or classes

###Aristotle

  • studied with Plato in Athens (politics, philosophy, science)
  • taught Alexander the Great for 2 years

####Historical Context

  • small city states (Polis)
  • violent world filled with warfare
  • fiscal policy of looting
  • slave-based economy
  • Athens traded and relied on merchant class, instead of military technology
  • looting - major source of revenue (pillage and conquest)

####Governing a City State?

  • preservation of the Polis
  • virtues of politics - man is a political animal
    • participation in politics
    • natural organizations: family -> household -> village
    • distinctions of authority
      • father superior in family
      • state a unit of equals -> statesman rules among peers
    • stable middle class -> preserve independence of polis (avoid wealth disparity and debt crisis)
      • natural hierarchy (masters and slaves)
      • self sufficiency (Autarkein)
      • hostility to trade -> act of acquiring new wealth not considered virtuous
  • period of rising inequality
  • believes in groups (upper strata have time and leisure for politics)
  • does not believe all men created equal
  • categories of acquiring wealth
    • natural production (farming, hunting, fishing, piracy)
    • unnatural, but acceptable exchange (money for goods)
    • unnatural and unacceptable exchange (money for money)

####READING: Aristotle's Politics (1.1-1.13 and 4.11)

  • "the state or political community, which is the highest of all, and which embraces all the rest, aims at good in a greater degree than any other, and at the highest good"
  • government(personal) = kind; bidirectional_rule = statesman
  • master -> slave; husband -> wife; father -> children
  • "the instruments commonly so called are instruments of production, whilst a possession is an instrument of action"

#####Slavery

  • master -> slave
    • "in the arts a servant is a kind of instrument"
    • "a slave is a living possession"
    • master does not belong to slave, but slave is slave to himself and master
    • "He who is by nature not his own but another's man, is by nature a slave; and he may be said to be another's man who, being a human being, is also a possession. And a possession may be defined as an instrument of action, separable from the possessor."
  • "Some should rule and others be ruled is a thing not only necessary, but expedient; from the hour of their birth, some are marked out for subjection, others for rule"
  • "there is a slave or slavery by law as well as by nature"
    • prisoners by law
    • barbarians by nature
  • the male is by nature superior, and the female inferior, and the other ruled; this principle of necessity, extends to all mankind

#####Property

  • slave part of property
  • "property, in the sense of a bare livelihood, seems to be given by nature herself to all"
  • the art of war is natural part of acquisition (like hunting)
  • acquire wealth through trade is unnatural
    • the value was first measured by size and weight, but in process of time they put a stamp on it, to save the trouble of weighing and to mark the value
  • there is no bound to the riches which spring from this art of wealth getting
  • "money was intended to be used in exchange, but not to increase an interest
  • hates usary, which makes a gain out of money itself

#####Classes

  • "silence is a woman's glory"
  • {very rich, another very poor, and a third in a mean}
  • "the middle class is least likely to shrink from rule"
  • "a city ought to be composed of equals and similars"
  • democracy most sustainable, but still not perfect

###Aquinas ####Historical Context

  • a religious world
    • explained natural phenomena, politics, civil society
  • a single religion - Christianity
    • Catholic Christianity ruled Western Europe
    • Jews not seen as threat
  • huge variety of political authorities
    • HRE ruled Central Europe (secular)
    • competition from political states
  • religious hierarchy
    • pope -> bishops -> orders
  • commercial boom during 13th century
    • trade networks forming
    • trade fairs (stock exchange) where big money was made
    • medieval merchants used loans/credit
      • Bills of Exchange (signed docs exchanged for gold/silver)
      • not necessarily worth face value
  • Church Attitude toward Commerce and Credit
    • building the Good Life in the next world
    • hostility to commerce
    • hostility to accumulation of wealth
    • hostility to credit and usury (seen as sin)
    • a Christian should rise above self interest

####Aquinas (I): Foundations

  • God as the source of all authority
  • goal of the state is to permit worship
  • Humans are communal, not individual
    • "necessary for humans to live in multitude, not alone"
    • "unification of man to achieve something in common"
    • preserve existing social order
    • Aquinas in favor of division of labor (divine providence)
    • state is there to ensure enough workers in every field

####Aquinas (II): New Paths

  • practicality
    • general rules with specific caveats
  • private property: yes, but with conditions
    • necessary for human life, man more inclined to cultivate what he owns
    • make use of it!
  • trade, ok, but must be equal
    • trade vs. robbery
      • robbery: buy too low, sell too high
    • exchange with friends ok, b/c part of personal connection
    • mostly personal transactions, ok to trade for unjust prices
  • usury/credit/interest - no, except for specific circumstances
    • making money while doing nothing is bad
    • money is consumed through use (like an Apple)
    • Aquinas distinguishes different types of loans
      • ok to expect interest from merchants and craftsmen

####READING: "Summa Theologica"

