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Adding Value

John Kay

in The Business of Economics

This chapter describes financial relationships between competitive advantage, economic rent, added value, and various other measures of firm performance.

Progress and Poverty: Malthus and Ricardo in America

Christopher W. Calvo

in The Emergence of Capitalism in Early America

This chapter further illustrates the split between American and British liberal political economy by analyzing the antebellum treatment of Thomas Malthus and David Ricardo. Important distinctions are ... More

This chapter further illustrates the split between American and British liberal political economy by analyzing the antebellum treatment of Thomas Malthus and David Ricardo. Important distinctions are shown between American liberals on population, and theories of rent and wages. American exceptionalism was the primary intellectual impetus behind liberal America’s apostasy from British classicism. This chapter showcases the various forms of laissez-faire ideology that circulated in the domestic discourse, with special attention paid to, among others, J. D. B. De Bow, George Tucker, Henry Vethake, Jacob Cardozo, and Thomas Dew. American exceptionalism, combined with the influence of regional social, political, economic and cultural attitudes, shaped Americans’ understanding of British liberalism.Less

The Changing Visions of Economics

Debra Satz

in Why Some Things Should Not Be for Sale: The Moral Limits of Markets

The view of the market as a homogeneous mechanism operating across different types of exchanges is distinctly modern. The classical political economists. especially Adam Smith, David Ricardo, and ... More

The view of the market as a homogeneous mechanism operating across different types of exchanges is distinctly modern. The classical political economists. especially Adam Smith, David Ricardo, and Karl Marx, held a very different view of markets and of their place within society. Our modern understanding of markets in terms of their formal properties and our ability to build tractable models far surpasses those of the classical political economists. This chapter focuses on these earlier thinkers’ larger overall vision and its contrast with that contemporary view. This alternative vision had far reaching implications for their views of the nature and limits of markets and the justice [or injustice] of many market transactionsLess

Classical Political Economy in Its Heyday

Margaret Schabas

in The Natural Origins of Economics

This chapter examines the works of several English economists and shows how their theories about political economy are indebted to natural philosophy. These include the works of David Ricardo, Thomas ... More

This chapter examines the works of several English economists and shows how their theories about political economy are indebted to natural philosophy. These include the works of David Ricardo, Thomas Robert Malthus, Nassau Senior and John Ramsey McCulloch. This chapter argues that there was a gradual shift toward the role of human institutions as the point of origin for economic phenomena and that commitment to providing a detailed account of human nature and of wealth as a natural phenomena had waned considerably.Less

Structural Change and Fiscal Crisis

Michael Veseth

in Mountains of Debt: Crisis and Change in Renaissance Florence, Postwar Britain, and Postwar America

This chapter presents basic ideas concerning structural change and fiscal crisis in the long view. It discusses the causes of major structural economic change and its likely impact on social ... More

This chapter presents basic ideas concerning structural change and fiscal crisis in the long view. It discusses the causes of major structural economic change and its likely impact on social institutions, including the institutions of government. It examines the nature of structural change and the relationship between structural change and fiscal crisis. It also looks at three case studies of structural change and fiscal crisis. By examining the specific problems and policies of Renaissance Florence and Victorian Britain, it becomes possible to better understand how the forces of change affect government, society, and the economy. David Ricardo's famous law of comparative advantage provides one of the oldest discussions of the problem of structural change. Ernst Engel, the nineteenth-century German statistician, showed that economic growth, even in a closed economy, also produces structural change.Less

Higher Education Is a Service

Robert B. Archibald and David H. Feldman

in Why Does College Cost So Much?

The path that most service prices follow over time differs systematically from the evolution of goods prices over time. As far back as David Ricardo's work in the early 19th century, economists have ... More

The path that most service prices follow over time differs systematically from the evolution of goods prices over time. As far back as David Ricardo's work in the early 19th century, economists have known that slow labor productivity growth in services compared to goods could provide an explanation. In the 1960s, the work of William Baumol and William Bowen on prices in the performing arts explained this process and gave it the name it typically goes by—cost disease. This chapter explains cost disease and how it affects colleges and universities. The chapter then uses cost disease to make sense of the price data for the wide variety of industries presented in the previous chapter.Less

