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Smith and Keynes.docx

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York University
Social Science
SOSC 1000
Terry Conlin

Smith and Keynes • Heilbroner says capitalism is a “ insatiable ,dynamic, disembedded, two edged sword” - Insatiable: Humans always want more and more and no matter how well we are off there is never more than enough- never satisfied, life is about accumulation. - Dynamic: capitalism is all about change - Disembedded: for the first time in history the economy becomes disembedded from society and it takes on a life of its own- Heilbroner tries to convince us that there was no economics - Two edged sword: capitalism simultaneously produces wealth and the goods like nothing we have seen before. Produces wealth and misery simultaneously. - He refers to Locke as possessive individualism - Karl Marx: “under capitalism all that is solid melts into air all the is holy is profaned” - Keynes referred to economics as the dismal science  For Aristotle economic life is void of nobility  Unnatural acquisition: for profit, usury is a sin; lending money without interest is a sin. Sin is natural  In feudal society the economy was embedded in society, it was limited, it was local it was regulated.  Liberal ideology challenged these ideas.  Mercantilism is tth target that Adam smith is aiming at- he disliked it. - In the 19 century it is under attack - It wasn’t until mid-19 century that Adam smiths ideas can be seen as legit - Labour markets were still heavily used - Jobs were regulated by guilds - Economic activity was dictated under the alliance- all about enriching the centre - There is a debate: who should government be aligned with - The Wealth of Nations: - Adam smith advocates a market society as the best way to maximize the wealth of nations while at the same time limiting the cohersive power of society. - Governments should not intervene in the market place - Businesses should be permitted to fail - Responsibility of governments to create and economic frame work - Result: Society of perfect economic ( laissez faire) If.… a) Incomes: must be a relatively equal distribution of income among society b) Labour: must be free, it is mobile c) Investment: the economy will always return to equilibrium if the investment cycle is self- regulating. d) Competition: must be a significant amount of this in an economy. A free market economy must have this or else it will not function. Must be sure there is free and fair competition = Laissez Faire Business Cycle GDP: C+INVESTMENT+GOVERNMENT SPENDING+(EXPORTS-IMPORTS)= AGGREGATE DEMAND C+I+G+(X-I)-AG Smith Keynes Supply: most important in terms of De
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