Economic Theory

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Economic Theory

• The ideas and economic philosophies of Adam Smith
  and Karl Marx

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Economics Theory

• The Big Thinkers
• Evaluate how societies solve the economic dilemma

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Adam Smith
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• Invisible hand
• self interest balanced out competition
• Self interestbusiness goal--
• No Consumer concerns
• Business will increase prices
• Competition-- businesses vive for consumers
• Innovation/inventions
• Essential issue is price
• Business need to keep prices low to stay in
  businesstherefore prices on product will be
  controlled

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• Result of Invisible Hand
• Good of the Community
• Resources, factors of production will shift to
  where they are needed
• The factors of production are recycled in the
  economy
• I.E.when business fails the workers find new
  jobs, the tools (capital) are sold to other
  companies and a new business will open up in the
  former stores location

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• Laissez-Faire let do
• Capitalism is self-regulating system
• Wealth is created with little to no government
  involvement
• Create stable system where Capitalism can furnish
• Govt. should provide only those items that
  business would not.
• National defense, Court system Roads, Education

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Karl Marx
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• Karl Marx
• Philosophy True value labor
• View of Capitalismis a just a point along the
  economic, social, and political development of a
  nation

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• Problems with Capitalism
• Desire for Profits
• Owners (Bourgeois) always want more profits
• Therefore
• Expand into new markets, find more consumers, to
  sell more goods, more profits
• Alsowant to produce more at lower cost
• Pay workers as little as possible
• Reduce wages/replace workers with machines
• cycle repeats again and again
• Workers (proletariat) will begin to realize
  they are being exploited/struggle for
  necessities
• Leads to a violent revolution

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• Other impacts on the workers
• Increased specialization
• Impact on creativity and emotional
  satisfaction Industrial Revolution

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• Overproduction
• Have to sell more to make more profit
• Demand more efficiency, higher production
• Everything produced cannot
• be consumed

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• Under consumption
• Wealth is unevenly distributed-bourgeois and
  proletariat (triangle)
• Who has ability to consume
• Bourgeois unlimited wants met
• will not, cannot consume all available products

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• 49th Porsche