  • Overview
  • Question 66: Of Theft and Robbery
    • Property
      • external things as regards to their nature:
        • only the power of God
      • external things as regard to their use:
        • natural dominion over external things, because, by his reason and will, he is able to use them for his own profit
    • Private Property
      • yes: power to procure and dispense
      • no: use should be for the common
  • Question 77: Cheating: Buying and Selling
    • sell for more than worth
      • sinful to sell above just price (b/c injure neighbor)
      • no equality of justice for buy/sell below/above just price
      • lawful to sell a thing for more than its worth, b/c worth more to one side (owner/buyer)
  • Question 78: Of the Sin of Usury
    • (Usury == sin)?
      • usury for money lent unjust (b/c sell what does not exist -> inequality)
      • ok to except money for services (e.x. renting a house)
      • unnatural to take use of money lent
      • tenant owes renter the fruits gained when renting use
    • ok to use unavoidable usury, as long as it goes to good ends
  • Question 96: Human Law
    • community v. individual
      • "laws should be made to suit the majority of instances; and they are not framed according to what may possibly happen in an individual case"
      • "now the end of law is the common good" -> "human lal should be proportionate to the common good"
    • repress all vices
      • "many things are permissible to men not perfect in virtue which would be intolerable in a virtuous man"
      • human laws don't ban all vices, "only the more grievous vices for the majority to abstain" -> "hurt others"
      • human law prevents murder, theft, and suchlike
    • only prescribe population to do things for the common good
    • laws framed by man are either just or unjust
    • does law apply to everyone?
      • law: (1) rule of human acts, (2) coercive power
      • whoever is subject to power is subject to the law of that power
      • the virtuous and righteous are not subject to the law, but only the wicked
      • the will of the good is in harmony with the law, whereas the will of the wicked is discordant from it.
      • "the sovereign is subject to the law by his own will, according to the statement that 'whatever law a man makes for another, he should keep for himself'"
    • if a case arise wherein the observance of that law would be hurtful to the general welfare, it should not be observed

##Part II: Classic Liberalism ###John Locke ####Historical Context

  • splitting of Christendom - Protestant Reformation
  • Age of Religious Wars
  • English Civil Wars
  • hierarchy of Christian authority

####Locke & Civic/Christian Traditions

  • similar to Aristotle
  • protection of private property, power based on consent of people
  • arguments framed with religious language
  • still accepts slavery

####Locke and Emerging Liberalism

  • inherent liberty and equality of humankind
  • state of nature is not a State of License
    • how do we behave naturally
    • can exist in relative peace
  • individual freedom is born all the rest
  • the state: right of retribution and punishment
  • law code needs to be settled and known
  • government
    • by consent
    • by lawgiver
    • as umpire
    • as executive
  • State's Goal is to Preserve Property
    • wealth of mankind can grow, not fixed
    • like Aquinas, shouldn't have so much that some is wasted
  • State of Nature -> Property -> Money -> Inequality -> State

####Differs with Aristotle

  • with money, people can accumulate property and wealth
  • believes in inheritance
  • private property precedes state
  • people enter agreement on money spontaneously
    • with money and property comes inequality
    • for Locke, inequality is natural

####READING: Second Treatise (2.1-2.5, 2.7, 2.9)

  • Extent and End of Civil Government
    • no right to heirs
    • no rulers now on earth should inherit God's power
    • political power different: power of a Magistrate over a man not the same as a Father over his children.
    • should distinguish different powers of same man
    • political power: a right of making laws with penalties of death, and consequently all less penalties, for the: (1) regulating and preserving of property, and of employing the force of the community, in the exception of such laws, and in the defense of the commonwealth from foreign injury; and all this only for the public good.
  • Of the State of Nature
    • naturally in state of perfect freedom to act on self and others constrained only to the law of nature (not other humans)
    • state of equality
    • every man has the right to punish the offender and be the executioner of the law of nature
    • men with power in one country does not imply absolute power: British parliament does not have power in the eyes of American Indian
    • all men are naturally in that state, and remain so, till by their own consents they make themselves members of some politic society.
  • Of the State of War
    • the safety of the innocent is preserved
    • he who attempts absolute power over another puts himself in state of war
    • makes it lawful for a man to kill a thief (took away liberty)
  • Of Slavery
    • liberty of man in nature: free from any superior power on Earth
    • liberty of man in society: no other legislative power
    • man can be enslaved instead of death when he wrongs another
    • the state of war continued, lawful conqueror and captive
    • servants aren't slaves because their masters cannot kill them and who'd eventually be free
  • Property
    • must have means of appropriating common goods that are only good for the individual (e.x. food)
    • labor is unquestionable property of the labourer
      • that labor put a distinction between them and common: that added something to them more than nature
      • "it is the taking any part of what is common, and removing it out of the state of nature leaves it in, which begins property; without which the common is of no use."
      • does not depend on consent of commoners
      • man can only take as much as he can enjoy, the rest goes to the commons
      • God commanded man to improve the Earth
      • must balance productivity of everyone individually vs. productivity of man together
      • productivity of commons in one country vs. another
    • it is labor that puts the greatest part of value upon land
    • man gradually began breaking up land and partitioning everything
    • must use them before they spoiled
    • invention of money to enlarge property through trade
  • Of Political or Civil Society
    • nature drives man to society
    • conjugal society
    • family structure
    • slaves are by the right of nature subjected to the absolute dominion and arbitrary power of their masters
    • government punishes transgressors
  • Of the Ends of Political Society and Government
    • why join society?
      • nature: man has complete freedom but no security
      • need for impartial judge
    • give up equality, liberty, and executive power to the hands of society
    • all for the peace, safety, and public good of the people

