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BRIEF HISTORY OF

ECONOMICS

PRIMITIVE ECONOMICS

Kingdoms and barangays

More consumption than production

System of commerce is not yet developed

Exchange was chiefly based on barter system

Profit is seldom the motive of economic activities

No regular markets

Three types:

Hunting and gather economy

Nomad or pastoral economy

and Subsistence/ agricultural economy

EARLY WESTERN CIVILIZATION

Ancient Greece

Plato and Aristotle wrote about the problems of wealth, trade


and property. They disliked commerce and believed that to live
by trade is undesirable.

Romans

Commerce is inferior to agriculture. The Roman Catholic Church


condemned the imposition of usury (interest from loans)

You shall not lend upon interest to your brother, interest on


money, interest on victuals, interest on anything that is lent for
interest. To a foreigner you may lend upon interest, but to
your brother you shall not lend upon interest (23:19-20) Old
Testament

The 1917 Code of Canon Law

BIRTH OF MERCATILISM

15TH AND 18TH century

European expansion and imperialism

High tariffs; creating overseas colonies; forbidding colonies to trade with


other nations; monopolizing markets with staple ports; banning the export of
gold and silver, even for payments; forbidding trade to be carried in foreign
ships; subsidies on exports; promoting manufacturing through research or
direct subsidies; limiting wages; maximizing the use of domestic resources;
and restricting domestic consumption through non-tariff barriers to trade.

Industrial revolution

Wars were fought for control over seas and trade routes

Wealth of the country depends on the quantity od gold and silver

BIRTH OF MERCATILISM

Physiocracy

Half of 18th century

French economist

Wealth of nations was derived solely from the value of "land


agriculture" or "land development" and that agricultural products
should be highly priced

Franois Quesnay - Tableau conomique

Individualism and laissez-faire

BIRTH OF ECONOMICS AS A
SCIENCE

1776

Adam Smith father of modern economics

An Inquiry to the Nature and Causes of the Wealth of


Nations

Attack on the protectionist doctrine of the mercantilists

Brief outline of free trade (enterprise and free market


economics)

Opened up for new concepts like international trade and


primitive theory on money.

BIRTH OF ECONOMICS AS A
SCIENCE
Thomas
An

Robert Malthus

Essay on the Principle of Population

Law of diminishing marginal returns

Natural depletion of resources as population increases

the only way to balance food supply is the occurrence of


severe natural calamities, diseases, and wars.

BIRTH OF ECONOMICS AS A
SCIENCE
David

Ricardo

1871
Invented
Law

the economic model

of comparative advantages

Benefits of trade are determined by comparative cost within


each country

BIRTH OF ECONOMICS AS A
SCIENCE
John

Stuart Mill

1984
Restated

Ricardian thought

Inheritance

should be taxed

BIRTH OF ECONOMICS AS A
SCIENCE
Karl

Marx

The Communist Manifesto (1848)

Das Kapital (1867)

Focused on Smith and Ricardos teachings

Added theory of surplus value

Human alone is of value and constitutes the sole source


of profits.

Coined the term Classical Economics

Marxism

THE MARGINAL REVOLUTION


Labor

theory of value/ Marginal Utility Theory of

Value
1870s

William Stanley Jevons (1863 and 1871)

Carl Menger (1871)

Leon Walras (1874)

Deals

with the demand

Stressed

the idea that prices are determined by


both supply and demand sides

NEOCLASSICAL ECONOMICS

a set of approaches to economics focusing on the


determination of prices, outputs, and income distributions
in markets through supply and demand.

Assumptions

People have rational preferences between outcomes that can be


identified and associated with values.

Individuals maximize utility and firms maximize profits.

People act independently on the basis of


full and relevant information.

NEOCLASSICAL ECONOMICS
John

Maynard Keynes

Founder

of modern macroeconomics

Keynesian

Economics

the modern capitalist economy does not


automatically work at top efficiency, but can be
raised to that level by the intervention and
influence of the government