- Ricardo and Marx and Keynes embraced the finite nature of the capitalist system. Compare and contrast their technical and philosophical justification for this.
There are many economists who made considerable contributions in the field of economics. For the purpose of answering this question, we will focus on the works and principles introduced by these three economists: David Ricardo, Karl Marx, and John Maynard Keynes. The focus of this section is the capitalism-centered economy and the technical and philosophical justification and rationales of their principles. In order to do that, a concrete operational definition of Capitalism should be established first. Capitalism pertains to a system of economy wherein production—including different means of production, trade, markets, and business industries are handled, controlled, and regulated by the private sector, usually by individuals or families, as in the case of business conglomerates whose main goal is to make profits from the market economy. Some of the distinct characteristics of capitalism include wage, labor, capital accumulation, and capital markets.
John Maynard Keynes is one of most remarkable historians of the 20th century and is one of the major proponents of Keynesian economics. In the 1930s, he countered the conventional ideas from neoclassical economics that suggest that free markets, including the ones in which capitalist markets exist, would eventually and automatically be able to provide full employment provided that workers would be flexible in their demands for employee benefits and wages. For Keynes, this idea of future infinity is unrealistic. He instead argued that the demand for goods and services determined the overall level of economic activity in a country and that inadequate demand for such could lead to periods of unemployment, as opposed to the neoclassical economic ideas that still flourished during his time. This is consistent with one of the most famous ideas in Keynesian economics that state that state intervention or interventionism is a necessary tool to moderate the often uncontrollable economic boom and bust cycles.
Karl Marx is more famous as a revolutionary communist than a philosopher. He is obviously the founder Marxism. Marxism actually criticized capitalism which goes in line with the truth that Marxism became the model theory of some of the revolutionary communist and socialist entities of the 20th century, most of which came from the communist state of Russia, and other countries in Europe. The Labor Theory of Value is one of the major principles behind Marx’s anti-capitalism ideologies. This theory basically claims that a commodity or a service’s value can be more objectively measured by determining the overall number of hours of labor required to manufacture such service or commodity. Capitalists, according to Marx, are in a very capable position to ruthlessly exploit workers, although this is not always the case because some workers, although not a majority of them, are getting paid adequately. He asserted that capitalism makes money from the market even without following the labor theory of value because they extract surplus value from their workers and benefit from the financial profits.
David Ricardo opposed the idea of Mercantilism which suggests that the international trade can make a nation richer simply by obtaining any level of trade surplus. His theory of comparative advantage suggests that a country should specialize in the production of a specialty commodity or service rather than focus on the production of a range of commodities. According to him, the international market could benefit more from this type of economic production scheme. He also suggested that international trade would also be mutually beneficial even without achieving a trade surplus or even in the presence of economic underdevelopment. David Ricardo was also a proponent of the labor theory of value which suggests that the economic value of a commodity or service can be more objectively measured by determining the average number of hours required to manufacture such product or service.
- How might Benthamite principles be applied to the possession of money and justify its redistribution? What might Bentham’s arguments against this be?
Jeremy Bentham focused on the legal principles of economics mainly because he was able to study as a lawyer, although he never really practiced this profession that much, early in his life. He was a major proponent of utilitarianism. One of his greatest life ambitions was to create a Pannomion, which is basically a state of complete utilitarian code of law. Utilitarianism is based on the idea that suggests that what the majority thinks about the rightness or wrongness of something is what should matter. Specifically, it suggests that “fundamental axiom, it is the greatest happiness of the greatest number that is the measure of right and wrong” . His strong background on law is what guided him and his opinions regarding monetary economics. His ideas about monetary economics is basically the opposite of David Ricardo’s which suggest that the free circulation of money, either by leaving or entering into economic circulation, should be prevented. Bentham believed otherwise. He also explained that expanding monetary values or monetary expansion can directly help achieve the goal of full employment among other strategies such as forced saving, consumer propensity, saving investment relationship, and etc. His being a proponent of utilitarianism shaped the fundamental concepts of his being a monetary economist. He also explained that monetary economics can be guided and influenced by pleasures and pains, both of which can be ranked based on their dimension or value—intensity, certainty, duration. Bentham favored secure banks while Ricardo favored a secure currency. Bentham’s anti-natural law ideologies, describing natural laws as mere nonsense, also influenced his often unrealistic views about economic monetarism.
- Discuss Thorstein Veblen’s concepts of conspicuous consumption, conspicuous leisure, vicarious consumption, and vicarious leisure. What do these things say about traditional utilitarian views of individual behavior? What is the role of pecuniary emulation in Veblen’s view of macroeconomic theory? What social and economic roles does it have? Be sure to discuss the concept of invidious distinctions.
Conspicuous consumption is as the name implies, the spending of money to buy or acquire wants or luxury things—may be a good or service in an effort to demonstrate economic power. Most of the time, conspicuous spending is done to attain or maintain a certain status in society. Conspicuous leisure on the other hand pertains to doing something, usually leisure, to demonstrate social status, or those leisure activities that are being motivated by social factors. Conspicuous leisure and consumption are common symptoms in a society where social stratification exists. Moreover, conspicuous consumption is a form of conspicuous leisure. Vicarious leisure on the other hand refers to leisure or any form of activity executed by wives or servants that demonstrate the wealth or social status of their master. Vicarious consumption is a form of vicarious leisure. One example of this is when a butler wears a tuxedo. The tuxedo demonstrates the social status of the master and not the butler. These factors are actually parts of the theory of the Leisure Class by Veblen which explains the function of consumerism according to social classes. These factors affect macroeconomics because they dictate what forms and what volume of commodities and services people from different social stratum may avail. All of these consumption or leisure activities are performed to establish invidious distinction according to pecuniary strength, the demonstration of purchasing power, wealth, and the demonstration and even the basis of social status.