###Adam Smith ####Historical Context

  • Britain wealthy by historical standards
  • consumer revolution
    • London had highest consumption to wage ratio
    • sugar, tea
  • foreign trade, slavery, war
    • Atlantic Trade
  • agricultural revolution and enclosure
    • new fertilizer, crop rotation
    • partitioning of public land (mention Locke!)
    • stratification of land-owners and agricultural proletariat
  • Britain as an increasingly modern economy
  • factors of production
    • Labor, Land, Capital
    • only just becoming marketable

####Smith and Human Nature (The Prudent Person)

  • humans:
    • are self-interested
    • care about opinion of others (Status)
      • character, good-will, strong moral compass
    • have finite goals
    • cooperative
    • have natural inclination to trade
  • the Prudent Man
    • only enters into new projects well-prepared and connected
    • acquires wealth slowly and industriously
  • "not the benevolence of the butcher"
  • don't know everyone involved with production
  • trade distinguishes us from animals

####Division of Labor

  • increases productivity and standard of living
  • e.x. the Pin factory
  • Exchange -> Divison of Labor
    • one of the fundamental rules behind economic growth
    • more shipping expands the market
  • Phases of Civilization
    • Nomadic -> Shepherd -> Agrarian -> Mercantile
  • people learn by doing (improve skill)
  • Saving Time
  • innovation

####The Invisible Hand

  • socially positive, unintended consequences of pursuing your self-interest though the market
    • not a central governing authority that can control variables like price, supply, demand, etc.
    • a reactionary system that adjusts
  • profit motive leads to efficiency in the market, given the right conditions
    • self-interest on a larger scale
  • assumptions
    • competitive market
    • easy entry/exit
    • certain time lag in adjustment
    • switch professions fluidly
    • knowledge of prices
  • critic of trade agreements

####British State

  • Non-Interventionist?
    • ensure private property through parliament
      • proper legal system, rights, and intellectual property
    • subsoil mineral rights and property
    • patent system
      • private property
    • bankruptcy law
  • Interventionist?
    • turnpike and canal building (infrastructure)
    • high taxation and massive military complex
    • poor laws to help Indigent
  • highest tax and most indebted in Europe at the time
  • Smith and the state
    • "every individual can in his local situation judge much better than any statesman or lawgiver can do for him"
    • statesman should not direct private property (impossible to trust)
  • The State's Functions
    • SHOULD
      • defend the state
      • provide a legal system
      • promote commerce through public works
        • "where there is great property, there is great inequality"
        • expensive projects for good of all
      • help provide education
    • SHOULD NOT
      • engage in mercantile projects
  • Paying for Government
    • raise money from people (local taxes, pay when possible, progressive)
    • leasing or selling state property
    • state debt

####The Benefits of Foreign Trade

  • magnitude of the British Empire
  • state regulation of foreign trade
  • trade monopolies
  • the doctrine of mercantilism
    • direct relation between gold stockpile and wealth of a nation
    • export surplus to accumulate gold
  • wealth of nation
    • welfare of people (not gold in treasury)
    • state should provide "revenue and sustenance" for people
    • Aquinas: "acheice salvation in next world"
  • trade controls divert production to unproductive sectors
    • controls should be lowered gradually
    • adjustment will happen smoothly

####READING: Wealth of Nations (1.1-1.4, 1.7)

