The History of Economics

Date: 2015-10-07; view: 540.

The word “economics” is derived from “oikonomokos”, which means skilled in household management. Although the word is very old, the discipline of economics as we understand it today is a relatively recent development. Modern economic thought emerged in the 17-th and 18-th centuries as the western world began its transformation from an agrarian to an industrial society.

The classical school of economic theory began with the publication in 1776 of Adam Smith's monumental work “The Wealth of Nations”. Adam Smith formulated economics as a science and started the doctrine of free business. He stated economic laws which explained the work of the free market. According to his philosophy, the major principles of economic liberalism or freedom were free trade, self-interest, private property, nongovernment intervention, and competition. Individuals were free to seek their own occupations, were free to enter any business. Self-interest was the motivating force of the economy. For example, to increase economic welfare, an individual decided to produce goods and sell them for a profit. But he automatically benefited the community as well, because he had purchased raw materials, provided employment, and supplied goods or services.

The principles and doctrines of classical economics were developed over many years by various economists and certain basic assumptions were accepted as the foundation of economic analysis. Thus, Jean Baptiste Say, a French economist, developed the theory that demand is affected by supply. This is often referred to as Say's law.

Karl Marx was the founder of scientific communism. Marx saw capitalism as an evolutionary phase in economic development. He believed that capitalism would ultimately destroy itself and be succeeded by a world without private property. He stated that the market system allows capitalists, the owners of means of production, to exploit workers and deny them a fair share of what they produce. He predicted movement of society toward communism, in which the workers own the means of production and thus have no need to exploit labor for profit.

Another famous economist was John Maynard Keynes. In 1936 John M.Keynes broke from the classical tradition with the publication of “General Theory of Employment, Interest, and Money”. This British economist was primarily responsible for the early development of the income-expenditure analysis of the economy. Subsequently many others improved and expanded the original Keynesian presentation, and it has developed into an excellent tool of economic analysis. Modern monetary, fiscal, and psychological policies are difficult to understand without the knowledge of the principles of the income-expenditure analysis. These principles have been widely accepted. It was Keynes who insisted on government intervention in the economy. Keynes arguments proved the modern rationale for the use of government spending and taxing to stabilize economy.

Despite the great differences between the past and the present, the basic economic problems which society faces remain the same: what to produce, how much to produce, and what method to use in allocating goods and services. These basic problems are common to all societies no matter what level of economic development they have reached. Economists have been trying to find the right answers for many years. A new school of ideas emerges as changes in the economy give fresh understanding and make existing doctrines obsolete.

Ex.8. Form adjectives and adverbs of the following words and give their Russian equivalents. Follow the models:

Model 1 Noun +” -ic “ - adjective