- What is the significance of Alienation in Marx’s 1844 manuscripts and why is it important in the reading of 1868’s Capital?
Marx is also a philosopher contrary to what most people believe that he is only an economist. According to his works, there are things that naturally belong or go together. The process wherein these two things that naturally go together become separated is called alienation. According to him, alienation disrupts the harmony that binds things any two or more things in a system. Alienation, apart from being a largely philosophical or even a religiously-related principle, can be applied in economics, particularly in a capitalist type of economy. According to Marx, workers are humans as humans; each human is bound to his humanity. A worker in a capitalist society is therefore vulnerable from alienation because he could only express labor, by working for a privately owned and for profit system of commodity production wherein each worker is being valued and treated as a money-making instrument and usually not as a person. This is why his works about Alienation is important in the reading of his works about Capitalism. In a capitalist society, the humanistic qualities of a worker and the worker himself, which according to Marx as a philosopher, are two naturally-occurring things that are bound to be together, get separated because of the for profit ideologies and objectives of capitalism. There are four types of Alienation according to Marx: alienation of the worker from the work or from the product of his labor, alienation of the worker from working, alienation of the worker from himself as a producer, and alienation of the worker from other workers. These different forms of alienation according to his works are very prevalent and are highly likely to develop and exist in a capitalist society.
- Keynes is often referenced as the father of the modern welfare state and was derided as a socialist by his contemporaries. How would Keynes respond to these allegations? Be sure to reference question 1 in your answer.
John Maynard Keynes is the person who introduced Keynesian economics and although he did not really yearn for an economic system that would demean the people’s rights, he is a firm believer of the importance of interventionism in maintaining and regulating a stable economy. In the 1930s, he countered the conventional ideas from neoclassical economics that suggest that free markets, including the ones in which capitalist markets exist, would eventually and automatically be able to provide full employment provided that workers would be flexible in their demands for employee benefits and wages. For Keynes, this idea of future infinity is unrealistic. He instead argued that the demand for goods and services determined the overall level of economic activity in a country and that inadequate demand for such could lead to periods of unemployment, as opposed to the neoclassical economic ideas that still flourished during his time. This is consistent with one of the most famous ideas in Keynesian economics that state that state intervention or interventionism is a necessary tool to moderate the often uncontrollable economic boom and bust cycles. So if ever he will be branded as a socialist by modern day people, then the author of this paper believes that Keynes would agree on the idea of being called a socialist because he was a firm believer of interventionism. He believed that productive resources in key industries such as mining and farming would perform much more effectively and would benefit the country’s economy more if the government has the capability to intervene in its operations; that the government should have a say in the planning process of developing or changing something within the economy; that the government should have the power to redistribute income whenever and or wherever necessary; and that all of these things should be done gradually—the power of the government over things, and peacefully as opposed to what communist governments usually—they usually do not care whether changes in government political and economic policies would be done gradually or peacefully.
- Compare and contrast the Malthusian and Ricardo’s positions on the Corn Laws. Specifically, how does Malthus’ position relate to his theory of Gluts and the Essay on population?
The Corn Laws are sets of economic and trade laws that the government designed to protect the producers of cereals operating in the United Kingdom of Great Britain as well as the state of Ireland against the harmful business effects of the high level of competition from less expensive foreign importers of cereal between the years 1815 and 1846. To maximize the effects of the corn laws, the governments involved introduced steep tax duties for all cereal import products, which made it impossible for importers to find importing cereal into the involved countries conducive, regardless whether the demand is alarmingly high—such as in the cases of famine, or otherwise.
Thomas Malthus believed that it would be risky for Britain to rely on foreign imports of corn despite their significantly lower prices because it would later on lead to decreased wages for laborers and poor profits and thus purchasing power of land owners—those who rent out lands, and farmers. Malthusianism suggests that unchecked growth in population is exponential while the theoretical growth of food supply is sequential or arithmetical. With this, it can be asserted that unchecked population growth, when really unchecked, can easily outpace the growth in food supply, which would eventually lead to a shortage of food supply. The restriction of foreign grown corns can further hinder the limitation on food supply growth brought by its being arithmetical—food supply generally grows slower compared to the demand which is directly influenced by growth of population.
Ricardo’s position about the Corn Laws on the other hand was fueled by his idea that Britain, once the price and supply of cereal and other related products have already been stabilized, could use its population and available capital to have a comparative advantage over other cereal importers. He may have hoped that after helping the local cereal farmers and land owners get up on their own feet and making sure that they could really do, Britain may be a specialized cereal exporter, considering that his most important legacy was the theory of comparative advantage.
- How does the increasing level of abstraction through the history of economic theory reflect upon the subjective priorities of those theories even in the presence of objectivity claims by its practitioners?
Economics is a field that can be influenced by both subjective and objective factors. In the same manner, a lot of things within the scope of economics can also be determined using objective and subjective means. The increasing level of abstraction through the history of economic theory has two parts: the subjective and the objective part. Determining the objective part using subjective means would most likely be impossible and the same is actually true when we want to review the subjective parts using objective means. There have been a lot of theories developed by philosophers and economists throughout the history of economics and while not all of the theories that have been developed are valid and applicable in the current era of economics, some of these theories formed the building blocks of the term economy that we know of today. Some aspects of the theories may actually be associated with the personal ideologies of the one who developed it. Marxism for example—which was developed by Karl Marx, can be seen as an economic system that portrays the ideal economic system that Marx wanted to be a part of. The same can actually be true about other economic theories.
Hunt, E. K. History of Economic Thought: A Critical Perspective. ME Sharpe Inc. 2011.