  • (1) Of the Division of Labor
    • productive powers of labor improved by divison of labor
    • e.x. Pin Factory
    • productivity increases: (1) increase dexterity, (2) switching time, (3) machinery
      • machinery helps all, not just those that use it
      • multiplication of productivity
  • (2) Of the Principle Which Gives Occasion to the Division of Labor
    • division of labor slow and gradual consequence of a certain propensity in human nature -> propensity to truck, barter, and exchange
    • man needs help of friend
    • e.x. Not the benevolence of the butcher (it's their self-interest)
    • trade is mutually beneficial
    • difference of natural talents is smaller than expected
      • effect of division of labor; not the cause
  • (3) That the division of Labor is Limited by the Extent of the Market
    • extent of division limited to the extent of the market
    • e.x. ships crossing sea
    • nations that first civilized were sea-bound
    • e.x. Egypt and the Mediterranean
  • (4) Of the Origin and Use of Money
    • naturally arises as trade expands
    • started off as metals (issues of weight and authenticity)
      • public stamps on metals
      • coins (no weight issue)
    • money = universal instrument of commerce
    • value in use (e.x. water/food)
    • value in exchange (e.x. money)
  • (7) Of the Natural and Market Price of Commodities
    • average rate of rent can be thought of as natural
    • when the price of commodity is neither more nor less than what is sufficient to pay the rent of land, the wages of the labor and the profits of the stock employed in all stages -> sold at natural price
    • profit should just cover costs of capitalist (food, water)
    • price will be lowest when there is perfect liberty to choose to trade
    • market price: actual price
    • competition (supply and demand) affect price
    • supply/demand changes over time, subject to seasons and popularity
    • market price approaches natural price
    • monopolists
      • keep market price above natural price

####READING: Theory of Moral Sentiments (6.1)

  • Of the Character of the Individual, so far as it affects his own Happiness; or of Prudence
    • the objects upon which his comfort and happiness in this life are supposed principally to depend is proper business of Prudence
    • security is first responsibility
    • not ostentatious
    • sincere and cautious
    • sedate friendship
    • sacrifice now for later, improve income modestly and spend within that income
    • not a "bustler" in business where he has no concern

####READING: Wealth of Nations (5.1-5.3 (except 2d,3d) and 5.2-5.3)

  • Of the Expenses of the Sovereign or Commonwealth
    • protect society from violence
    • government can employ farmers who are ready for war
    • fighters need pay
    • the public needs to maintain a standing army - those who's job is to fight and train in the use of advanced warfare
    • police
    • firearms and other technology completely changed militia structure
    • militia becomes standing army over time
      • specialization and development of skills
  • Of the Expense of Justice
    • prevent injustice and oppression
    • hierarchy: personal qualifications -> superiority of age -> riches -> birth
    • inequality of fortune takes place in period of shepherds
    • taxes had to be introduced when security became more expensive
    • judge needs to quickly and efficiently prescribe remedies to injustice as possible by the government
    • no all cases fair: (hard to quantify lost value)
    • separation of judicial and executive power
  • Of the Expense of Public works and public Institutions
    • public works
    • tolls help pay for public works
    • public institutions need to be maintained, no value if in disuse
    • tolls for maintenance cannot be made the property of private persons
      • should be maintained by government
  • joint-stock
    • "when a company of merchants undertake, at their own risk and expense, to establish a new trade with some remote and barbarous nation, it may not be unreasonable to incorporate them into a joint-stock company" and to grant a temporary monopoly
    • joint-stock arises when companies are uniform (banking, insurance, navigation, utilities)
  • education
    • should be paid for through government, to not let parents interfere with grading
    • students should pick teachers to make this more competitive
  • believes in free market where government establishes rules and secures property and honors contracts
  • taxes should be levied in proportion to people's ability to pay
    • set rates, not arbitrary, easy, minimal externalities
    • avoid large debt
    • tax revenue in proportion to the produce of the land, not its rent
    • everyone should support as much as possible to state, in proportion to their respective abilities
    • proportion to revenue earned under protection of government
    • land tax (might be one of the fairest)
  • tax on excess profit
  • small public debt

####READING: Wealth of Nations (4.1, 4.2, 4.8)

  • of the principle of the commercial or mercantile system
    • political economy: (1) system of commerce, (2) system of agriculture
    • need to accumulate gold and silver to fund foreign wars
    • unfavorable balance of trade occurs with trade imbalance
    • scarcity of money
    • wants money, not goods
    • wealth of a nation is not perishable
    • restraints upon importation and exportation affects the real wealth of a nation
  • Importation from Foreign Countries of such goods that can be produced at home
    • every individual continually exerts himself to employ his capital as efficiently as possible
    • employ capital near to home
    • merchant prefers home to foreign consumption
    • domestic to foreign promotes security and helps industry
      • the invisible hand of the market!
    • restricting employment of capital is a useful or hurtful regulation
    • taxes which raise price of labor and (subsequently) of all other commodities
    • taxes on necessities of life limit ability to consume
  • Conclusion of Mercantile System
    • mercantilism: promote exportation, prevent importation
    • private interests can exhort exemptions from legislature
    • exact bounties on trades
    • consumption is the sole end and purpose of all production

###David Ricardo

  • countries should specialize in those products where they have a comparative advantage
  • trade benefits all parties

####Historical Context

  • Britain as Free Trade powerhouse
  • repeal of corn laws
    • previously heavy tax on corn laws
  • end of EITC (1874)
  • climax of free trade (1860's -> '80s)
  • free trade benefits British industry

