Adam Smith Karl Marx and John Maynard Keynes

Adam Smith, Karl Marx and John Maynard Keynes

WARM-UP • What is one way in which Market Economy and Mixed Economy are similar? A They both share the idea of competition and individual rights. B They both share the idea growing their own resources in old traditional ways C They both share the idea the land capital are owned by the government. D They both share the idea of a hereditary ruler.

Adam Smith, 1723 -1790 • Scottish Enlightenment writer • Wanted to understand what made some countries wealthy and others not so much • In 1776, wrote An Inquiry into the Nature and Causes of the Wealth of Nations

Major Themes of Wealth of Nations • Division of Labor • Self Interest and Cooperation in Markets • Role of Government (Laissez-faire) • The Invisible Hand

Karl Marx, 1818 -1883 • German philosopher, economist, sociologist • Lived and wrote during the Industrial Revolution in Europe, which was a time of dramatic change to society • Observed how this transition created stark divisions and inequities in society • Communist Manifesto

Major themes of Karl Marx • • Class struggle Bourgeosie Proletariat Society will evolve from capitalism to socialism and finally to communism

John Maynard Keynes, 1883 -1946 • British economist • Greatly influenced understanding of macroeconomics • Concerned with how to regulate the boom and bust business cycle • Argued government intervention in the economy was necessary to control the fluctuations of the boom/bust economic cycle

Major Themes of Keynes • Wrote The General Theory of Employment, Interest and Money in 1936 • Argued government involvement necessary to moderate “boom and bust” economic cycle • Government can do this through fiscal and monetary policy • Government’s use of monetary and fiscal policy can boost aggregate demand