Refinement, Affirmation—and the Seeds of Revolt

John Kenneth Galbraith

in Economics in Perspective: A Critical History

This chapter examines how economists in the established tradition amended and sharpened Adam Smith's conclusions, struggled to resolve his ambiguities, and sought otherwise to complete his system. In ... More

This chapter examines how economists in the established tradition amended and sharpened Adam Smith's conclusions, struggled to resolve his ambiguities, and sought otherwise to complete his system. In the years following Smith's death, three key figures emerged to refine and extend his work: Jean Baptiste Say, Thomas Robert Malthus, and David Ricardo. Improving on Smith, all three men sought to bring economics in step with the Industrial Revolution. With them came the economics of the industrial order. The chapter first considers the concept of Say's Law and Say's views on subjects such as borrowing, capitalism, distribution, production, profit, and purchasing power before discussing the ideas of Malthus and Ricardo regarding capitalism, competition, prices, value, stock market, employment, production, and poverty.Less

The Problem of the Poor

in Friends of the Unrighteous Mammon: Northern Christians and Market Capitalism, 1815-1860

Antebellum Christians had many reasons to be skeptical of the modernizing economy and the new so-called science that was meant to explain it. Some feared that political economy might have atheistic ... More

Antebellum Christians had many reasons to be skeptical of the modernizing economy and the new so-called science that was meant to explain it. Some feared that political economy might have atheistic origins and that in the business world it sanctioned amoral behavior at best and immoral behavior at worst. Other critics claimed that the modernizing economy was creating more rigid social classes, and that the growing disparity in wealth injured not only the poor, but also the health of the larger society. Instead of raising all boats, market capitalism might end up lowering them all, violently. Many could agree that free trade and the division of labor had led to some good ends—greater individual and national wealth, for example—but was this good fruit only for a privileged few and perhaps even at the expense of the many? Political economists in Great Britain had been writing about these class concerns for decades, but unfortunately ideas such as David Ricardo's iron law of wages and Thomas Malthus's prediction of working-class starvation were never endearing.Less

The Case for Free Trade: Old Theories, New Evidence

Douglas A. Irwin

in Free Trade under Fire: Fifth Edition

This chapter examines the economic logic of free trade and recent empirical evidence reinforcing the case for it. It mentions Adam Smith and David Ricardo who have described the gains from trade in a ... More

This chapter examines the economic logic of free trade and recent empirical evidence reinforcing the case for it. It mentions Adam Smith and David Ricardo who have described the gains from trade in a systematic way many centuries that made economists of today urge for higher income that results from improved resource allocation as the main advantage of trade. It also explains how trade not only helps to improve the allocation of existing resources but also makes those resources more productive. The chapter talks about the productivity gains from trade that are sometimes neglected but appear to be substantial. It also points out the importance of welfare benefits of a greater variety of products that resulted from trade.Less

The Great Classical Tradition, 1: Around the Margins

John Kenneth Galbraith

in Economics in Perspective: A Critical History

This chapter examines the classical tradition in economics that emerged after the death of David Ricardo. Following Ricardo's death, there was some systemic dissent, mainly from French, German, and ... More

This chapter examines the classical tradition in economics that emerged after the death of David Ricardo. Following Ricardo's death, there was some systemic dissent, mainly from French, German, and American scholars, against the great truths emanating from the British economic scene. In addition, there were changes and refinements in the theory of prices and distribution—in how prices, wages, interest, rents and profits are determined. The chapter considers the influential criticism of the founding fathers of the classical system by American, German, and French economists and their claim that the classical system may have been too conveniently British. These economists included Adam Müller and Georg Friedrich List from Germany, Jean Charles Léonard de Sismondi and Pierre Joseph Proudhon from France, and Henry Charles Carey from the United States.Less

VALUE IN CLASSICAL ECONOMICS

Patrick L. Anderson

in The Economics of Business Valuation: Towards a Value Functional Approach

The author begins a review of 10 different theories of value with this chapter on classical economic thought. The labor theory of value dates as least as far back as Adam Smith and the 18th century, ... More

The author begins a review of 10 different theories of value with this chapter on classical economic thought. The labor theory of value dates as least as far back as Adam Smith and the 18th century, and may have independently been articulated by the Indian sage Kautilya in the 3rd century BC. The author observes that the labor theory fails to explain the actual determination of prices in a market economy, but still provides valuable insight into human behavior in the modern economy.Less

