Austrian Economists Warn of Impending Disaster
During the 1920s, there was a school of economics that did predict a monetary crisis Specifically, the up and coming generation of Austrian economists, Ludwig von Mises 1881-1973 and Friedrich Hayek 1899-1992 . Mises and Hayek argued, contrary to Fisher, that monetary inflation and easy-money policies are inherently unstable and create structural imbalances in the economy that cannot last. In Mises's view, money is non-neutral, especially in the short run. The fateful decision by central banks...
Smith Favors a Strong But Limited Government
As a proponent of the Scottish Enlightenment and the virtues of natural liberty, Adam Smith was a firm believer in a parsimonious but strong government. He wrote of three purposes of government Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice in Danhert 1974, 218 . More specifically, Smith endorsed 1 the need for a well-financed militia for national defense 2 a legal system to...
Smith Identifies Three Ingredients
Smith began his book with a discussion of how wealth and prosperity are created through democratic free-market order. He highlighted three characteristics of this self-regulating system or classical model 1. Freedom individuals have the right to produce and exchange products, labor, and capital as they see fit. 2. Competition individuals have the right to compete in the production and exchange of goods and services. 3. Justice the actions of individuals must be just and honest, according to the...
The Ricardian Device or Vice
Ricardo is considered the founder of economics as a rigorous science involving mathematical precision. The financial economist had a remarkable gift of abstract reasoning, developing a simple analytical tool involving only a few variables that yielded, after a series of manipulations, powerful conclusions. This model-building approach has been adopted by many prominent economists, including John Maynard Keynes, Paul Samuelson, and Milton Friedman, and has led to the popularity of econometrics....
The Pendulum Approach to Competing Economic Theories
Simple though it is, I see several problems with the spectral approach. First, it treats Karl Marx and Adam Smith as coequals, that is, Figure A The Pendulum Approach to Competing Economic Theories Figure A The Pendulum Approach to Competing Economic Theories extreme in their positions and therefore equally bad. By implication, neither man's position is sensible and must be rejected. The result is a pendulum-like swing between the two extremes, eventually coming to rest in the middle....
The Pendulum and the Totem Pole
The stories and ideas of these Big Three economists are told in context of a larger history I have described in greater detail in The Making of Modern Economics. In the introduction to that work, I describe two possible approaches to writing about the lives and ideas of economists, what I term the spectral versus the hierarchal approach. The most popular method of analysis I describe as a pendulum, by which historians place each economist somewhere along a political spectrum, from extreme left...
Three in Economics
AU rights reserved. No part of this book may be reproduced in any form without written permission from the publisher, M.E. Sharpe, Inc., 80 Business Park Drive, Armonk, New York 10504. Library of Congress Cataloging-in-Publication Data The big three in economics Adam Smith, Karl Marx, and John Maynard Keynes Mark Skousen. p. cm. Includes bibliographical references and index. ISBN-10 0-7656-1694-7 cloth alk. paper ISBN-13 978-0-7656-1694-4 cloth alk. paper 1. Economists History. 2. Economics...
Advocate for the Common Man
Just as George Washington was the father of a new nation, so Adam Smith was the father of a new science, the science of wealth. The great British economist Alfred Marshall called economics the study of the ordinary business of life. Appropriately, Adam Smith would have an ordinary name. He was named after the first man in the Bible, Adam, which means out of many, and his last name, Smith, signifies one who works. Smith is the most common surname in Great Britain. The man with the pedestrian...