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Lecture 2

Political Science 2j03 Week 1 Lecture 2.docx

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Political Science
Course Code
Richard Mc Master

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Political Science 2j03 Week 1 Lecture 2  Varieties of liberalism o Classical o Neoclassical o Embedded o Neoliberalism  Classical Liberalism o Adam smith – founder of classical liberalism  Moral philosophy  1723-90  An inquiry into the wealth of nations  Late 18 century = time of revolutionary change  1776 – year of US independence  Decade later = French revolution  US revolution influenced by taxes  Time of bankrupt empires (therefore they tax everything) (ex. British)  Invisible hand of the market place  Market allocates resources in an efficient way  Efficiency = morally good  Market not to be controlled or manipulated by a monarch (ex. king john the third)  Sellers and buyers can negotiate values amongst themselves = greater freedom of society  Determining exchange values: o “In use” vs in exchange  In use = something that has intrinsic value; instrumental for human society; water  In exchange = high desirability; high exchange rate; diamonds o Labor theory of value  Products that have greater labor input (more ppl more time) will necessarily allow for this product to have a larger value (intrinsic value of labor) o Natural price for goods and services  Equilibrium  Distribution o Classes 3 types (Ricardo)  Capitalist  Profit  Workers  Wages  Landowners  Rent  Ability of landowners to extract rent will compromise ability of capitalist to gain profit and in turn the workers to receive a wage  Malthusian Trap  Worried about workers to improve their wages to actually change their wages and quality of life  If wages can go up, capitalist makes more and workers get paid more  This changes lifestyles of workers (larger families; healthcare; longer lifespan) what will emerge is a reserve army of labor entering the workforce  Capitalist therefore cannot sustain this amount; competition for wages and therefore wages will be pulled down  Growth  Division of labor o Specialized tasks – labor force specialize in its operation focusing on one aspect and this will act as a virtuous cycle of efficiency o Virtuous cycle  Produce more on a cheaper level and these capitalist can use their profits to reinvest into the industry o Assumption that wealth has little intrinsic value on its own, point not to gain profit but to reinvest in industry so it is a virtuous cycle  Expansion of trade (international aspect) o Comparative advantage – (chapter four example) (focus on steel because their comparative advantage was greater)  Not only good for your own country but good for others because they can expand their trade by focusing on their commodity; even if they cant do better than their countries  By allowing another country to sell their products they will have more money to buy your products o ^ Creates a positive sums game o Relative costs  Capital accumulations o Says law - supply creates its own demand; a virtuous cycle of greater productivity allows greater investment allows for greater availability of stuff to be traded both domestically and internationally. This is all GOOD o ^ Is this true?  Comparative Advantage o 1815 corn laws  Restricted food imports in Great Britain  ^ Allows domestic (British) production of corn to sell to domestic (British) markets  ^ Made capitalist pay their workers more money  Made capitalist decrease wages because corn was cheaper  Caused higher food costs for British workers and limited British exports o Another Side to Classical Liberalism  Poor law amendment – 1834  Allow maintenance and construction of poor houses  Encourage more populous into factories  Made poor houses much worse than the worse of the factories  3 Institutions of British  1) Free Trade - British underwent industrial revolution first (along with Dutch) therefore they were willing to have trade relations within empire and other countries this is possible due to second institution – the gold standard.  2) G
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