####READING: On Foreign Trade (7.11-7.36)

  • comparative advantage
  • production in one country affects production in other countries

###Main Tenets of Classic Liberalism

  • sanctity of private property
  • self-interest
  • division of labor leads to economic growth
  • invisible hand: self-interest works for the common good
  • minimal state
  • comparative advantage work's for everyone
  • optimistic about progress

##Part III: Critiquing Classic Liberalism ###Jean-Jacques Rousseau ####Historical Context

  • absolute monarchy
  • growing power to King
  • highly stratified and Hierarchical Society by Law

####Rousseau's Progression of History

  1. The First State of Nature (Equality) - self-preservation - copulation, but no division of labor - no need for family structure
  2. The Second State of Nature (Strong vs. Weak) - survival of the fittest - mutual interest causes people to start to work together
    • still sought private advantage (no collective good) - the weak imitate the powerful - women become more sedentary - families begin to settlement and community forms - competition and preference - people begin to become stronger/weaker, better/worse - specialization in skills - morality introduced, punishments follow
  3. The Fatal Accident (Inequality entrenched) - man begins to rely on one another - property introduced, cooperation indispensable, and vast forests became smiling fields "where slavery and misery were soon to germinate the fields" - revolution in metallurgy and agriculture - man needs help of others and cares about their opinion
  4. Government (Rich vs. Poor) - people accumulate property and band together to defend it - "if we have a prince, it is to save ourselves from having a master" -> not Rousseau, but Pliny - government didn't begin with absolute power - religion has saved more blood than spilled - magis
  5. Despotism (Master vs. Slave) - criticize Locke's view of servant that cannot sell himself to master - extreme of government brings it back to law of the strongest (what it was trying to fix) - blind ambition leads to errors that allow him to be enslaved by government - return to state of inequality, though through excessive corruption, not naturally

####Rousseau's Underlying Themes

  • analysis based on radical individualism
  • interdependence leads to misery
  • questions the notion of progress
  • human nature changes, responds to institutions
  • paradox of human vice
  • FIXME
    • radical break with old institutions
    • redemptive politics
    • the state and the General Will

####READING: The Origins of Inequality (Discourse Part II)

  • founder of civil society man who enclosed piece of ground and called it private property
  • Refer to Rousseau's progression of history above
  • conclusion:
    • growth of inequality parallels growth in state of mind
    • begin in perfect equality, end in perfect inequality
    • moral inequality clashes with natural right (contrary to law of nature) children command parents, young the old, etc.
    • upset by people who have too much while others have not

####Rouseau: solution

  • radical break with old institutions
  • redemptive politics
  • the state and the General Will

###Friedrich List: Nationalist Response ###Historical Context

  • German Economic History
    • Germany = "goegraphical expression pre 1871"
    • international wars on German territory left them economically behind
      • Britain, Spain, Britain, France
    • agrarian until late 19th century
    • British seen as threat to industry
    • Germany and France developed together (Income/capita), but lower than Britain
  • Silesian Weavers' Revolt (1884)
  • Activist German State
    • German Customs Union (1830s)
    • Tariffs
    • state-owned railroad
    • state-owned enterprises - public utilities
    • the German University System (best in world)

####List v. Classic Liberalism

  • criticizes comparative advantage
  • importance of nation
  • interruptions to trade happen
  • qualitative difference between types of production
  • productive powers

####Policies advocated by List

  • tariffs to promote domestic industry
  • expanding a holistic division of labor within a region or Nation through customs union
  • state cultivation of institutions
  • Euro-Centrism of List

####READING: The National System of Political Economy (2.11-2.16)