Reading ‘Trade’ in The Wealth of Nations

Keith Tribe

in The Economy of the Word: Language, History, and Economics

International trade was clearly linked to the ‘wealth of a nation’ in the eighteenth century, but since modern trade theory is thought to begin with Ricardo, it is assumed that eighteenth-century ... More

International trade was clearly linked to the ‘wealth of a nation’ in the eighteenth century, but since modern trade theory is thought to begin with Ricardo, it is assumed that eighteenth-century theories are ‘pre-modern’. Instead of applying modern theory to eighteenth-century arguments, this chapter presents a reading of Adam Smith’s Wealth of Nations that simply examines the way Smith writes about international trade, and in this way reveals that Wealth of Nations is a much more tightly organised book than hitherto thought.Less

The bank

John Kenneth Galbraith and James K. Galbraith

in Money: Whence It Came, Where It Went

This chapter discusses the history of central banks, with emphasis on the case of the Bank of England. For a long time after John Law, Frenchmen remained deeply suspicious of banks and bank notes, of ... More

This chapter discusses the history of central banks, with emphasis on the case of the Bank of England. For a long time after John Law, Frenchmen remained deeply suspicious of banks and bank notes, of any money that was not made of metal. The chapter considers the reforms that occurred in the banking industry, led by the Bank of England, which gradually emerged as the guardian of the money supply as well as of the financial concerns of the government of England during the period 1720–1780. It also examines the 1811 debate on the nature of money and its management, focusing on David Ricardo's arguments about money in relation to the gold standard. Finally, it looks at the Bank of England's role in introducing the use the two historic instruments of central bank policy: open-market operations and the bank rate.Less

The Problem of the Human Sciences

Stephen Gaukroger

in Civilization and the Culture of Science: Science and the Shaping of Modernity, 1795-1935

In the nineteenth century there arose claims to scientific standing that were highly contested, and provoked a new kind of metascientific enquiry. The accreditation and ranking of disciplines were ... More

In the nineteenth century there arose claims to scientific standing that were highly contested, and provoked a new kind of metascientific enquiry. The accreditation and ranking of disciplines were rationalized in terms of the internal structure of science, but they were predominantly extra-scientific in origin, and were more than anything else an elaborate exercise in legitimation. The issues centred on accounts of human behaviour that had traditionally been the preserve of religious and metaphysical teaching. These included ethics, where efforts were now afoot to put it on a scientific standing, as well as areas that had the character of a loose combination of moral, political, and economic views which could now be claimed to have been put on a scientific footing. The dispute between Whewell and Mill on the scientific standing of the new disciplines became transformed into a philosophical project of understanding the nature of science.Less

Modeling the Dynamics of Urban Growth

in Ancient Mesopotamia at the Dawn of Civilization: The Evolution of an Urban Landscape

This chapter examines models of modern urban growth. It looks back at the ideas proposed by economist David Ricardo almost two centuries ago about the importance of trade for economic development and ... More

This chapter examines models of modern urban growth. It looks back at the ideas proposed by economist David Ricardo almost two centuries ago about the importance of trade for economic development and the role of comparative advantage between regions as a spur to trade. It also considers the ideas of Jane Jacobs on how trade spurs and sustains settlement growth; the work of Paul Krugman and other adherents of the self-styled “new economic geography” explaining how unequal gains from trade structure differentially complex urban systems; and the work of Gunnar Myrdal explaining the mechanisms that allow systems of cities to expand, once created, and thus become the primary motor of development in the regions they occupy. Their views, when combined, provide an explicitly evolutionary perspective on the origins and development of cities that adds much to the analytical schema that have characterized the study of early Near Eastern urban origins thus far, which, as noted in Chapter 2, are largely descriptive in nature and devoid of a historical dimension.Less

The Ideas Behind the Making of Welfare Institutions

in Measuring Up: A History of Living Standards in Mexico, 1850-1950

This chapter analyzes the ideas that influence the concepts and policies on welfare, poverty, and charity in Mexico. It discusses the views of poverty alleviation by three classical economics, ... More

This chapter analyzes the ideas that influence the concepts and policies on welfare, poverty, and charity in Mexico. It discusses the views of poverty alleviation by three classical economics, including Adam Smith, David Ricardo, and Thomas Malthus. It argues that the design of welfare institutions in Mexico were shaped by social and political events and by ideas on welfare in the West as they were understood by Mexican intellectuals.Less