Over the centuries, as the world was slowly changing so was economics. As natural disasters, wars, and diseases occurred in Europe during and after the Middle Ages, people were forced to interact with different peoples and populations were greatly affected. This caused the economy to evolve and develop from a mainly agricultural one into the complex economy we know it as today. The concept of economics however was never really explained till economists such as Adam Smith, Richard Cantillon, and Karl Marx began to shed more light and depth on its idea, developing and pioneering theories on economics. Economics at the beginning of the Middle Ages revolved around the feudal system, a system that depended on the hierarchy of society to work effectively.
“And thus came in the use of money, some lasting thing that men might keep without spoiling, and that by mutual consent men would take in exchange for the truly useful, but perishable supports of life” (S.V.47). Because money (which Locke sometimes substitutes with gold, diamonds, or silver), does not spoil, one can acquire an unlimited amount of wealth, therefore breaking the Law of Nature. Unlike the way that excess apples rot, no matter how much money one possesses, there is no way for it to go bad. It will generally have as much use today as it will tomorrow. This leads to the situation of wealth inequality, where some people possess a lot of money while others have very little.
His book titled “The General Theory of Employment Interest and Money” was published in 1936 i.e. during the Great Depression and became the basis of modern macroeconomics. Keynes supports government intervention during economic turmoil in the capitalist economy. Keynes believed that it was the role of the state to build a bridge between the economy’s potential and its actual output during any financial crisis. His book “General Theory” was written during the period of great depression and was mainly the product of his prolonged study of unemployment in Britain.
The Bullionist Controversy: Origins of Monetary Economics Developments Amanda A. Wirinhayu (1A122G20) Waseda University History of Macroeconomics Prof. Norikazu Takami November 5, 2014 In 1797, rumors of France invasion provoked bank runs that forced the Bank of England to suspend its convertibility of bank notes to gold. It marked a watershed in the history of monetary economics as the subsequent events constituted the foundation of monetary thought developments. The debates during the suspension of convertibility until 1821 revolved around what is now called the Bullionist controversy, which initially focused on the problems of monetary management under a flexible exchange rate and roused further arguments that represented a significant contribution to economic analysis about the goals of monetary policies and the quest to discover the optimal level of freedom or limitation in banking practices to ensure economic stability. At the start of the Bullionist
Freakonomics establishes this unconventional premise: If morality represents how we would like the world to work, then economics represents how it actually does work. In the first chapter, the question "What do schoolteachers and sumo wrestlers have in common?” is answered, in which, Levitt segues into an in-depth discussion of incentives. He defines them as the way people get what they want or need, especially when other people want or need the same thing. We learn to respond to incentives from a young age, such as rewards for studying hard and getting good grades, and punishments for bad behaviour. The point that I liked in this chapter was that if the economy were allowed to work untouched, then
This added value is understood through the labor needed to produce the resource or good, which increases the value of the item above its original cost. Karl Marx also believed that individual workers and their productivity is what really determined the value of consumer goods or services. The amount of labor used to produce a good or service. Marx believed that profit could be accumulated in the economy. The concept of surplus value used by Karl Marx declared that workers not only create economic value through the wages paid to them but also through the more value of transforming economic resources into valuable products.
LM CURVE Background: John Maynard Keynes published Keynes’s General Theory which is also known as The General Theory of Employment, Interest and Money in February 1936. Soon after the publication, J.R. Hicks published an article that attempted to integrate the insights he felt were useful in the General Theory and proposed his IS-LM curves model based on his studies on Keynes’s General Theory. The IS-LM Model: IS stands for investment to savings and LM stands for the liquidity preference to money supply. The simplest version of the IS-LM model describes the macroeconomy using two relationships involving output and the interest rate. The model is presented as a graph of two intersecting lines.
There will be better allocation of resources as demand and supply will automatically adjust to equilibrium based on individual’s interest and utility. This way, the society is better off and this concept is now a well-known concept accepted by Economists. This theory transit from personal knowledge to share knowledge, which verify that personal knowledge have the ability to shape shared knowledge. Before Adam Smith’s theory of invisible hand, the discipline of economics didn’t even exist. Thus without his personal knowledge, I will not be able to learn about the theory of invisible hand in Economics lessons.
The Ascent of Money by Niall Ferguson In “The Ascent of Money”, Niall Ferguson tries to elaborate various aspects of finance that have been documented throughout the history. He outlines the various names that people use while referring to money, and how this does not affect the role that it plays. There is an evaluation of how different people in the society tend to view money based on their circumstances or experiences. A favorable example is how Christians view money as the root of all evil. It is also the chains of labor to the revolutionaries and sinews of war to the generals.
The Invention of Money There are a lot of inventions in the world, but one invention stands above them all. That has become the obsession of the modern world, this invention is Money. Money was not just an invention, it was a mental revolution. Money created a system of trust and elaborate a tie that binds us all together. It connected the world by sending merchants across continents in the search of the far off ridges.