Key Theory Flashcards
(15 cards)
David Ricardo (Classical Economist) [7]
Labour Theory of Value (direct and indirect)
Zero-rent land principle
International trade and comparative advantage (lower costs)
Convertibility (for price stability)
Ricardian Equivalence
Principle of Equal Profitability
Replacement of labour with machines
Thomas Robert Malthus (Classical Economist) [9]
Scientific Metholodology
Law of Population
Malthusian Trap
Checks on Population
Fostering institutions
Economic growth is a function of population growth, capital accumulation and effective demand.
Land productivity
Zero-sum game (distribution)
Agricultural Protectionism
Adam Smith (Classical Economist)
Division of Labour
Expanding markets and capital accumulation for economic growth
Self-interest and invisible hand
Labour theory of value
Natural vs Market Prices
Productive vs Unproductive labour
Free competition
Mercantilism (Pre-Classical Economy) [5]
Protectionism
Accumulation of Wealth
Balance of Trade (international trade = zero-sum game)
Monopolies
Strength of a Nation
Physiocracy (Pre-Classical Economy) [4]
Natural laws
Productivity of land (surplus)
Free trade
Productive vs sterile expenditure
John Stuart Mill (Classical)
Optimism
Productive vs Unproductive Labour
Labour theory of value (no standard measure)
No written destiny for income distribution
Progressive social reforms
LR profit rate -> increasing risk
Government civiliser
Taste elevation
Karl Marx (Critique to Classical - Marxian Economics) [8] CLCOCLCV
Capitalism is historically contingent and exploitative
Labour theory of value: labour power vs SNLTV
Capital accumulation increases productivity but increases unemployment
Ownership not pre-determined social order
Contingent situations rather than fixed natural law
Labour is structurally exploited
Crisis is embedded within capitalistic system
Violent revolution
William Stanley Jevons (British NEO) MOUTM
Marginal utility (final degree of utility)
Utils
Optimal choice to max utility
Theory of value = utility (how people choose, not absolute standard)
Mathematical derivation
Carl Menger (Austrian NEO) LOLS VUM
Logic over maths
Ordinal utility
Lower and higher order ‘goods’
Spontaneous orders of society
Value of goods linked to relative scarcity (determines prices)
Utility and consumption determine value
Marg utility is satisfaction of least importance (abstract idea)
Leon Walras (Lausanne NEO) MAGPPTI
Mathematical derivation of marg. utility (also considers scarcity)
Abstract
General Equilibrium model
Pure Theorist
Perfect competition
Tatonnement
Interdependent Markets
Alfred Marshall (British NEO) SPALM SPAQV
Supply and demand curves
Partial equilibrium
Abstract theorist and practical observer
Loanable funds market
Marginal product of factors (waiting)
SR vs LR costs
Positive
Against collective ownership
Quantity theory of money - independent money demand.
Value derived from supply and demand
Johan Gustaf Knut Wicksell (Stockholm BC) [5] MEPIB
Misalignment between natural and monetary interest rates causes instability
Endogenous money (commercial banks and demand for loans drive credit creation)
Perfect competition and interlinked markets
Intertemporal money illusion (nominal rates misled agents about real economic conditions)
Banks can distort the natural evolution of the economy
Irving Fisher (American BC)
Physics background
Maths and utility - intertemporal optimisation according to budget constraints
Real interest rate concept: r = i - pi
MV=PT
Real purchasing power governs decisions
Debt-deflation theory - economic downturns can translate into financial crises via balance sheets.
Long-run neutrality of money
Freidrich August Von Hayek (Austian BC)
Spontaneous Natural Order
Opposed to central planning
General Equilibrium models unrealistic
Intervention and active monetary policy disturbs the economic system
Self-correcting market system against intervention
Hayekian Triangle - disturbing interest rates disturbs economic system and co-ordination.
John Maynard Keynes (British Keynesian School)
Fundamental uncertainty
Animal spirits and expected revenues drive investment
Liquidity preference - hoarding can occur when people view money as an asset (critique to Say’s Law and Loanable funds theory)
Disconnection of savings and investment
Consumption and income linkage (leakages may weaken links, e.g., uncertainty and liquidity preferences)
Multiplier effect
Full employment occurs through sustained income increases
Interest rates ineffective to stimulate investment
Purpose of gvt is to sustain income