  • Political and "Cosmopolitical" Economy
    • distinction between best for nation and best for humans
      • Smith: focuses on world economy and assumes international has same consequences of domestic trade
      • Smith: assumes peace
      • Smith ignores nationality
    • we do not live in a perpetual state of peace
    • war reduces total prosperity
    • countries already working together more (unification of Britain)
    • we should work/live together, but unlikely
    • not there yet
    • Smith and others ignore this lack of unification state
    • Germany could have done better if unified and promoted free trade sooner, but not too late for any country to begin this process
  • The Theory of the Powers of Production and Theory of Values
    • the power of producing wealth is infintely more important than wealth itself
    • Smith mentions productive power, but quickly focuses on divison of labor and universal freedom instead
    • Smith: labor is fund of nation's wealth
      • it should be the productivity of that labor
    • List: society dictates how people should use their labor
    • List: farmer e.x.
      • do two kids on a farm contribute more to the wealth of a nation than two children in school
      • if all children inherit the farm, lose the returns to scale
    • stand on shoulder of giants (mental capital of human race)
    • Smith: pig breeder productive, teacher isn't
    • powers of united production cost lost material property
    • Theory of values vs. theory of powers of production
    • Trading: the Trojan Horse paradox
  • National Division of Commercial Operations and the Confederation of the National Productive Forces
    • division of labor: both many people working together on same things vs. one man doing many things
      • both division of labor
      • without combining together people's work, Smith's division of labor is useless
      • weakest link analogy (only as strong as weakest link)
    • agriculture
      • frequently the weakest link in an economy
    • manufacturing power vs. agricultural power
      • both go hand in hand to promote the exchange of goods
    • the whole social state of a nation will be chiefly determined by the principle of the variety and division of occupations and the cooperation of its productive powers
    • two arm analogies (manufacturing and agriculture)
  • Private Property and National Economy
    • Smith: invisible hand
      • List: government needs to regulate
      • List: foreign encroachments on our private property more powerful than domestic
    • people currently act as though they live in a national economy: prefer domestic to foreign; trust fellow citizens over outsiders
    • they care about the honor and glory of a nation
  • Nationality and the Economy of the Nation
    • failures in Smith:
      • "which neither recognizes the principle of nationality, nor takes into consideration the satisfaction of its interests; secondly, from a dead materialism, which everywhere regards chiefly the mere exchangeable value of things without taking into consideration the mental and political, the present and the future interests, and the productive powers of the nation; thirdly, from a disorganizing particularism and individualism, which, ignoring the nature and character of social labour and the operation of the union of powers in their higher consequences, considers private industry only as it would develop itself under a state of free interchange with society (i.e. with the whole human race) were that race not divided into separate national societies."
    • THE NATION
    • introduce tariff system if can more easily regulate trade
    • savage -> pastoral -> agricultural -> manufacturing / navigation
    • protect important branches of industry (agriculture and defense)
    • war makes us more protective (even in times of peace)
    • internal market of a nation 10x more important to it than its external one
    • commerce in all manufacturing countries should be free to make things more fair
    • developing nations supply raw goods to manufacturing countries
    • optimistic about future trade expanding in other countries (not just limited to Britain)
  • Popular and State Financial Administration, Political and National Economy
    • government of a community (raising/expending/administering) different from regulation of economy of individuals
    • economy of the people same as national economy when people united by political institutions

###Karl Marx ####Themes

  • the industrial revolution and its consequences
  • class and the means of production
  • Marx's Logic of History
  • Capitalism
  • The State

####The Industrial Revolution

  • new, labor-saving innovations
    • power-loom, steam-engine, the factory
  • increase in economic growth
  • eventual increase in Wealth per person
  • issues
    • severe delay in improvement in standard of living
    • longer working hours
    • child labor
    • dangerous working and living conditions
  • not a substantial increase in wealth per person until 1870
  • dangerous occupations

####Marx and the Theory of Classes

  • classes and the means of production
  • Bourgeois and Proletariat
  • Material Conditions Shape Human Nature
  • The Concept of Freedom
  • "nature of individuals thus depends on the material conditions determining their production" production expresses one's life -> The German Ideology

####Marx and Historical Stages of Development

  • humans vs. nature
  • stages of development and Modes of Production
    • Tribal -> Ancient Communal -> Feudal -> Capitalist -> Communist
    • TODO
  • each stage has its own Mode of Production and Type of Property
  • The Uniqueness of the Capitalist / Bourgeois State
  • the Cash Nexus
    • the depersonalized connection that exists betweeen employees and employers in a capitalist society

####Marx and the Socialist Response #####Intellectual Background to Kapital

  • the British Classical Economists
    • drew on French socialism
    • systematic study of the economy
    • Smith and Ricardo both believe one couldn't study one's intentions directly
  • Classical Theory of Production
    • Ricardo: population growth among laboring classes limits increase in income per capita; any increase in income increases population
    • Smith: more optimistic
    • Marx agrees with Ricardo and Malthus
  • Classical Theory of Classes
    • (factors of production become classes)
    • Smith: factors of production (land, labor, money)
    • Ricardo: need to limit landowner's ability to exploit laborers
    • Marx again expands on Ricardo
  • Ricardo and the Labor Theory of Value
    • Ricardo: how to come up with standard unit of value?
    • Smith + Ricardo: what should the natural price be? (labor)
    • Smith changes opinion later, not Ricardo
    • price = labor (e.x. 1 fish/2hours, 1 chair / 10 hours; 1 chair = 5 fish)
    • labor as price becomes more complicated as division of labor occurs

#####Capitalism

  • as a flow:
    • C -> M -> C
      • sell superfluous commodity for money to be used for necessary commodity
      • labor is a commodity
    • M -> C -> M'
      • (M -> C -> M' -> C -> M'' -> C -> M''' -> ...)
      • this entire process is capital
      • this exchange can occur forever
  • labor is a unique commodity - its use creates value
    • capitalists acquire capital from commodity of labor
  • surplus value
    • when workers work more than the minimum amount to sustain themselves by being exploited by capitalists (effective wage decreases)

