Competing Schools of Economic Thought by Lefteris Tsoulfidis

By Lefteris Tsoulfidis

The maximum works of economists have the aptitude to supply insights on present financial advancements and coverage demanding situations lengthy once they are written. This ebook seeks to enquire the evolution of the center principles and coverage options of the main colleges of financial proposal, and to give and seriously overview these theories that experience survived over the years and will tell us approximately present advancements and financial regulations. The theories of significant economists are provided and used to advertise an realizing of the underlying mechanisms of the economic climate and to handle modern difficulties and matters. furthermore, the publication explores the attention-grabbing dynamics of transferring from one university of monetary concept to a different. each one bankruptcy concludes with a precis, serious feedback, a collection of questions for mirrored image and dialogue, and proposals for additional reading.

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44). On closer examination, however, we discover that such curves have no place in Smith’s analysis. The reason is that every point on a demand curve represents a possible equilibrium, which is equivalent to saying that each point on an ordinary demand curve corresponds to a natural price. The price that finally prevails in the market is the one that is determined by the intersection of demand and supply curves. 9 The mechanism through which market prices orbit around natural prices can be depicted in terms of the following illustration: As it is shown in Fig.

375, Vol. I) Consequently, the rising capital stock leads to a rising capital–output ratio which is the principal cause for the falling rate of profit. The intensification of competition will be the result of a situation where capitals cannot be used in a profitable manner anymore. In other words, the stagnation of profits will be the result of overaccumulation, a point of view very close to Marx’s (see Chap. 5). In the stationary state, one would expect that the low rate of profit is accompanied by high wages, but this is not the case, because on Smith’s claims, both the rate of profit and wage are low: In a country which had acquired that full complement of riches which the nature of its soil and climate, and its situation with respect to other countries, allowed it to acquire; which could, therefore, advance no further, and which was not going backwards, both the wages of labour and the profits of stock would probably be very low.

417). Although Smith was writing during the industrial evolution, there is no evidence that he was aware of the tremendous changes that were taking place and which, in a short period of time, would transform economic life completely. 11 34 3 Adam Smith’s Wealth of Nations Physiocrats believed that market forces were weak and that state intervention was necessary to make the economy work according to natural law. By contrast, Smith believed that the market mechanism is powerful enough to cope with any obstacles that were caused by feudalistic relics.

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