خرید و دانلود نسخه کامل کتاب History of Economic Ideas From Adam Smith to Paul Krugman – Original PDF

is interaction, since humanity is ultimately determined by the totality of its social relations. It is often argued, however, that today’s economic society is eternal and ideal, something like a Platonic idea, compatible with the ‘speculative nature of man’, who appears to have an inherent tendency to maximize his utility. According to this view, there is no inherent solidarity and cooperativeness in ‘human nature’ but only a tendency to compete and maximise utility. Also, man, and the individual social and economic unit in general, appears to determine and motivate the total economy and society, and not the other way round, that is to be determined by them. In this context, the economic system appears to be perfectly functioning, since it is seen as not facing generalised economic instabili- ties and crises emanating from the overall economy, but the individual social and xvi economic unit is seen as imposing its own stable, competitive, maximising behav- iour on the economic system. Finally, money is not considered to play any essential role in the economy, since it is used only as a medium of exchange and to facilitate transactions, since in most analyses in Economics, the prices of various commodities are expressed in relation to the prices of other commodities, that is in ‘relative prices’, and not as exchange for an amount of money. Hence, money is usually absent from analyses at the level of the individual unit, that is the (micro)economic perspective. At the same time, money is usually considered ‘neutral’ in the overall economy, that is it is believed to have no effect on other economic variables, but only increases the price at the level of the overall economy, that is in the (macro)economic perspective. But what binds these elements together in the modern economic system? It is the so-called market. Markets are those sets of activities where the exchange of goods and services and/or financial assets takes place and determine two very basic ele- ments: the prices and quantities to be sold and purchased, simultaneously. At the same time, financial markets also perform the function of pricing products and ser- vices and pricing risk. Hence, they provide the incentive to act speculatively on the basis of this information and are often characterised by instability inherent in the economic system, as well as a misunderstanding of the function of money in the theoretical analyses of market transactions. Therefore, linked, directly or indirectly, to the view or the functioning of the market are: (a) speculation, (b) instability and (c) neglect of money in theoretical analyses. Therefore, we observe that modern Economic Theory exhibits a practical difficulty in ‘metabolizing’, among other things, the aforementioned concepts of profitability, instability and money in a theoretically consistent and coherent con- ceptual framework. These terms and concepts are absent from almost all textbooks in Economics worldwide. In this way, this book allows us to gain a better understanding of when and how the various ideas, concepts and practices emerged, developed, and were applied in order to come up with the body of modern Economics. Introduction 1 1Adam Smith (1723–1790) c Learning Objectives After having studied this chapter, the reader should be able to: • Understand the meaning of the ‘invisible hand’ in the economy. • Explain Adam Smith’s ‘labour theory’. • Analyse Smith’s ideas on the ‘division of labour’. • Give examples on the functioning of a ‘free market’. • Analyse Smith’s view on the role of the state. • Present briefly Adam Smith’s contribution to Economics. c Summary Smith is widely considered as the ‘father’ of Economics, but also of the Classical School of Political Economy. His theoretical approach to systemic forces in an eco- nomic environment led to predictable conclusions, as he was able to construct a ‘theory’ regarding how systemic forces operate. Consequently, for him, man has a primarily ‘economic character’, he is homo oeconomicus, and his defining qualities are ‘economic transaction’ and ‘trade’. In theory, each individual has a self-interest, which is guided by an ‘invisible hand’ which directs the personal desires and inter- ests of individuals towards situations that are in the best interests of society. Therefore, Smith believed that society’s prosperity is built on the pursuit of indi- vidual interests. A key theory of Smith is non-intervention, also known as laissez faire, which states that the less the state intervenes in economic activity, the more benefits society receives. The role of the state, according to Smith, should be limited to a few specific activities. A fundamental part of Smith’s economic theory was the use of labour as the sole source of value. Further, he considered that specialisation resulting from the division of labour was the main rea