Home Exam During the Long Development of Term Paper

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Home Exam

During the long development of economic science, many doctrines appeared which very often explained economic processes and connections in different ways. This created basis for development of different economic systems. Crisis of one economic system demands the thorough study of its' qualitative and quantitative parameters to effectively implement this experience in the future. That is why time-proven theories and models of economic development are looked from different angles at different points of times. In this essay I shall try to discuss the relevance of the views of major economics thinkers and criticism that might occur.

Adam Smith himself would be probably surprised, if in his time he would be called an economist: in the era of Enlightenment intellectuals, as it is known, always had very wide scientific interests and encyclopaedical knowledge with philosophy as the base for it. His research was possible only thanks to the sociological-political and economical changes that were happening in Europe in the 18th century and were connected with the development of market production and exchange relationships. Some of Smith's ideas are very relevant to our time. For example, his idea of labour division was one of the progressive circumstances after domestic boundaries were eliminated, which led to automatic increase in the commodity market and the ability to increase the volume of production. Right now we see immense movements of production to the countries where production is more efficient technically or economically. Smith was also developing the idea of economic freedom, laissez faire and supported the view that different restrictions are in the way of natural and most efficient capital flows. The main economic principle now is to provide as much freedom to the markets as possible so that the natural market forces bring the markets into equilibrium. Smith was the first to try to find laws of production within the goods exchange, prices movements and money circulation; to separate and even contradict the use and exchange values, cost and price. He considered labour the main substance of the cost, and it is still so in our days, when labour costs are the biggest in the overall cost of the products. He developed the concepts of fixed and operational capital, profit, wage and rent.

One of the most accurate Smith's ideas is the relationship of government and monopolies, relationship to principles of laissez faire and policy of mercantilism. One of the basic ideas discussed in Smith's "An Inquiry into the Nature and Causes of the Wealth of Nations" is the development of such a society where a person trying to satisfy own interest will inevitably take care about well-being and satisfaction of interests of the whole society. So, the relevance of Smith's ideas is based on the development of economic theory, especially, the problems of monopolistic and governmental subsidies and the probability of centralized economic planning. Smith supports the thesis that the country which really takes care of increasing own wealth must create such laws that would provide conditions for maximal economic freedom for every person and any producer. It is the personal interest that must inspire the person's participation in exchange relations and thus promote the overall progress of market relations.

A very bright and unique impact on economic science was made by the representative of the classical school of England Thomas Malthus. His work "Essay on the Principle of Population," published in 1798, made and still makes a very powerful influence on the readers so that there are still discussions about it going on. The diapason of comments on this work ranges from "genius prevision" till "antiscientific nonsense." His theory of laws affecting changes in population became so popular because he was the first to contradict the widely spread thesis that by the means of social reforms of humanity, the society can be perfected. He states that there is a contradiction between the reproduction instinct and the limited space useful for agriculture. Instincts make people multiply with geometrical progression, but the products necessary for living produced by agriculture, can be cultivated only with arithmetical progression. Thus, the reason for poverty is the faster increase in population than the wealth accumulation tempo. Any try to improve the life conditions by social reforms will be offset by the growing population. Thus, giving people ability to limitlessly multiply, nature through economic processes puts limits (moral, health, poverty, sins that lead to death rates increase) on humanity, which regulates the population growth. Nowadays his theory approves itself; when, for example, Chinese government must put limits on population growth in order to avoid poverty. Once having been nonsense, in the present time more and more scientists return to Malthus theory.

In the list of the greatest economists the name of David Ricardo (1772-1823) always stands together with Adam Smith. Having thoroughly studied Smiths works, it was Ricardo who was able to make the next step and turn economics into real science. Having become one of the richest men of England (his wealth accumulated to 1 million pounds, an enormous sum for that time), he devoted the last 13 years of his life to scientific research. Ricardo developed many branches of economic science, but especially he contributed a lot to international trade theory. He wrote just several pages on this topic, but they had so many ideas, that several generations of economists were trying to develop them. It was Ricardo who discovered the main force for international trade -- the principle of comparative advantages. He predicted, that trade based on this principle, will be mutually profitable for all the participants and will unite the civilized nations into a peaceful society. Today, when WTO, NAFTA and other international organization aimed at promoting free trade, have become the integral part of our reality, these predictions of Ricardo become true and change the overall appearance of the world. Free trade within regions is becoming more and more important to increase the wealth of the nations and to find the most efficient spots in the world for production of specific goods. Though globalization causes many discussions, it is inevitable and we can only try to make the best use of it.

J.B. Say is considered the follower of Smith, who accepted the principles of free markets, price formation, free domestic and foreign trade, not limiting free competitiveness of entrepreneurs, and no protectionism. He believed and tried to prove that if humanity adopted those principles, there would be no overproduction, underconsumption of society products, thus there would be no economic recessions. Why has his works become so popular and are still relevant today? Say pointed out to three main production factors: labour, capital, land. With the help of natural order, with no interfering, flexible prices and wages, there will be mutually beneficial exchange of the labour products of all the subjects in the markets. Say's law is against any external interfering into economy. All this can lead to gradual development of market economic relations on the base of scientific-technical development. The production then (supply) will create adequate consumption (demand), so production of goods and services will create profits to consume them. The importance of this law today is that almost all the countries are trying to follow these principles because flexible and free price formation in the market has proven to lead to almost instant reactions to the changes in the conjunction of the economy and will guarantee its' self-regulation.

Karl Marx, who considered himself the follower of Smith and Ricardo, was against Say's law and in his theory of public reproduction insisted that cyclical crises of overproduction were inevitable. Marx sees production, not ideas, as the principal human activity, while ideas are formed within the production process. Marx's main economic views are the following: mode of production (production forces and relations) forms social life, mode of production is created historically, all ideologies have social and political consequences and produce false consciousness, and ideas are usually a reflection of the economic base. The main features of Marxism include the unity of parties and science, revolutionism, humanity.

Marx is one of the most long-lived economists ever. He was reestimated, contradicted, he was buried thousands times, but he always fights when they are trying to send him to intellectual past. Whether it is good or bad, but his ideas have become the main part of the world mentality we all think with. Nobody is struggling for Smith' or Ricardo's ideas now, but the blood pressure still rises as soon as Marx becomes the research target. The criticism of Marx include the claims that he underestimated the problem of a person as individual, overestimated the class factor while analyzing its' essence and economics, was too absolute on the fight of the opposites in the development, absolute on the leaps -- explosions and he underestimated gradual leaps. But Marx created a system that included all the social sciences, and if we study only his economic theory, we are unfair to his philosophical, sociological and historical ideas. The twentieth century witnessed energetic fight aimed against grandiose…[continue]

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