#####Capitalism and Class Conflict

  • How to Expand Surplus Value
    • lengthen the work day (less time to consume)
    • Apply Machinery (more work, less time)
    • Organize Cooperation in Factory (more efficiency)
  • Factory and Machinery Degrade Work
  • Conflict over the Workday

#####Capitalism in Crisis

  • Competition among Capitalists (outcompete rivals)
  • Short Term:
    • Machinery Replaces Workers
    • Reserve Army of Impoverished Workers (wage-level kept down)
  • Long Term:
    • crisis of overproduction ("magician who loses control of his powers")
    • leads to concentration of capital among larger firms
    • machinery raises efficiency but lowers rate of profit
  • Blockages in Flow of M - C - M'
    • this can happen on a large scale

#####Marx and the State

  • base determines the superstructure
  • class and class conflict determine politics and ideology

####READING: Communist Manifesto

  • Bourgeois and Proletarians
    • history of class struggles
  • Proletarians and Communists
    • wants
      • abolition of property in land
      • progressive tax
      • abolition of inheritance
      • confiscate property of emigrants and rebels
      • centralization of credit
      • centralized transport and communications
      • extension of factories and instruments of production owned by state
      • industrial armies (esp. agriculture)
      • combine agriculture and manufacturing industries
      • free education and abolition of children's factory labor

####READING: Capital, Volume 1 (4, 6, 7, 10.1, 15, 16)

  • The General Formulation for Capital
    • Money and Commodities Capital process
  • The Buying and Selling of Labour-Power
    • labor-power: aggregate of those mental and physical capabilities existing in a human being, which he exercises whenever he produces a use-value of any description
  • The Labor-Process and the Process of Producing Surplus Value
  • The Working-Day
    • workers working longer hours than necessary
  • Machinery and Modern Industry
  • Absolute and Relative Surplus Value

##Part IV: Refining Classic Liberalism ###John Stuart Mill ####Backlash Against Capitalism

  • intellectuals against Capitalism
  • trade unions and workers associations
  • government social reform
  • International Working Man's Association
    • tried to coordinate a trans-national response to the negatives of capitalism
    • disorganized, didn't last veyr long
  • company towns, paris commune
    • no monopoly on services, but on many goods
    • common in isolated areas
    • sense of exploitation from companies
  • British factory acts
    • limits hours worked for women and children (~10hrs)
    • 1880 - German first nationwide health care scheme
    • unemployment insurance after WW1
    • Britain uses income tax to pay for assistance to unemployed workers and national disability insurance

####Mill: Foundational Concepts

  • EITC -> University Professor -> government official
  • distinction between Abstract Theory and Practical Application
    • abstract truths vs. allocation
    • can't apply these principles wholesale to every society
    • always differences between theory and application per society
  • distinction between production and distribution
    • on set of goals for production, another for distribution
    • efficiency for production, socially just for distribution
    • two solutions for two problems
  • distinction between Necessary and Advisory/Optional Government
    • governments are both!
      • authoritative - no murder, rape, theft
      • nudge economics - health advisories, but not laws

####Mill: A Liberal At Heart

  • sanctity of individual
    • large protected space for its citizens
    • no government can force thoughts or actions
    • people need to learn on their own not told what to do by government
  • the importance of individual genius and experimentation
    • space to experiment because society advanced by geniuses
    • maximum ability to develop
    • limiting action is starving individual of their ability to develop
  • Laissez-Faire as a general principle
    • lost the nuance of Smith's time - became overreaching
    • production planning should be left to those who have a stake in them; government isn't inherently bad (just less efficient)

####Mill: Problems with Liberalism

  • wage inequality
    • "the really exhausting and repulsive labors" paid the worst because workers have no choice
    • requires high barrier to entry
  • caste-like nature of employment
  • consumer doesn't always know best
  • education of the broad masses
    • breaks caste-system and teaches people about many opportunities

####Mill: Precursor to the Welfare State?

  • inheritance tax (preserves incentive and breaks caste-system)
  • state guarantee of minimum level of subsistence
    • poor relief
    • state better positioned than individual charities
    • state cannot judge morality, just flat fee to everyone
  • legalization of unions
    • not a hindrance, but a necessary instrument to enable sellers of labor to care for their own interests
  • education of laboring classes

####READING: The Principles of Political Economy (2.14, 5.10)

  • Of the Differences in Wages in Different Employments
    • high barrier to entry for some jobs
    • teaching not as difficult, but requires additional training and education that the masses cannot afford
    • worst-paid jobs can be done by women and children (because they're easier)
  • Of the Grounds and Limits of the Laisser-Faire or Non-Interference Principle
    • government should punish citizens for injurious behavior
    • government should protect its citizens
    • government should
      • encourage and nurture the spirit of individual exertion
      • remove obstacles to voluntary enterprise
      • education for the people

