ILRLE 3440 Lecture Notes - Lecture 10: Bernard Mandeville, Mercantilism, Conspicuous Consumption
8 May 2018
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1 March 2018
ECON 3300 - Lecture 10!
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Bernard Mandeville (1670-1773)!
Born in Rotterdam but lived most of his life in Britain!•
Believed that Christian virtues are detrimental to economic growth!•
Societies of this sort will fall into apathy!◦
That consumers should have high demand, the constant want of more drives economic growth •
and invention!
!
Adam Smith (1723-1790)!
Wrote Theory of Moral Sentiments and Wealth of Nations •
He was a professor of moral philosophy !•
In the Theory of Moral Sentiments he first used the notion of the invisible hand!•
In 1764 Adam Smith is hired by Duke to take his son around Europe and tutor him!•
After this, living on pension, he starts writing the Wealth of Nations •
The four aspects of Adam Smith’s theory are!
Law of markets!1.
Division of labor!2.
Theory of value!3.
Theory of distribution !4.
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Law of Markets!
Believed that society works best when left to itself, not when it is controlled by government!•
Self interest acts to guide men to do the activities society is willing to pay for, increasing •
individual welfare and the welfare of society!
When men work for their own interests they work for the good of society as well, without ◦
even knowing it most of the time!
However, the pursuit of self interest is not unrestrained because as people pursue their self •
interests simultaneously this creates competition, which leads to the effective allocation of goods
and services !
This competition keeps prices at market value and regulates how much of each commodity is •
produced, ensuring that goods in more demand are produced more than goods in less demand!
This is facilitated by effective institutions that allows for free trade and perfect competition !•
!
Division of Labour!
Adam Smith argued that the division of labour increased productivity!•
Specialisation within firms!◦
His classic pin factory example comes to mind!‣
To make a pin took 18 different tasks!‣
When one worker did all tasks he could make 20 pins a day!‣
If you have each worker do one or two tasks 10 workers could produce 48000 a day!‣
Why?!◦
Under the original system you had to learn all the operations, but the new system ‣
allowed workers to become dexterous at their tasks!
Reduces inefficiency from having to shift from one task to another!‣
When people only have to do one or two things that start to come up with ways to do ‣
those tasks better!
!
!
Document Summary
Wrote theory of moral sentiments and wealth of nations. In the theory of moral sentiments he rst used the notion of the invisible hand. In 1764 adam smith is hired by duke to take his son around europe and tutor him. After this, living on pension, he starts writing the wealth of nations. The four aspects of adam smith"s theory are. Born in rotterdam but lived most of his life in britain. Believed that christian virtues are detrimental to economic growth. Societies of this sort will fall into apathy. That consumers should have high demand, the constant want of more drives economic growth and invention. Believed that society works best when left to itself, not when it is controlled by government. Self interest acts to guide men to do the activities society is willing to pay for, increasing individual welfare and the welfare of society.
