Theme 1.1 - Economic Thinkers Flashcards
Name the 3 significant economic thinkers and the economy that they believed in
Adam Smith - Free Market
Karl Marx - Command
Friederich Hayek - Free Market
What did Adam Smith produce?
Book
‘The Wealth of Nations’
What did Smith believe in?
The Invisible Hand
What would the Invisible Hand supposedly do?
Allocate resources in societies best interest
Demand balances out competition
What does the Invisible Hand believe consumers and producers are motivated to maximise?
Consumers: Their own benefit
Producers: Their own profit
What does the Invisible Hand lead to?
Choice for consumers
Lower prices
Factors of production being allocated appropriately
Therefore, what did Smith believe will happen in a free market?
Supply and demand will lead to prices that satisfy both the consumer and producer
What did Smith believe about capitalism?
Highly efficient
Everything determined by competition vs self interest
Ultimately benefits community
What did Smith believe in with regards to labour?
Division of labour
Specialisation
What form of economy did Marx believe in?
Command
For what did Marx believe that an economy should exist?
Benefit of workforce
What was Marx’s first criticism of the free market?
Owners will take desires for profits too far
Owners want output at lowest possible cost, and will pay workers bare minimum
Bourgeoise will exploit proletariat
What was Marx’s second criticism of the free market?
Specialisation will lead to boredom
Loss in creativity + rising dissatisfaction
Workers will go on to realise that they’re being exploited
What was Marx’s third criticism of the free market?
Overproduction Underconsumption
Explain overproduction
Owners assume all produce will sell
Driven by perceived profit
Demand greater efficiency