##Study Guide from Class ###Essay Question (60%) Grading

  • outline -> introduction and conclusion
  • lower expectations than take-home
  • outline assumption by assumption
  • A essays -> capture nuance and demonstrate knowledge
    • e.x. Smith - mention Wealth of Nations and Theory of Moral Sentiments
    • know the theories
  • 4-7 blue book pages
  • focus on a solid main argument (but have nuance)

Questions

  1. How well do the ideas and assumptions of classic liberalism hold up under the criticism presented by theorists from the 18th and 19th centuries? Choose at least one critic of liberalism (Rousseau, List, or Marx) and at least one classic liberal (Locke, Smith, or Ricardo), and evaluate the extent to which the criticisms of the former undermine the ideas and assumptions of the latter. (can mention Mills)

  2. To what extent was classic liberalism an ideology of and for the British Empire? Were the ideas of classic liberalism uniquely suited to the circumstances of the British Empire during the 18th and 19th centuries, or are they universally applicable? Choose at least two of the following theorists (Locke, Smith, Ricardo, List, Marx, or Mill) and discuss the relationship of their ideas to the British Empire.

  3. How, if at all, did industrialization change the study of political economy? Choose at least one theorist writing before 1800 and one writing after 1800, and examine the way in which industrialization led to new assumptions, concerns, ideas, or paradoxes.

####Question 1

  • assumptions of classic liberalism
  • highlight 3

#####Outline

  • Thesis
  • Who is List?
  • who is Smith?
  • List's criticisms of Smith
    • criticize comparative advantage (Ricardo)
      • manufacturing and agriculture two arms on a man
      • Trojan Horse trading
    • importance of nation
      • defense, security, national identity
    • interruptions to trade happen
      • war, embargos, unfavorable relationships, natural disasters. One problem somewhere in the supply chain affect everyone involved
      • division of labor
        • trading susceptible to weakest link
        • without final combination, all steps useless
      • we do not live in a perpetual state of peace
      • countries have begun working together, but still problem
    • productive powers
      • "the power of producing wealth is infinitely more important than wealth itself"
      • productivity of labor more important than labor itself
      • mental capital of human race
      • theory of values vs. theory of production
      • e.x. farming family

####Question 2

  • refer to lecture on Smith I
  • look at the aspects of the British empire that Smith didn't approve of (mercantilism)

#####Outline

  • Unique to British Empire -> List v. Smith
    • British policies
      • ensure private property, mineral rights/property, patent system, bankruptcy law
      • infrastructure development, high taxation and massive military complex, poor laws
    • East India Trading Company
      • joint-stock company: monopoly behavior
    • Relationship with the Colonies
    • unified nation (less warfare on the isles)

####Question 3

  • when economies became modern
  • how globalization changed theories
  • changes in material life
  • can use Aristotle's view on commerce (there's a quote in Capital!)

###Short Answer Questions (40%) [mostly from slides] e.x. Why is the divison of labor so important? (What and Why) full page in the blue book

###Examples

  • state of nature (Locke)
  • stages of nature (Rousseau)
  • the Prudent Man (Smith)
  • the Invisible Hand (Smith)
  • Surplus Value (Marx)
  • accumulation of capital (Marx)
  • stages through economics (Marx)
  • something about Aristotle and Aquinas

##Addressing Core Concepts

  • Frederich List
    • theorist of the nation, his unit of analysis
    • juxtaposes productive powers vs. Smith's wealth
      • human capital: acquired skills and techniques over generations
      • Smith: how much people can consume
      • List: people's potential to produce things (skills, technology, political institutions)
      • List would criticize GDP as unit of wealth
  • Marx
    • Surplus Value: labor theory of value
      • prices and value determined by amount of labor required
      • surplus value similar to profit: exploitative nature
      • mainstream Economists don't think of profit as exploitative, but Marx and Marxist economists do
      • Marx: capitalists pay them lower wages (so they need to work longer) to exploit their workers for profit
    • Theory of Growth (think of essay questions 1 and 3) - specifically growth of economy, not of ideas
      • Smith: lower tariffs to not limit growth; incentivize people to innovate
      • Marx: one group exploits another -> capitalists work the proletariat for longer hours and build capital
        • is not clear on how this would continue in a socialist society
        • potentially, the government continues growth without being as exploitative
  • Smith
    • invisible hand, division of labor
    • Human Nature:
      • Wealth of Nations: humans barter and trade
      • Theory of Moral Sentiments: HOW IT DIFFERS FROM WEALTH OF NATIONS
    • the infrastructure of commerce
      • then: roads, bridges
      • now: intellectual property
  • Rousseau
    • the paradox of human vice
      • government that tries to solve problems just creates more
      • no perfect solution
      • always battle of strong v. weak, rich v. poor, gov't v. people
Sign up for free to join this conversation on GitHub. Already have an account? Sign in to comment